P113_-_RFI_-_OA_-19_-_2_-_8-22-19.docx

Sources Sought / Request for Information For Major Audit Support Services Office of Inspector General Housing and Urban Development

The Department of Housing and Urban Development (HUD) Office of Inspector General (OIG) is issuing this sources sought notice/ request for information (RFI) as a means of conducting market research to identify parties having an interest in and the resources to support this requirement for:

Firms capable of providing comprehensive, cradle to grave Audit Support Services for the following specialized areas and specific audits:

1) Government National Mortgage Association Financial Statement Audit

OIG is requesting information related to potentially contracting for an audit of the financial statements of the Government National Mortgage Association (Ginnie Mae) for the fiscal year ended September 30, 2020 and 2019. The Independent Public Accountant (IPA) would be required to:

Perform the audit under Generally Accepted Government Auditing Standards (GAGAS) and the Financial Audit Manual of the U.S. Government Accountability Office and the Council of the Inspectors General on Integrity and Efficiency, which includes the evaluation of whether Ginnie Mae management has taken appropriate corrective action to address findings and recommendations from previous engagements that could have a material effect on the financial statements or other financial data significant to the audit objectives.

In accordance with Office of Management and Budget (OMB) Bulletin No. 19-01, Audit Requirements for Federal Financial Statements, our audit process: (1) considers the internal control structure to determine auditing procedures for the purpose of expressing an opinion on the financial statements, (2) identifies and conducts necessary audit procedures in accordance with Government Auditing Standards to opine on the principal financial statements, (3) includes tests for compliance with selected provisions of applicable laws and regulations that may materially affect the consolidated financial statements, and (4) applies procedures with respect to reported performance measure data.

The selected IPA will provide an/a:

· Unmodified or modified opinion on whether Ginnie Mae’s financial statements are fairly presented, in all material respects, in accordance with U.S. generally accepted accounting principles (GAAP) as of and for the years ended September 30, 2020 and 2019;

· Report on results of tests of Ginnie Mae’s internal controls over financial reporting as of September 30, 2020; and

· Report on results of tests of Ginnie Mae’s compliance with select provisions of applicable laws, regulations, contracts, and grant agreements for fiscal year 2020.

We expect the auditor to issue a combined independent auditor’s report, report on internal controls over financial reporting, and a report on compliance with laws, regulations, contracts and grant agreements on or before November 10, 2010.

The consideration of the internal controls over financial reporting will not necessarily disclose all matters in the internal controls over financial reporting that might be significant deficiencies as defined by standards issued by the American Institute of Certified Public Accountants (AICPA). Further, tests and other limited procedures are performed of HUD’s compliance with certain provisions of laws, regulations, contracts, and grant agreements applicable to HUD that have a direct effect on the determination of material amounts and disclosures in HUD’s consolidated financial statements. However, tests are not expected to detect all instances of noncompliance. Accordingly, the contractor is not expected to provide an opinion on compliance with laws and regulations or internal control over financial reporting as part of the audit.

Ginnie Mae’s financial statements for fiscal years 2018 and 2017 and the auditor’s report thereon can be obtained at: https://www.ginniemae.gov/about_us/what_we_do/Financial_Statements/annual_financials_18.pdf

· HUD OIG issued a disclaimer of opinion on these financial statements for the past five years and reported audit findings comprised of four material weaknesses, one significant deficiency, and one reportable noncompliance. The audit of Ginnie Mae’s 2019 financial statements is currently ongoing.

· Ginnie Mae’s financial statements are prepared under GAAP, issued by the Financial Accounting Standards Board (FASB).

As discussed in Note 1 to the financial statements, Ginnie Mae guarantees the timely payment of principal and interest (P&I) on Mortgage-Backed Securities (MBS) backed by federally insured or guaranteed residential loans to its MBS investors. The guarantee, which is backed by the full faith and credit of the U.S. government, increases liquidity in the secondary mortgage market and attracts new sources of capital for residential mortgage loans from investors. Ginnie Mae’s role in the market enables qualified borrowers to have reliable access to a variety of mortgage products. Ginnie Mae’s principal market is the housing markets in the U.S. and its Territories. At September 30, 2018 and 2017, the unpaid principal balance of Ginnie Mae’s MBS securities amounted to $2 trillion and $1.9 trillion, respectively. As of September 30, 2018, Ginnie Mae’s Non-pooled Loan (NPL) portfolio was estimated to be approximately $3 billion, net. Ginnie Mae’s NPL portfolio consists of Mortgages Held for investment including Accrued Interest, Reimbursable Costs/Expenses, Acquired Property, and Claims Receivable.

Through the MBS program, Ginnie Mae supports:

· First-time home buyers;

· low and moderate-income households;

· borrowers in rural, or other areas, where credit access is limited;

· young professionals with unestablished credit histories;

· borrowers with lower credit scores;

· working families with little, or no, down payment;

· borrowers with higher debt to income ratios;

· the construction and renovation of multifamily housing;

· senior citizens who need housing and support services; and

· military veterans who have served the country.

Ginnie Mae requires all mortgages to be insured or guaranteed by government agencies, including the Federal Housing Administration (FHA), HUD’s Office of Public and Indian Housing, the U.S. Department of Agriculture’s Rural Development Agency (USDA), and the U.S. Department of Veterans Affairs (VA).

Ginnie Mae offers two product structures – Ginnie Mae I MBS and Ginnie Mae II MBS:

· Ginnie Mae I MBS are pass-through securities providing monthly P&I payments to each investor. They are exclusively single-family or multifamily pools of mortgages with similar maturities and interest rates offered by a single issuer.

· Ginnie Mae II MBS are similar to Ginnie Mae I MBS, but allow multiple-issuer and single-issuer pools. They permit the securitization of adjustable rate mortgages, manufactured home loans, and home equity conversion mortgages, and allows small issuers unable to meet the dollar requirements of the Ginnie Mae I MBS program to participate in the secondary mortgage market.

Ginnie Mae currently has a contract with a financial institution to perform mortgage pool processing, authenticating agent services, and central registry functions. In addition, Ginnie Mae uses two master subservicers to manage its pooled and nonpooled loan portfolios. Ginnie Mae also has a contract with a another financial institution to provide document custodian services for loan portfolios.

Ginnie Mae’s headquarters is located in Washington, D.C. The primary place of work for this sources sought notice/RFI is in Washington, D.C. The auditors may be required to travel and conduct fieldwork at Ginnie Mae’s contractor and/or subcontractor location(s), unless otherwise specified. The primary contractor and subcontractor locations outside of the Washington, D.C. area where fieldwork may be required could include the following: New York, NY; Anaheim, CA; Houston, TX; Andover, MA; Westfield, Indiana; and Minneapolis, MN.

2) Support for Audit of Ginnie Mae Non-Pooled Loan Portfolio

OIG is requesting information related to potentially contracting for support in the audit of the financial statements of Ginnie Mae, specifically the NPL portfolio, for the fiscal year ended September 30, 2020. The IPA would be required to plan and perform financial statement audit procedures on Ginnie Mae’s NPL portfolio reported on the balance sheet. This portfolio includes several types of assets that are reported on the financial statements, net of allowance, including:

· Mortgages Held for investment including accrued interest, net

· Reimbursable Costs

· Acquired Property

· Claims Receivable

HUD OIG would function as the Group Auditor and assume responsibility for the IPA’s work. The IPA must perform the audit task using GAGAS and the Financial Audit Manual of the U.S. Government Accountability Office and the Council of the Inspectors General on Integrity and Efficiency. The task also includes the IPA’s evaluation of whether Ginnie Mae management has taken appropriate corrective action to address findings and recommendations from previous engagements that could have a material effect on the financial statements or other financial data significant to the audit objectives.

The selected IPA will be required to provide the following audit documentation:

· Audit planning documents, including but not limited to, understanding of the NPL control environment for inclusion in the strategic audit plan, line item risk assessments and specific control evaluations, and financial statement line item audit programs.

· Testing phase documents, including but not limited to, audit workpapers, finding outlines, notices of findings and recommendations, input to OIG’s Third Quarter Assessment, input to testing phase status meetings, and evaluation of Ginnie Mae models (i.e., NPL allowance models).

· Reporting phase documents, including but not limited to, an audit summary memorandum and an evaluation of Ginnie Mae’s responses to HUD OIG notices of findings and recommendations and/or audit report.

At September 30, 2018 and 2017, the unpaid principal balance of Ginnie Mae’s MBS securities amounted to $2 trillion and $1.9 trillion, respectively. As of September 30, 2018, Ginnie Mae’s NPL portfolio was estimated to be approximately $3 billion, net. Ginnie Mae’s NPL portfolio is serviced by two master subservicers that provide operational balances (non-GAAP), which are converted into GAAP account balances through the use of a subsidiary ledger database. The two master subservicers are headquartered in Houston, TX, and Anaheim, CA.

3) Federal Housing Administration Financial Statement Audit

OIG is requesting information related to potentially contracting for an audit of the stand-alone financial statements of the Federal Housing Administration (FHA) for the fiscal years ended September 30, 2020 and 2019. The FHA financial statements are comprised of the balance sheet as of September 30th and related statements of net cost, changes in net position, and the statement of budgetary resources and accompanying notes for the years then ended. The IPA would be required to perform the audit under GAGAS and the Financial Audit Manual of the U.S. Government Accountability Office and the Council of the Inspectors General on Integrity and Efficiency, which includes the evaluation of whether FHA management has taken appropriate corrective action to address findings and recommendations from previous engagements that could have a material effect on the financial statements or other financial data significant to the audit objectives.

In accordance with OMB Bulletin No. 19-01, Audit Requirements for Federal Financial Statements, our audit process: (1) considers the internal control structure to determine auditing procedures for the purpose of expressing an opinion on the financial statements, (2) identifies and conducts necessary audit procedures in accordance with Government Auditing Standards to opine on the principal financial statements, (3) includes tests for compliance with selected provisions of applicable laws and regulations that may materially affect the consolidated financial statements, and (4) applies procedures with respect to reported performance measure data.

The IPA will provide an/a:

· Unmodified or modified opinion on whether FHA’s financial statements are fairly presented, in all material respects, in accordance with GAAP as of and for the years ended September 30, 2020 and 2019,

· Report on results of tests of FHA’s internal controls over financial reporting as of September 30, 2020, and

· Report on results of tests of FHA’s compliance with select provisions of applicable laws, regulations, contracts, and grant agreements for fiscal year 2020.

The IPA is also required to issue a combined independent auditor’s report, report on internal controls over financial reporting, and report on compliance with laws, regulations, contracts and grant agreements on or before November 10, 2020.

The consideration of the internal controls over financial reporting will not necessarily disclose all matters in the internal controls over financial reporting that might be significant deficiencies as defined by standards issued by the AICPA. Further, tests and other limited procedures are performed of HUD’s compliance with certain provisions of laws, regulations, contracts, and grant agreements applicable to HUD that have a direct effect on the determination of material amounts and disclosures in HUD’s consolidated financial statements. However, tests are not expected to detect all instances of noncompliance. Accordingly, the contractor is not expected to provide an opinion on compliance with laws and regulations or internal control over financial reporting as part of the audit.

FHA’s financial statements for fiscal years 2018 and 2017 and the auditor’s report thereon can be obtained at:

https://www.hudoig.gov/sites/default/files/2018-11/2019-FO-0002.pdf

HUD OIG reported that FHA’s fiscal years 2018 and 2017 financial statements were presented fairly, in all material respects, in accordance with GAAP for the Federal Government. Our audit disclosed one material weaknesses, three significant deficiencies in internal controls, and no instances of noncompliance with applicable laws and regulations. The audit of FHA’s fiscal year 2019 financial statements is ongoing at this time.

FHA was established under the National Housing Act of 1934 and became a wholly owned government corporation in 1948, subject to the Government Corporation Control Act (31 U.S.C. § 9101 et seq.), as amended. While FHA was established as a separate federal entity, it was subsequently merged into HUD when that department was created in 1965. FHA does not maintain a separate staff or facilities. Its operations are conducted, along with other Housing activities, by HUD organizations. FHA is headed by HUD's Assistant Secretary for Housing/Federal Housing Commissioner, who reports to the Secretary of HUD.

FHA administers a wide range of activities to make mortgage financing more accessible to the home-buying public and to increase the availability of affordable housing to families and individuals, particularly to the nation's poor and disadvantaged. FHA insures private lenders against loss on mortgages, which finance single family homes, multifamily projects, healthcare facilities, property improvements, manufactured homes, and home equity conversion mortgages (reverse mortgages). The objectives of activities carried out by FHA relate directly to the development of affordable housing.

FHA categorizes its insurance programs as single family, multifamily, healthcare, and reverse mortgages. Single Family activities support initial or continued home ownership, including Title I activities which support manufactured housing and property improvement. Multifamily and Healthcare activities support high-density housing and medical facilities. Reverse mortgages allow homeowners 62 years of age or older to convert the equity in their homes into lump sum or monthly cash payments without having to repay the loan until the loan terminates.

FHA supports its insurance operations through five funds. The Mutual Mortgage Insurance fund (MMI), FHA's largest fund, provides basic single family mortgage insurance and is a mutual insurance fund, whereby mortgagors, upon non-claim termination of their mortgages, share surplus premiums paid into the MMI fund that are not required for operating expenses and losses or to build equity. The Cooperative Management Housing Insurance fund, another mutual fund, provides mortgage insurance for management-type cooperatives. The General Insurance fund (GI), provides a large number of specialized mortgage insurance activities, including insurance of loans for property improvements, cooperatives, condominiums, housing for the elderly, land development, group practice medical facilities, nonprofit hospitals, and reverse mortgages. The Special Risk Insurance fund provides mortgage insurance on behalf of mortgagors eligible for interest reduction payments who otherwise would not be eligible for mortgage insurance. To comply with the FHA Modernization Act of 2008, activities related to most Single Family programs, including reverse mortgages, endorsed in fiscal year 2009 and going forward, are in the MMI fund. The Single Family activities in the GI fund from fiscal year 2008 and prior remain in the GI fund.

FHA’s insurance-in-force reached $1.26 trillion of unpaid principal balance at the end of fiscal year 2018 and endorsed over one million forward mortgages totaling $209 billion in unpaid principal balance during fiscal year 2018. FHA’s MMI Fund’s Capital Ratio overall Economic Net Worth for fiscal year 2018 was $34.86 billion.

Specific Information Requested

HUD OIG is especially interested in determining the extent and capabilities of individual firms to meet these needs. Some potential challenges that a prospective firm may encounter are:

· Being conflicted out, owing to work performed and/or being performed for the target of the audit(s).

· When not conflicted out, lack the resources to audit the activities of entities with $1.26 trillion of insurance in force and a $38 billion loan guarantee liability (FHA), and $2 trillion in outstanding MBS securities (Ginnie Mae).

· Having sufficient preparation time to align resources.

The result of this market research will contribute to determining the method of procurement. The applicable North American Industry Classification System code assigned to this procurement is anticipated as 541211, Offices of Certified Public Accountants.

There is no solicitation at this time. This request for capability information does not constitute a request for proposals; submission of any information in response to this market survey is purely voluntary; and the Federal Government assumes no financial responsibility for any costs incurred. The results of this sources sought notice/RFI may be combined with other RFIs and related market research to support future actions.

If your organization has the potential capacity to perform these contract services, please provide the following information:

1. Organization name, address, email address, website address, telephone number, and size and type of ownership for the organization.

2. The Firm’s independence, as defined by GAGAS, Revision 2011, with respect to HUD, FHA, and Ginnie Mae, including a description of any recent (within the past five years) contracts or agreements between the Firm and HUD, FHA, and/or Ginnie Mae.

3. Tailored capability statements addressing the particulars of this effort, with appropriate documentation supporting claims of organizational and staff capability. If significant subcontracting or teaming is anticipated in order to deliver technical capability, organizations must address the administrative and management structure of such arrangements. Capability statements should include the Firm’s experience with audits involving mortgages, mortgage-backed securities, government loans and loan guarantees (FHA, VA, USDA), specialized valuation estimates, and implementation of new accounting systems. They should also include information about the availability of Firm resources to perform the financial statement audit(s) in accordance with GAGAS, including the ability to assess the appropriateness of Ginnie Mae’s accounting policies, assess the effectiveness of its corrective actions, assess the risks of material misstatement, and design and perform appropriate audit procedures.

4. Any Federal schedules and/or vehicles under which the services might be obtained.

The tasks require a set of skill categories based on the following approximate distribution:

Level

Position

Applicable certifications

Range of % of budgeted hours per position & category (Audit, IT and Actuary)

IT Partner Director Actuary

CPA

CISA

5-10%

Manager Senior Auditor Auditor

CPA

20-40%

IT Manager Senior IT Auditor IT Auditor IT Security Specialist

CISA

CISSP

20-40%

80%

Additional Information

The Federal Government will evaluate market information to ascertain potential market capacity to: 1) provide services consistent in scope and scale with those described in this notice and otherwise anticipated; 2) secure and apply the full range of corporate financial, human capital, and technical resources required to successfully perform similar requirements; 3) implement a successful project management plan that includes compliance with program schedules, cost containment, meeting and tracking performance, hiring and retention of personnel, and risk mitigation; and 4) provide services under a performance-based service acquisition contract.

Based on the responses to this sources sought notice/market research, this requirement may be set aside for small businesses or procured through full and open competition, and multiple awards may be made. Telephone inquiries will not be accepted or acknowledged, and no feedback or evaluations will be provided to companies regarding their submissions.

The Government estimates that the value of these tasks could range from $1.5 million to $6.5 million depending on the number of tasks contracted out.

Submission Instructions: Interested parties who consider themselves qualified to perform any or all of the above-listed services are invited to submit a response to this sources sought notice/RFI by 09/04/2019. All responses under this sources sought notice/RFI must be emailed to Robert Coyle, at Rcoyle@hudoig.gov.

If you have any questions concerning this opportunity, please contact: Rcoyle@hudoig.gov.