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We contracted with the independent public accounting firm of CliftonLarsonAllen LLP (CLA) to audit the financial statements of FHA as of and for the fiscal years ended September 30, 2023 and 2022, 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 CLA 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, CLA reported

  • That FHA’s financial statements as of and for the fiscal year ended September 30, 2023 and 2022, were presented fairly, in all material respects, in accordance with U.S. generally accepted accounting principles.
  • No material weaknesses for fiscal year 2023 in internal control over financial reporting, based on limited procedures performed. 
  • One significant deficiency for fiscal year 2023 in internal control over financial reporting, based on the limited procedures performed.  The significant deficiency was related to weaknesses in internal controls over loans receivable.
  • No reportable noncompliance issues for fiscal year 2023 with provisions of applicable laws, regulations, contracts, and grant agreements or other matters.

In connection with the contract, we reviewed CLA’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.  CLA is responsible for the attached Independent Auditors’ Report, dated November 13, 2023, and the conclusions expressed therein.  Our review disclosed no instances in which CLA did not comply, in all material respects, with U.S. generally accepted government auditing standards.

FHA’s audited financial statements are included in FHA’s Annual Management Report which can be found at- FHAFY2023ANNUALMGMNTRPT.PDF (hud.gov).

Recommendation Status Date Issued Summary
2024-FO-0002-001-A Open November 13, 2023 Develop a plan and a timeline that ensures all due and payable partial claims are transferred to the FOC, and subsequently processed by the FOC.
2024-FO-0002-001-B Open November 13, 2023 Develop and implement procedures to i) monitor the transfer of due and payable partial claims from NSC to the FOC for collection, ii) determine the financial statement impact of not referring due and payable partial claims to the FOC, and iii) decide when FHA will record a reclassification entry to accounts receivable for those due and payable partial claims that are not transferred to the FOC timely.
2024-FO-0002-001-C Open November 13, 2023 Consider accounting implications to the gross HECM loans receivable balance for the $20 million lost in security interests.
2024-FO-0002-001-D Open November 13, 2023 Record an adjusting entry to remove the duplicate $44 million from the gross HECM loans receivable balance as of September 30, 2023.
2024-FO-0002-001-E Open November 13, 2023 Identify and remove all duplicate transactions from the accounting module and prevent future occurrences.
2024-FO-0002-001-F Open November 13, 2023 Develop and enhance training for servicing the HECM portfolio.
2024-FO-0002-001-G Open November 13, 2023 Develop corrective procedures to bring the HECM portfolio servicing current, initiate collection proceedings for due and payable loans, redeem the tax certificates for properties for which FHA lost its security interest, and implement a solution to monitor tax payments to prevent tax delinquencies and avoid FHA’s risk of loss in loan security interest.