Fannie Mae 2004 Annual Report Download - page 203

Item 9A. Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of 1934, or the Exchange Act, management
has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the
effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. In
addition, management has performed this same evaluation as of the date of filing this report. Disclosure
controls and procedures refer to controls and other procedures designed to ensure that information required to
be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding our required disclosure. In designing and evaluating our
disclosure controls and procedures, management recognizes that any controls and procedures, no matter how
well designed and operated, can provide only reasonable assurance of achieving the desired control objectives,
and management was required to apply its judgment in evaluating and implementing possible controls and
procedures.
Management conducted its evaluation of disclosure controls and procedures under the supervision of the Chief
Executive Officer and the Chief Financial Officer. Pursuant to its evaluation, management determined that we
did not maintain effective disclosure controls and procedures as of December 31, 2004. We failed to maintain
an effective Disclosure Committee and we have not filed periodic reports on a timely basis, as required by the
rules of the SEC and the NYSE, since June 30, 2004. Our review of our accounting policies and practices in
2005 and 2006, and the restatement of our consolidated financial statements for the years ended December 31,
2003 and 2002, resulted in an inability to timely file our Annual Reports on Form 10-K for the years ended
December 31, 2004 and 2005, and our Quarterly Reports on Form 10-Q for the quarters ended September 30,
2004, March 31, 2005, June 30, 2005, September 30, 2005, March 31, 2006, June 30, 2006 and September 30,
2006.
In addition, as described below, management identified numerous material weaknesses in our internal control
over financial reporting, which management considers an integral component of our disclosure controls and
procedures. The Public Company Accounting Oversight Board’s Auditing Standard No. 2 defines a material
weakness as a significant deficiency, or combination of significant deficiencies, that results in more than a
remote likelihood that a material misstatement of the annual or interim financial statements will not be
prevented or detected. As a result of these material weaknesses, as well as the reasons noted above, our Chief
Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were
not effective as of December 31, 2004 or as of the date of filing this report.
We have made progress in improving our disclosure controls and procedures. We have taken, and are taking,
the actions described below under “Remediation Activities and Changes in Internal Control Over Financial
Reporting” to remediate the material weaknesses in our internal control over financial reporting. In addition,
we have enhanced the procedures followed by our Disclosure Committee. These enhancements include:
• revision and adoption of a new charter by the Disclosure Committee;
• an annual review of the Disclosure Committee charter;
• clarification of authority and role of the Disclosure Committee;
• formal training for Disclosure Committee members;
• maintenance of agendas; and
• implementation of a formalized voting process.
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