Fannie Mae 2006 Annual Report Download - page 68

•Instill operational discipline: Making continued progress in building out robust controls and instilling
operational discipline into all of our functions. We have also made considerable progress in our efforts to
remediate identified material weaknesses in our internal control over financial reporting. At December 31,
2005, we reported 20 material weaknesses. During 2006 and the first two quarters of 2007, we reduced
the number of outstanding material weaknesses to five, and for each remaining material weakness,
remediation plans are either underway or have been completed and await testing for effectiveness.
•Focus on our customers and employees: Focusing on reshaping the culture of Fannie Mae to fully reflect
the levels of service, engagement, accountability and good management that we believe should characterize
a company privileged to serve such an important role in a large and vital market. This, including the
ongoing renewal of our people strategy, continues to be a priority of the company.
Current Corporate Priorities
We have adopted and are aggressively pursuing the following key corporate objectives, which we believe will
contribute to the achievement of our mission and business objectives:
•Grow Revenue: We are engaged in a company-wide effort to explore additional opportunities to serve
mortgage lenders, housing agencies and organizations, investors, shareholders, the housing finance market
and the company’s affordable housing mission with the goal of increasing our revenue base.
•Reduce Costs: Management is committed to cost competitiveness and productivity, and, to that end, has
undertaken a company-wide effort to reduce our projected ongoing daily operations costs in 2007 by
$200 million compared to 2006. For the longer-term, management intends to reduce the overall cost basis
of the company through focused efforts to streamline operations and increase productivity. Our stated
objective is to reduce our ongoing daily operations costs, which excludes costs associated with our efforts
to return to current financial reporting and various costs that we do not expect to incur on a regular basis,
to approximately $2 billion in 2008.
•Exceed Mission: In 2006, we achieved all of our housing goals and subgoals. Our objective is to
continue to support the populations targeted by the housing goals by developing products to reach
underserved populations and those with unique needs, such as residents of the Gulf Coast. We also intend
to provide and expand, as far as possible, liquidity to the overall mortgage market.
•“Get Current”: This key objective refers to our commitment to complete and file our 2006 and 2007
financial statements and remediation of the company’s operational and control weaknesses. Becoming a
current filer with effective internal controls is a top priority.
•Operate in “Real Time”: We have set a longer-term goal of reengineering the company’s business
operations to make the enterprise more streamlined, efficient, productive and responsive to the market,
lender customers and partners, and regulators.
•Accelerate Culture Change: Strengthening our corporate culture remains a top corporate priority. Fannie
Mae’s culture change efforts are designed to foster professionalism, competitiveness, and humility through
the attributes of service, engagement, accountability and, good management.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with GAAP requires management to make a number of
judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and
expenses in the consolidated financial statements. Understanding our accounting policies and the extent to
which we use management judgment and estimates in applying these policies is integral to understanding our
financial statements. We describe our most significant accounting policies in “Notes to Consolidated Financial
Statements—Note 1, Summary of Significant Accounting Policies.”
We have identified four of our accounting policies that require significant estimates and judgments and have a
significant impact on our financial condition and results of operations. These policies are considered critical
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