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February 11, 1999
To: PricewaterhouseCoopers LLP
The management of the Federal Reserve Bank of San Francisco
(FRB-SF) is responsible for the preparation and fair presentation
of the Statement of Financial Condition, Statement of Income, and
Statement of Changes in Capital as of December 31, 1998 (the "Financial
Statements"). The Financial Statements have been prepared in
conformity with the accounting principles, policies, and practices
established by the Board of Governors of the Federal Reserve System
and as set forth in the Financial Accounting Manual for the Federal
Reserve Banks, and as such, include amounts, some of which are based
on judgments and estimates of management.
The management of the FRB-SF is responsible for maintaining
an effective process of internal controls over financial reporting
including the safeguarding of assets as they relate to the Financial
Statements. Such internal controls are designed to provide reasonable
assurance to management and to the Board of Directors regarding
the preparation of reliable Financial Statements. This process of
internal controls contains self-monitoring mechanisms, including,
but not limited to, divisions of responsibility and a code of conduct.
Once identified, any material deficiencies in the process of internal
controls are reported to management, and appropriate corrective
measures are implemented.
Even an effective process of internal controls, no matter how
well designed, has inherent limitations, including the possibility
of human error, and therefore can provide only reasonable assurance
with respect to the preparation of reliable financial statements.
The management of the FRB-SF assessed its process of internal
controls over financial reporting including the safeguarding of
assets reflected in the Financial Statements, based upon the criteria
established in the "Internal Control Integrated Framework"
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this assessment, the management of the
FRB-SF believes that the FRB-SF maintained an effective process
of internal controls over financial reporting including the safeguarding
of assets as they relate to the Financial Statements.
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Federal Reserve Bank of San Francisco
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by
Robert T. Parry
President |
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by
John F. Moore
First Vice President |
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PricewaterhouseCoopers LLP
Report of Independent Accountants
To the Board of Directors of the
Federal Reserve Bank of San Francisco
We have examined managements assertion that the Federal Reserve
Bank of San Francisco ("FRB San Francisco") maintained
effective internal control over financial reporting and the safeguarding
of assets as they relate to the Financial Statements as of December
31, 1998, included in the accompanying Managements Assertion.
Our examination was made in accordance with standards established
by the American Institute of Certified Public Accountants, and accordingly,
included obtaining an understanding of the internal control over
financial reporting, testing, and evaluating the design and operating
effectiveness of the internal control, and such other procedures
as we considered necessary in the circumstances. We believe that
our examination provides a reasonable basis for our opinion.
Because of inherent limitations in any internal control, misstatements
due to error or fraud may occur and not be detected. Also, projections
of any evaluation of the internal control over financial reporting
to future periods are subject to the risk that the internal control
may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, managements assertion that the FRB San Francisco
maintained effective internal control over financial reporting and
over the safeguarding of assets as they relate to the Financial
Statements as of December 31, 1998, is fairly stated, in all material
respects, based upon criteria described in " Internal Control
- Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
[Signed PricewaterhouseCoopers LLP]
San Francisco, California
March 5, 1999
PricewaterhouseCoopers LLP
Report of Independent Accountants
To the Board of Governors of The Federal Reserve System
and the Board of Directors of the Federal Reserve
Bank of San Francisco
We have audited the accompanying statements of condition of the
Federal Reserve Bank of San Francisco (the "Bank") as of December
31, 1998 and 1997, and the related statements of income and changes
in capital for the years then ended. These financial statements
are the responsibility of the Bank's management. Our responsibility
is to express an opinion on the financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
As discussed in Note 3, the financial statements were prepared
in conformity with the accounting principles, policies, and practices
established by the Board of Governors of The Federal Reserve System.
These principles, policies, and practices, which were designed to
meet the specialized accounting and reporting needs of The Federal
Reserve System, are set forth in the Financial Accounting Manual
for Federal Reserve Banks and constitute a comprehensive basis of
accounting other than generally accepted accounting principles.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the
Bank as of December 31, 1998 and 1997, and the results of its operations
for the years then ended, on the basis of accounting described in
Note 3.
[Signed PricewaterhouseCoopers LLP]
San Francisco, California
March 5, 1999
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