WASHINGTON (10/2/15)--The Federal Housing Finance Agency’s (FHFA) budget review and approval process has imposed “virtually no budget control” over Fannie Mae and Freddie Mac, according to a report by its Office of Inspector General (OIG). These shortcomings, per the report, prevent the FHFA from exercising effective control over Fannie and Freddie spending.
“We found that FHFA’s budget review and approval process has not achieved FHFA’s stated purpose for re-asserting its approval authority because of late timing, cursory-level analysis, and inadequate resources,” the report reads. “These shortcomings prevent FHFA from exercising effective control over Enterprise spending, both in amount and direction. As a consequence, FHFA’s budget review and approval process has imposed virtually no budget control on the Enterprises, and FHFA’s approval of the budgets creates the risk that it has endorsed Enterprise spending that has not been well understood by FHFA.”
Since fiscal year 2013, the FHFA has required Fannie and Freddie obtain agency approval for their budgets. The FHFA’s stated purpose for this was to “ensure budgets aligned with FHFA’s strategic direction and safety and soundness priorities.”
The OIG report makes four recommendations that the FHFA:
According to the OIG, the FHFA agreed with recommendations one, two and three, and “generally agreed to recommendation four.
The OIG finished its report in June of this year, and the FHFA announced in July it will enhance its budget review and approval process. The OIG said it cannot assess the newly approved changes until they are fully implemented.