The inspector general (IG) for the U.S. Department of Housing and Urban Development (HUD) stated in a report that it could not sign off on financial statements made by Ginnie Mae because of accounting errors in statements for the year ending Sept. 30, 2014, and the agency’s failure to provide enough information.
“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 non-pooled loan assets from Ginnie Mae’s defaulted issuers’ portfolio and $735 million in liability for loss on the mortgage-backed securities program guaranty,” according to the report summary.
The report identified four material weaknesses and one significant deficiency in Ginnie Mae’s internal controls, attributing inadequate monitoring, oversight and governance of its accounting and reporting functions by the executive management team; loss of several key Office of Chief Financial Officer personnel; and the inability to track accounting transactions and events at a loan level because of system limitations to these findings.
The material weaknesses included findings that material asset balances related to nonpooled loans were not auditable, weaknesses in Ginnie Mae’s internal controls over financial reporting, unreliable mortgage-backed security loss liability balances and financial management governance issues.
The significant deficiency concerned Ginnie Mae’s system security controls on financial management information. The security system did not fully comply with federal requirements and Ginnie Mae’s own security policies.
According to an article by The Wall Street Journal, Ginnie Mae guarantees around $1.5 trillion worth of mortgage-backed securities that contain loans backed by the Federal Housing Administration and other government agencies. Ginnie Mae is a part of HUD, and although “HUD’s inspector general raised similar red flags on HUD’s overall financial statements made in 2004 and 1999, this was the first time Ginnie Mae’s financial statements were singled out.”