Management Report: Opportunities for Improvement in FHFA’s Evaluation of Internal Control over Financial Reporting, Jun 14, 2017

This post first appeared on GAO. Read the original article.

What GAO Found

During its audit of the Federal Housing Finance Agency’s (FHFA) fiscal years 2016 and 2015 financial statements, GAO identified deficiencies in FHFA’s evaluation of internal control over financial reporting. This includes the FHFA Office of the Inspector General’s (FHFA-OIG) evaluation of its own internal control over financial reporting as FHFA-OIG’s reported amounts constitute a material portion of the consolidated FHFA financial statements. Specifically, GAO found that during FHFA’s internal control evaluation, FHFA and the FHFA-OIG did not (1) adequately document their consideration of materiality thresholds and risk assessments, (2) adequately document their consideration of all internal control components and related principles, and (3) adequately identify and document financial reporting control activities. In addition, FHFA did not maintain independent roles in the implementation and monitoring of control activities. GAO did not consider these deficiencies to be material weaknesses or significant deficiencies, either individually or collectively, but nonetheless they warrant FHFA management’s attention. GAO is making nine recommendations to FHFA to address the deficiencies identified related to FHFA’s evaluation of internal control over financial reporting that were identified by GAO during the fiscal year 2016 FHFA audit. FHFA stated that it agreed with the nine recommendations GAO made in the report and described actions it is taking or plans to take to address each recommendation. GAO will evaluate FHFA’s actions for addressing the deficiencies identified in the report as part of GAO’s audit of FHFA’s fiscal year 2017 financial statements.

Why GAO Did This Study

The purpose of this report is to present internal control deficiencies identified during GAO’s audit of FHFA’s fiscal years 2016 and 2015 financial statements. There were no prior recommendations outstanding for FHFA related to past financial statement audits.

What GAO Recommends 

GAO is making nine recommendations to FHFA to address the deficiencies identified related to FHFA’s evaluation of internal control over financial reporting that were identified by GAO during the fiscal year 2016 FHFA audit. FHFA stated that it agreed with the nine recommendations GAO made in the report and described actions it is taking or plans to take to address each recommendation. GAO will evaluate FHFA’s actions for addressing the deficiencies identified in the report as part of GAO’s audit of FHFA’s fiscal year 2017 financial statements.

For more information, contact J. Lawrence Malenich at (202) 512-3406 or malenichj@gao.gov.

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