Federal Reports

Under the Affordable Care Act, the Centers for Medicare & Medicaid Services (CMS) operates the federally facilitated marketplace (Federal marketplace) in States that chose not to operate their own marketplaces. Prior OIG audits of the Federal marketplace covering the 2014 coverage year determined that not all of the marketplace's internal controls were effective in ensuring that individuals were properly determined eligible for qualified health plans (QHPs) and insurance affordability programs. Further, since 2014, additional eligibility verification requirements have become effective. The results of our prior audits and these additional requirements led us to review the marketplace's eligibility determinations for the 2018 coverage year.

This report presents the results of our audit of Ginnie Mae’s fiscal year 2019 financial statements, including our report on Ginnie Mae’s internal control and test of compliance with selected provisions of laws, regulations, and contracts applicable to Ginnie Mae.In fiscal year 2019, we were unable to obtain sufficient, appropriate evidence to express an opinion on the fairness of Ginnie Mae’s financial statements. Specifically, our work noted significant modeling concerns affecting Ginnie Mae’s guaranty asset, guaranty liability, and allowance for loan losses, which prevented us from completing our audit work due to time constraints imposed by the statutory reporting deadlines. These issues concerned the appropriateness and reasonableness of the model methodologies, specifications, and model assumptions, which raised questions about the reliability of the significant accounting estimates produced by these models. Additionally, we were unable to audit the nonpooled loan assets due to (1) documentation challenges to support balances for claims receivable and reimbursable costs and (2) insufficient time to complete necessary audit procedures for mortgage loans held for investment and acquired properties. Given the significance of all of these limitations combined, it is our professional opinion that there may be risks that undetected misstatements that could be material may exist in these statements. Therefore, we deemed our audit scope to be insufficient to express an opinion on Ginnie Mae’s fiscal year 2019 financial statements as a whole. We have 18 new audit recommendations in this year’s report. Based on the results of our work, we identified two material weaknesses, one significant deficiency, and one reportable noncompliance with selected provisions of laws, regulations and contracts.

We are required to audit the consolidated financial statements of the U.S. Department of Housing and Urban Development (HUD) annually in accordance with the Chief Financial Officers Act of 1990 as amended. Our objectives were to express an opinion on the fair presentation of HUD’s consolidated financial statements and report on HUD’s internal controls over financial reporting and compliance with select provisions of applicable laws, regulations, contracts, and grant agreements. This report supplements our independent auditor’s report on the results of our audit of HUD’s consolidated financial statements for the fiscal year ending September 30, 2019.We expressed a qualified opinion on HUD’s consolidated financial statements for fiscal year 2019 because of the significant effects of certain unresolved audit matters, which restricted our ability to obtain sufficient, appropriate evidence about HUD’s noncredit reform loans1 and other liabilities resulting from Ginnie Mae’s guaranty asset and guaranty liability. This report provides additional details on one material weakness, three significant deficiencies, and three instances of noncompliance with laws, regulations, contracts, and grant agreements. The most significant finding relates to instances in which HUD’s accounting did not always comply with Federal generally accepted accounting principles. We also identified (1) weaknesses in internal controls over financial reporting, (2) weaknesses in the financial management system and computing environment, (3) financial management governance deficiencies, and (4) three instances of noncompliance with laws and regulations. These findings occurred because of insufficient policies and procedures and limitations with HUD’s financial management systems.Current recommendations are included after each finding, while outstanding prior-year recommendations are included in the Followup on Prior Audits section of this report. Most significant are those in which we recommend that HUD (1) improve its validation methodology for accrued grant liabilities and (2) develop, implement, and improve policies and procedures.