We contracted with the independent public accounting firm of Sikich CPA LLC to audit the financial statements of FHA as of and for the fiscal year ending September 30, 2025, 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 Sikich 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, Sikich reported
- That FHA’s financial statements as of and for the fiscal year ending September 30, 2025, were presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles.
- One material weakness for fiscal year 2025 in internal control over financial reporting, based on limited procedures performed.
- No reportable noncompliance for fiscal year 2025 with provisions of applicable laws, regulations, contracts, and grant agreements or other matters.
In connection with the contract, we reviewed Sikich’s reports and related documentation and questioned 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, and grant agreements or other matters. Sikich is responsible for the attached Independent Auditors’ Report, dated January 27, 2026, and the conclusions expressed therein. Our review disclosed no instances in which Sikich did not comply, in all material respects, with U.S. generally accepted government auditing standards.
FHA’s financial statements are included in its Annual Management Report, which can be found at- https://www.hud.gov/sites/dfiles/Housing/documents/FHAFY2025ANNUALMGMNTRPT.PDF
Recommendations
Housing
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Status2026-FO-0003-001-AOpenClosed
Implement a process and procedure to ensure a complete and accurate Missing Documents Report is submitted to the General Ledger Division for recording a monthly reclassification entry between HECM loans receivable and accounts receivable.
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Status2026-FO-0003-001-BOpenClosed
Develop a process to (1) monitor receipt of original first notes and mortgages and recorded assignments, (2) follow up with mortgagees who fail to submit documents by the required deadline, and (3) initiate repurchase requests for HECM mortgagees who fail to meet assignment requirements.
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Status2026-FO-0003-001-COpenClosed
Implement procedures to (a) ensure all HECM loan terminations are accurately reported, (b) prevent HECM terminated loans from being included in the loans receivable balance, and (c) prevent inspections and tax payments on HECM terminated loans.
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Status2026-FO-0003-001-DOpenClosed
Implement comprehensive controls to (a) identify all Single Family partial claims related to terminated first mortgages, (b) update the system record of partial claims that will become due and payable when the refinanced mortgages are terminated, and (c) remove partial claims related to terminated mortgages from SMART.
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Status2026-FO-0003-001-FOpenClosed
Implement an enhanced review process to ensure the receipt of partial claim documents is accurately marked in SMART so that the Missing Documents Report will be accurate.
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Status2026-FO-0003-001-GOpenClosed
Determine which report accurately reflects the status of partial claims without original documentation, certify the completeness and accuracy of the identified report, and provide the report to the General Ledger Division for the reclassification entry.
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Status2026-FO-0003-001-HOpenClosed
Transmittal of Independent Public Accountant’s Audit Report on the Federal Housing Administration’s Fiscal Year 2025 Financial Statements
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Status2026-FO-0003-001-IOpenClosed
Record journal entries to reclassify the HECM cases with missing original first notes for more than 90 days from loans receivable to accounts receivable.
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Status2026-FO-0003-001-JOpenClosed
Ensure the report provided by the NSC to reclassify partial claims from loans receivable to account receivable is appropriate for financial reporting and document the decision.
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Status2026-FO-0003-001-KOpenClosed
Implement a procedure to test journal entry posting models and their effect on the financial statements and related note disclosures when there are program changes requiring new journal entries.
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Status2026-FO-0003-001-LOpenClosed
Develop a standard operating procedure that details the rationale, calculation, and underlying support needed for the amounts and narrative descriptions in the financial statement note disclosures, including borrowing authority.
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Status2026-FO-0003-001-MOpenClosed
Implement quality control checks that reconcile financial statement disclosure amounts to the general ledger and other supporting documentation as part of the financial statements review and approval process.