Fannie Mae 2004 Annual Report Download - page 209

• we made significant changes in the personnel responsible for internal control over financial reporting prior
to the commencement of their work; and
• we made extensive changes to our internal control over financial reporting that had been in place as of
December 31, 2004 prior to the commencement of their field work.
Deloitte & Touche’s report disclaimed an opinion on management’s assessment of the effectiveness of our
internal control over financial reporting as of December 31, 2004 because of a scope limitation and expressed
an adverse opinion on the effectiveness of our internal control over financial reporting as of December 31,
2004 because of material weaknesses and the effects of a scope limitation. The report is included on page 211.
REMEDIATION ACTIVITIES AND CHANGES IN INTERNAL CONTROL OVER FINANCIAL
REPORTING
Overview
Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer,
whether any changes in our internal control over financial reporting that occurred during the period from
July 1, 2004 through the date of this filing (including the quarter ended December 31, 2004) have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on
the evaluation we conducted, management has implemented substantial changes during the period from July 1,
2004 through the date of this filing to remediate our material weaknesses in internal control over financial
reporting.
We believe that, as of the date of this filing, we have fully remediated the following four material weaknesses
relating to our control environment described above:
• Tone at the Top;
• Board of Directors and Executive Roles;
• Whistleblower Program; and
• Accounting/Finance Staff Levels.
With respect to the remaining material weaknesses described above, we are implementing new internal
controls and are currently in the process of testing to assess their effectiveness. Management will not make a
final determination that we have completed our remediation of these remaining material weaknesses until we
have completed testing of our newly implemented internal controls. We currently estimate that we will not
complete implementation and testing of most of these new controls until the filing of our Annual Report on
Form 10-K for the year ended December 31, 2006, which we will not file on a timely basis; however, we
anticipate that we may complete testing with respect to some of our remaining material weaknesses prior to
that time. Further, we believe that we will not have remediated the material weakness relating to our disclosure
controls and procedures until we are able to file required reports with the SEC and the NYSE on a timely
basis. Deloitte & Touche will independently assess the effectiveness of our internal control over financial
reporting, but will make that assessment only in connection with its audit of our consolidated financial
statements for the year ended December 31, 2006. In addition, our internal control environment will continue
to be modified and enhanced in order to enable us to file periodic reports with the SEC on a current basis in
the future.
The discussion below describes the actions that management has taken, or is taking, to remediate the material
weaknesses described above and to improve our internal control over financial reporting and disclosure
controls and procedures. Management believes the measures that we have implemented to remediate the
material weaknesses in internal control over financial reporting have had a material impact on our internal
control over financial reporting since June 30, 2004, and anticipates that these changes and other ongoing
enhancements and remediation activities will continue to have a material impact on our internal control over
financial reporting in future periods.
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