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) |
According to FHFA, its efforts to address this recommendation were ongoing as of September 30, 2023. FHFA awarded a contract for three contractors to independently conduct a comprehensive review of all FHFA electronic official personnel folders (eOPF). This review includes identifying all errors related to the accuracy and completeness of personnel and payroll actions and their supporting documentation. As errors are identified, the Office of Human Resource Management (OHRM) will be responsible for making the needed corrections. OHRM has developed a project plan and work is under way. GAO will evaluate FHFA's efforts to address this recommendation as part of our audit of FHFA's fiscal year 2024 financial statements.
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| 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) |
According to FHFA, its efforts to address this recommendation were ongoing as of September 30, 2023. FHFA updated its benefits processing standard operating procedure (effective March 2023) to include a new process. Specifically, it plans to have a senior benefits specialist review a newly hired employee's electronic official personnel folder (including those with prior federal service) and benefits elections within 30 days of receipt to verify that the information is accurate. GAO will evaluate FHFA's efforts to address this recommendation as part of our audit of FHFA's fiscal year 2024 financial statements.
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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) |
According to FHFA, its efforts to address this recommendation were ongoing as of September 30, 2023. FHFA updated its payroll oversight procedures (effective August 2023) to include a process for a senior financial management specialist, or designee, within the Office of Budget and Financial Management, to conduct a periodic review of the financial coding information associated with employee time charges and to follow up with the Office of Human Resources Management if any charges are identified that might be erroneous and in need of correction. GAO will evaluate FHFA's efforts to address this recommendation as part of our audit of FHFA's fiscal year 2024 financial statements.
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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) |
According to FHFA, its efforts to address this recommendation were ongoing as of September 30, 2023. FHFA implemented an awards standard operating procedure (effective April 2023), which includes periodic reviews of processed personnel actions, including awards, to verify that personnel actions are correctly documented and coded on the SF 52. FHFA informed us that it has completed a periodic review of all fiscal year 2023 excellence awards. GAO will evaluate FHFA's efforts to address this recommendation as part of our audit of FHFA's fiscal year 2024 financial statements.
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