We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of the Government National Mortgage Association’s (Ginnie Mae) contract for financial industry and media marketing services with public relations and communications firm Burson-Marsteller.  We initiated the audit after we became aware of potential issues regarding the amount of funds used for services, which may not have been reasonable or necessary.  Specifically, Ginnie Mae paid the firm to promote members of its senior staff.  Our objective was to determine whether HUD ensured that costs for Ginnie Mae’s contract with Burson-Marsteller were reasonable, necessary, and supported.

HUD did not ensure that all costs associated with Ginnie Mae’s contract with Burson-Marsteller were supported, reasonable, and necessary.  Specifically, HUD did not ensure that (1) Ginnie Mae maintained adequate supporting documentation for invoices paid and (2) costs for promoting members of Ginnie Mae’s senior staff were reasonable and necessary.  This condition occurred because HUD did not have adequate oversight of Ginnie Mae’s procurement and contract administration processes.  As a result, HUD did not have assurance that $1.8 million paid under Ginnie Mae’s contract with Burson-Marsteller was supported and that up to $1.1 million paid was for services that were reasonable and necessary.  Unless HUD requires Ginnie Mae to improve its procurement and contract administration processes and increases its monitoring of Ginnie Mae, Ginnie Mae could incur additional costs under the Burson-Marsteller contract and future contracts that are not supported, reasonable, and necessary.

We recommend that HUD’s Acting Chief Procurement Officer (1) assess Ginnie Mae’s processes and capabilities, and provide technical assistance to ensure that its staff is adequately trained on procurement and contract administration matters; (2) require Ginnie Mae to improve its procurement and contract administration processes to ensure that it follows all applicable requirements, thereby putting up to $259,008 to better use; and (3) increase monitoring to ensure that Ginnie Mae’s costs related to its contract with Burson-Marsteller and any future contracts are supported, reasonable, and necessary.