Fannie Mae 2005 Annual Report Download - page 186

• formal training for Disclosure Committee members;
• preparation and maintenance of agendas for Disclosure Committee meetings;
• implementation of a Disclosure Committee voting process; and
• implementation of new disclosure policies and procedures covering, among other things, the relevant
documents reviewed by the Disclosure Committee and the process for raising and resolving disclosure
questions in a timely manner.
We continue to strive to improve our disclosure controls and procedures to enable us to provide complete and
accurate public disclosure on a timely basis. Management believes that this material weakness relating to our
disclosure controls will not be remediated until we are able to file required reports with the SEC and the
NYSE on a timely basis.
To address the material weaknesses described in this Item 9A, management performed additional analyses and
other post-closing procedures designed to ensure that our consolidated financial statements were prepared in
accordance with GAAP. These procedures included data validation and certification procedures from the
source systems to the general ledger, pre- and post-closing analytics, model validation procedures for financial
models supporting the consolidated financial statements, and independent third-party reviews of selected
accounting systems and accounting conclusions. As a result, management believes that the consolidated
financial statements included in this report fairly present in all material respects the company’s financial
position, results of operations and cash flows for the periods presented.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Overview
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting, as defined in rules promulgated under the Exchange Act, is
a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer
and effected by our Board of Directors, management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:
• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of our assets;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorizations of our management and members of
our Board of Directors; and
• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on our financial statements.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting
objectives because of its inherent limitations. Internal control over financial reporting is a process that involves
human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human
failures. Internal control over financial reporting also can be circumvented by collusion or improper override.
Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a
timely basis by internal control over financial reporting. However, these inherent limitations are known
features of the financial reporting process, and it is possible to design into the process safeguards to reduce,
though not eliminate, this risk.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31,
2005. In making its assessment, management used the criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Management’s assessment of our internal control over financial reporting as of December 31, 2005 identified
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