The Chief Financial Officers Act of 1990 (Public Law 101-576), as amended, requires the Office
of Inspector General to audit the financial statements of the Federal Housing Administration
(FHA) annually. We audited the accompanying financial statements and notes of FHA as of and
for the fiscal years ending September 30, 2018 and 2017 (restated), which are comprised of the
balance sheets, related statements of net cost and changes in net position, and combined
statements of budgetary resources for the years then ended. Additionally, we audited the
restatement adjustments made by FHA in fiscal year 2018 to restate its fiscal year 2017 financial
statements and notes.
In our opinion, FHA’s fiscal years 2018 and 2017 financial statements were presented fairly, in
all material respects, in accordance with the U.S. generally accepted accounting principles for the
Federal Government. Our opinion is reported in FHA’s Fiscal Year 2018 Annual Management
Report. The results of our audit of FHA’s principal financial statements and notes for the fiscal
years ending September 30, 2018 and 2017, including our report on FHA’s internal control and
test of compliance with selected provisions of laws and regulations applicable to FHA, are
presented in this report. Our audit disclosed one material weaknesses, three significant
deficiencies in internal controls, and no instances of noncompliance with applicable laws and
regulations, which are discussed further in the body of this report.
Recommendations
Housing
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Status2019-FO-0002-001-AOpenClosedClosed on Marzo 26, 2019
Correct the impact of all of the modeling errors identified in this report.
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Status2019-FO-0002-001-BOpenClosedClosed on Septiembre 30, 2019
Revise the modeling policies and procedures to use the established HECM loan limits in the HECM LLG cash flow model.
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Status2019-FO-0002-001-COpenClosedClosed on Septiembre 30, 2019
Develop alternative policies and procedures that would enable the use of the final single-family LLG cash flow model results and HECM return on notes cash flow model results in the final ROA models.
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Status2019-FO-0002-001-DOpenClosedClosed on Septiembre 30, 2019
Reassess the HECM assumption that mortgages with an unpaid principal balance greater than the maximum claim amount will not be assigned to HUD and perform the following: (1) compare this assumption to historical experience, (2) document the basis for selecting the assumption as opposed to alternative assumptions, and (3) determine the impact of this assumption and the associated risk.
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Status2019-FO-0002-001-EOpenClosedClosed on Septiembre 23, 2019
Reassess the model design that was implemented to avoid the double counting of the cash flows for HECM mortgages in the LLG cash flow and ROA models and perform the following: (1) determine whether there are alternative methodologies that will not result in the exclusion of cash flows in both models, (2) document the basis of the selected methodology, and (3) determine the impact and risk of the selected methodology.
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Status2019-FO-0002-001-FOpenClosedClosed on Marzo 26, 2019
Restate the fiscal year 2017 financial statements to correct the impact of using the improper discounting methodology in the HECM ROA model in fiscal year 2017.
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Status2019-FO-0002-002-AOpenClosedClosed on Septiembre 26, 2019
Implement an automated subsidiary ledger system with the capability of obtaining loan-level transaction data from FHA, Treasury, and FFB source systems.
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Status2019-FO-0002-002-BOpenClosedClosed on Septiembre 30, 2019
Work with Treasury and FFB to receive monthly loan-level transaction reports.
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Status2019-FO-0002-002-COpenClosedClosed on Septiembre 26, 2019
Identify the cause for the accrued interest differences and determine the correct accounting treatment.
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Status2019-FO-0002-002-DOpenClosedClosed on Septiembre 27, 2019
Establish policies and procedures for recording and accounting for manual transactions, including the accounting rationale for the principal and interest on the direct loans and accrued interest on the borrowings.
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Status2019-FO-0002-002-EOpenClosedClosed on Marzo 26, 2019
Correct the error related to the allocation of the liquidating reestimates in fiscal years 2017 and 2018.
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Status2019-FO-0002-002-FOpenClosedClosed on Marzo 26, 2019
Restate salary and administrative costs on FHA’s fiscal year 2017 statement of net cost, statement of net position, and footnote disclosures.
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Status2019-FO-0002-002-GOpenClosedClosed on Marzo 26, 2019
Require FHA and HUD OCFO to work together to determine a policy and procedure to ensure that both parties receive and provide complete information related to salaries and administrative costs.
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Status2019-FO-0002-002-HOpenClosedClosed on Octubre 28, 2019
Establish and implement a review process for salary and administrative cost information that is received from HUD OCFO to ensure that the information is complete and accurate.
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Status2019-FO-0002-002-IOpenClosed$399,090,727.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Closed on Junio 18, 2024Ensure that $399.1 million identified as invalid obligations in fiscal year 2018 is deobligated as appropriate.
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Status2019-FO-0002-002-JOpenClosedClosed on Septiembre 30, 2019
Document the rationale and policy for the crosswalks used to prepare the financial statement note line items.
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Status2019-FO-0002-002-KOpenClosedClosed on Septiembre 30, 2019
Document and implement policies and procedures, which include a review process to ensure that the general ledger accounts are correctly crosswalked to financial statement note line items.
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Status2019-FO-0002-002-LOpenClosedClosed on Marzo 26, 2019
Restate the fiscal year 2017 financial statement notes to correct inaccurate classifications, expenses, and market value balances reported by FHA.
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Status2019-FO-0002-002-MOpenClosedClosed on Septiembre 30, 2021
In conjunction with the loan-servicing contractor, determine what actions can be taken to ensure that recorded assignments are reviewed in a timely manner after receipt.
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Status2019-FO-0002-002-NOpenClosedClosed on Marzo 30, 2020
Develop and implement a billing and sanctioning process to ensure that FHA bills servicers for the costs incurred to obtain recorded assignments from the counties’ recorder’s offices and sanctions the servicers when they do not provide the recorded assignments within 6 months of claim payment.
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Status2019-FO-0002-002-OOpenClosedClosed on Marzo 30, 2020
Improve the tracking of recording assignments by modifying the HERMIT assignment timeline to include date fields for servicers’ (1) receipt of recorded assignments from counties and (2) mailing of recorded assignments to the loan-servicing contractor.
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Status2019-FO-0002-003-AOpenClosedClosed on Marzo 18, 2020
Establish a timeframe and process to notify the Office of Single Family Housing that funds or documents were not received so noncompliant lenders can be referred to the MRB within 14 business days for temporary suspension or termination and notify FHA of any noncompliant lenders accordingly.