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093554 1 (1974-02-15)

handle is hein.gao/gaobacxfq0001 and id is 1 raw text is: 2 UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON REGIONAL OFFICE ou~ FIFTH FLOOR 803 WEST BROAD STREET FALLS CHURCH, VIRGINIA 22046 q3 FEB 1 5 1974 Mr. John L. Burke Vice-President Fiscal Management Government National Mortgage Association Department of Housing and Urban Development lllIliI LMO93554 Dear Mr. Burke: As you know, wke place considerable reliance on the work the Federal National Mortgage Association's (FNMA) internal auditors perform at FNMA Regional Offices when we make our annual audit of the Government National Mortgage Association (GNMA). During our 1973 audit we observed and tested the work of the internal auditors at FNMA's Chicago Regional Office. Our observations of the work performed in Chicago indicated certain aspects of the internal audit coverage can be improved. The audit program itself needs to be reexamined and brought up-to-date with current practices. Furthermore, FNMA may wish to examine into the validity of the comment of the FNMA auditor-in-charge of the review in Chicago that insufficient time was allowed by his Headquarters for a satisfactory performance of the audit work programmed. In this connection FNMA may wish to require its auditors to obtain written consent from Washington when they wish to deviate signifi- cantly from the program, as for example, in the number of transactions to be examined. In accordance with our discussionA we are sending you and FNMA our specific comments as an enclosure, keyed to a copy, also enclosed, of the program used by FNMA's auditors in Chicago. The appropriateness of the confirmation methodology was another matter of concern to us. In 1972 less than 50 percent of the multifamily mortgages selected responded to confirmation requests. These unconfirmed accounts were not further reviewed by the FNMA auditors nor were other steps taken to establish their validity. Further, this year's audit contained no selection of accounts for confirmation that were unconfirmed the previous year. We are aware that FNMA experienced major changes in its internal audit organi- zation at about the time a followup to the prior year's confirmations would normally have been made. Nevertheless, we believe that it is important that confirmations should have been sent this year to mortgagors who had not responded last year or FNMA should have reviewed the accounts for other. evidence of validity at the start of this year's review. Because of the significance of this step we expanded our work and were able to satisfy our- selves on this point.

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