Fannie Changes Audit Committee Chair

Several days before what is expected to be a heavily critical report from the mortgage company's regulator, Fannie Mae taps former FASB chairman Dennis Beresford.

Stephen Taub
CFO.com | US

May 22, 2006

The Federal National Mortgage Association (FNMA, or Fannie Mae) has replaced the head of its audit committee.

Dennis Beresford, a former chairman of the Financial Accounting Standards Board, will join the embattled mortgage finance company as a director and as audit committee chairman.

He succeeds Thomas Gerrity, a former dean of The Wharton School of the University of Pennsylvania. Gerrity, who has served as a Fannie Mae director since 1991 and as audit committee chairman since 1999, will leave the board by the year-end.

The change comes just days before Fannie Mae's regulator, the Office of Federal Housing Enterprise Oversight, is to issue a report expected to be heavily critical of the company's board for not asking tough questions about the company's accounting practices.

In December 2004, chief executive officer Franklin Raines and chief financial officer Timothy Howard were ousted by the board shortly before the Securities and Exchange Commission ordered the company to restate its financials. Last November, the company disclosed $10.8 billion in accounting errors stemming from its derivatives and hedging activities.

"Denny's significant financial accounting and board experience will provide valuable expertise to Fannie Mae's board and its audit committee as the company works toward completion of our financial restatement and return to timely filings, and completes building its new finance, controller's, audit, and compliance organizations," said chairman Stephen Ashley, in a statement.

From 1961 to 1986, Beresford was with Ernst & Young, including 10 years as a senior partner and national director of accounting; from 1987 to 1997, he served as FASB chairman. He is currently Ernst & Young Executive Professor of Accounting in the J.M. Tull School of Accounting at the University of Georgia. He also is a director and chairman of the audit committee of Kimberly-Clark and Legg Mason.