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Fiscal Years 2016 and 2015 (Restated) HUD Consolidated Financial Statements Audit

November 21, 2016 / Source: HUD

In accordance with the Chief Financial Officers Act of 1990, as amended, we are required to annually audit the consolidated financial statements of the U.S. Department of Housing and Urban Development (HUD) and the stand-alone financial statements of the Federal Housing Administration and the Government National Mortgage Administration (Ginnie Mae).  Our objective was to express an opinion on the fairness of the financial statements in accordance with U.S. generally accepted accounting principles applicable to the Federal Government.  This report presents the results of our audit of fiscal years 2016 and 2015 (Restated) HUD consolidated financial statements, including our report on HUD’s internal control and test of compliance with applicable laws and regulations.

We expressed a disclaimer of opinion on HUD’s fiscal years 2016 and 2015 (Restated) consolidated financial statements because of HUD’s inability to deliver principal financial statements for the fiscal years ending September 30, 2016 and 2015 (Restated) and accompanying notes in a timely manner.  In addition, there were several other  unresolved audit matters, which restricted our ability to obtain sufficient, appropriate evidence to express an opinion.  These unresolved audit matters relate to (1) OGC’s declination of signing the management representation letter; (2) HUD’s improper use of cumulative and first-in, first-out budgetary accounting methods of disbursing community planning and development program funds; (3) the $4.2 billion in nonpooled loan assets from Ginnie Mae’s stand-alone financial statements that we could not audit because Ginnie Mae could not provide adequate support for us to test these asset balances; (4) the improper accounting for HUD’s assets and liabilities related to grant accruals; loan guarantees; property, plant, and equipment; accounts receivable; payables; and prepayments; and (5) material differences between HUD’s subledger and general ledger accounts.  This audit report contains 11 material weaknesses, 7 significant deficiencies in internal controls, and 5 instances of noncompliance with applicable laws and regulations.  These weaknesses were due to an inability to establish a compliant control environment, implement adequate financial accounting systems, retain key financial management staff, and identify appropriate accounting principles and policies.