Washington DC | Dallas TX | Irvine CA
202.628.2000

WBK Industry News - Federal Regulatory Developments

HUD Internal Audit Reveals Pervasive Material Errors

Recently, the U.S. Department of Housing and Urban Development’s (“HUD”) Office of Inspector General (“OIG”) released an audit of HUD’s fiscal years 2016 and 2015 (Restated) which found billions of dollars’ worth of accounting errors in HUD’s financial reporting.

HUD OIG is required by the Chief Financial Officers Act of 1990, as amended by the Government Management Reform Act of 1994 and implemented by Office of Management and Budget Bulletin 15-02, to audit HUD’s principal financial statements.  Due to delays caused by internal accounting changes at HUD and late financial restatements issued by HUD’s component entities, Ginnie Mae and the Federal Housing Administration (“FHA”), the OIG was not able to provide a full opinion on HUD’s fiscal years 2016 and 2015 financial restatements until March, 2017.

The OIG’s audit uncovered multiple shortcomings with HUD’s financial statements and reporting structure.  First, the audit found the financial statement note disclosures contained approximately $278.5 billion in errors, due to incorrect data entry, omission of restated balances, incorrect data provided by Ginnie Mae and the FHA, and inappropriate rounding adjustments.  Next, $557 million in errors were found due to an incorrect split between budgetary and non-budgetary columns on HUD’s statement of budgetary resources.

Finally, the audit revealed that these errors occurred because HUD had extensive weaknesses in its internal controls covering HUD’s financial reporting.  The OIG found that HUD failed to design and implement an adequate system of internal controls over financial reporting necessary to mitigate the challenges and risks in its complex financial reporting process.

While HUD was alerted to some of these discrepancies by an earlier OIG report, the OIG’s opinion regarding HUD’s rampant reporting errors remained unchanged due to other material matters identified.

The entire HUD OIG audit may be found here.