Management Report: Federal Housing Finance Agency Should Improve Controls over Personnel and Payroll Information
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.
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.
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) |
In September 2024, FHFA completed its review of existing personnel records and determined that it corrected or otherwise addressed the issues identified. During fiscal year 2025, FHFA conducted an internal review and determined that its record review reasonably assured the accuracy of benefits information in existing employee records.
|
| 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) |
In March 2023, FHFA implemented documented procedures for its human resources staff to review the personnel files of new employees with prior federal service within 30 days of receipt to ensure the employee's benefits information is accurately recorded in FHFA's records. During fiscal year 2025, FHFA conducted an internal review and determined the procedures were implemented as intended.
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| 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) |
In May 2024, FHFA documented procedures to clarify its bi-weekly payroll procedures for resolving coding errors and to include periodic verification of employee time charges. During fiscal year 2025, FHFA conducted an internal review and determined the procedures were implemented as intended.
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| 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) |
During our fiscal year 2024 audit, we (1) determined that FHFA updated its documented procedures to clarify award processing steps, (2) did not identify any errors from testing a statistical sample of payroll transactions that included award transactions as documented on the SF-52, and (3) determined that there was evidence that FHFA performed periodic reviews to evaluate the accuracy of its award actions.
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