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This report presents the results of our fiscal year 2014 audit of Ginnie Mae’s financial statements, including our report on Ginnie Mae’s internal control and test of compliance with selected provisions of laws and regulations applicable to Ginnie Mae.  We contracted with the independent certified public accounting firm of CliftonLarsonAllen LLP to audit Ginnie Mae’s fiscal year 2013 financial statements.  CliftonLarsonAllen was responsible for its audit reports and the conclusions expressed on those reports.

In regards to the fiscal year 2014 audit, we were unable to obtain sufficient appropriate evidence to express an opinion on the fairness of the $6.6 billion in nonpooled loan assets from Ginnie Mae’s defaulted issuers’ portfolio and $735 million in liability for loss on the mortgage-backed securities program guaranty.   Additionally, Ginnie Mae improperly accounted for Federal Housing Administrationreimbursable costs as an expense instead of capitalizing the costs as an asset. This error resulted in the misstatement of the asset and net income.  Overall, the issues cited in this report were tied to the problems associated with the acquisition and management of a multi-billion dollar defaulted issuers’ portfolio, which is a non-core segment of Ginnie Mae’s business.  Due to the scope limitation in our audit work and the effects of material weaknesses in internal control, we have not been able to obtain sufficient appropriate evidence to provide a basis for an audit opinion on Ginnie Mae’s fiscal year 2014 financial statements.  Accordingly, we did not express an opinion on the fiscal year 2014 financial statements.

Our review noted four material weaknesses and one significant deficiency over internal controls over financial reporting. Our audit recommendations are directed toward strengthening Ginnie Mae’s governance of its financial operations.