oversight

HUD Did Not Ensure That All Costs for Ginnie Mae's Contract With Burson-Marsteller Were Supported, Reasonable, and Necessary

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-07-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

        Office of the Chief Procurement
           Officer, Washington, DC
      The Government National Mortgage Association’s
             Contract With Burson-Marsteller




Office of Audit, Region 3      Audit Report Number: 2016-PH-0002
Philadelphia, PA                                     July 23, 2016
To:            Keith W. Surber, Acting Chief Procurement Officer, N
               //signed//
From:          David E. Kasperowicz, Regional Inspector General for Audit, Philadelphia
               Region, 3AGA
Subject:       HUD Did Not Ensure That All Costs for Ginnie Mae’s Contract With Burson-
               Marsteller Were Supported, Reasonable, and Necessary




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of HUD’s oversight of the Government National
Mortgage Association’s contract with public relations and communications firm Burson-
Marsteller.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at
215-430-6734.
                       Audit Report Number: 2016-PH-0002
                       Date: July 23, 2016

                       HUD Did Not Ensure That All Costs for Ginnie Mae’s Contract With
                       Burson-Marsteller Were Supported, Reasonable, and Necessary




Highlights

What We Audited and Why
We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of the
Government National Mortgage Association’s (Ginnie Mae) contract for financial industry and
media marketing services with public relations and communications firm Burson-Marsteller. We
initiated the audit after we became aware of potential issues regarding the amount of funds used for
services, which may not have been reasonable or necessary. Specifically, Ginnie Mae paid the firm
to promote members of its senior staff. Our objective was to determine whether HUD ensured that
costs for Ginnie Mae’s contract with Burson-Marsteller were reasonable, necessary, and supported.

What We Found
HUD did not ensure that all costs associated with Ginnie Mae’s contract with Burson-Marsteller
were supported, reasonable, and necessary. Specifically, HUD did not ensure that (1) Ginnie
Mae maintained adequate supporting documentation for invoices paid and (2) costs for
promoting members of Ginnie Mae’s senior staff 1 were reasonable and necessary. This
condition occurred because HUD did not have adequate oversight of Ginnie Mae’s procurement
and contract administration processes. As a result, HUD did not have assurance that $1.8 million
paid under Ginnie Mae’s contract with Burson-Marsteller was supported and that up to $1.1
million paid was for services that were reasonable and necessary. Unless HUD requires Ginnie
Mae to improve its procurement and contract administration processes and increases its
monitoring of Ginnie Mae, Ginnie Mae could incur additional costs under the Burson-Marsteller
contract and future contracts that are not supported, reasonable, and necessary.

What We Recommend
We recommend that HUD’s Acting Chief Procurement Officer (1) assess Ginnie Mae’s
processes and capabilities, and provide technical assistance to ensure that its staff is adequately
trained on procurement and contract administration matters; (2) require Ginnie Mae to improve
its procurement and contract administration processes to ensure that it follows all applicable
requirements, thereby putting up to $259,008 to better use; and (3) increase monitoring to ensure
that Ginnie Mae’s costs related to its contract with Burson-Marsteller and any future contracts
are supported, reasonable, and necessary.



1
    Primarily Ginnie Mae’s president, Theodore W. Tozer, and its former executive vice president, Mary K. Kinney
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: HUD Did Not Ensure That All Costs for Ginnie Mae’s Contract Were
         Supported, Reasonable, and Necessary .......................................................................... 4

Scope and Methodology ...........................................................................................8

Internal Controls ....................................................................................................10

Appendixes ..............................................................................................................11
         A. Schedule of Funds To Be Put to Better Use ............................................................ 11

         B. Auditee Comments and OIG’s Evaluation ............................................................. 12

         C. Summary of Invoices Reviewed ............................................................................... 20




                                                            2
Background and Objective
The U.S. Department of Housing and Urban Development’s (HUD) Office of the Chief
Procurement Officer was created in 1998 to streamline and improve HUD’s procurement
operations. The office acquires products and services needed to support HUD’s program
missions and infrastructure; assists program offices in defining and specifying their procurement
needs; and provides advice, guidance, and technical assistance related to procurement.

The Housing and Urban Development Act of 1968 created the Government National Mortgage
Association (Ginnie Mae). Ginnie Mae’s mission is to bring global capital into the housing
finance market while minimizing the risk to the taxpayer. It does this by providing a guarantee
backed by the full faith and credit of the United States for the timely payment of principal and
interest on mortgage-backed securities secured by pools of government home loans. Ginnie Mae
is a self-financing, wholly owned U.S. Government corporation within HUD. Title III of the
National Housing Act states that all the powers and duties of Ginnie Mae will be vested in the
Secretary of HUD and Ginnie Mae will be administered under the direction of the Secretary.
Further, the Act indicates that within the limitations of law, the Secretary will determine the
general policies that will govern Ginnie Mae’s operations.

Since July 2011, Ginnie Mae has maintained a contract 2 for financial industry and media
marketing services with the public relations and communications firm Burson-Marsteller. The
contract includes services, such as a marketing plan, media relations and clip services,
conference and event support, stakeholder outreach and validation, legislative tracking, and Web
site support. As of October 2015, Ginnie had paid more than $3.9 million for these services.


                                            Year        Amount paid

                                            2011           $503,676
                                            2012            984,520
                                            2013            798,982
                                            2014            913,859
                                            2015            794,339
                                            Total         $3,995,376

Our objective was to determine whether HUD ensured that costs for Ginnie Mae’s contract with
Burson-Marsteller were reasonable, necessary, and supported.


2
    Ginnie Mae issued a task order covering 1 year under the General Services Administration Federal Supply
    Schedule 541 (advertising and integrated marketing services), special item number 5 (integrated marketing
    services), in accordance with subpart 8.4 of the Federal Acquisition Regulation. It later executed modifications
    to increase the amount of the contract and extend the term.



                                                          3
Results of Audit

Finding: HUD Did Not Ensure That All Costs for Ginnie Mae’s
Contract Were Supported, Reasonable, and Necessary
HUD did not ensure that all costs associated with Ginnie Mae’s contract with Burson-Marsteller
were supported, reasonable, and necessary. Specifically, HUD did not ensure that (1) Ginnie
Mae maintained adequate supporting documentation for invoices paid and (2) costs for
promoting members of Ginnie Mae’s senior staff were reasonable and necessary. This condition
occurred because HUD did not have adequate oversight of Ginnie Mae’s procurement and
contract administration processes. As a result, HUD did not have assurance that $1.8 million
paid under Ginnie Mae’s contract with Burson-Marsteller was supported and that up to $1.1
million paid was for services that were reasonable and necessary. Unless HUD requires Ginnie
Mae to improve its procurement and contract administration processes and increases its
monitoring of Ginnie Mae, Ginnie Mae could incur additional costs under the Burson-Marsteller
contract and future contracts that are not supported, reasonable, and necessary.

Ginnie Mae Did Not Always Have Adequate Supporting Documentation for Invoices Paid
We reviewed 55 invoices that Ginnie Mae paid for its contract with Burson-Marsteller. HUD did
not ensure that Ginnie Mae maintained adequate documentation to support costs associated with
its contract. For example,
    •    For 29 of the 55 invoices reviewed, Ginnie Mae did not have records detailing its request,
         approval, and receipt of the specific media outreach services performed. Both the
         contract and the HUD Acquisition Regulation, paragraph 2452.237-73(c), indicated that
         Ginnie Mae’s government technical representative (GTR) would issue guidance
         regarding work to be performed in writing or if issued orally, would confirm such
         direction in writing. 3 Further, HUD Handbook 2210.3 required the GTR to maintain a
         working file for the contract, including copies of all correspondence and notes of
         substantive oral communications with the contractor. While Ginnie Mae indicated that
         approval for media outreach services was usually handled over the telephone, it was
         unable to produce records detailing the phone calls or showing that the GTR had
         provided guidance. Further, while Ginnie Mae maintained a marketing plan with the
         contractor that referenced potential media opportunities, only a few specific media
         outreach activities were directly approved in the marketing plan. Finally, Ginnie Mae did
         not have a comprehensive list or copies of the deliverables provided by the contractor,
         such as articles, blog posts, and interviews related to its senior staff.
    •    For 16 of the 55 invoices reviewed, Ginnie Mae’s records did not include supporting
         documentation, such as evidence of payments made and individual daily timecards. Both


3
    The HUD Acquisition Regulation required confirmation in writing within 5 calendar days, and the contract
    required written confirmation within 10 calendar days.



                                                         4
         the contract and Federal Acquisition Regulation (FAR), paragraph 52.232-7(a)(5),
         required the contractor to substantiate invoices by evidence of actual payment, individual
         daily timecards, records verifying that the employees meet the qualifications for the labor
         categories specified in the contract, or other substantiation specified in the contract.
    •    For 1 of the 55 invoices reviewed, Ginnie Mae’s records did not include a description of
         the services that were performed for the period. Both the contract and section 24.52.232-
         70 of the HUD Acquisition Regulation required the contractor to include all items
         required by section 52.232-25 of the FAR in its invoice. Paragraph 52.232-25(a)(3)(iv),
         FAR stated that invoices must include a description, quantity, and unit of measure for all
         services performed.

As a result of the issues identified above, HUD did not have assurance that $1.8 million paid (see
appendix C) under the contract by Ginnie Mae was supported and that the costs paid were for
services requested and received by Ginnie Mae.

Costs for Promoting Members of Ginnie Mae’s Senior Staff May Not Have Been
Reasonable and Necessary
Of the 55 invoices reviewed, 29 contained charges relating to the promotion of members of
Ginnie Mae’s senior staff. 4 HUD did not ensure that these costs were reasonable and necessary.
For example, according to the invoice documentation provided, Ginnie Mae paid for
    •    Outreach to media outlets to position its president, Theodore W. Tozer, as an industry
         expert who could provide unique insights into the housing industry and economy.
    •    An article placement with SHAPE.com, entitled “28 Powerful Women Share Their Best
         Advice.” In the article, Ginnie Mae’s former executive vice president, Mary K. Kinney,
         provided career advice for reaching personal goals and suggested that exercise and
         maintaining a healthy diet are essential for managing the stresses of a high profile
         position.
    •    An article placement with Government Executive authored by Ginnie Mae’s former
         executive vice president, Mary K. Kinney, entitled “How to improve employee
         satisfaction by 50 percent.”
    •    A blog post placement with Forbes authored by Ginnie Mae’s former executive vice
         president, Mary K. Kinney, on tips for women looking to succeed in financial services.

Although promoting senior staff was not expressly prohibited by section 31.205-1 of the FAR,
this activity did not clearly meet the FAR criteria for allowable public relations and advertising
costs, did not clearly correspond to typical tasks listed under the General Services




4
    The majority of the charges related to Ginnie Mae’s president, Theodore W. Tozer, and its former executive vice
    president, Mary K. Kinney.



                                                         5
Administration’s Federal Supply Schedule, 5 and may not have been reasonable and necessary.
Ginnie Mae guarantees mortgage-backed securities of government-insured loans. These
securities are issued by approved private lending institutions. Because Ginnie Mae is the
primary agency to offer this service, is a wholly owned government corporation that is not
required to make decisions to increase value for shareholders, 6 and does not work directly with
consumers, media outreach initiatives to promote members of its senior staff may not have been
reasonable or necessary. As a result, HUD did not have assurance that up to $1.1 million 7
disbursed was for costs that were reasonable and necessary.

HUD Did Not Provide Adequate Oversight of Ginnie Mae’s Procurement and Contract
Administration Processes
The conditions above occurred because HUD’s Office of the Chief Procurement Officer did not
regularly perform reviews of Ginnie Mae and did not adequately follow up on issues it identified.
In May 2013, HUD performed contract file reviews for Ginnie Mae’s GTRs and identified
several issues related to the Burson-Marsteller contract. For example, the GTR approved work
orders without having proper written authority, the GTR’s file lacked documentation to support
some charges, and the GTR’s file did not show that it had completed contractor performance
assessment reports. Further, in April 2015, HUD completed a monitoring checklist related to the
Burson-Marsteller contract, in which it noted that Ginnie Mae did not have copies of all
correspondence between the GTR and the contractor, contracting officer, or others concerning
the performance of the contract and indicated that Ginnie Mae had not maintained
documentation and data to provide a complete history of all relevant actions taken by the GTR.
However, HUD did not adequately follow up on the issues identified. While it provided a
corrective action plan related to its 2013 review, the plan did not show the status of the
recommendations. Further, HUD did not provide any follow up documentation related to its
2015 checklist.

Conclusion
HUD did not ensure that all costs associated with Ginnie Mae’s contract with Burson-Marsteller
were supported, reasonable, and necessary. This condition occurred because HUD did not have
adequate oversight of Ginnie Mae’s procurement and contract administration processes. As a
result, HUD did not have assurance that $1.8 million paid under Ginnie Mae’s contract with
Burson-Marsteller was supported and that up to $1.1 million paid was for services that were
reasonable and necessary. Unless HUD requires Ginnie Mae to improve its procurement and
contract administration processes and increases its monitoring of Ginnie Mae, Ginnie Mae could


5
    Typical tasks listed in the advertising and integrated marketing solutions schedule included press, public
    relations, and crisis communications; training of agency personnel to deal with media; media alerts; and press
    clipping services.
6
    The Federal National Mortgage Association and Federal Home Loan Mortgage Corporation are government-
    sponsored enterprises that were chartered by Congress. They are owned by shareholders and are under
    conservatorship. These agencies primarily guarantee mortgage-backed securities and loan portfolios of
    conventional loans.
7
    The 29 invoices did not provide a breakdown of costs for each activity performed by the contractor during the
    billing period. However, the activities that promoted senior staff were billed as part of line items totaling
    approximately $1.1 million.



                                                          6
incur additional costs under the Burson-Marsteller contract and future contracts that are not
supported, reasonable, and necessary. By improving its processes, Ginnie Mae will not spend
funds on charges that are not reasonable and necessary and, instead, will spend those funds on
costs that are reasonable and necessary, thereby putting up to $259,008 8 of funds to better use
over the next year.

Recommendations
We recommend that HUD’s Acting Chief Procurement Officer

        1A.      Assess Ginnie Mae’s processes and capabilities, and provide technical assistance
                 to ensure that its staff is adequately trained on procurement and contract
                 administration matters.

        1B.      Require Ginnie Mae to improve its procurement and contract administration
                 processes to ensure that it follows all applicable requirements, thereby putting up
                 to $259,008 to better use.

        1C.      Increase monitoring of Ginnie Mae to ensure that costs related to its contract with
                 Burson-Marsteller and any future contracts are supported, reasonable, and
                 necessary.




8
    This is the amount of funds that HUD can put to better use in the next 12 months. This amount was calculated
    by annualizing the average monthly amount that was charged to line items that included the promotion of senior
    staff during our 52 month audit period (July 2011 through October 2015). The calculation is: $1,122,345/52
    months = $21,584/month x 12 months = $259,008 for a year.




                                                        7
Scope and Methodology
We conducted the audit from April 2015 through June 2016 at HUD’s office located at 451 7th
Street SW, Washington, DC, Ginnie Mae’s office located at 550 12th Street SW, Washington
DC, and our office located in Philadelphia, PA. The audit covered the period July 2011 through
October 2015.

To accomplish our objective, we reviewed
    •    Relevant background information;
    •    Applicable laws, regulations, and HUD guidance;
    •    The Burson-Marsteller contract, along with invoices and supporting documentation
         submitted by the contractor;
    •    Payment registers, payment vouchers, and other documentation prepared by Ginnie Mae
         in relation to the contract;
    •    Ginnie Mae’s draft and final marketing plans, along with its 2014 and 2015 fiscal year
         media coverage reports;
    •    Articles, blogs, and interviews associated with the contract;
    •    A May 2013 monitoring report prepared by HUD, along with related documents; and
    •    An April 2015 monitoring checklist prepared by HUD.

We interviewed responsible employees of Ginnie Mae and HUD staff located in Washington,
DC.

To achieve our audit objective, we relied in part on the Federal Procurement Data System – Next
Generation computer-processed data. We used the data to help identify the contract reviewed.
Although we did not perform a detailed assessment of the reliability of the data, we performed a
minimal level of testing and found the data to be adequate for our purposes.

Using the Federal Procurement Data System - Next Generation, we identified 11,454
procurement records for HUD covering October 2011 through March 2015. From these data, we
identified 59 records covering 15 contracts that specifically related to public relations. 9 Of the
15 contracts, Ginnie Mae’s contract with Burson-Marsteller had the largest amount obligated and
represented more than 35 percent of the total funds obligated to the 15 contracts for the period.
Further, we identified publicly available information showing that Burson-Marsteller had billed
Ginnie Mae for promoting members of its senior staff. Therefore, we limited the scope of our


9
    Each record had a product or service code or a North American Industry Classification System code that
    included public relations in the code description.



                                                         8
review to this contract. Although this approach did not allow us to make a projection to the
entire population of contracts related to public relations, it allowed us to review 100 percent of
the invoices for the contract selected.

We identified 55 invoices totaling nearly $4 million that were paid for the contract between July
2011 and October 2015. We obtained copies of the invoices and related documentation from
Ginnie Mae as well as any other relevant documentation maintained by the GTR and Ginnie
Mae’s finance staff. We reviewed this information to identify charges related to the promotion
of members of senior staff and to evaluate the overall presence of supporting documentation.
Appendix C contains details on the invoices reviewed. In addition to the documentation
obtained from HUD and Ginnie Mae throughout the audit, we obtained and reviewed
documentation from the contractor in response to an OIG subpoena.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require 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(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                                  9
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

•   Effectiveness and efficiency of operations,
•   Reliability of financial reporting, and
•   Compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.

Relevant Internal Controls
We determined that the following internal control was relevant to our audit objective:

•   Compliance with laws and regulations – Policies and procedures that management has
    implemented to reasonably ensure that the use of resources is consistent with laws and
    regulations.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.

Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:

•   HUD’s Office of the Chief Procurement Officer did not regularly perform reviews of Ginnie
    Mae to ensure that it complied with all applicable requirements and did not adequately follow
    up on issues it identified.




                                                  10
Appendixes

Appendix A


                       Schedule of Funds To Be Put to Better Use
                         Recommendation Funds to be put
                             number          to better use 1/
                                  1B               $259,008


1/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. These amounts include reductions in outlays, deobligation of funds,
     withdrawal of interest, costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     that are specifically identified. In this instance, if HUD implements our
     recommendations, Ginnie Mae will not spend funds on charges that are not reasonable
     and necessary, either under the Burson-Marsteller contract or any future contracts, and,
     instead, will spend those funds on costs that are reasonable and necessary, thereby putting
     up to $259,008 of funds to better use over the next year.




                                              11
Appendix B
             Auditee Comments and OIG’s Evaluation


Ref to OIG    Auditee Comments
Evaluation




Comment 1



Comment 2


Comment 3




                               12
             Auditee Comments and OIG’s Evaluation


Ref to OIG    Auditee Comments
Evaluation


Comment 4




Comment 5


Comment 3




                               13
             Auditee Comments and OIG’s Evaluation


Ref to OIG    Auditee Comments
Evaluation




Comment 6



Comment 7




Comment 8




                               14
             Auditee Comments and OIG’s Evaluation


Ref to OIG    Auditee Comments
Evaluation


Comments 8
and 9




                               15
                         OIG Evaluation of Auditee Comments

Comment 1   HUD stated that we did not have a discussion or “out-brief” with Ginnie Mae
            regarding the finding and recommendations and that if we had, the review may
            have resulted in a different assessment. We conducted the audit in accordance
            with generally accepted government auditing standards. Those standards require
            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. The objective of this audit was to determine whether HUD ensured that
            costs for Ginnie Mae’s contract with Burson-Marsteller were reasonable,
            necessary, and supported. During the audit, we contacted HUD and Ginnie Mae
            staff to obtain relevant documentation. While we did not meet with Ginnie Mae
            regarding the finding and recommendations because it was not the auditee, we
            informed HUD that it was welcome to share the results of the audit with Ginnie
            Mae. As discussed in the report, we believe that the evidence obtained during the
            audit provides a reasonable basis for our finding and conclusion.

Comment 2   HUD contended that there was an incorrect reliance on allowable versus
            unallowable costs in accordance with section 31.205-1 of the FAR. We disagree.
            As discussed during the exit conference, we included the information from the
            FAR as a point of comparison because this section discusses public relations and
            advertising costs for contracts with commercial organizations and provides
            examples of allowable and unallowable public relations and advertising costs. As
            noted in the report, promoting members of senior staff was not expressly
            prohibited by section 31.205-1 of the FAR, nor did it clearly meet the criteria for
            allowable public relations and advertising costs.

Comment 3   HUD contended that since costs directly incurred in the performance of the
            contract are allowable, the question of whether they should have been incurred is
            a policy question and not within the purview of the Office of the Chief
            Procurement Officer. Section 31.201-2 of the FAR states that a cost is allowable
            only when the cost is, among other factors, reasonable. Section 31.201-3 of the
            FAR states that a cost is reasonable if, in its nature and amount, it does not exceed
            that which would be incurred by a prudent person in the conduct of competitive
            business. Our review found that the costs for promoting Ginnie Mae’s senior staff
            may not have been reasonable in nature. HUD’s Office of the Chief Procurement
            Officer is responsible for all matters related to HUD’s acquisition-related needs
            and activities, including managing the acquisition workforce, in addition to
            conducting procurement activities. While we understand that this office works
            with the program offices and Ginnie Mae when conducting procurement
            activities, we believe that the question of whether these costs should have been
            incurred is within the purview of HUD’s Office of the Chief Procurement Officer.

Comment 4   HUD contended that unless the costs for promoting members of Ginnie Mae’s
            senior staff were determined to not be reasonable, as defined in the FAR, they



                                              16
            should not be considered unallowable. We agree. However, section 31.201-3 of
            the FAR states that a cost is reasonable if, in its nature and amount, it does not
            exceed that which would be incurred by a prudent person in the conduct of
            competitive business. Although promoting members of senior staff was not
            expressly prohibited by section 31.205-1 of the FAR, our review found that the
            costs for promoting Ginnie Mae’s senior staff may not have been reasonable in
            nature. Ginnie Mae guarantees mortgage-backed securities of government-
            insured loans. These securities are issued by approved private lending
            institutions. Ginnie Mae is the primary agency to offer this service, is a wholly
            owned government corporation that is not required to make decisions to increase
            value for shareholders, and does not work directly with consumers. Therefore,
            media outreach initiatives to promote members of its senior staff, particularly
            articles that do not pertain specifically to the work of Ginnie Mae, may not have
            been reasonable or necessary.

Comment 5   HUD stated that Ginnie Mae believed that there was inadequate communication
            and understanding and that there was supporting documentation available for
            review. During the audit, we conducted two onsite visits to Ginnie Mae’s office.
            We also communicated via email during the period October 2015 to February
            2016. In some of the email communication, Ginnie Mae stated that certain
            documents, such as individual work orders and a summary of activity report, did
            not exist and, therefore, could not be provided to support the questioned costs.
            We also communicated our findings to HUD during the audit, and it did not
            indicate that there was additional documentation available for review. Further, in
            HUD’s April 2015 monitoring checklist, it found that Ginnie Mae did not have
            copies of all correspondence between the GTR and the contractor, contracting
            officer, or others concerning the performance of the contract and indicated that
            Ginnie Mae had not maintained documentation and data to provide a complete
            history of all relevant actions taken by the GTR.

            In addition to the documentation obtained from HUD and Ginnie Mae throughout
            the audit, we obtained documentation from the contractor in response to an OIG
            subpoena. This documentation included electronic documentation related to the
            promotion of members of Ginnie Mae’s senior staff. We reviewed more than
            1,000 documents obtained through the subpoena but did not identify any
            additional records detailing Ginnie Mae’s request, approval, and receipt of
            specific media outreach services performed.

Comment 6   Ginnie Mae contended that the former GTR was not interviewed by OIG nor were
            her extensive electronic files considered. While we did not interview the former
            GTR, we copied her on emails in which we asked for supporting documentation
            for invoices. For example, we emailed the current GTR and the former GTR
            (after she had returned from medical leave) requesting a copy of the summary of
            activity report for the one invoice that did not include a description of the services
            performed for the period. Neither was able to provide a copy of the report for our



                                               17
            review. In addition, we emailed Ginnie Mae’s chief financial officer, the current
            GTR, and the former GTR to request documentation regarding ordered services.
            In reply to this email, the current GTR stated that Ginnie Mae did not develop
            individual work orders for each assignment under the contract. Further, Ginnie
            Mae should have had controls in place to ensure that no matter who the GTR was
            at any point in time, the official Government files were accessible to the
            organization and contained all of the relevant information and documentation,
            whether maintained in hardcopy, electronically, or both. The current GTR should
            have had all relevant information.

            As mentioned in comment 5, we obtained documentation from the contractor.
            This documentation included electronic documentation related to the promotion
            of members of Ginnie Mae’s senior staff. We did not identify any additional
            records detailing Ginnie Mae’s request, approval, and receipt of specific media
            outreach services performed.

Comment 7   Ginnie Mae stated that a 2015 review by HUD found that while supporting
            documentation was not in the GTR file, it was available electronically. HUD’s
            April 2015 monitoring checklist noted that there were electronic files related to
            monitoring and periodic evaluations of contractor performance; inspection,
            acceptance, and monitoring; and required administrative, financial, and technical
            progress reports. However, the checklist indicated that Ginnie Mae did not have
            copies of all correspondence between the GTR and the contractor, contracting
            officer, or others concerning the performance of the contract and indicated that
            Ginnie Mae had not maintained documentation and data to provide a complete
            history of all relevant actions taken by the GTR. The checklist did not note that
            there were electronic files related to these checklist items.

            Also, as mentioned in comment 5, we obtained documentation from the
            contractor. We did not identify any additional records detailing Ginnie Mae’s
            request, approval, and receipt of specific media outreach services performed.

Comment 8   Ginnie Mae contended that promoting the knowledge and skills of corporate
            leadership is a standard practice of any successful corporation and instilling
            confidence in Ginnie Mae’s leadership, particularly its top staff, is crucial because
            issuers and investors active in the program participate voluntarily. Ginnie Mae
            further stated that issuers’ and investors’ confidence that its top leaders are
            capable and knowledgeable and can make financial decisions is a crucial element
            in successfully accomplishing its mission. We disagree. Ginnie Mae guarantees
            mortgage-backed securities of government-insured loans. These securities are
            issued by approved private lending institutions. Ginnie Mae is the primary
            agency to offer this service, is a wholly owned government corporation that is not
            required to make decisions to increase value for shareholders, and does not work
            directly with consumers. Therefore, media outreach initiatives to promote
            members of its senior staff, particularly articles that do not pertain specifically to



                                               18
            the work of Ginnie Mae, may not have been reasonable or necessary. For
            example, Ginnie Mae paid the contractor for an article placement with
            SHAPE.com, in which its former executive vice president, Mary K. Kinney,
            provided career advice for reaching personal goals and suggested that exercise
            and maintaining a healthy diet are essential for managing the stress of a high-
            profile positon. We do not believe that this media initiative showed that Ginnie
            Mae’s top leaders were capable and knowledgeable and could make financial
            decisions or informed stakeholders that Ginnie Mae had the appropriate
            leadership in place to efficiently execute the program.

Comment 9   Ginnie Mae contended that its charter explicitly directed it to be active and
            competitive in the secondary market. However, Ginnie Mae did not provide a
            reference to the specific provision, and we were unable to substantiate its
            existence based on a review of Title III of the National Housing Act, which
            contains Ginnie Mae’s authorizing statute.




                                             19
Appendix C
                                          Summary of Invoices Reviewed
                                                         Amount charged                             Amount
                                                                                        Amount
                                               Total      to line items that                       missing a
               Invoice           Invoice                                                missing
     #                                        invoice       included the                          summary of
               number             date 10                                               invoice
                                              amount        promotion of                            activities
                                                                                        support
                                                             senior staff                            report
  1             192552          9/15/2011     $50,321
  2             193996          9/16/2011     310,619
  3             197572         11/14/2011      68,291
  4             195500         11/22/2011      74,444                                               $74,444
  5             198978         12/12/2011      46,000                                   $46,000
  6             199058         12/12/2011      65,449                                    65,449
  7             201078          1/11/2012      32,209                                    32,209
  8             202966          2/10/2012      50,984                                    50,984
  9            204591-9         3/14/2012      29,528                                    29,528
 10             206293          4/10/2012      61,058                                    61,058
 11             208081          5/15/2012      68,973                                    68,973
 12             209827          6/12/2012      42,806                                    42,806
 13             211584          7/12/2012      33,640           $19,587
 14             212249          7/27/2012      13,446
 15              21365          8/20/2012      49,115            31,881
 16              26000          9/11/2012      69,698            46,961                  69,698
 17           222100346         9/28/2012     240,540
 18           222100595        10/10/2012      56,797            44,855                  56,797
 19           222101194        11/13/2012      58,356            35,462
 20           222101923        12/10/2012      65,920            47,072
 21           222102801         1/17/2013      54,337            44,880
 22           222104126         3/13/2013      68,288            32,324                  68,288
 23           222103310          4/3/2013      60,406            32,904
 24           222104968         4/11/2013      80,020            16,377                  80,020
 25           222105632         5/10/2013      74,563
 26           222106351         6/11/2013      38,860            13,175
 27           222106910          7/9/2013      31,327            13,686
 28           222107130         7/19/2013       9,640             3,676                  9,640
 29           222107515         8/21/2013     279,214           260,391
 30           222107939         9/10/2013      35,659            14,969




10
         The invoice dates shown were taken from the payment register provided by Ginnie Mae.



                                                            20
                                                                   Amount charged                             Amount
                                                                                             Amount
                                                     Total         to line items that                        missing a
                Invoice            Invoice                                                   missing
     #                                              invoice          included the                           summary of
                number              date 11                                                  invoice
                                                    amount           promotion of                             activities
                                                                                             support
                                                                      senior staff                             report
 31    222108604    10/17/2013       41,840                              17,417
 32    222109076    11/19/2013       24,830                               7,376
 33    222109927      1/7/2014       48,692                              14,775
 34    222110176     1/17/2014       43,706                              25,903
 35    222110543     2/28/2014       49,911                              16,751               49,911
 36    222111334     4/24/2014       50,361                              22,303               50,361
 37    222110787     5/27/2014       39,392                              17,399
 38    222111922     5/27/2014       44,303                              26,853
 39    222112493     6/25/2014       35,972
 40 222113059-39 8/12/2014           75,652
 41    222113502     8/18/2014      166,340
 42     22211350     9/25/2014       52,850                                                   52,850
 43    222113453     9/25/2014      179,821
 44    222114558    10/27/2014       56,847
 45    222115006    11/24/2014       70,013
 46    222115506    12/22/2014       33,536                              21,565
 47    222115932     1/30/2015       35,966
 48    222116168     2/23/2015       54,825                              28,827
 49    222116494     4/14/2015       68,365                              30,791
 50    222116934     4/22/2015       52,712                              17,709
 51    222117396     5/20/2015       52,462                              18,031
 52    222117858     6/24/2015       67,698
 53    222118264     7/28/2015      141,753
 54    222118649     9/15/2015       51,027
 55    222119118     10/6/2015      235,994                             198,445
 Totals                           $3,995,376                          $1,122,345 12        $834,572           $74,444
 Total amount discussed in the finding                                                 $1,848,114 13




11
         The invoice dates shown were taken from the payment register provided by Ginnie Mae.
12
         The 29 invoices did not provide a breakdown of costs for each activity performed by the contractor during the
         billing period. However, the activities that promoted senior staff were billed as part of line items totaling
         approximately $1.1 million.
13
         The $1,848,114 includes $834,572 for invoices that were missing support, $74,444 for the invoice that did not
         include a summary of activities report, and $939,098 for line items that included the promotion of senior staff on
         invoices not included in the other two categories. The remaining $183,247 shown for line items that included
         the promotion of senior staff was part of invoices that were also missing supporting documentation.



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