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.
21
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)