We contracted with the independent public accounting firm of CliftonLarsonAllen LLP (CLA) to audit the financial statements of FHA as of and for the fiscal years ended September 30, 2022 and 2021, and to provide reports on FHA’s 1) internal control over financial reporting; and 2) compliance with laws, regulations, contracts, and grant agreements and other matters. Our contract with CLA required that the audit be performed in accordance with U.S. generally accepted government auditing standards, Office of Management and Budget audit requirements, and the Financial Audit Manual of the U.S. Government Accountability Office and the Council of the Inspectors General on Integrity and Efficiency.
In its audit of FHA, CLA reported:
- The financial statements as of and for the fiscal year ended September 30, 2022 and 2021, are presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles.
- One material weakness for fiscal year 2022 in internal control over financial reporting, based on the limited procedures performed. The material weakness was related to FHA’s financial accounting and reporting controls over borrowing authority and loan receivables.
- No reportable noncompliance issues for fiscal year 2022 with provisions of applicable laws, regulations, contracts, and grant agreements or other matters.
In connection with the contract, we reviewed CLA’s reports and related documentation and inquired of its representatives. Our review, as differentiated from an audit of the financial statements in accordance with U.S. generally accepted government auditing standards, was not intended to enable us to express, and we do not express, opinions on FHA’s financial statements or conclusions about 1) the effectiveness of FHA’s internal control over financial reporting and 2) FHA’s compliance with laws, regulations, contracts, grant agreements, or other matters. CLA is responsible for the attached Independent Auditors’ Report, dated November 16, 2022, and the conclusions expressed therein. Our review disclosed no instances in which CLA did not comply, in all material respects, with U.S. generally accepted government auditing standards.
FHA’s Annual Management Report, which contains the audited financial statements, can be found at https://www.hud.gov/sites/dfiles/Housing/documents/FHAFY2022ANNUALMGMNTRPT.PDF
Recommendations
Housing
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Status2023-FO-0003-001-AOpenClosedClosed on Agosto 02, 2023
Establish change management and periodic reviews of control activities to ensure regulatory changes, such as Fiscal Service updates to the USSGL, are identified, analyzed, and assessed for potential needed changes to FHA’s established processes.
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Status2023-FO-0003-001-BOpenClosedClosed on Agosto 03, 2023
Establish and ensure appropriate and effective communication protocols between OFAR, FHA, and HUD’s Office of Budget to ensure (1) funding type is clearly indicated within the SF 132 and clear communications are made in differentiating between definite and indefinite borrowing authority, (2) legislative changes in FHA’s borrowing authority are vetted with OMB to ensure appropriate treatment, and (3) – draft SF-133s are reviewed and vetted with HUD and FHA’s budget officers prior to OFAR’s finalization with Treasury and OMB.
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Status2023-FO-0003-001-COpenClosedClosed on Junio 07, 2023
Establish internal control procedures around the borrowings process to include verifying sufficient borrowing authority exists within the SF 132, prior to executing the borrowing request. Such verification should also be included as part of the borrowing review and approval controls.
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Status2023-FO-0003-001-DOpenClosedClosed on Septiembre 27, 2023
Receive a final opinion from HUD’s Office of the Chief Financial Officer’s Appropriation Law Division on whether FHA was in violation of the Antideficiency Act.
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Status2023-FO-0003-001-EOpenClosedClosed on Agosto 10, 2023
Implement procedures to enhance the review of all journal entries recorded in the general ledger by requiring a two-level review that includes the review of source documents for the journal entry (for example, the OMB approved SF 132).
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Status2023-FO-0003-001-FOpenClosedClosed on Junio 07, 2023
Strengthen controls over the preparation of the SF 132 to the SF 133 reconciliation by preparing such reconciliations (1) first, with the unadjusted trial balance and later, with the adjusted trial balance and (2) at the fund level, with detailed documentation of differences, and with sufficient detailed explanations that describe the general ledger impact of the differences.
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Status2023-FO-0003-001-GOpenClosedClosed on Junio 07, 2023
Perform a thorough review of the SF 132 to SF 133 reconciliations and work with Financial Analysis and Controls Division and other divisions and groups to resolve material reconciling items timely.
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Status2023-FO-0003-001-HOpenClosedClosed on Agosto 01, 2024
Coordinate with the Deputy Assistant Secretary for Single Family Housing and HUD’s Office of the Chief Procurement Office (OCPO) in developing effective communication channels between FHA’s NSC and OFAR, and in developing effective monitoring controls to ensure the timely identification and remediation of issues, such as unprocessed documentation and inaccurate records, which may impact the balances reported within FHA’s financial statements.
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Status2023-FO-0003-001-IOpenClosedClosed on Agosto 01, 2024
Develop effective detective controls to ensure HECM loan receivables are accurate and complete, exist, and FHA appropriately holds or controls the rights to any collateral property in connection with the receivable.
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Status2023-FO-0003-001-JOpenClosedClosed on Septiembre 29, 2023
Develop and implement procedures to review the reasonableness of the amounts included in the Missing Documents Report before recording the reclassification entry. Include steps to be followed if the amounts in the report do not appear reasonable.
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Status2023-FO-0003-001-KOpenClosedClosed on Septiembre 27, 2023
Coordinate with the NSC to take all the actions necessary required by HUD Handbook 4000.1 to ensure that FHA’s interests are protected with respect to the partial claims for which FHA has not received the original promissory note and recorded mortgage.
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Status2023-FO-0003-001-LOpenClosedClosed on Septiembre 29, 2023
Coordinate with the NSC to conduct a detailed review of the HECM assigned notes portfolio to identify and record all default events that have occurred to date and initiate collection proceedings in accordance with the applicable HUD Handbooks.
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Status2023-FO-0003-001-MOpenClosedClosed on Mayo 30, 2024
Coordinate with the NSC and the OCPO to determine whether the information technology system could be enhanced to track the annual payment of state property taxes for the HECM portfolio.