Capital Briefs: Greenspan Defends the Fed's Los Angeles Branch

The controversy about cash management practices lives on at the Los Angeles branch of the Federal Reserve Bank of San Francisco.

In a letter released Wednesday, Federal Reserve Board Chairman Alan Greenspan objected to a General Accounting Office report on the L.A. branch.

The GAO report accused the L.A. branch of misreporting its monthly currency reports in October, November, and December 1995. It said these errors are indicative of larger problems with the Fed's financial reporting system.

Mr. Greenspan acknowledged that the late 1995 reports were inaccurate. But he said those records are for "informational purposes" only. The reserve bank's official financial statements, which the GAO did not review, were error-free, Mr. Greenspan said.

"We would welcome a review by the GAO to determine whether or not its concerns have any foundation," the Fed chairman wrote to Assistant Comptroller General Gene L. Dodaro.

A complete counting of the cash at the L.A. branch's vault uncovered no problems, he said. Also, he said, its examiners did not find any problems when they recently reviewed the branch's internal controls.

Finally, he said, the Fed's outside auditors, accounting giant Coopers & Lybrand, concluded that the San Francisco Fed's financial statements were correct.

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