Federal Housing Finance Agency 

Office of Inspector General

FHFA Complied with Applicable 

Improper Payment Requirements 

for Fiscal Year 2019 

Audit Report • AUD-2020-003 • February 13, 2020
AUD-2020-003

February 13, 

2020

Executive Summary

The Improper Payments Information Act of 2002, as amended by the 

Improper Payments Elimination and Recovery Act of 2010 and the Improper 

Payments Elimination and Recovery Improvement Act of 2012 (collectively, 

IPIA), requires federal agencies to periodically review, estimate, and report 

programs and activities that may be susceptible to significant improper 

payments. IPIA, among other things, directs federal Inspectors General to

determine annually whether their respective agencies are in compliance with 

the statute and to submit a report to the head of the agency, Congressional 

oversight committees, the Comptroller General of the United States, and the 

controller of the Office of Management and Budget (OMB). 

The Federal Housing Finance Agency (FHFA or Agency), through its Office 

of General Counsel (OGC), maintains that most requirements of IPIA are not 

applicable to the Agency because those requirements apply only to payments 

made with federal funds and FHFA does not finance its operations with 

federal funds. That said, FHFA asserts that it has put into place internal 

controls to achieve the intent of IPIA. We conducted a performance audit to 

assess the Agency’s compliance with IPIA for fiscal year 2019. We found that 

FHFA complied with the applicable provisions of IPIA. 

This report was prepared by Heath Wolfe, Director of Audit Operations, with 

the assistance of Bob Taylor, Senior Advisor. We appreciate the cooperation 

of FHFA staff, as well as the assistance of all those who contributed to the 

preparation of this report. 

This report has been distributed to FHFA, Congress, OMB, the Government 

Accountability Office (GAO), and others and will be posted on our website, 

www.fhfaoig.gov. 

Marla A. Freedman, Deputy Inspector General for Audits /s/
OIG • AUD-2020-003 • February 13, 2020 3

TABLE OF CONTENTS ................................................................ 

EXECUTIVE SUMMARY .............................................................................................................2

ABBREVIATIONS .........................................................................................................................4

BACKGROUND .............................................................................................................................5

FACTS AND ANALYSIS...............................................................................................................6

Not All IPIA Requirements Are Applicable to FHFA .............................................................6

CONCLUSION................................................................................................................................8

FHFA COMMENTS AND OIG RESPONSE.................................................................................8

OBJECTIVE, SCOPE, AND METHODOLOGY...........................................................................9

APPENDIX: FHFA MANAGEMENT RESPONSE ....................................................................11

ADDITIONAL INFORMATION AND COPIES .........................................................................12
OIG • AUD-2020-003 • February 13, 2020 4

ABBREVIATIONS ....................................................................... 

AFR Agency Financial Report

FHFA or Agency Federal Housing Finance Agency 

GAO Government Accountability Office

IPIA Improper Payments Information Act of 2002, as amended by the 

Improper Payments Elimination and Recovery Act of 2010, and the 

Improper Payments Elimination and Recovery Improvement Act of 

2012 

OGC Federal Housing Finance Agency Office of General Counsel 

OIG Federal Housing Finance Agency Office of Inspector General

OMB Office of Management and Budget

OMB M-18-20 Office of Management and Budget Memorandum M-18-20, 

Transmittal of Appendix C to OMB Circular A-123, Requirements for 

Payment Integrity Improvement

PAR Performance and Accountability Report
OIG • AUD-2020-003 • February 13, 2020 5

BACKGROUND .......................................................................... 

Because federal agencies regularly make payments to program beneficiaries, grantees, 

vendors, and contractors, or on behalf of program beneficiaries, there is a possibility that 

some of these payments may be “improper” in one or more respects. As guidance to federal 

agencies, OMB defines “improper payment” as:

[A]ny payment that should not have been made or that was made in an incorrect 

amount under statutory, contractual, administrative, or other legally applicable 

requirements. Incorrect amounts are overpayments or underpayments that are 

made to eligible recipients (including inappropriate denials of payment or service, 

any payment that does not account for credit for applicable discounts, [footnote 

omitted] payments that are for an incorrect amount, and duplicate payments). 

An improper payment also includes any payment that was made to an ineligible 

recipient or for an ineligible good or service, or payments for goods or services 

not received (except for such payments authorized by law). In addition, when an 

agency’s review is unable to discern whether a payment was proper as a result of 

insufficient or lack of documentation, this payment must also be considered an 

improper payment.1

IPIA directs federal agencies to put into place internal controls designed to eliminate payment 

errors, waste, fraud, and abuse, including reducing and recapturing erroneous payments. 

OMB M-18-20 establishes steps for agencies to follow to identify those operations subject to 

IPIA, and to design and implement appropriate internal controls to reduce the risk of improper 

payments: 

1. Review all programs and activities and identify those that are susceptible to 

significant improper payments;

2. Obtain a statistically valid estimate of the annual amount of improper payments 

in programs and activities identified in Step 1;

3. Implement a plan sufficient to prevent or reduce improper payments; and 

 

1 OMB M-18-20, Transmittal of Appendix C to OMB Circular A-123, Requirements for Payment Integrity 

Improvement (June 26, 2018) (online here) [hereinafter OMB M-18-20].
OIG • AUD-2020-003 • February 13, 2020 6

4. Report annually on improper payments in the agency financial report (AFR) or 

the performance and accountability report (PAR).2

To determine an agency’s compliance with IPIA, IPIA and OMB M-18-20 require each 

agency Inspector General to review their agency’s AFR or PAR (and any accompanying 

information) for the most recent fiscal year. Inspectors General are to complete their annual 

compliance reviews by May 15th of the following year and report their findings.3 If an 

Inspector General finds that an agency is not in compliance with IPIA, the agency is required 

to submit a plan to Congress describing the actions it will take to come into compliance.4

FHFA issued its fiscal year 2019 PAR on November 19, 2019. Pursuant to IPIA, we 

conducted this performance audit. 

FACTS AND ANALYSIS ............................................................... 

Not All IPIA Requirements Are Applicable to FHFA

In its 2019 PAR, FHFA makes no representations that it is covered by IPIA. Since 2012, 

FHFA’s OGC has advised our office that it has concluded that various subsections of IPIA are 

only applicable to payments made with federal funds, and that these subsections do not apply 

to FHFA because it is an independent regulatory agency that does not seek appropriations for 

its operations. Consequently, OGC reasons that payments made by the Agency, such as 

payments to vendors, are not transfers of federal funds.5

Figure 1 below lists the requirements in IPIA that an Inspector General is to review to 

determine an agency’s compliance with IPIA, and FHFA’s determination of the requirements’ 

applicability to its operations.

 

2 OMB M-18-20, App. C. A PAR provides both financial and performance information that enables the 

President, Congress, and the public to assess the performance of an agency relative to its mission and to 

demonstrate accountability. An AFR provides similar information, but a performance section is not included. 

See OMB, Circular A-136 Revised, Financial Reporting Requirements, at 14-15 (July 30, 2018).

3 OMB M-18-20, App. C, supra note 1, at Part IV § A(2).

4

 Improper Payments Elimination and Recovery Act of 2010 § 3(c)(1)(A), see 31 U.S.C. § 3321 note.

5 See 12 U.S.C. § 4516(f).
OIG • AUD-2020-003 • February 13, 2020 7

FIGURE 1. REQUIREMENTS FOR IPIA COMPLIANCE AND FHFA’S DETERMINATION OF APPLICABILITY

TO ITS OPERATIONS – FISCAL YEAR 2019 

IPIA Compliance Requirement FHFA Determination of Applicability

The agency has published an annual AFR or PAR 

for the most recent fiscal year and posted that report 

and any accompanying materials required under 

guidance of OMB on the agency website.

FHFA determined that this requirement 

applies to the Agency; FHFA published 

its 2019 PAR. 

The agency has conducted a program-specific risk 

assessment for each program or activity that 

conforms with IPIA (31 U.S.C. § 3321 note) (if 

required).

FHFA determined that this requirement 

is not applicable to the Agency.

The agency has published improper payments 

estimates for programs and activities identified 

as susceptible to significant improper payments 

under its risk assessment (if required).

FHFA determined that this requirement 

is not applicable to the Agency.

The agency has published programmatic corrective 

action plans in its PAR or AFR (if required).

FHFA determined that this requirement 

is not applicable to the Agency.

The agency has published, and is meeting, improper 

payments reduction targets for each program 

assessed to be at risk and estimated for improper 

payments (if required and applicable).

FHFA determined that this requirement 

is not applicable to the Agency.

The agency has reported a gross improper payment 

rate of less than 10 percent for each program and 

activity for which an estimate was obtained and 

published in its AFR or PAR. 

FHFA determined that this requirement 

is not applicable to the Agency.

OIG’s Office of Counsel reviewed FHFA’s legal memorandum supporting its determinations 

of applicability and concluded that FHFA’s analysis was reasonable.

Notwithstanding the applicability of IPIA’s compliance requirements, FHFA advises in its 

PAR:

FHFA, in the spirit of compliance and as part of its sound internal control 

structure, has established controls to detect and prevent improper vendor 

payments. ... FHFA has not identified any programs or activities susceptible 

to significant improper payments that meet IPIA’s thresholds.6

 

6 See FHFA, Fiscal Year 2019 Performance and Accountability Report (Nov. 19, 2019) (online here). 
OIG • AUD-2020-003 • February 13, 2020 8

To assess this representation by FHFA, we reviewed the following FHFA procedures and 

guidance implemented for fiscal year 2019 to mitigate the risks of fraud, misuse, and payment 

delinquency: 

• Invoice and payment procedures;

• Purchase charge card procedures;

• Accrual and deobligation procedures; and 

• Micro-purchase procedures and supplemental purchase cardholder guidance. 

We noted no weaknesses in the design of these procedures and guidance. Furthermore, GAO 

is charged with performing audits of FHFA’s annual financial statements7 and internal control 

over financial reporting. In its report Financial Audit: Federal Housing Finance Agency’s 

Fiscal Years 2019 and 2018 Financial Statements, GAO opined that FHFA maintained, in all 

material respects, effective internal control over financial reporting as of September 30, 2019, 

based on relevant criteria. Additionally, GAO did not communicate any deficiencies with the 

Agency’s invoice and payment process controls to FHFA. 

CONCLUSION ............................................................................ 

We conclude that FHFA complied with the IPIA compliance requirement applicable to the 

Agency – publication of its PAR. Therefore, we determined that FHFA complied with IPIA. 

As to the other IPIA compliance requirements for Inspector General review that FHFA opined 

are not applicable to its operations, we determined that its analysis was reasonable.

FHFA COMMENTS AND OIG RESPONSE ..................................... 

OIG provided FHFA an opportunity to respond to a draft report of this audit. In its 

management response, which is included as an appendix to this report, FHFA acknowledged 

our conclusion that it complied with the applicable provisions of IPIA. 

 

7 12 U.S.C. § 4516(h).
OIG • AUD-2020-003 • February 13, 2020 9

OBJECTIVE, SCOPE, AND METHODOLOGY ................................. 

Our audit objective was to determine FHFA’s compliance with IPIA. The scope of the audit 

covered the period October 1, 2018, through September 30, 2019. 

To accomplish the audit, we: 

• Reviewed OIG’s prior IPIA audit documentation and audit report (AUD-2019-007, 

dated May 16, 2019);

• Reviewed IPIA and OMB M-18-20 requirements and guidance that apply to FHFA 

and OIG; 

• Determined whether there had been any change in FHFA’s assessment of the 

applicability of IPIA to the Agency and obtained a review by OIG’s Office of Counsel 

of that assessment;

• Determined whether FHFA had published its PAR, and accompanying materials for 

fiscal year 2019, and posted that report, as well as any accompanying materials 

required by IPIA, on the Agency’s website; 

• Determined whether FHFA was required to conduct program-specific risk assessments 

for each program or activity under 31 U.S.C. 3321 and OMB M-18-20; 

• Interviewed FHFA officials/staff to obtain any additional background information that 

may be required, such as improper payments assessments, related correspondence, 

and/or results of procedures performed, including any legal opinions received and 

decisions taken; 

• Obtained and reviewed the Agency’s invoice and payments procedures, purchase 

charge card procedures, accrual and deobligation procedures, micro-purchase 

procedures and supplemental purchase cardholder guidance, and internal control 

self-assessments for fiscal year 2019; and

• Reviewed GAO’s report on its audit of FHFA’s financial statements for fiscal years 

2019 and 2018, and inquired of FHFA and GAO staff. The purpose of our inquiries 

was to determine whether any deficiencies may have been communicated by GAO in 

the conduct of its audit related to the design and effectiveness of FHFA’s invoice and 

payment process controls. 

We conducted this performance audit between December 2019 and February 2020 in 

accordance with generally accepted government auditing standards. Those standards require 
OIG • AUD-2020-003 • February 13, 2020 10

that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our audit objective. We believe

that the evidence obtained provides a reasonable basis for our findings and conclusions based 

on our audit objective. 
OIG • AUD-2020-003 • February 13, 2020 11

APPENDIX: FHFA MANAGEMENT RESPONSE ............................. 
OIG • AUD-2020-003 • February 13, 2020 12

ADDITIONAL INFORMATION AND COPIES ................................. 

For additional copies of this report: 

• Call: 202-730-0880 

• Fax: 202-318-0239 

• Visit: www.fhfaoig.gov

To report potential fraud, waste, abuse, mismanagement, or any other kind of criminal or 

noncriminal misconduct relative to FHFA’s programs or operations: 

• Call: 1-800-793-7724 

• Fax: 202-318-0358 

• Visit: www.fhfaoig.gov/ReportFraud

• Write:

FHFA Office of Inspector General

Attn: Office of Investigations – Hotline

400 Seventh Street SW

Washington, DC 20219