Management Report: Federal Housing Finance Agency Should Improve Controls over Personnel and Payroll Information

GAO-23-106487 Published: Apr 19, 2023. Publicly Released: Apr 19, 2023.
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Fast Facts

We audit the Federal Housing Finance Agency's financial statements every year.

During our 2022 audit, we identified issues with FHFA's internal controls related to the processing of personnel and payroll information. Internal controls are processes to reasonably assure that transactions are properly authorized and recorded.

Specifically, we found instances where FHFA:

  • Recorded the wrong employee benefits (i.e., life insurance and retirement plan) information
  • Paid an employee a cash award for more than the authorized amount
  • Categorized payroll costs that didn't match employee time charges

Our 4 recommendations address these issues.

image of hand touching a virtual payroll screen

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Highlights

What GAO Found

During the audits of the Federal Housing Finance Agency's (FHFA) fiscal years 2022 and 2021 financial statements, GAO identified deficiencies in FHFA's internal control over the processing of personnel and payroll information. GAO did not consider these deficiencies to be material weaknesses or significant deficiencies, either individually or collectively. Nonetheless, they warrant FHFA management attention. Specifically, GAO found that FHFA did not reasonably assure that (1) it accurately recorded employee benefits information, (2) gross cost information in its financial statements was supported by detailed employee time charges, and (3) cash awards paid to employees and recorded in its financial statements matched the amounts management authorized.

GAO communicated to FHFA management detailed information regarding these control deficiencies and made four new recommendations to address them.

Why GAO Did This Study

The purpose of this report is to communicate control deficiencies identified during GAO's audit testing of FHFA's 2022 and 2021 payroll operating expenses and GAO's four recommendations related to these new deficiencies. This report is intended for FHFA management's use.

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Recommendations

GAO is making four recommendations to help FHFA reasonably assure that payroll-related costs are properly supported and recorded in the financial statements. FHFA agreed with GAO's four recommendations and described actions it has taken, or plans to take, to address each recommendation.

Recommendations for Executive Action

Agency Affected Recommendation Status
Federal Housing Finance Agency The Director of FHFA should ensure that the appropriate management officials undertake a detailed review of existing personnel records to identify and correct errors. (Recommendation 1)
Open
In its written comments on our draft report, FHFA stated it agreed with this recommendation and that it will use contractor support to review personnel records for accuracy. We will continue to monitor FHFA's efforts to address this recommendation.
Federal Housing Finance Agency The Director of FHFA should ensure that the appropriate management officials develop and implement a process to monitor controls over the recording of benefits information for employees with prior federal service to reasonably assure that these controls are operating as designed. (Recommendation 2)
Open
In its written comments on our draft report, FHFA stated it agreed with this recommendation and that it updated procedures to include a new process to review and verify benefit election information within 30 days. It also stated that periodic reviews of this new process will be performed to ensure compliance. We will continue to monitor FHFA's efforts to address this recommendation.
Federal Housing Finance Agency The Director of FHFA should ensure that the appropriate management officials develop a process to periodically verify that gross cost information in FHFA's financial statements is supported by detailed employee time charges. (Recommendation 3)
Open
In its written comments on our draft report, FHFA stated it agreed with this recommendation and that it will update payroll oversight procedures to include periodic verification of detailed employee time charges. We will continue to monitor FHFA's efforts to address this recommendation.
Federal Housing Finance Agency The Director of FHFA should ensure that appropriate management officials develop a process to reasonably assure that recorded cash award payments match what management authorized as documented on the approved SF 52. (Recommendation 4)
Open
In its written comments on our draft report, FHFA stated it agreed with this recommendation and that it updated its procedures related to awards to clearly document how to process various awards and to include periodic review of award actions. We will continue to monitor FHFA's efforts to address this recommendation.

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