Fannie Mae 2004 Annual Report Download - page 210

Description of Remediation Actions
Control Environment
•Tone at the Top
We believe that we remediated this material weakness prior to the date of this filing. We have made
significant changes to our Board of Directors, our management team and our corporate structure since
December 31, 2004 in order to establish and maintain a consistent and proper tone as to the importance
of internal control over financial reporting. The Board and management have emphasized the importance
of internal control over financial reporting through communication and action. After an extensive
recruitment process, our Board of Directors appointed a new Chief Executive Officer from within the
company and a new Chief Financial Officer from outside the company. Over 35% of our senior officers,
including our Chief Financial Officer, Controller, Chief Audit Executive, Chief Risk Officer, General
Counsel and all senior officers in our Controller’s and Accounting Policy functions, joined the company
after December 2004. In addition, with the assistance of an independent consulting firm, we have assessed
the organizational design of our finance, risk, audit, compliance, operations and technology functions.
New organizational structures and frameworks for each of these areas have been developed, and we are
currently implementing these designs in many areas.
We have also initiated a comprehensive plan to transform our corporate culture into one focused on
service, open and honest engagement, accountability and effective management practices. Additionally,
based on recommendations made by independent consultants, we modified our compensation practices to
include metrics in addition to earnings per share, including non-financial metrics relating to our controls,
culture and mission goals.
In addition to these personnel, organizational and compensation changes, our new management team has
encouraged an environment that fosters frequent, open and direct communications. This environment
includes weekly CEO newsletters, open question lines to executive management, frequent company-wide
town hall meetings, training on how to further foster open communication, and open feedback solicitation
through management forums, surveys and roundtables. Management has continuously reinforced that
enhancement of the understanding and execution of internal control over financial reporting is a top
priority for the company.
•Accounting Policy
We have completed a full assessment of all our accounting policies to ensure their compliance with
GAAP, which required us to revise substantially all of these accounting policies. We currently maintain a
written, comprehensive set of GAAP-compliant financial accounting policies. All of these accounting
policies have been documented and communicated to the appropriate accounting functions.
Staff in the accounting policy function has worked closely with each of the business units and financial
reporting to ensure accurate accounting policy interpretation and to address new or emerging accounting
policy issues. In addition, accounting standard-setting developments are actively monitored, with
implementation impacts researched in coordination with the Controller’s department, business unit
personnel and other divisions that would be impacted. Additionally, accounting policy is actively engaged
in new product and process approval to ensure that the correct accounting policy decisions are reached
and implemented.
In addition, in order to provide a segregation of duties between those who develop our accounting policies
and those who implement them, as part of our organizational redesign, reporting responsibility for the
accounting policy function was moved from the Controller to the CFO. In May 2005, we announced the
hiring of a new senior officer to oversee the accounting policy function.
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