Fannie Mae 2008 Annual Report Download - page 224

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 our last fiscal quarter
have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting. Changes in our internal control over financial reporting since September 30, 2008 that management
believes have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting are described below.
Remediation Actions Relating to Board of Directors and Audit Committee
FHFA and Fannie Mae management took several actions during the fourth quarter of 2008 and first quarter of
2009 that remediated the material weakness in internal control over financial reporting relating to the lack of
authority of our Board of Directors and Audit Committee over our disclosure controls and procedures. As a
result of these actions, this material weakness was remediated as of the date of filing this report.
The remediation actions taken by FHFA and Fannie Mae management during the fourth quarter of 2008 and
first quarter of 2009 included:
• On November 24, 2008, FHFA, as conservator, reconstituted Fannie Mae’s Board of Directors and
directed Fannie Mae regarding the function and authorities of the Board of Directors. FHFA’s delegation
of authority to the Board became effective on December 19, 2008 when nine Board members were
appointed by FHFA, in addition to the Board Chair who was appointed by FHFA on September 16, 2008.
FHFA specified that Fannie Mae’s directors serve on behalf of the conservator and exercise their authority
as directed by the conservator. In addition, FHFA instructed the Board to consult with and obtain the
approval of the conservator before taking action in specified areas. For more information on FHFA’s
delegation of authority to the Board, including the limitations of this delegation, and the current
composition of the Board, refer to “Part III—Item 10—Directors, Executive Officers and Corporate
Governance.”
• On November 24, 2008, FHFA reconstituted four standing Board Committees, including the Audit
Committee. Subject to consultation with and the approval of the conservator in specified areas (such as
actions involving the retention and termination of external auditors and material changes in accounting
policy), the Audit Committee has authority similar to its authority prior to conservatorship.
• On December 19, 2008, FHFA issued an order appointing nine Board members (three of whom were
Board members prior to the conservatorship). The Board Chair had previously been appointed by FHFA
on September 16, 2008. For more information regarding these Board members, refer to “Part III—
Item 10—Directors, Executive Officers and Corporate Governance—Directors.”
• On December 24, 2008, the Board of Directors, by unanimous written consent and in consultation with
FHFA, appointed four members of the Board to the Audit Committee and selected a chair of the
Committee. For more information regarding the Audit Committee’s membership, refer to “Part III—
Item 10—Directors, Executive Officers and Corporate Governance—Corporate Governance—Audit
Committee Membership.”
• On January 30, 2009, the Board held its first meeting, at which it approved and amended various
governing documents to reflect the conservatorship, including our Bylaws, our Corporate Governance
Guidelines and charters for the Audit, Compensation, Nominating and Corporate Governance, and Risk
Policy and Capital Committees.
As a result of these actions, Fannie Mae has a Board of Directors and Audit Committee with delegated
authority and responsibility for reviewing and discussing with management and others the adequacy and
effectiveness of our disclosure controls and procedures and management reports thereon, as well as the annual
audited and quarterly unaudited financial statements and certain disclosures required to be contained in our
periodic reports. In addition, the newly reconstituted Audit Committee has resumed its role of consulting with
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