This audit report was reissued on February 13, 2018 to correct the Combined Statement of Budgetary Resources for the period ended September 30, 2017 on page 44. The Budget Authority and Outlays, Net section is now included.
This audit report was previously reissued on November 27, 2017 to correct an error in a number reported for deobligations on page 16 from $206.9 million to $71.9 million. The sentence was changed from “Of the $276.5 million identified as invalid deobligations during the fiscal year 2016 audit, $206.9 million had not been deobligated at the end of fiscal year 2017” to “Of the $276.5 million identified as invalid deobligations during the fiscal year 2016 audit, $71.9 million had not been deobligated at the end of fiscal year 2017.”
This report presents the results of our audit of FHA’s fiscal years 2017 and 2016 (restated) financial statements, including our report on FHA’s internal control and test of compliance with selected provisions of applicable laws and regulations.
In our opinion, FHA’s fiscal years 2017 and 2016 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 2017 Annual Management Report. The results of our audit of FHA’s principal financial statements and notes for the fiscal years ending September 30, 2017 and 2016, 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 two material weaknesses, two 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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Status2018-FO-0003-001-AOpenClosedClosed on Febrero 25, 2019
Establish and implement an effective quality control process to prevent or detect model processing errors cited in our report and prevent other similar model processing errors in the future.
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Status2018-FO-0003-001-BOpenClosedClosed on Septiembre 30, 2019
Reevaluate FHA’s existing model documentation for single-family, HECM, and multifamily models to determine whether their current state is acceptable, so that it provides the intended users a thorough understanding of how the model works and also allows new users to assume responsibility for the model’s use (operational procedures). Based on this review, FHA should make adjustments as needed to the model documentation. At a minimum, these adjustments should include appropriate actions taken to address model documentation deficiencies cited in our report.
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Status2018-FO-0003-001-COpenClosedClosed on Septiembre 30, 2019
Review FHA’s existing model coding for single-family, HECM, and multifamily models and make necessary changes to make them consistent with industry’s best practices in model coding. At a minimum, FHA should implement actions to address model coding deficiencies cited in our report.
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Status2018-FO-0003-001-DOpenClosedClosed on Octubre 15, 2019
Establish and implement policies and procedures for assessing and monitoring the reliability of the work performed by FHA’s modeling contractors.
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Status2018-FO-0003-001-EOpenClosedClosed on Agosto 13, 2019
Revisit the model’s ability to predict future performance of the single-family portfolio, based on our concerns expressed in this report regarding relationships of certain variables (such as loan-to-value ratio and FICO scores to prepayment) that are not consistent with our expectations. FHA should provide us an analysis to support its position if it believes that a model design change is not warranted.
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Status2018-FO-0003-001-FOpenClosedClosed on Noviembre 15, 2017
Correct the impact of all the modeling errors that we identified in this report.
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Status2018-FO-0003-002-AOpenClosed$270,747,281.00Funds 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 the $270.7 million identified as invalid obligations in fiscal year 2017 is deobligated as appropriate.
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Status2018-FO-0003-002-BOpenClosedClosed on Junio 06, 2018
Develop and implement policies, procedures, and controls to ensure that he obligation is recognized when the loan guarantee commitment or the direct loan obligation is made and the subsidy cost expense is recognized when the loan is endorsed for loan guarantees and when the loan is disbursed for direct loans.
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Status2018-FO-0003-002-COpenClosedClosed on Noviembre 02, 2018
Develop and implement a reconciliation process to ensure that the information in various systems is consistent for all accounting events.
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Status2018-FO-0003-002-DOpenClosedClosed on Septiembre 11, 2018
Develop and implement (1) a methodology to estimate accrued liabilities for property contracts to account for expenses that had been incurred by contractors but not billed and (2) a process to ensure that an audit trail exists for identifying accruals in the general ledger.
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Status2018-FO-0003-002-EOpenClosedClosed on Agosto 20, 2018
Develop and implement policies and procedures to ensure that the reasonableness and appropriateness of the quarterly supplemental claims accrual estimation methodology is periodically reviewed.
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Status2018-FO-0003-002-FOpenClosedClosed on Octubre 31, 2019
Develop and implement policies, procedures, and controls to ensure that the reported current-year endorsements in HERMIT and SFHEDW agree with the current-year endorsements in CHUMS.
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Status2018-FO-0003-002-GOpenClosedClosed on Julio 03, 2018
Strengthen existing internal control to ensure that amounts reported on the financial statements agree with the appropriate supporting documentation.
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Status2018-FO-0003-002-HOpenClosedClosed on Marzo 14, 2018
Restate the fiscal year 2016 financial statement notes to correct the inaccurate loan guarantee amounts reported by FHA.
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Status2018-FO-0003-002-IOpenClosedClosed on Julio 26, 2018
Develop and implement procedures and controls to ensure that management reviews and approves changes in the reestimate workbook before they are implemented and maintains documentation to support the rationale for making changes in the reestimate workbook.
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Status2018-FO-0003-002-JOpenClosedClosed on Marzo 14, 2018
Correct the presentation error related to the allocation of reestimates in FHA’s fiscal year 2017 financial statements.
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Status2018-FO-0003-002-KOpenClosedClosed on Marzo 14, 2018
Assess whether prior-year financial statements need to be restated to correct the impact of the presentation error in the allocation of reestimates identified in fiscal year 2017.