Financial Audit

In Process

In GAO's opinion, FHFA's fiscal years 2010 and 2009 financial statements are fairly presented in all material respects. GAO also concluded that FHFA had effective internal control over financial reporting as of September 30, 2010. GAO found no reportable instances of noncompliance with the laws and regulations it tested. Because fiscal year 2009 was the first full year of FHFA's operations, fiscal year 2010 is the first year in which FHFA prepared comparative financial statements. As discussed in note 10, the fiscal year 2009 statement of net cost presents costs as one program for fiscal year 2009. For fiscal year 2010, FHFA tracked resource allocations and costs by strategic goal (responsibility segments), consistent with the strategic goals identified in its new strategic plan. Consequently, the fiscal year 2010 statement of net cost presents FHFA's costs by strategic goal. In early September 2008, Fannie Mae and Freddie Mac were placed into conservatorship by the Director of FHFA, with the stated intent to stabilize these entities. The assets, liabilities, and activities of the two entities, Fannie Mae and Freddie Mac, are not reflected in FHFA's fiscal years 2010 and 2009 financial statements, based on determinations by the Office of Management and Budget (OMB) and the Department of the Treasury (Treasury) that they do not meet the criteria for inclusion in the financial statements of the U.S. government or the Treasury under federal accounting concepts. Specifically, OMB and Treasury concluded this because the entities are not currently reflected in the federal government's budget and because the conservatorship arrangement is considered to be temporary. FHFA management concurred with this conclusion. Should circumstances change, this conclusion would need to be revisited. As of September 30, 2010, Fannie Mae and Freddie Mac have received about $148.2 billion in direct financial support from Treasury in exchange for Treasury's purchase of the entities' senior preferred stock. Over the longer term, Congress and the executive branch face difficult decisions on how to restructure the entities and promote housing opportunities while limiting the risks to taxpayers and the financial markets. GAO noted other less significant matters involving FHFA's internal controls and will be reporting separately to FHFA management on these matters.