Independent Auditors' Report on Internal Accounting Control
The Board of Directors and Shareholders
AXP Federal Income Fund, Inc.:
In planning and performing our audit of the financial statements of AXP Federal
Income Fund, Inc. for the year ended May 31, 2000, we considered its internal
control, including control activities for safeguarding securities, in order to
determine our auditing procedures for the purpose of expressing our opinion on
the financial statements and to comply with the requirements of Form N-SAR, not
to provide assurance on the internal control.
The management of AXP Federal Income Fund, Inc. is responsible for establishing
and maintaining internal control. In fulfilling this responsibility, estimates
and judgments by management are required to assess the expected benefits and
related costs of controls. Generally, controls that are relevant to an audit
pertain to the entity's objective of preparing financial statements for external
purposes that are fairly presented in conformity with generally accepted
accounting principles. Those controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or irregularities
may occur and not be detected. Also, projection of any evaluation of internal
control to future periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of the internal control would not necessarily disclose all
matters in the internal control that might be material weaknesses under
standards established by the American Institute of Certified Public Accountants.
A material weakness is a condition in which the design or operation of one or
more of the internal control components does not reduce to a relatively low
level the risk that misstatements caused by error or fraud in amounts that would
be material in relation to the financial statements being audited may occur and
not be detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters involving the
internal control and its operation, including controls for safeguarding
securities, that we consider to be a material weakness as defined above.
This report is intended solely for the information and use of management, the
Board of Directors of AXP Federal Income Fund, Inc., and the Securities and
Exchange Commission and is not intended to be and should not be used by anyone
other than these specified parties.
KPMG LLP
Minneapolis, Minnesota
July 7, 2000
