Federal Housing Finance Agency: Improvements Needed in Controls over Financial Statement Review Process
Fast Facts
Each year, we audit the Federal Housing Finance Agency's financial statements.
During our 2025 audit, we found a problem with FHFA's controls that could lead to the financial statements not conforming to federal accounting standards.
Specifically, FHFA had major workforce reductions during FY 2025. We found that it didn't initially determine that related costs—such as voluntary separation incentive payments—should be reported separately.
Better guidance can help ensure that FHFA's financial statements are accurate and reported as required. Our recommendation addresses this issue.
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Highlights
What GAO Found
During GAO’s audits of the Federal Housing Finance Agency’s (FHFA) fiscal year 2025 financial statements, GAO identified a deficiency in FHFA’s controls over its review of its financial statements for conformity with U.S. generally accepted accounting principles that represents a new significant deficiency in FHFA’s internal control over financial reporting. GAO also found that FHFA completed corrective actions to address seven of the nine recommendations from prior reports that remained open as of September 30, 2024. In conjunction with the recommendations it addressed, FHFA resolved the significant deficiency in controls over its review of accounts payable accruals that GAO reported as a result of its 2024 audits.
Why GAO Did This Study
In January 2026, GAO reported on the results of its audits of FHFA’s fiscal year 2025 financial statements and the deficiency in FHFA’s internal controls. This report presents (1) the deficiency GAO identified during its fiscal year 2025 audit, along with the related recommendation to address this deficiency, and (2) the status of FHFA’s corrective actions to address recommendations related to internal control over financial reporting deficiencies identified in prior reports that remained open as of September 30, 2024. As part of its fiscal year 2025 audits, GAO reviewed FHFA policies and procedures; interviewed FHFA management and staff; observed controls in operation; and tested controls to determine whether FHFA effectively designed, implemented, and operated these controls. GAO also followed up on the status of FHFA’s corrective actions to address open recommendations related to internal control over financial reporting deficiencies that GAO identified in prior reports.
Recommendations
GAO is making one recommendation. Specifically, GAO recommends that FHFA update its financial statement review procedures to include guidance to consider the potential effect of significant changes in transactions on the presentation of FHFA’s financial statements. FHFA disagreed that there is a deficiency that requires revision to existing procedures. As discussed in the report, GAO maintains that its recommendation would reduce FHFA’s risk of misstating its financial statements.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Federal Housing Finance Agency | The Director of FHFA should update FHFA's financial statement review procedures to include specific guidance for financial reporting personnel to consider the potential effect of significant changes in the magnitude or types of transactions on the presentation of information in FHFA's financial statements. (Recommendation 1) |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
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