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Board Report: 2015-FMIC-B-003 March 12, 2015

Board of Governors of the Federal Reserve System Financial Statements as of and for the Years Ended December 31, 2014 and 2013, and Independent Auditors' Reports

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Managementís Report on Internal Control Over Financial Reporting

Board of Governors of the Federal Reserve System
Washington, DC 20551

March 12, 2015

Management's Report on Internal Control over Financial Reporting

To the Committee on Board Affairs:

The management of the Board of Governors of the Federal Reserve System ("the Board") is responsible for the preparation and fair presentation of the balance sheet as of December 31, 2014, and for the related statement of operations and statement of cash flows for the year then ended (the "Financial Statements"). The Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America and, as such, include some amounts which are based on management judgments and estimates. To our knowledge, the Financial Statements are, in all material respects, fairly presented in conformity with generally accepted accounting principles and include all disclosures necessary for such presentation.

The Board's management is also responsible for establishing and maintaining effective internal control over financial reporting as it relates to the Financial Statements. Such internal control is designed to provide reasonable assurance to management and to the Committee on Board Affairs regarding the preparation of the Financial Statements in accordance with accounting principles generally accepted in the United States of America. The Board's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Board; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of Financial Statements in accordance with generally accepted accounting principles, and that the Board's receipts and expenditures are being made only in accordance with authorizations by its management; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Board's assets that could have a material effect on the Financial Statements.

Internal control, no matter how well designed and operated, can only provide reasonable assurance of achieving the Board's control objectives with respect to the preparation of reliable Financial Statements. The likelihood of achievement of such objectives is affected by limitations inherent to internal control, including the possibility of human error. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that specific controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate.

The Board's management assessed its internal control over financial reporting with regards to the Financial Statements based upon the criteria established in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, we believe that the Board has maintained effective internal control over financial reporting as it relates to its Financial Statements.

Donald V. Hammond   /signed/
Chief Operating Officer

William L. Mitchell   /signed/
Chief Financial Officer