oversight

Fiscal Years 2016 and 2015 (Restated) U.S. Department of Housing and Urban Development Consolidated Financial Statements Audit

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-11-18.

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

    U.S. Department of Housing and
  Urban Development, Washington, DC
    Fiscal Years 2016 and 2015 (Restated) Consolidated
                Financial Statements Audit




Office of Audit, Financial Audits Division   Audit Report Number: 2017-FO-0004
Washington, DC                                               November 18, 2016
To:            Courtney Timberlake, Deputy Chief Financial Officer, F
                      /signed/
From:          Thomas R. McEnanly, Director, Financial Audits Division, Washington DC, GAF
Subject:       Fiscal Years 2016 and 2015 (Restated) U.S. Department of Housing and Urban
               Development Consolidated Financial Statements Audit




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) independent auditor’s report on HUD’s consolidated financial statements and
reports on internal controls over financial reporting and compliance with laws and regulations.
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
202-402-8216.
                    Audit Report Number: 2017-FO-0004
                    Date: November 18, 2016

                    Fiscal Years 2016 and 2015 (Restated) U.S. Department of Housing and
                    Urban Development Consolidated Financial Statements Audit


Highlights

What We Audited and Why
In accordance with the Chief Financial Officers Act of 1990, as amended, we are required to
annually audit the consolidated financial statements of the U.S. Department of Housing and
Urban Development (HUD) and the stand-alone financial statements of the Federal Housing
Administration and the Government National Mortgage Administration (Ginnie Mae). Our
objective was to express an opinion on the fairness of the financial statements in accordance with
U.S. generally accepted accounting principles applicable to the Federal Government. This report
presents the results of our audit of fiscal years 2016 and 2015 (Restated) HUD consolidated
financial statements, including our report on HUD’s internal control and test of compliance with
applicable laws and regulations.

What We Found
We expressed a disclaimer of opinion on HUD’s fiscal years 2016 and 2015 (Restated)
consolidated financial statements because of HUD’s inability to deliver principal financial
statements for the fiscal years ending September 30, 2016 and 2015 (Restated) and
accompanying notes in a timely manner. In addition, there were several other unresolved audit
matters, which restricted our ability to obtain sufficient, appropriate evidence to express an
opinion. These unresolved audit matters relate to (1) OGC’s declination of signing the
management representation letter; (2) HUD’s improper use of cumulative and first-in, first-out
budgetary accounting methods of disbursing community planning and development program
funds; (3) the $4.2 billion in nonpooled loan assets from Ginnie Mae’s stand-alone financial
statements that we could not audit because Ginnie Mae could not provide adequate support for us
to test these asset balances; (4) the improper accounting for HUD’s assets and liabilities related
to grant accruals; loan guarantees; property, plant, and equipment; accounts receivable; payables;
and prepayments; and (5) material differences between HUD’s subledger and general ledger
accounts. This audit report contains 11 material weaknesses, 7 significant deficiencies in
internal controls, and 5 instances of noncompliance with applicable laws and regulations. These
weaknesses were due to an inability to establish a compliant control environment, implement
adequate financial accounting systems, retain key financial management staff, and identify
appropriate accounting principles and policies.

What We Recommend
Our recommendations regarding each of the components’ findings were made in audit reports
2017-FO-0001, 2017-FO-0002, and 2017-FO-0003.
Table of Contents
Independent Auditor’s Report................................................................................3

Appendixes ..............................................................................................................24
         A. Auditee Comments .................................................................................................... 24
         B. Schedule of Questioned Costs and Funds To Be Put to Better Use ...................... 26
         C. HUD’s Fiscal Years 2016 and 2015 (Restated) Consolidated Financial
            Statements and Notes ................................................................................................ 27




                                                                2
                                            U.S. DEPARTMENT OF

                               HOUSING AND URBAN DEVELOPMENT
                                      OFFICE OF INSPECTOR GENERAL




                  Independent Auditor’s Report                                                 1




To the Secretary,
U.S. Department of Housing and Urban Development:

Report on the Financial Statements
The Chief Financial Officers Act of 1990 (CFO Act) requires the U.S. Department of Housing
and Urban Development (HUD) to prepare the accompanying consolidated balance sheets as of
September 30, 2016 and 2015 (Restated); the related consolidated statements of net cost, changes
in net position, and combined statement of budgetary resources for the fiscal years then ended;
and the related notes to the financial statements. We were engaged to audit those financial
statements in accordance with generally accepted government auditing standards accepted in the
United States of America and Office of Management and Budget (OMB) Bulletin 15-02.

Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with accounting principles generally accepted in the United States of America,
which include the design, implementation, and maintenance of internal controls relevant to the
preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.




1
  This report is supplemented by three separate reports issued by the HUD Office of Inspector General (OIG) to
provide a more detailed discussion of the internal control and compliance issues and to provide specific
recommendations to HUD management. The findings have been included in the internal control and compliance
with laws and regulations sections of the independent auditor’s report. The supplemental reports are available on
the HUD OIG Internet site at https://www.hudoig.gov and are entitled (1) Additional Details To Supplement Our
Fiscal Years 2016 and 2015 (Restated) U.S. Department of Housing and Urban Development Financial Statement
Audit (audit report 2017-FO-0003, issued November 15, 2016); (2) Audit of Federal Housing Administration
Financial Statements for Fiscal Years 2016 and 2015 (Restated) (audit report 2017-FO-0002, issued November 14,
2016); and (3) Audit of the Government National Mortgage Association’s Financial Statements for Fiscal Years
2016 and 2015 (Restated) (audit report 2017-FO-0001, issued November 14, 2016).




                                                        3
Auditor’s Responsibility
The OIG is required by the CFO Act, as amended by the Government Management Reform Act
of 1994 and implemented by OMB Bulletin 15-02, Audit Requirements for Federal Financial
Statements, to audit HUD’s principal financial statements or select an independent auditor to do
so.

Our responsibility is to express an opinion on the fair presentation of these principal financial
statements in all material respects, in conformity with accounting principles generally accepted
in the United States of America. Because of the matters described in the Basis for Disclaimer of
Opinion section, however, we were not able to obtain sufficient, appropriate audit evidence to
provide a basis for an audit opinion. The audit was conducted in accordance with government
auditing standards generally accepted in the United States of America, which require the auditor
to plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.

Basis for Disclaimer of Opinion
Due to late restatements performed by HUD’s component entities, the Government National
Mortgage Association (Ginnie Mae) and Federal Housing Administration (FHA), and delays in
HUD’s reporting process, HUD was unable to provide final consolidated financial statements
and accompanying notes in a timeframe that would allow us to obtain sufficient, appropriate
evidence to determine if they were free from material misstatement. Therefore, we are unable to
provide an opinion on the fiscal year 2016 and 2015 (Restated) consolidated financial statements
and accompanying notes at this time.

In addition, during our fiscal year 2016 audit, HUD’s general counsel refused to sign off on certain
matters included in the management representation letter concerning all known actual or possible
litigation, claims, and assessments related to HUD, including its component entities. OIG believes
that HUD’s legal counsel is responsible for and knowledgeable about those matters that should be
considered in OCFO management’s preparation and fair presentation of the financial
statements. Due to legal counsel’s refusal to sign off on these matters, which is a scope limitation,
we lacked assurance that all known actual or possible litigation, claims and assessments had been
properly accounted for or disclosed in the consolidated financial statements in accordance with
generally accepted accounting principles.

Lastly, we identified several other matters for which we were unable to obtain adequate audit
evidence to provide a basis of opinion on the fiscal years 2016 and 2015 (restated) financial
statements. When evaluating these areas and their impacts on the financial statements as a
whole, we determined that multiple material financial statement line items were impacted and the
issues identified were pervasive and material to the fiscal years 2016 and 2015 consolidated
financial statements. There were no other satisfactory audit procedures that we could adopt to
obtain sufficient, appropriate evidence with respect to these unresolved matters. These
additional matters would have contributed to a disclaimer of opinion if consolidated financial
statements and notes and disclosures were made available in a timeframe that allowed for our




                                                  4
review and validation. Readers are cautioned that amounts reported in the financial statements
and related notes may not be reliable.

The other matters that we identified related to (1) improper budgetary accounting; (2) disclaimer
of opinion on Ginnie Mae’s financial statements; (3) unvalidated grant accrual estimates; (4)
improper and unreliable accounting for assets and liabilities; and (5) significant unreconciled
subledger to general ledger differences. Additional details are discussed below.

      Improper budgetary accounting. HUD continued to use budgetary accounting for the
      Office of Community Planning and Development (CPD) programs that was not performed
      in accordance with Federal generally accepted accounting principles (GAAP), which
      resulted in misstatements in HUD’s combined statement of budgetary resources.
      Therefore, we could not assess whether the balances reported were reasonable.

      HUD used a cumulative and first-in first-out (FIFO) method 2 to disburse and commit CPD
      program funds that was not in accordance with GAAP for Federal grants. These methods
      were used to determine the amount of uncommitted HOME Investment Partnerships
      Program grant funds that would be subject to reallocation and recapture under section
      218(g) of the HOME Investment Partnership Act and to process disbursements for CPD
      formula programs, respectively. The effects of these methodologies were considered
      pervasive because of the dollar risk exposure and volume of CPD grant activities from
      several thousand grantees (as of September 30, 2016, approximately $2.7 billion in
      disbursements and $2.4 billion in undisbursed obligations were impacted that are related to the
      HOME program, Community Development Block Grant, Housing for Persons with AIDS,
      and Emergency Shelter Grant) and the system limitations of HUD’s grant management and
      mixed accounting system to properly account for these grant transactions in accordance
      with the statutory requirements and GAAP.

      Due to these issues, we determined that financial transactions related to CPD’s formula-
      based programs that entered HUD’s accounting system had been processed incorrectly.
      Although FIFO has been removed for disbursements made from fiscal year 2015 and
      forward grants, this method will not be removed retroactively from prior-year grants.
      Thus, based on the pervasiveness of their effects, in our opinion, the obligated and
      unobligated balance brought forward and obligated and unobligated balances reported in
      HUD’s combined statement of budgetary resources for fiscal year 2015 and in prior years




2
  The Federal Accounting Standards Advisory Board (FASAB) Handbook defines FIFO as a cost flow assumption.
The first goods purchased or produced are assumed to be the first goods sold (FASAB Handbook, Version 13,
appendix E, page 30, dated June 2014). In addition, the Financial Audit Manual states that the use of “first-in, first-
out” or other arbitrary means to liquidate obligations based on outlays is not generally acceptable (GAO-PCIE (U.S.
Government Accountability Office-President’s Council on Integrity and Efficiency) Financial Audit Manual,
Internal Control Phase, Budget Control Objectives, page 395, F-3). In the context of HUD’s use of this method, the
first funds appropriated and allocated to the grantee are the first funds committed and disbursed, regardless of the
source year in which grant funds were committed for the activity.



                                                           5
      were materially misstated. The related amount of material misstatements for these CPD
      programs in the accompanying combined statement of budgetary resources could not be
      readily determined to reliably support the budgetary balances reported by HUD at yearend
      due to the inadequacy of evidence available from HUD’s mixed accounting and grants
      management system.

      Disclaimer of opinion on Ginnie Mae financial statements. In fiscal year 2016, for the
      third consecutive year, Ginnie Mae could not bring its material asset balances related to its
      nonpooled loan assets into an auditable state. Specifically, we were unable to obtain
      sufficient, appropriate evidence to express an opinion on the fairness of the $4.2 billion (net
      of allowance) in nonpooled loan assets from Ginnie Mae’s defaulted issuers’ portfolio, and
      Ginnie Mae continued to improperly account for FHA reimbursable costs as an expense
      instead of capitalizing the costs as an asset.

      A number of Ginnie Mae balance sheet line items made up the $4.2 billion in nonpooled
      loan assets, 3 which were consolidated into the other-non-credit reform loans reported on
      HUD’s consolidated balance sheet. This condition occurred because Ginnie Mae lacked
      financial management systems capable of handling Ginnie Mae’s loan-level transaction
      accounting requirements. Therefore, we were again unable to perform all of the audit
      procedures needed to obtain sufficient, appropriate evidence. As a result, we determined
      that our audit scope was insufficient to express an opinion on Ginnie Mae’s $4.2 billion in
      nonpooled loan assets as of September 30, 2016.

      Ginnie Mae continued to improperly account for FHA reimbursable costs as an expense
      instead of capitalizing the costs as an asset in fiscal year 2016. This practice caused Ginnie
      Mae’s asset and net income line items to be misstated, resulting in misstatements in HUD’s
      consolidated assets, expenses, and net position. Due to multiple years of incorrect
      accounting, we believe the cumulative effect of the errors identified was material.
      However, we were unable to determine with sufficient accuracy a proposed adjustment to
      correct the errors due to insufficient available data.

      Unvalidated grant accrual estimates. In reporting on HUD’s liabilities, HUD’s principal
      financial statements were not prepared in accordance with the requirements of the Federal
      Government and Federal Accounting Standards Advisory Board (FASAB) Technical
      Release (TR) 12. FASAB TR 12 provides guidance to agencies on developing reasonable
      estimates of accrued grant liabilities to report on their financial statements. We were
      unable to obtain sufficient, appropriate audit evidence that the fiscal years 2015 and 2016
      estimates were reasonable. This lack of evidence was due to (1) CPD’s not validating its
      accrued grant liability estimates, (2) CPD’s inability to provide adequate supporting
      documentation for grant disbursements in a timely manner, and (3) insufficient time to




3
 These are (1) mortgage loans held for investment, net ($3.47 billion); (2) claims receivable, net ($709 million); (3)
accrued interest receivable, net ($19 million); and (4) acquired property, net ($41 million).



                                                          6
perform all of the audit procedures we deemed necessary to obtain sufficient, appropriate
audit evidence to form an opinion on the estimate in lieu of adequate validation procedures
by CPD. There were no other compensating audit procedures that could be performed to
obtain reasonable assurance regarding CPD’s accrued grant liability estimates. Therefore,
we could not form an opinion on CPD’s accrued grant liability estimates for fiscal years
2016 and 2015. CPD’s estimated accrued grant liabilities were $2.3 billion and $2 billion
for fiscal years 2016 and 2015, respectively. These amounts accounted for 85 percent of
HUD’s total $2.7 billion accrued grant liabilities for fiscal year 2016 and 84 percent of
HUD’s total $2.4 billion accrued grant liabilities in fiscal year 2015.

Improper and unreliable accounting for assets and liabilities. HUD did not properly
account for several types of assets and liabilities reported on its balance sheet, causing
misstatements or unreliable balances. Specifically, (1) balances reported for non-FHA loan
guarantees and property, plant, and equipment balances could not be relied upon; (2)
payments advanced to Indian Housing Block Grant (IHBG) grantees for investment
purposes were not recorded as advances; and (3) loans receivable related to the Emergency
Homeowners’ Loan Program (EHLP) could not be audited.

During fiscal year 2016, HUD was undergoing a reconciliation and cleanup effort for
balances related to its non-FHA loan guarantee programs. Many discrepancies had been
identified and adjustments had been processed during the fiscal year to address some of the
discrepancies identified totaling $17.3 billion. However, as of September 30, 2016, HUD
was in the process of researching and resolving additional discrepancies identified, and the
review was ongoing. As a result, we could not rely on HUD’s non-FHA loan guarantee
balances, including its loan guarantee liability ($303 million), foreclosed property ($36
million), unpaid obligations ($22.4 million), and memorandum accounts used to track the
status of loan guarantee authority. There were no other compensating audit procedures that
could be performed to obtain reasonable assurance regarding these balances.

HUD’s accounting for its property, plant, and equipment did not comply with Federal
GAAP. Specifically, HUD could not support balances related to internal use software
totaling $254.3 million. In addition, HUD did not adequately record property, plant, and
equipment balances related to furniture and equipment and leasehold improvements.
Therefore, the total HUD proper property, plant, and equipment balance of $297 million
could not be relied upon.

HUD authorized recipients of Federal funds to retain funding advanced to it before
incurring eligible expenses; however, HUD did not recognize these funds as advances on
its financial statements in accordance with Statements on Federal Financial Accounting
Standards 1. As of June 30, 2016, as much as $260.1 million was being held in investment
accounts with IHBG grantees, which represented an advance in accordance with the
standards. HUD elected to present these as expenses on its statement of net cost once they
were disbursed. Therefore, we believe the Office of Public and Indian Housing (PIH)
prepayment reported on HUD’s consolidated balance sheet and expenses reported on
HUD’s consolidated statement of net cost were likely misstated as of September 30, 2016.




                                          7
        Lastly, weaknesses in the accounting for the EHLP loans receivable portfolio continued,
        which limited our ability to audit during the fiscal year. A data review was performed
        during the fiscal year as a result of serious deficiencies in the accuracy of the loan balances
        identified in our prior-year audit report. 4 However, adjustments to correct the loan data
        were being made as of the end of our fieldwork. Therefore, we were unable to obtain
        sufficient, appropriate evidence to express an opinion on the fairness of the balances
        reported in the direct loan and loan guarantees line item reported on HUD’s consolidated
        balance sheet as of September 30, 2016, related to EHLP. The total loan principal issued
        under this program was $246 million; however, we were unable to determine whether the
        current balance recognized on the consolidated balance sheet of $103.2 million was an
        accurate net realizable value of the portfolio.

        Significant unreconciled subledger to general ledger differences. During the fiscal year,
        HUD initiated a subledger review and identified material differences between its
        subledgers and general ledger accounts. As of September 30, 2016, its subledger review
        was ongoing, and there was an unreconciled balance of $29.4 billion. These differences
        remained unresolved mainly because HUD could not identify and locate sufficient
        documentation to support material United States Standard General Ledger (USSGL)
        accounts. The reconciling differences were material and pervasive and impacted several
        USSGL accounts and financial statement line items. A total of $27.9 billion represented
        differences in unpaid obligation balances. The remaining $1.5 billion difference impacted
        the PIH prepayments (advances), liability for nonentity assets not reported on statement of
        custodial activity (other liabilities), loan guarantee liability, and account receivable
        balances reported on HUD’s consolidated balance sheet. While progress had been made in
        the resolution of differences since September 30, 2016, differences remained that,
        combined, were material to the financial statements. Due to HUD’s inability to support the
        balances recorded in the USSGL with sufficient, adequate documentation, we were unable
        to rely on the balances presented in HUD’s consolidated balance sheet and the combined
        statement of budgetary resources.

Disclaimer of Opinion
Because of the significance of the matters described in the Basis for Disclaimer of Opinion
section above, we were not able to obtain sufficient, appropriate audit evidence to provide an
audit opinion on HUD’s principal financial statements and accompanying notes as of September
30, 2016 and 2015 (restated), and its net costs, changes in net position, and budgetary resources
for the fiscal year then ended. Accordingly, we do not express an opinion on the financial
statements.




4
    Audit Report 2015-DP-0004, Loan Accounting System, issued December 9, 2014



                                                      8
Emphasis of Matter
Restatement
At the time of issuance of this auditor’s report and as discussed in note 31 to the financial
statements, the 2015 financial statements have been restated for the correction of errors related to
(1) Ginnie Mae’s improper budgetary closing process and (2) FHA’s improper use of the raw
data used to establish FHA’s maintenance and operating expense rate management assumption.
Our opinion was not modified with respect to these matters.

However, there were other material misstatements in the fiscal year 2016 financial statements in
which no adjustments had been made. Specifically, (1) regarding the use of the FIFO method to
liquidate obligations under CPD’s formula grant programs, no adjustments had been made
because the specific amount of misstatements and their related effects were unknown and (2)
regarding advanced funds held by grantees for IHBG grantees, which totaled as much as $260
million as of June 30 30, 2016, an amount could not be reasonably determined as of September
30, 2016, because HUD could not provide the information needed to quantify the amount. These
amounts were not included in the financial statements due to HUD’s disagreement regarding the
presentation of these advances. Additional details on these items can be found in note 31 to the
financial statements.

Prior-Period Financial Statements
In our report, dated November 18, 2015, we reported that FHA’s financial statements for fiscal
years 2015 and 2014, respectively, fairly presented the financial position of FHA’s financial
statements as of September 30, 2015 and 2014, and its net costs, changes in net position, and
budgetary resources for the years then ended in accordance with GAAP. However, in fiscal year
2016, new information concerning material errors affecting the 2015 and 2014 FHA financial
statements were identified. For this reason, the opinion expressed in FHA’s 2015 and 2014 audited
financial statements was no longer appropriate because the financial statements as published at that
time contained material misstatements. Accordingly, our opinion on FHA’s audited financial
statements for 2015 and 2014 is withdrawn because the statements can no longer be relied upon and
is replaced by the auditor’s report on the restated financial statements. As a result, the basis for
disclaimer expressed on HUD’s consolidated 2015 and 2014 audited financial statements is
expanded to include the material errors that affected those financial statements, which are further
described in note 31.

FHA’s Loan Guarantee Liability
FHA’s loan guarantee liability is an actuarially determined estimate of the net present value of
future claims, net of future premiums, and future recoveries from loans insured as of the end of the
fiscal year. This estimate is developed using econometric models that integrate historical loan-level
program and economic data with regional house price appreciation forecasts to develop assumptions
about future portfolio performance. This year’s estimate is the mean value from a series of
projections using many economic scenarios, and FHA’s single-family liability for loan guarantee
estimates reported as of September 30, 2016, could change depending on which economic outcome
prevails. This forecast method helps project how the estimate will be affected by different
economic scenarios but does not address the risk that the models may not accurately reflect current




                                                 9
borrower behavior or may contain technical errors. Our opinion was not modified with respect to
this matter.

Other Matters
Required Supplementary Information
U.S. GAAP requires that certain information be presented to supplement the basic general-
purpose financial statements. Such information, although not a part of the basic general-purpose
financial statements, is required by FASAB, which considers it to be an essential part of financial
reporting for placing the basic general-purpose financial statements into an appropriate
operational, economic, or historical context. We did not audit and do not express an opinion or
provide any assurance on this information; however, we applied certain limited procedures in
accordance with auditing standards generally accepted in the United States of America, which
consisted principally of inquiries of management regarding the methods of preparing the
information and comparing the information for consistency with management’s responses to the
auditor’s inquiries, the basic financial statements, and other knowledge the auditor obtained
during the audit of the basic financial statements. These limited procedures do not provide
sufficient evidence to express an opinion or provide assurance on the information.

In its fiscal year 2016 agency financial report, HUD presents “required supplemental stewardship
information” and “required supplementary information.” The required supplemental stewardship
information presents information on investments in non-Federal physical property and human
capital and investments in research and development. In the required supplementary
information, HUD presents a “management discussion and analysis of operations” and
combining statements of budgetary resources. HUD also elected to present consolidating
balance sheets and related consolidating statements of changes in net position as required
supplementary information. The consolidating information is presented for additional analysis of
the financial statements rather than to present the financial position and changes in net position
of HUD’s major activities. This information is not a required part of the basic financial
statements but is supplementary information required by FASAB and OMB Circular A-136.

Other Information
Our audit was conducted for the purpose of forming an opinion on the basic financial statements
as a whole. HUD’s agency financial report contains other information that is not a required part
of the basic financial statements. Such information has not been subjected to the auditing
procedures applied in the audit of the principal financial statements, and, accordingly, we do not
express an opinion or provide assurance on it.




                                                10
Additional details on our findings regarding HUD’s, FHA’s, and Ginnie Mae’s internal controls
are summarized below and were provided in separate audit reports to HUD management. 5 These
additional details also augment the discussions of instances in which HUD had not complied
with applicable laws and regulations; the information regarding our audit objectives, scope, and
methodology; and recommendations to HUD management resulting from our audit.

Report on Internal Control
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, to
prevent or detect and correct misstatements on a timely basis. A significant deficiency is a
deficiency or combination of deficiencies in internal control that is less severe than a material
weakness yet important enough to merit attention by those charged with governance. A
material weakness is a deficiency or combination of deficiencies in internal control, such that
there is a reasonable possibility that a material misstatement of the entity’s financial statements
will not be prevented or detected and corrected on a timely basis.

Our consideration of internal control was for the limited purpose described above and was not
designed to identify all deficiencies in internal control that might be significant deficiencies or
material weaknesses. However, we noted in our reports the following nine material weaknesses
and eight significant deficiencies.

Material Weaknesses
A material weakness is a deficiency or combination of deficiencies in internal control, such that
there is a reasonable possibility that a material misstatement of the entity’s financial statements
will not be prevented or detected and corrected on a timely basis. We noted the following
deficiencies met the definition of a material weakness:


Weak Internal Controls Over Financial Reporting Led to Errors and Delays in the Preparation
of Financial Statements and Notes
Internal controls over HUD’s financial reporting process were weak, causing HUD to be unable
to provide year end financial statements and accompanying notes in a timeframe that would
allow for sufficient OIG audit review. Additionally, Ginnie Mae closed material accounts
prematurely. Finally, HUD performed 2,868 journal vouchers to adjust transactional data in its
general ledger, primarily due to data quality issues. Ineffective governance over HUD’s
transition to a Federal Shared Service Provider (FSSP), Treasury’s Administrative Resource



5
  Audit Report 2017-FO-0003, Additional Details To Supplement Our Fiscal Years 2016 and 2015 (Restated) U.S.
Department of Housing and Urban Development Financial Statements, issued November 15, 2016; Audit Report
2016-FO-0002, Federal Housing Administration Fiscal Year 2016 and 2015 (Restated) Financial Statements Audit,
issued November 14, 2016; Audit Report 2017-FO-0001, Audit of the Government National Mortgage Association’s
Fiscal Years 2016 and 2015 (Restated) Financial Statements , issued November 14, 2016



                                                     11
Center (ARC), and Ginnie Mae’s budgetary accounting created an ineffective financial reporting
environment that could not prevent and detect errors in a timely manner. As a result, (1) we
could not audit HUD’s year end financial statements and accompanying notes, (2) HUD’s fiscal
year 2016 third quarter financial statement notes contained unsupported balances and errors
totaling $477 million, and (3) HUD had to restate its fiscal year 2015 statement of budgetary
resources due to an error with an absolute value of $2 billion. Further, HUD’s extensive reliance
on manual journal vouchers increased the risk of error in its general ledger and financial
statements.

HUD Assets and Liabilities Were Misstated and Not Adequately Supported
HUD did not properly account for, have internal controls over, or have adequate support for all
of its assets and liabilities. Specifically, (1) CPD did not validate its accrued grant liabilities
estimates; (2) HUD’s accounting for its cash management process did not include the recognition
of receivables and payables when incurred and understated its prepayment balance; (3) HUD did
not recognize a prepayment for funds advanced to its IHBG grantees that were used for
investment; (4) EHLP could not be audited; (5) balances related to HUD’s loan guarantee
programs were not reliable; and (6) HUD did not properly account for its property, plant, and
equipment. These problems occurred because of continued weaknesses in HUD’s internal
controls and a lack of communication between OCFO and the program offices. As a result,
several financial statement line items were misstated or could not be audited as of September 30,
2016. Specifically, (1) CPD’s accrued grant liabilities estimates could not be audited; (2) HUD’s
PIH prepayments and accounts receivable balances contained errors with an absolute value of
approximately $476.2 million and $201.2 million, respectively, and accounts payable were
understated by an unknown amount; (3) HUD’s expenses on its statement of net costs were
overstated by $293.2 million; (4) loans receivable balances for EHLP could not be audited and
were potentially misstated; (5) balances related to HUD’s loan guarantee programs were
misstated by unknown amounts; and (6) HUD’s $297 million balance for property, plant, and
equipment was not supported.

Significant Reconciliations Were Not Completed in a Timely Manner
Material differences between subsidiary ledgers and the general ledger were not resolved, and
sufficient evidence to support financial statement line items was not maintained. Further, OCFO
did not complete required cash reconciliations or intragovernmental reconciliations in a timely
manner. In fiscal year 2016, HUD began using an FSSP for financial reporting but failed to
define (1) roles and responsibilities between HUD and the FSSP, and (2) policies and procedures
for completing key reconciliations of material financial statement line items. HUD’s policies
and procedures were not effective. The lack of these internal controls increased the risk of a
material misstatement occurring in the financial statements and the potential for material
misstatements to be undetected by management.




                                                12
CPD’s Formula Grant Accounting Did Not Comply With GAAP, Resulting in Misstatements on
the Financial Statements
CPD’s formula grant program accounting continued to depart from GAAP because of its use of
the FIFO method 6 for committing and disbursing obligations. Since 2013, we have reported that
the information system used, the Integrated Disbursement Information System (IDIS) Online, a
grants management system, was not designed to comply with Federal financial management
system requirements. Further, HUD’s plan to eliminate FIFO from IDIS Online was applied
only to fiscal year 2015 and future grants and not to fiscal years 2014 and earlier. As a result,
budget year grant obligation balances continued to be misstated, and disbursements made using
an incorrect USSGL attribute resulted in additional misstatements. Although FIFO has been
removed from fiscal year 2015 and forward grants, modifications to IDIS are necessary for the
system to comply with the Federal Financial Management Improvement Act (FFMIA) and
USSGL transaction records. The inability of IDIS Online to provide an audit trail of all financial
events affected by the FIFO method prevented the financial effects of FIFO on HUD’s
consolidated financial statements from being quantified. Further, because of the amount and
pervasiveness of the funds susceptible to the FIFO method and the noncompliant internal control
structure in IDIS Online, the combined statement of budgetary resources and the consolidated
balance sheet were materially misstated. The effects of not removing the FIFO method
retroactively will continue to have implications on future years’ financial statement audit
opinions until the impact is assessed to be immaterial.

HUD’s Financial Management System Weaknesses Continued in 2016
HUD’s financial system weaknesses remained a material weakness in fiscal year 2016 due to the
combined impact of many deficiencies and limitations. While HUD took steps to modernize its
financial management system through the transition of key financial management functions to an
FSSP in 2016, it encountered significant challenges after implementation that had not been
resolved as of September 30, 2016. HUD’s inability to modernize its legacy financial systems
and the lack of an integrated financial management system resulted in a continued reliance on
disparate, legacy financial systems with various limitations. Program offices compensated for
system limitations by using less reliable manual processes to meet financial management needs.
These system issues and limitations inhibited HUD’s ability to produce reliable, useful, and
timely financial information.




6
  The FASAB Handbook defines FIFO as a cost flow assumption. The first goods purchased or produced are
assumed to be the first goods sold (FASAB Handbook, Version 13, appendix E, page 30, dated June 2014). In
addition, the Financial Audit Manual states that the use of “first-in, first-out” or other arbitrary means to liquidate
obligations based on outlays is not generally acceptable (GAO-PCIE Financial Audit Manual, Internal Control
Phase, Budget Control Objectives, page 395, F-3). In the context of HUD’s use of this method, the first funds
appropriated and allocated to the grantee are the first funds committed and disbursed, regardless of the source year
in which grant funds were committed for the activity.




                                                           13
Material Asset Balances Related to Nonpooled Loans Were Not Auditable
In fiscal year 2016, for the third consecutive year, Ginnie Mae could not bring its material asset
balances related to its nonpooled loan assets into an auditable state. Therefore, we were unable
to audit the $4.2 billion (net of allowance) in nonpooled loan assets reported in Ginnie Mae’s
financial statements as of September 30, 2016. These assets related to (1) claims receivable, net
($709 million); (2) mortgage loans held for investment, net ($3.47 billion); (3) accrued interest
receivable, net ($19 million); and (4) acquired property, net ($41 million). This condition
occurred because Ginnie Mae lacked financial management systems capable of handling its loan-
level transaction accounting requirements. Therefore, we were again unable to perform all of the
audit procedures needed to obtain sufficient, appropriate evidence. As a result, we determined
that our audit scope was insufficient to express an opinion on Ginnie Mae’s $4.2 billion in
nonpooled loan assets as of September 30, 2016.

Ginnie Mae’s Internal Controls Over Financial Reporting Continued To Have Weaknesses
In fiscal year 2015, we reported that Ginnie Mae’s internal controls over financial reporting were
not effective. This condition continued, and some new issues were identified in fiscal year 2016.
These material weaknesses in internal controls were issues related to the (1) improper accounting
for FHA’s reimbursable costs and accrued interest earned on nonpooled loans; (2) accounting for
cash in transit; (3) revenue accrual accounting; and (4) several other accounting issues, such as
advances, fixed assets, and financial statement note disclosures. The first three issues were
repeat findings from prior years, and the last one was new in fiscal year 2016. These conditions
occurred because of Ginnie Mae’s failure to ensure that (1) adequate monitoring and oversight of
its accounting and reporting functions were in place and operating effectively and (2) accounting
policies and procedures were developed, finalized, and appropriately implemented. As a result,
the risk that material misstatements in Ginnie Mae’s financial statements would not be prevented
or detected increased.

The Allowance for Loan Loss Account Balances Were Unreliable
In fiscal year 2016, we identified accounting issues related to Ginnie Mae’s allowance for loan
loss accounts. Specifically, we noted that Ginnie Mae improperly (1) accounted for certain
nonpooled loan accounting transactions in its allowance for loan loss accounts and (2) booked a
provision for loan loss against a nonexisting asset account. Factors that contributed to these
issues included (1) the delayed implementation of accounting policies and procedures related to
the allowance accounts and (2) the lack of financial management systems capable of handling
loan-level transactions. Due to a combination of all of these accounting issues, we determined
the balance of the allowance for loan loss accounts reported in Ginnie Mae’s financial statements
to be unreliable.




                                               14
HUD’s and Ginnie Mae’s Financial Management Governance Was Ineffective 7
Overall, we determined that HUD’s financial management governance remained
ineffective. Weaknesses in program and component internal control that impacted financial
reporting were able to develop in part due to a lack of financial management governance
processes that could detect or prevent significant program- and component-level internal control
weaknesses.

In fiscal year 2016, Ginnie Mae’s executive management began to address the financial
management governance problems cited in our fiscal years 2015 and 2014 audit reports. While
significant progress was made this year, more work is needed to fully address the issues cited in
our report. Specifically, these problems included issues in (1) keeping Ginnie Mae OCFO’s
operations fully functional; (2) ensuring that emerging risks affecting its financial management
operations were identified, analyzed, and responded to appropriately and in a timely manner; (3)
establishing adequate and appropriate accounting policies and procedures and accounting
systems; and (4) implementing an effective entitywide governance of the models used to
generate accounting estimates for financial reporting. Some of these conditions continued
because the implementation of the corrective action plans took longer than anticipated. This
issue again contributed to Ginnie Mae’s inability to produce auditable financial statements for
the third consecutive fiscal year.

HUD’s financial management governance remained ineffective during 2016. HUD’s transition
to an FSSP for financial management services was punctuated by operational issues that were
exacerbated by a lack of mature financial management governance practices. Additionally, as
we have reported in prior-year audits, HUD did not have reliable financial information for
reporting and continued using its outdated legacy financial systems. Weaknesses in program and
component internal control that impacted financial reporting were able to develop in part due to a
lack of financial management governance processes. As a result, there were multiple
deficiencies in HUD’s internal controls over financial reporting, resulting in misstatements on
the financial statements and noncompliance with laws and regulations.

Cash Flow Modeling Errors Were Not Detected
In fiscal years 2014 and 2015, FHA home equity conversion mortgage (HECM) net loans
receivable and liability for loan guarantee were not reported in accordance with GAAP.
Specifically, FHA did not estimate its property maintenance and operating management assumption
expense rate based on actual historical payments. This condition occurred because FHA failed to
isolate the accrued expenses in its input data in modeling its maintenance and operating expense rate
management assumption. Additionally, FHA failed to adequately review significant changes
observed in its maintenance and operating expense input data until 2016. This failure caused an
overstatement of FHA’s loan guaranty liability and an understatement of net loans receivable and



7
 This was classified as a material weakness, based on the findings on financial management governance reported in
Audit Report 2017-FO-0003, Additional Details To Supplement Our Fiscal Years 2016 and 2015 (Restated) U.S.
Department of Housing and Urban Development Financial Statement Audit, and Audit Report 2017-FO-0001, Audit
of the Government National Mortgage Association’s Fiscal Years 2016 and 2015 (Restated) Financial Statements.



                                                       15
related foreclosed property line items in fiscal years 2014 and 2015. According to FHA, the
overstatement of the liability account and understatement of the asset account was $833 million and
$540 million, respectively in fiscal year 2015, and the overstatement of the liability account and
understatement of the asset account was $830 million and $542 million respectively in fiscal year
2014.

FHA’s Controls Over Financial Reporting Related to Budgetary Resources Had Weaknesses
In fiscal year 2016, we identified financial reporting control deficiencies related to FHA’s
monitoring of its budgetary resources. Specifically, we found that errors were not prevented or
detected in a timely manner. These errors were related to the (1) discrepancies identified between
proprietary and budgetary accounts and (2) system-generated accounting report used for financial
reporting. Additionally, FHA’s monitoring of its unliquidated obligation balances was not effective.
We attributed these conditions to FHA’s ineffective monitoring and processing controls. As a
result, errors with an absolute amount totaling $680.2 million were not prevented or detected in a
timely manner. Finally, FHA missed the opportunity to recapture $276.5 million in invalid
obligations.

Significant Deficiencies
A significant deficiency is a deficiency or combination of deficiencies in internal control that is
less severe than a material weakness yet important enough to merit attention by those charged
with governance. We determined that the following deficiencies met the definition of a
significant deficiency.

Weaknesses in HUD’s Administrative Control of Funds System Continued
We have reported on HUD’s administrative control of funds in our audit reports and
management letters since fiscal year 2005. HUD continued to not have a fully implemented and
complete administrative control of funds system that provided oversight of both obligations and
disbursements. Our review noted instances in which (1) the Office of Multifamily Housing
Programs did not follow HUD’s administrative control of funds; (2) funds control plans were out
of date or did not reflect the controls and procedures in place with the transition to an FSSP; (3)
program codes were not included in funds control plans and funds control documentation; and
(4) OCFO staff processed accounting changes without proper review, approval, and sufficient
supporting documentation. These conditions existed because of (1) decisions made by HUD
OCFO, (2) failures by HUD’s allotment holders to update their funds control plans and notify
OCFO of changes in their obligation process before implementation, (3) a lack of compliance
reviews in the current year, and (4) a lack of policies and procedures requiring documentation of
system accounting changes. As a result, HUD could not ensure that its obligations and
disbursements were within authorized budget limits and complied with the Antideficiency Act.

HUD Continued To Report Significant Amounts of Invalid Obligations
Deficiencies in HUD’s process for monitoring its unliquidated obligations and deobligating
balances tied to invalid obligations continued. Specifically, some program offices did not
complete their obligation reviews in a timely manner, and we discovered $204.4 million in
invalid obligations not previously identified by HUD. We discovered another $93.4 million in
inactive obligations, indicating potentially additional invalid obligations. We also discovered



                                                16
$34.6 million in obligations that HUD determined needed to be closed out and deobligated
during the fiscal year that remained on the books as of September 30, 2016. We attributed these
deficiencies to ineffective monitoring efforts and the inability to promptly process contract
closeouts. Lastly, we noted that, as of September 30, 2016, HUD had not implemented prior-
year recommendations to deobligate $100.5 million in funds. As a result, HUD’s unpaid
obligation balances on the statement of budgetary resources were potentially overstated by
$432.9 million.

HUD’s Computing Environment Controls Had Weaknesses
HUD’s computing environment, data centers, networks, and servers provide critical support to
all facets of its programs, mortgage insurance, financial management, and administrative
operations. In fiscal year 2016, we audited application controls over the New Core Interface
Solution, which exchanges data between the financial systems at ARC (Oracle Financials) and
HUD. We found that some access controls within the New Core Interface Solution were not
effective and some of the application security documentation was inaccurate. These weaknesses
occurred because of limited resources to perform the required tasks. As a result, some
contractors had inappropriate access to sensitive budget and general ledger financial transactions.
Further, inaccurate security documentation could lead to inappropriate decisions. In addition,
although HUD had taken action to address information system control weaknesses reported in
prior years, several of those weaknesses remained. Without adequate general and application
controls, there was no assurance that financial management applications and the data within them
were adequately protected

Ginnie Mae Did Not Provide Adequate Oversight To Ensure Compliance With Federal
Regulations and Guidance
Ginnie Mae did not provide adequate oversight of its pool processing agent for the Integrated
Pool Management System (IPMS) to ensure that adequate controls over business processes
complied with Federal regulations and guidance. Specifically, (1) IPMS does not have adequate
controls that automatically track overrides in the system; (2) IPMS does not have automated
controls to prevent a pool processor from making changes to the master data without prior
approval; and (3) Ginnie Mae’s lacked policies and procedures for data management. These
conditions occurred because Ginnie Mae did not have a policies for monitoring overrides and
IPMS does not sufficiently track the use of overrides or generate a report that captures changes.
As a result, Ginnie Mae’s data was susceptible to an increased risk of improper use of authority,
which could cause financial harm to Ginnie Mae by attaching its guarantee to mortgage-backed
securities.

FHA’s Controls Related to Claims Had Weaknesses
In fiscal year 2016, we found that (1) the designation of two A43C (Claims) system edits, which are
used in processing claims, was inappropriate, and (2) FHA continued to have significant delay in
billing noncompliant lenders for partial claims for which the promissory note was not provided
within 60 days. The system edit issue occurred because FHA lacked periodic monitoring to ensure
that the designation of the error codes was appropriate. The lack of alignment between FHA’s
policy and the regulatory requirements and persistent delays in initiating the collection process for




                                                 17
noncompliant mortgages was a contributing factor to FHA’s not claiming amounts due in a timely
manner. The system edit issue creates a significant vulnerability in FHA’s systems application
controls, and its risk of improper payments is increased because FHA relied heavily on system
edits to ensure that hundreds of thousands of single-family claim requests worth more than $15
billion in fiscal year 2016 were processed correctly. Additionally, delays in implementing the
collection process for noncompliant mortgagees with unsupported partial claims caused
unsupported partial claims to remain in the loans receivable inventory longer, which is neither a
good cash management practice nor a good strategy to help improve the health of the Mutual
Mortgage Insurance fund.

Weaknesses in FHA’s Controls Over Model Governance
FHA had not fully implemented an effective model risk management governance framework.
Specifically, it had not finalized or implemented policies and procedures relating to (1) model
documentation, (2) model assumption sensitivity analysis testing, and (3) data management and
validation. This condition occurred because FHA had not made establishing a model governance
framework a priority. FHA’s failure to fully implement a control mechanism, such as the model
risk management governance framework, increased the risk of inconsistencies and errors in
financial reporting occurring without being detected or prevented.

Weaknesses Were Identified in Selected FHA Information Technology Systems
Our review of the general and application controls over FHA’s Single Family Premium Collection
System – Periodic (SFPCS-P) and Single Family Acquired Asset Management System (SAMS)
found (1) weaknesses in SFPCS-P, which included the system’s being incorrectly classified as a
low-impact system instead of a moderate-impact system; (2) that software products used by SFPCS-
P were outdated; (3) that the interface reconciliation from HUD’s Single Family Insurance System
(SFIS) to SFPCS-P was not sufficiently performed; (4) that SFPCS-P had not participated in HUD’s
disaster recovery exercise for more than 4 years; (5) that segregation of duties for SFPCS-P
developers was not effectively implemented; and (6) that SFPCS-P security documents contained
inaccurate information. Additionally, we found (1) weaknesses in SAMS, which included that the
interface reconciliations from SFIS to SAMS were not sufficiently performed and (2) least privilege
and segregation of duties requirements were not fully implemented for SAMS users.

We completed an additional review of the general and application controls over SFIS and the
Claims system and determined that the information system control weaknesses previously identified
in SFIS and Claims were being addressed. However, we found (1) weaknesses in Claims, which
included inconsistencies in error code, and (2) that the configuration information and the history of
system changes were not retained for more than 5 years. Further, we found (1) weaknesses in both
SFIS and Claims systems, which included that application and user access controls were not
effectively implemented or adequately managed, and (2) that management did not adequately
implement effective application configuration management. We also found that HUD Application
Release Tracking System documents for FHA applications were not processed and maintained
properly. These conditions occurred because some application controls were not sufficient. As a
result, the appropriate confidentiality, integrity, and availability of critical information may have
been negatively impacted. In addition, the information used to provide input to the FHA financial
statements could have been adversely affected.



                                                 18
Report on Compliance With Laws and Regulations
In connection with our audit, we performed tests of HUD’s compliance with certain provisions
of laws and regulations. The results of our tests disclosed five instances of noncompliance that
are required to be reported in accordance with Government Auditing Standards, issued by the
Comptroller General of the United States, or OMB Bulletin No. 15-02, Audit Requirements for
Federal Financial Statements. However, the objective of our audit was not to provide an opinion
on compliance with laws and regulations. Accordingly, we do not express such an opinion.

HUD’s Financial Management Systems Did Not Comply With the Federal Financial
Management Improvement Act
In fiscal year 2016, we noted a number of instances of FFMIA noncompliance 8 within HUD’s
financial management system. HUD’s continued noncompliance was due to New Core
implementation challenges and a reliance on a number of legacy financial systems.

HUD Continued To Not Comply With the HOME Investment Partnership Act
HUD continued to not comply with section 218(g) of the HOME Investment Partnership Act
(also known as the HOME Statute) regarding grant commitment requirements. HUD’s
misinterpretation of the plain language in the Act, the implementation of the cumulative method
and the FIFO technique, and the current recapture policies continued to result in HUD’s
noncompliance with HOME Statute requirements. As a result, HUD continued to incorrectly
permit some jurisdictions to retain, commit, and disburse HOME Investment Partnerships
Program grant funds beyond the statutory deadline. HUD will continue to be noncompliant with
related laws and regulations until the cumulative method is no longer used to determine whether
grantees meet commitment deadlines required by the HOME Statute. Allowing grantees to
disburse funds from commitments made outside the 24-month statutory period may have caused
HUD to incur improper payments.

HUD Did Not Comply With Treasury Financial Manual’s Rules on Cash Management or 2 CFR
Part 200
Since the implementation of its cash management policies in fiscal year 2013, PIH has made
significant progress toward compliance with Treasury Financial Manual rules on cash
management. 9 However, despite considerable efforts by HUD’s Office of Housing Voucher
Programs, PHAs maintained Federal cash in excess of their immediate disbursement need for
extended periods. Specifically, Moving To Work program PHAs held between $432.4 million
and $466.5 million for the majority of the fiscal year and even after offsets performed in August




8
  Compliance with Section 803(a) elements of FFMIA include (1) system requirements, (2) accounting standards,
and (3) ussgl at the transaction level.
9
  Before fiscal year 2013, HUD provided housing assistance payments to its PHAs that far exceeded their need and
did not have a process in place to offset excess funding. To address this problem, PIH implemented the following
cash management polices: (1) determine future disbursement based on previous need, (2) perform quarterly cash
reconciliations and offset excess funding as it is identified, and (3) offset amounts that accumulated before the
implementation of these new processes.



                                                        19
and September 2016, held $212 million in excess of their immediate disbursement needs.
Further, PHAs accumulated $168.3 million from January to June 2016 and most likely
accumulated additional excess funds from July through September, none of which had been
offset as of September 30, 2016. These conditions occurred because HUD lacked an automated
system and real-time expense data needed to fully implement its cash management policies.
Since PHAs maintained these funds in excess of immediate disbursement need for extended
periods and were unable to quickly offset the funds against future disbursements, HUD did not
comply with Treasury’s cash management regulations 10 or 2 CFR (Code of Federal Regulations)
Part 200, 11 increasing the risk of funds being susceptible to fraud, waste, and abuse.

HUD Did Not Comply With the Improper Payments Elimination and Recovery Act of 2010
Our Improper Payments Elimination and Recovery Act (IPERA) audit 12 found that HUD did not
comply with IPERA in fiscal year 2015 because it did not conduct its annual risk assessment in
accordance with OMB guidance or meet its annual improper payment reduction target.
Specifically, HUD did not assess all low-risk programs on a 3-year cycle or consider all nine
required risk factors, making the review incomplete and noncompliant with section 3(a)(3)(B) of
IPERA. HUD also failed to meet or exceed the annual improper payment reduction targets for
its high-priority program, Rental Housing Assistance Programs (RHAP), causing noncompliance
with section 3(a)(3)(E) of IPERA. This is the third year in a row that HUD did not comply with
IPERA. Additionally, we found information published in the agency financial report did not
meet the reporting requirements of OMB Circular A-136, significant improper payments in
HUD’s RHAP continued, and HUD’s improper payment estimate and methodology for RHAP
continued to have deficiencies during fiscal year 2015.

Ginnie Mae Did Not Comply With the Debt Collection Improvement Act of 1996
In fiscal year 2016, Ginnie Mae’s noncompliance with the Debt Collection Improvement Act
(DCIA) of 1996 continued. Specifically, as reported in fiscal year 2015, Ginnie Mae had not
remediated its practice of ensuring that all debt collection tools allowed by law had been
considered before deciding to discharge certain uninsured mortgage debts owed to Ginnie Mae.
This condition occurred because Ginnie Mae’s management continued to take the position that
DCIA did not apply to Ginnie Mae; therefore, it did not need to comply with DCIA




10
   Treasury Financial Manual, Vol. 1, Part 4A, Section 2045.10, Cash Advances Establishing Procedure for Cash
Advances, section 3, states, “It is the responsibility of grantor agencies to monitor the cash management practices of
their recipient organizations to ensure that Federal cash is not maintained by them in excess of immediate disbursing
needs. Agencies must establish systems and procedures to assure that balances are maintained commensurate with
immediate disbursing needs, excess balances are promptly returned to the Treasury; and advance funding
arrangements with recipient organizations unwilling or unable to comply are terminated.”
11
   Regulations at 2 CFR 200.305 state, “For non-Federal entities other than States, payments methods must minimize
the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the
disbursement by the non-Federal entity.” The regulations further state, “Advance payments to a non-Federal entity
must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash
requirements of the non-Federal entity in carrying out the purpose of the approved program or project.”
12
   Audit Report 2016-FO-0005, Compliance With the Improper Payments Elimination and Recovery Act, issued
May 13, 2016



                                                         20
requirements. As a result, Ginnie Mae may have missed opportunities to collect tens of millions
of dollars in debts related to losses on its mortgage-backed securities program.

Results of the Audit of FHA’s Financial Statements
We performed a separate audit of FHA’s fiscal years 2016 and 2015 (restated) financial
statements. Our report on FHA’s financial statements, 13 includes a qualified opinion on FHA’s
financial statements, along with discussion of two material weaknesses and three significant
deficiencies in internal controls.

Results of the Audit of Ginnie Mae’s Financial Statements
We performed a separate audit of Ginnie Mae’s fiscal years 2016 and 2015 (restated) financial
statements. Our report on Ginnie Mae’s financial statements, 14 includes a disclaimer of opinion
on these financial statements, along with discussion of four material weaknesses, one significant
deficiency in internal control, and one instance of noncompliance with laws and regulations.

Objectives, Scope, and Methodology
As part of our audit, we considered HUD’s internal controls over financial reporting. We are not
providing assurance on those internal controls. Therefore, we do not provide an opinion on
internal controls. We conducted our audit in accordance with Government Auditing Standards
and the requirements of OMB Bulletin 15-02. These standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement.

We also tested HUD’s compliance with laws, regulations, governmentwide policies, and
provisions of contract and grant agreements that could have a direct and material effect on the
financial statements. However, our consideration of HUD’s internal controls and our testing of
its compliance with laws, regulations, governmentwide policies, and provisions of contract and
grant agreements were not designed to and did not provide sufficient evidence to allow us to
express an opinion on such matters and would not necessarily disclose all matters that might be
material weaknesses; significant deficiencies; or noncompliance with laws, regulations,
governmentwide policies, and provisions of contract and grant agreements. Accordingly, we do
not express an opinion on HUD’s internal controls or its compliance with laws, regulations,
governmentwide policies, and provisions of contract and grant agreements.

With respect to information presented in HUD’s “required supplementary stewardship
information” and “required supplementary information” and management’s discussion and
analysis presented in HUD’s fiscal year 2015 agency financial report, we performed limited
testing procedures as required by AU-C 730, Required Supplementary Information. Our




13
   Audit Report 2017-FO-0002, Audit of Federal Housing Administration Fiscal Years 2016 and 2015 (Restated)
Financial Statements Audit, issued November 14, 2016, was incorporated into this report.
14
   Audit Report 2017-FO-0001, Audit of the Government National Mortgage Association’s Fiscal Years 2016 and
2015 (Restated) Financial Statements, issued November 14, 2016, was incorporated into this report.



                                                     21
procedures were not designed to provide assurance, and, accordingly, we do not provide an
opinion on such information.

Because of the matters described in the Basis for Disclaimer of Opinion section above, we were
not able to obtain sufficient, appropriate audit evidence to provide a basis for an audit opinion.

Agency Comments and Our Evaluation
We reviewed management’s response to the draft independent auditor’s report which can be
found in its entirety in appendix A. We noted both points of agreement and differences of
opinion. While we agree with OCFO that there is more work to do to remediate outstanding
issues, we also noted management continues to minimize internal control weaknesses and
overestimate progress. For example, this year, management disagreed with a number of
preliminary assessments and OIG findings and recommendations that were identified and
provided to OCFO early in the audit cycle. The primary basis of many of the disagreements
cited OIG’s use of “best practice” standards or criteria that HUD believed was optional. HUD’s
continued minimization and diminishment of issues throughout the course of the year resulted in
inaction and a failure to escalate the need to remediate internal control weaknesses in a timely
manner. Consequently, significant delays in the completion and delivery of final consolidated
financial statements and accompanying notes occurred and as a result, OIG was compelled to
issue a disclaimer of opinion on HUD’s 2016 and 2015 (Restated) consolidated financial
statements with a primary basis that OIG was unable to audit them in their entirety due to their
untimely delivery.
Progress was made on two material weaknesses, and a third was not resolved, but instead,
consolidated with other new findings identified during fiscal year 2016. However, two new
material weaknesses were identified during the course of the year, one of which contributed to
HUD’s inability to timely complete and deliver final consolidated financial statements and
accompanying notes. This material weaknesses could have been identified and remediated by
management early in the fiscal year, allowing for the detection and prevention of the errors and
issues identified by OIG at third quarter and possibly ensuring timely delivery of final
consolidated financial statements and accompanying notes.
With respect to the FHA restatements performed, we are not taking exception to FHA’s
reestimation process. At issue here is FHA’s failure to use best and accurate data available to
FHA at that time in its cash flow modeling process. We have sufficient appropriate evidence to
support that this control failure resulted in errors in the utilization of home equity conversion
mortgage operations and maintenance cost data. This condition occurred because of a weak
entitywide model governance structure and internal controls.
The Department’s and Ginnie Mae’s ongoing joint efforts in mapping out a path forward on its
nonpooled loan assets will bring them closer to a better state where it can potentially be ready for
audit fiscal in year 2017.


This report is intended for the information and use of the management of HUD, OMB, GAO, and
Congress and is not intended to be and should not be used by anyone other than these specified




                                                22
23
Appendixes
Appendix A

             Auditee Comments




                    24
25
Appendix B


           Schedule of Questioned Costs and Funds To Be Put to Better Use
                Audit report                       Funds to be put to
                                  Unsupported 1/      better use 2/
                  number
                 2017-FO-0001                               $248,016,624
                 2017-FO-0002          $55,350,830           276,567,940
                 2017-FO-0003                                500,689,142

                     Totals             55,350,830          1,025,273,706



1/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.
2/   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.




                                             26
Appendix C
 HUD’s Fiscal Years 2016 and 2015 (Restated) Consolidated Financial Statements and
                                      Notes




                                        27
Financial Statements
Introduction
The principal financial statements have been prepared to report the financial position and results
of operations of HUD, pursuant to the requirements of 31 U.S.C. 3515(b). While the statements
have been prepared from HUD’s books and records in accordance with GAAP for Federal
entities and the formats prescribed by OMB, the statements are in addition to the financial
reports used to monitor and control budgetary resources, which are prepared from the same
books and records. The statements should be read with the realization that they are for a
component of the U.S. Government, a sovereign entity.
The following financial statements are presented:
The Consolidated Balance Sheet, as of September 30, 2016, and 2015, which presents those
resources owned or managed by HUD that are available to provide future economic benefits
(assets), amounts owed by HUD that will require payments from those resources or future
resources (liabilities), and residual amounts retained by HUD comprising the difference (net
position).
The Consolidated Statement of Net Cost, which presents the net cost of HUD operations for
the years ended September 30, 2016, and 2015. HUD’s net cost of operations includes the gross
costs incurred by HUD less any exchange revenue earned from HUD activities.
The Consolidated Statement of Changes in Net Position, which presents the change in HUD’s
net position resulting from the net cost of HUD operations, budgetary financing sources other
than exchange revenues, and other financing sources for the years ended September 30, 2016,
and 2015.
The Combined Statement of Budgetary Resources, which presents the budgetary resources
available to HUD during FY 2016 and 2015, the status of these resources at September 30, 2016,
and 2015, and the outlay of budgetary resources for the years ended September 30, 2016,
and 2015.
The Notes to the Financial Statements provide important disclosures and details related to
information reported on the statements.




                                                28
                                     U.S. Department of Housing And Urban Development
                                                  Consolidated Balance Sheet
                                        For The Period Ending September 2016 and 2015
                                                      (Dollars in Millions)




                                                                                     2016                  2015 (Restated)


Assets:
 Intragovernmental:
   Fund balance with Treasury (Note 4)                                           $           73,198    $              94,691
   Short-Term Investments ( Note 6)                                              $           15,954    $              12,923
   Long-Term Investments held to Maturity ( Note 6)                                          36,398                   14,754
   Accounts Receivable, Net (Note 7)                                                              1                      -
   Other Assets (Note 12)                                                                       43                           9
 Total Intragovernmental Assets                                                  $          125,594    $             122,377


 Cash (Note 5)                                                                   $              60     $                 45
 Investments (Note 6)                                                                           31                       31
 Accounts Receivable, Net (Note 7)                                                             611                      780
 Direct Loan and Loan Guarantees, Net (Note 8)                                               19,476                   14,965
 Other Non-Credit Reform Loans (Note 9)                                                       2,680                    3,227
 General Property, Plant, and Equipment (Note 10)                                              381                      329
 PIH Prepayments (Note 11)                                                                     380                      672
 Other Assets (Note 12)                                                                         53                       45
Total Assets                                                                     $          149,266    $             142,471


Liabilities:
 Intragovernmental
   Accounts payable (Note 13)                                                    $              24     $                 16
   Debt (Note 14)                                                                            31,002                   27,150
   Other Intragovernmental Liabilities (Note 17)                                              3,024                    3,148
 Total Intragovernmental Liabilities                                             $           34,050    $              30,314


 Accounts payable (Note 13)                                                      $            1,006    $                966
 Accrued Grant Liabilities (Note 13)                                                          2,663                    2,388
 Loan Guarantees (Note 8)                                                                    (2,057)                  13,473
 Debt Held by the Public (Note 14)                                                                8                          8
 Federal Employee and Veterans Benefits (Note 15)                                               64                       69
 Loss Reserves (Note 16)                                                                          3                      -
 Other Governmental Liabilities (Note 17)                                                     1,367                    1,239
Total Liabilities                                                                $           37,104    $              48,457


Commitments and Contingencies (Note 19)                                          $              55     $                 55


Net Position:
 Unexpended appropriations - fund from dedicated collections (Note 20)           $             (342)   $                (305)
 Unexpended appropriations - other funds                                                     47,257                   51,420
 Cumulative results of operations - funds from dedicated collections (Note 20)               22,655                   21,417
 Cumulative results of operations - other funds                                              42,592                   21,482
 Total Net Position                                                              $          112,162    $              94,014
Total Liabilities and Net Position                                               $          149,266    $             142,471


The accompanying notes are an integral part of these statements




                                                              29
                               U.S. Department Of Housing And Urban Development
                                       Consolidated Statement Of Net Cost
                                 For The Period Ending September 2016 and 2015
                                               (Dollars in Millions)
                                                                               2016                  2015 (Restated)
COSTS
Federal Housing Administration
 Gross Costs (Note 21)                                                 $              (17,758)   $            (16,203)
 Less: Earned Revenues                                                                 (1,218)                 (1,849)
 Net Program Costs                                                                    (18,976)                (18,052)
 (Gain)/Loss on pension, ORB or OPEB Assumption Changes                                   -                       -
 Net program costs including Assumption Changes                                       (18,976)                (18,052)

Government National Mortgage Association
 Gross Costs (Note 21)                                                 $                  432    $               (234)
 Less: Earned Revenues                                                                 (1,646)                 (1,555)
 Net Program Costs                                                                     (1,214)                 (1,789)
 (Gain)/Loss on pension, ORB or OPEB Assumption Changes                                   -                       -
 Net program costs including Assumption Changes                                        (1,214)                 (1,789)

Section 8 Rental Assistance
 Gross Costs (Note 21)                                                 $              30,653     $             29,482
 Less: Earned Revenues                                                                   -                        -
 Net Program Costs                                                                    30,653                   29,482
 (Gain)/Loss on pension, ORB or OPEB Assumption Changes                                  -                        -
 Net program costs including Assumption Changes                                       30,653                   29,482

Public and Indian Housing Loans and Grants (PIH)
 Gross Costs (Note 21)                                                 $               2,995     $              2,835
 Less: Earned Revenues                                                                     0                      -
 Net Program Costs                                                                     2,995                    2,835
 (Gain)/Loss on pension, ORB or OPEB Assumption Changes                                  -                        -
 Net program costs including Assumption Changes                                        2,995                    2,835

Homeless Assistance Grants
 Gross Costs (Note 21)                                                 $               1,957     $              1,894
 Less: Earned Revenues                                                                     5                        (4)
 Net Program Costs                                                                     1,962                    1,890
 (Gain)/Loss on pension, ORB or OPEB Assumption Changes                                  -                        -
 Net program costs including Assumption Changes                                        1,962                    1,890

Housing for the Elderly and Disabled
 Gross Costs (Note 21)                                                 $                 974     $              1,037
 Less: Earned Revenues                                                                  (109)                    (136)
 Net Program Costs                                                                       865                      901
 (Gain)/Loss on pension, ORB or OPEB Assumption Changes                                  -                        -
 Net program costs including Assumption Changes                                          865                      901

Community Development Block Grants (CDBG)
 Gross Costs (Note 21)                                                 $               6,286     $              7,567
 Less: Earned Revenues                                                                   -                        -
 Net Program Costs                                                                     6,286                    7,567
 (Gain)/Loss on pension, ORB or OPEB Assumption Changes                                  -                        -
 Net program costs including Assumption Changes                                        6,286                    7,567

HOME
 Gross Costs (Note 21)                                                 $               1,167     $              1,241
 Less: Earned Revenues                                                                   -                        -
 Net Program Costs                                                                     1,167                    1,241
 (Gain)/Loss on pension, ORB or OPEB Assumption Changes                                  -                        -
 Net program costs including Assumption Changes                                        1,167                    1,241

Other
 Gross Costs (Note 21)                                                 $               6,351     $              6,071
 Less: Earned Revenues                                                                   (37)                     (29)
 Net Program Costs                                                                     6,314                    6,042
 Net program costs including Assumption Changes                                        6,314                    6,042

Costs Not Assigned to Programs                                                           262                      218
Less: Earned Revenues Not Attributed to Programs                                         -                        -

Consolidated
 Gross Costs (Note 21)                                                 $              33,319     $             33,908
 Less: Earned Revenues                                                                (3,005)                  (3,573)
Net Cost of Operations                                                 $              30,314     $             30,335

The accompanying notes are an integral part of these statements




                                                        30
                                                                            U.S. Department Of Housing And Urban Development
                                                                             Consolidated Statement Of Changes In Net Position
                                                                              For The Period Ending September 2016 and 2015
                                                                                            (Dollars in Millions)
                                                                                     2016                                                                         2015 (Restated)

                                                 Funds From Dedicated                                                               Funds From Dedicated
                                                      Collections                   All Other Funds             Total                    Collections              All Other Funds               Total


CUMULATIVE RESULTS OF OPERATIONS:
 Beginning of Period                             $                21,417 $                      20,646 $                 42,063     $             19,621 $                     5,434 $                  25,055
 Adjustments:
    Changes in Accounting Principles                                 -                             -                        -                        -                           -                          -
    Corrections and Errors                                            (5)                          835                      830                       (3)                        -                          (3)
 Beginning Balance, As Adjusted                  $                21,412 $                      21,481 $                 42,893     $             19,618 $                     5,434 $                  25,052

BUDGETARY FINANCING SOURCES:
 Other Adjustments (Rescissions, etc.)         $                       (1) $                       -   $                      (1)   $                -   $                       -     $                   -
 Appropriations Used                                                  89                        54,372                   54,461                      115                      52,878                    52,993
 Non-Exchange Revenue                                                   5                          201                      206                        3                         -                            3
 Donations and Forfeitures of Cash/Equivalents                       -                             -                        -                        -                           -                         -
 Transfers In/Out Without Reimbursement                              -                             -                        -                        -                           -                         -
 Other Budgetary Financing Sources                                   -                             -                        -                        -                             (0)                       (0)

OTHER FINANCING SOURCES (NON-EXCHANGE):
 Donations and Forfeitures of Property  $                            -      $                      -    $                    -      $                -   $                          -   $                   -
 Transfers-In/Out Without Reimbursement                              -                             -                         -                       -                             0                          0
 Imputed Financing                                                     1                           158                       159                     -                            65                         65
 Other                                                                13                        (2,170)                   (2,157)                    -                        (4,879)                    (4,879)
                                                                                                                                                     -                           -                          -
 Total Financing Sources                                             107                        52,560                    52,667                     119                      48,063                     48,182
 Net Cost of Operations                                            1,136                       (31,450)                  (30,314)                  1,680                     (32,015)                   (30,335)
 Net Change                                                        1,243                        21,111                    22,354                   1,799                      16,048                     17,847

CUMULATIVE RESULTS OF OPERATIONS                     $            22,655        $              42,592 $                  65,247         $        21,417       $              21,482 $                   42,899

UNEXPENDED APPROPRIATIONS:
 Beginning of Period                                 $              (320) $                     51,435      $            51,115         $           (221)     $               56,442        $           56,221
 Adjustments:                                                        -                             -                        -
    Changes in Accounting Principles                                 -                             -                        -                        -                           -                         -
    Corrections and Errors                                            14                           (15)                       (1)                    -                           574                       574
 Beginning Balance, As Adjusted                  $                  (306) $                     51,420      $            51,114     $               (221) $                   57,016        $           56,795

BUDGETARY FINANCING SOURCES:
 Appropriations Received                             $               -          $               51,088 $                  51,088        $            -        $               47,639 $                   47,639
 Appropriations Transferred-In/Out                                    80                           (80)                      -                        55                         (56)                         0
 Other Adjustments (Rescissions, etc.)                               (27)                         (799)                     (826)                    (24)                       (301)                      (325)
 Appropriations Used                                                 (89)                      (54,372)                  (54,461)                   (115)                    (52,878)                   (52,994)
 Total Budgetary Financing Sources                   $               (36)       $               (4,163) $                 (4,200)       $            (84)     $               (5,596) $                  (5,680)

TOTAL UNEXPENDED APPROPRIATIONS                  $                  (342) $                    47,257       $            46,915     $               (305) $                  51,420         $           51,115

NET POSITION                                         $            22,313        $              89,849       $           112,162         $        21,112       $              72,902         $           94,014

The accompanying notes are an integral part of these statements




                                                                                                          31
                                                          U.S. Department Of Housing And Urban Development
                                                             Combined Statement Of Budgetary Resources
                                                            For The Period Ending September 2016 and 2015
                                                                          (Dollars in Millions)

                                                                                             2016                                   2015 (Restated)


                                                                                                 Non Budgetary Credit                         Non Budgetary Credit
                                                                                                  Program Financing                            Program Financing
                                                                                Budgetary             Accounts               Budgetary             Accounts
Budgetary Resources:
   Unobligated Balance Brought Forward, October 1                          $            44,260 $              35,616     $           34,729 $              49,760
   Adjustments to Unobligated Balance Brought Forward, October 1                             7                    (3)                   (13)                  -
   Unobligated Balance Brought Forward, Oct 1, As Adjusted                              44,267                35,613                 34,716                49,760
   Recoveries of Prior Year Unpaid Obligations                                           1,039                   463                    716                   397
   Other Changes in Unobligated Balance                                                 (1,089)                   (0)                  (708)                  -
Unobligated Balance From Prior Year Budget Authority, Net                               44,217                36,076                 34,724                50,157

   Appropriations (discretionary and mandatory)                                         51,256                    -                  47,458                    -
   Borrowing Authority (discretionary and mandatory)                                       -                   13,078                   -                   12,146
   Contract Authority (discretionary and mandatory)                                        -                      -                     -                      -
   Spending Authority From Offsetting Collections                                       28,705                 22,657                26,158                 28,452
Total Budgetary Resources                                                  $          124,178 $               71,811     $         108,340 $               90,755

Status of Budgetary Resources:
 Obligations Incurred
   Direct                                                                  $            55,328 $              51,020     $           63,700 $              49,732
   Reimbursable                                                                            214                 3,613                    249                 5,538
 Subtotal                                                                  $            55,542 $              54,633     $           63,949 $              55,270

 Unobligated Balances, End of Year
   Apportioned                                                             $            12,148   $              5,776    $           13,115   $              4,479
   Exempt From Apportionment                                                               -                      -                     -                      -
   Unapportioned                                                                        55,639                 11,402                31,275                 31,007
Unexpired unobligated balance, end of year                                 $           67,787    $            17,178     $          44,391    $            35,485
   Expired unobligated balance, end of year                                                849                    -                     -                      -
Total Unobligated Balance, End of Year                                     $            68,636   $             17,178    $           44,391   $             35,485
Total Status of Budgetary Resources                                        $          124,178    $            71,811     $         108,340    $            90,755

Change in Obligated Balance
 Unpaid Obligations:
  Unpaid Obligations, Brought Forward, October 1                           $             39,303 $               2,781    $           41,087 $                2,511
  Adjustment to Unpaid Obligations, Start of Year                                             (8)                   3                    13                    -
  Obligations Incurred                                                                   55,543                54,633                63,950                 55,271
  Outlays (gross)                                                                       (57,520)              (54,048)              (65,009)               (54,627)
  Actual Transfers, Unpaid Obligations                                                      -                     -                     -                      -
  Recoveries of Prior Year Unpaid Obligations                                            (1,039)                 (463)                 (716)                  (397)
 Unpaid Obligations, End of Year (gross)                                   $             36,279 $               2,906    $           39,325 $                2,758

 Uncollected Payments:
  Uncollected Payments, Fed Sources, Brought Forward, Oct 1                $                (18) $                (56)   $               (12) $                (53)
  Adjustment to Uncollected Payments, Fed Sources, Start of Year                            -                     -                      -                     -
  Change in Uncollected Customer Payments, Fed Sources                                      (23)                    5                      (6)                   1
  Actual Transfers, Uncollected Payments, Fed sources                                       -                     -                      -                     -
 Uncollected Payments, Fed sources, End of Year                            $                (41) $                (51)   $               (18) $                (52)

Memorandum (non-add) Entries:
Obligated Balance, Start of Year                                           $            39,277   $             2,728     $          41,088    $             2,458
Obligated Balance, End of Year                                             $            36,238   $             2,855     $          39,307    $             2,706

Budget Authority and Outlays, Net:
 Budget Authority, Gross (discretionary and mandatory)                    $              79,961 $              35,735    $           73,615 $               40,598
 Actual Offsetting Collections (discretionary and mandatory)                            (28,825)              (31,889)              (26,642)               (41,108)
 Change in Uncollected Customer Payments from Fed sources (discretionary and mandatory)     (23)                    5                     (6)                    1
 Recoveries of prior year paid obligations (discretionary and mandatory)                     28                   -                     -                      -
 Anticipated Offsetting Collections (discretionary and mandatory)                           -                     -                     -                      -
Budget Authority, Net (discretionary and mandatory)                       $             51,141 $               3,851                46,967                   (509)

 Outlays, Gross (discretionary and mandatory)                              $             57,520 $              54,048    $           65,009 $               54,627
 Actual Offsetting Collections (discretionary and mandatory)                            (28,825)              (31,889)              (26,639)               (41,108)
Outlays, Net (discretionary and mandatory)                                 $             28,695 $              22,159    $           38,370 $               13,519

Distributed Offsetting Receipts                                                          (2,302)                  -                  (2,844)                   -
Agency Outlays, Net (discretionary and mandatory)                          $            26,393 $              22,159     $          35,526 $               13,519
The accompanying notes are an integral part of these statements




                                                                                32
Notes to Financial Statements
September 30, 2016 and 2015
Note 1: Entity and Mission
HUD was created in 1965 to (1) provide housing subsidies for low and moderate income
families, (2) provide grants to states and communities for community development activities,
(3) provide direct loans and capital advances for construction and rehabilitation of housing
projects for the elderly and persons with disabilities, and (4) promote and enforce fair housing
and equal housing opportunity. In addition, HUD insures mortgages for single family and
multifamily dwellings; insures loans for home improvements and manufactured homes; and
facilitates financing for the purchase or refinancing of millions of American homes.
HUD’s major programs are as follows:
The Federal Housing Administration (FHA) administers active mortgage insurance programs
which are designed to make mortgage financing more accessible to the home-buying public and
thereby to develop affordable housing. FHA insures private lenders against loss on mortgages
which finance single family homes, multifamily projects, health care facilities, property
improvements, and manufactured homes.
The Government National Mortgage Association (Ginnie Mae) guarantees the timely payment of
principal and interest on Mortgage-Backed Securities (MBS) issued by approved private
mortgage institutions and backed by pools of mortgages insured or guaranteed by FHA, the
Department of Agriculture (USDA), the Department of Veterans Affairs (VA), and the HUD
Office of Public and Indian Housing (PIH).
The Section 8 Rental Assistance programs assist low- and very low-income families in obtaining
decent and safe rental housing. HUD makes up the difference between what a low- and very
low-income family can afford and the approved rent for an adequate housing unit funded by the
Housing Choice Voucher (HCV) Program.
The Low Rent Public Housing Grants program provides grants to Public Housing Agencies
(PHAs) and Tribally Designated Housing Entities (TDHEs) for construction and rehabilitation of
low-rent housing. This program is a continuation of the Low Rent Public Housing Loan program
which pays principal and interest on long-term loans made to PHAs and TDHEs for construction
and rehabilitation of low-rent housing.
The Homeless Assistance Grants program provides grants to localities to implement innovative
approaches to address the diverse facets of homelessness. The grants provide funds for the
Emergency Solutions Grant and Continuum of Care which award funds through formula and
competitive processes.



                                                33
The Section 202/811 Supportive Housing for the Elderly and Persons with Disabilities programs
provided 40-year loans to nonprofit organizations sponsoring rental housing for the elderly or
disabled. During FY 1992, the program was converted to a grant program. The grant program
provides capital for long-term supportive housing for the elderly (Section 202) and the disabled
(Section 811).
The Community Development Block Grant (CDBG) programs provide funds for metropolitan
cities, urban counties, and other communities to use for neighborhood revitalization, economic
development, and improved community facilities and services. The United States Congress
appropriated $17.5 billion in FY 2008 and $150 million in emergency supplemental
appropriations in FY 2005 for the “Community Development Fund” for emergency expenses to
respond to various disasters such as Hurricanes Katrina and Ike. Funds of $3 billion were
disbursed as of September 30, 2016. Any remaining un-obligated balances remain available
until expended.
The Home Investments Partnerships program provides grants to states, local governments, and
Indian tribes to implement local housing strategies designed to increase home ownership and
affordable housing opportunities for low- and very low-income families.
Other Programs not included above consist of other smaller programs which provide grant,
subsidy funding, and direct loans to support other HUD objectives such as fair housing and equal
opportunity, energy conservation, rehabilitation of housing units, removal of lead hazards, and
for maintenance costs of PHAs and TDHEs housing projects. The programs provided 13 percent
of HUD’s consolidated revenues and financing sources as of September 30, 2016.

Note 2: Summary of Significant Accounting Policies
A. Basis of Consolidation
The accompanying principal financial statements include all Treasury Account Fund Symbols
(TAFSs) designated to the Department of Housing and Urban Development, which consist of
principal program funds, revolving funds, general funds and deposit funds. All inter-fund
accounts receivable, accounts payable, transfers in and transfers out within these TAFSs have
been eliminated to prepare the consolidated balance sheet, statement of net cost, and statement of
changes in net position. The SBR is prepared on a combined basis as required by OMB Circular
A-136, Financial Reporting Requirements.
The Department’s FY 2016 financial statements do not include the accounts and transactions of
one transfer appropriation, the Appalachian Regional Commission. Some laws require
departments (parent) to allocate budget authority to another department (child). Allocation
means a delegation, authorized by law, by one department of its authority to obligate and outlay
funds to another department. HUD, the child account, receives budget authority and then
obligates and outlays sums of up to the amount included in the allocation. As required by OMB
Circular A-136, financial activity is in the parent account which is also accountable for and



                                               34
maintains the responsibility for reporting while the child performs on behalf of the parent and
controls how the funds are expended. Consequently, these balances are not included in HUD’s
consolidated financial statements as specified by OMB Circular A-136.
B. Basis of Accounting
The Department’s FY 2016 financial statements include the accounts and transactions of FHA,
Ginnie Mae, and its grant, subsidy and loan programs.
The financial statements are presented in accordance with the OMB Circular No. A-136,
Financial Reporting Requirements, and in conformance with the Federal Accounting Standards
Advisory Board’s (FASAB) Statements of Federal Financial Accounting Standards (SFFAS).
The financial statements are presented on the accrual and budgetary bases of accounting. Under
the accrual method, HUD recognizes revenues when earned, and expenses when a liability is
incurred, without regard to receipt or payment of cash. Generally, procedures for HUD’s major
grant and subsidy programs require recipients to request periodic disbursement concurrent with
incurring eligible costs. Budgetary accounting facilitates compliance with legal requirements on
the use of Federal funds.
The Department’s disbursement policy permits grantees/recipients to request funds to meet
immediate cash needs to reimburse themselves for eligible incurred expenses and eligible
expenses expected to be received and paid within three days or as subsidies payable in
accordance with the Cash Management Improvement Act of 1990. Except for PIH programs,
HUD’s disbursement of funds for these purposes are not considered advance payments but are
viewed as sound cash management between the Department and the grantees. In the event it is
determined that the grantee/recipient did not disburse the funds within the three-day time frame,
interest earned must be returned to HUD and deposited into one of Treasury’s miscellaneous
receipt accounts.
C. Use of Estimates
The preparation of the principal financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those estimates.
Amounts reported for net loans receivable and related foreclosed property and the loan guarantee
liability represent the Department’s best estimates based on pertinent information available.
To estimate the Allowance for Subsidy (AFS) associated with loans receivable and related
foreclosed property and the Liability for Loan Guarantees (LLG), the Department uses cash flow
model assumptions associated with the loan guarantees subject to the Federal Credit Reform Act
of 1990 (FCRA), as described in Note 8, to estimate the cash flows associated with future loan




                                                35
performance. To make reasonable projections of future loan performance, the Department
develops assumptions based on historical data, current and forecasted program and economic
assumptions.
Certain programs have higher risks due to increased chances of fraudulent activities perpetrated
against the Department. The Department accounts for these risks through the assumptions used
in the liabilities for loan guarantee estimates. HUD develops the assumptions based on historical
performance and management's judgments about future loan performance.
The Department relies on estimates by PIH to determine the amount of funding needs for PHAs
and Indian Housing Authorities (IHAs) under the PIH Housing Choice Voucher Program. Under
the Department’s cash management program, PIH evaluates the program needs of PHAs/IHAs to
minimize excess cash balances maintained by these entities. The Department implemented a
cash management policy in calendar year 2012 over the voucher program given its significant
funding levels and the excess cash balances which PHAs/IHAs had accumulated over the years.
The cash reserves, referred to as restricted net position (RNP) are monitored by the Department
and estimated by HUD on a recurring basis. The RNP balances are the basis for PIH
prepayments recorded by the Department in its comparative financial statements for FY 2016
and FY 2015.
In response to the OIG finding, HUD implemented a grant accrual policy on September 4, 2014,
and restated its FY 2013 financial statements. The Department continues to refine its
methodologies and the underlying assumptions used by program offices to develop the estimates.
Described below are the methodologies used by our major program offices which are
Community Planning and Development (CPD), PIH and the Office of Housing.
       CPD developed a statistical model for its grant programs based on recent historical data
        in the Integrated Disbursement Information System (IDIS). Utilizing activity type,
        funding and disbursement information in IDIS, CPD was able to extrapolate the
        relationship between accrued expenses over a specified period of time and when the
        services are generally billed to the government by the grantees.
       PIH administrative programs use disbursement data from the Department’s Electronic
        Line of Credit Control Systems (ELOCCS) and evaluated it for reasonableness based on
        unaudited data using the Financial Subsystem for Public Housing (FASS-PIH).
       The Office of Housing, similar to the PIH administered programs, utilizes disbursement
        data recorded in ELOCCS over a 12 month period and assumes a 30 day processing time
        from when the entity incurs eligible expenses and the associated drawdown of funds by
        the grantee occurs.
D. Credit Reform Accounting
The primary purpose of the Federal Credit Reform Act of 1990 (FCRA), which became effective
on October 1, 1991, is to more accurately measure the cost of Federal credit programs and to



                                               36
place the cost of such credit programs on a basis equivalent with other Federal spending. OMB
Circular A-11, Preparation, Execution, and Submission of the Budget, Part 5, Federal Credit
Programs defines loan guarantee as any guarantee, insurance or other pledge with respect to the
payment of all or a part of the principal or interest on any debt obligation of a non-Federal
borrower (Issuer) to a non-Federal lender (Investor). FHA practices Credit Reform accounting.
The FCRA establishes the use of the program, financing, and general fund receipt accounts for
loan guarantees committed and direct loans obligated after September 30, 1991, (Credit Reform).
It also establishes the liquidating account for activity relating to any loan guarantees committed
and direct loans obligated before October 1, 1991, (pre-Credit Reform). These accounts are
classified as either budgetary or non-budgetary in the Combined Statements of Budgetary
Resources. The budgetary accounts include the program, capital reserve and liquidating
accounts. The non-budgetary accounts consist of the credit reform financing accounts.
The program account is a budget account that receives and obligates appropriations to cover the
subsidy cost of a direct loan or loan guarantee and disburses the subsidy cost to the financing
account. The program account also receives appropriations for administrative expenses. The
financing account is a non-budgetary account that records all of the cash flows resulting from
Credit Reform direct loans or loan guarantees. It disburses loans, collects repayments and fees,
makes claim payments, holds balances, borrows from U.S. Treasury, earns or pays interest, and
receives the subsidy cost payment from the program account.
The general fund receipt account is a budget account used for the receipt of amounts paid from
the financing account when there are negative subsidies from the original estimate or a
downward re-estimate. In most cases, the receipt account is a general fund receipt account and
amounts are not earmarked for the credit program. They are available for appropriations only in
the sense that all general fund receipts are available for appropriations. Any assets in this
account are non-entity assets and are offset by intragovernmental liabilities. At the beginning of
the following fiscal year, the fund balance in the general fund receipt account is transferred to the
U.S. Treasury General Fund. The FHA general fund receipt accounts of the General Insurance
(GI) and Special Risk Insurance (SRI) funds are in this category.
In order to resolve the different requirements between the FCRA and the National Affordable
Housing Act of 1990 (NAHA), OMB instructed FHA to create the capital reserve account to
retain the Mutual Mortgage Insurance/Cooperative Management Housing Insurance
(MMI/CMHI) negative subsidy and subsequent downward re-estimates. Specifically, the NAHA
required that FHA’s MMI fund achieve a Capital Ratio of 2.0 percent by FY 2000. The Capital
Ratio is defined as the ratio of economic net worth (current cash plus the present value of all
future net cash flows) of the MMI fund to unamortized insurance in force (the unpaid balance of
insured mortgages). Therefore, to ensure that the calculated capital ratio reflects the actual
strength of the MMI fund, the resources of the capital reserve account, which are considered
FHA assets, are included in the calculation of the MMI fund’s economic net worth.




                                                 37
The liquidating account is a budget account that records all cash flows to and from FHA
resulting from pre-Credit Reform direct loans or loan guarantees. Liquidating account
collections in any year are available only for obligations incurred during that year or to repay
debt. Unobligated balances remaining in the GI and SRI liquidating funds at year-end are
transferred to the U.S. Treasury’s General Fund. Consequently, in the event that resources in the
GI/SRI liquidating account are otherwise insufficient to cover the payments for obligations or
commitments, the FCRA provides the GI/SRI liquidating account with permanent indefinite
authority to cover any resource shortages.
E. Operating Revenue and Financing Sources
HUD finances operations principally through appropriations, collection of premiums and fees on
its FHA and Ginnie Mae programs, and interest income on its mortgage notes, loans, and
investments portfolio.
Appropriations for Grant and Subsidy Programs
HUD receives both annual and multi-year appropriations and recognizes those appropriations as
revenue when related program expenses are incurred. Accordingly, HUD recognizes grant-
related revenue and related expenses as recipients perform under the contracts. HUD recognizes
subsidy-related revenue and related expenses when the underlying assistance (e.g., provision of a
Section 8 rental unit by a housing owner) is provided or upon disbursal of funds to PHAs.
Ginnie Mae Fees
Fees received for Ginnie Mae’s guaranty of MBS are recognized as earned. Commitment fees
represent income that Ginnie Mae earns for providing approved issuers with authority to pool
mortgages into Ginnie Mae MBS. The authority Ginnie Mae provides issuers expires 12 months
from issuance for single family issuers and 24 months from issuance for multifamily issuers.
Ginnie Mae receives commitment fees as issuers request commitment authority and recognizes
the commitment fees as earned as issuers use their commitment authority, with the balance
deferred until earned or expired, whichever occurs first. Fees from expired commitment
authority are not returned to issuers.

F. Appropriations and Moneys Received from Other HUD Programs
The National Housing Act of 1990, as amended, provides for appropriations from Congress to
finance the operations of GI and SRI funds. For Credit Reform loan guarantees, appropriations
to the GI and SRI funds are provided at the beginning of each fiscal year to cover estimated
losses on insured loans during the year. For pre-Credit Reform loan guarantees, FHA has
permanent indefinite appropriation authority to finance any shortages of resources needed for
operations.
Monies received from other HUD programs, such as interest subsidies and rent supplements, are
recorded as revenue for the liquidating accounts when services are rendered. Monies received




                                               38
for the financing accounts are recorded as additions to the Liability for Loan Guarantee or the
Allowance for Subsidy when collected.

G. Investments
HUD limits its investments, principally comprised of investments by FHA’s MMI/CMHI Fund
and by Ginnie Mae, to non-marketable market-based Treasury interest-bearing obligations (i.e.,
investments not sold in public markets). The market value and interest rates established for such
investments are the same as those for similar Treasury issues, which are publicly marketed.
HUD’s investment decisions are limited to Treasury policy which: (1) only allows investment in
Treasury notes, bills, and bonds; and (2) prohibits HUD from engaging in practices that result in
“windfall” gains and profits, such as security trading and full scale restructuring of portfolios in
order to take advantage of interest rate fluctuations.
FHA’s normal policy is to hold investments in U.S. Government securities to maturity.
However, in certain circumstances, FHA may have to liquidate its U.S. Government securities
before maturity to finance claim payments.
HUD reports investments in U.S. Government securities at amortized cost. Premiums or
discounts are amortized into interest income over the term of the investment. HUD intends to
hold investments to maturity, unless needed for operations. No provision is made to record
unrealized gains or losses on these securities because, in the majority of cases, they are held to
maturity.
In connection with an Accelerated Claims Disposition Demonstration program (the
601 program), FHA transfers assigned mortgage notes to private sector entities in exchange for
cash and equity interest. FHA uses the equity method of accounting to measure the value of its
investments in these entities.
Multifamily Risk Sharing Debentures [Section 542(c)] is a program available to lenders where
the lender shares the risk in a property by issuing debentures for the claim amount paid by FHA
on defaulted insured loans.
H. Credit Program Receivables and Related Foreclosed Property
HUD finances mortgages and provides loans to support construction and rehabilitation of low
rent housing, principally for the elderly and disabled under the Section 202/811 program. Prior
to April 1996, mortgages were also assigned to HUD through FHA claims settlement (i.e.,
Mortgage Notes Assigned (MNAs). Single family mortgages were assigned to FHA when the
mortgagor defaulted due to certain “temporary hardship” conditions beyond the control of the
mortgagor, and when, in management's judgment, it is likely that the mortgage could be brought
current in the future. FHA’s loans receivable include MNAs, also described as Secretary-held
notes, Purchase Money Mortgages (PMM) and notes related to partial claims. Under the
requirements of the FCRA, PMM notes are considered to be direct loans while MNA notes are




                                                 39
considered to be defaulted guaranteed loans. The PMM loans are generated from the sales on
credit of FHA’s foreclosed properties to qualified non-profit organizations. The MNA notes are
created when FHA pays the lenders for claims on defaulted guaranteed loans and takes
assignment of the defaulted loans for direct collections. In addition, multifamily mortgages are
assigned to FHA when lenders file mortgage insurance claims for defaulted notes.
Credit program receivables for direct loan programs and defaulted guaranteed loans assigned for
direct collection are valued differently based on the direct loan obligation or loan guarantee
commitment date. These valuations are in accordance with the FCRA and SFFAS No. 2,
“Accounting for Direct Loans and Loan Guarantees,” as amended by SFFAS No. 18. Those
obligated or committed on or after October 1, 1991, (post-Credit Reform) are valued at the net
present value of expected cash flows from the related receivables.
Credit program receivables resulting from obligations or commitments prior to October 1, 1991,
(pre-Credit Reform) are recorded at the lower of cost or fair value (net realizable value). Fair
value is estimated based on the prevailing market interest rates at the date of mortgage
assignment. When fair value is less than cost, discounts are recorded and amortized to interest
income over the remaining terms of the mortgages or upon sale of the mortgages. Interest is
recognized as income when earned. However, when full collection of principal is considered
doubtful, the accrual of interest income is suspended and receipts (both interest and principal) are
recorded as collections of principal. Pre-Credit Reform loans are reported net of allowance for
loss and any unamortized discount. The estimate for the allowance on credit program
receivables is based on historical loss rates and recovery rates resulting from asset sales and
property recovery rates, and net of cost of sales.
Foreclosed property acquired as a result of defaults of loans obligated or loan guarantees
committed on or after October 1, 1991, is valued at the net present value of the projected cash
flows associated with the property. Foreclosed property acquired as a result in defaulted loans
obligated or loan guarantees committed prior to 1992 is valued at net realizable value. The
estimate for the allowance for loss related to the net realizable value of foreclosed property is
based on historical loss rates and recovery rates resulting from property sales, and net of cost of
sales.
I. Borrowings
As further discussed in Note 14, several of HUD’s programs have the authority to borrow funds
from the U.S. Treasury for program operations. These borrowings, representing unpaid principal
balances and future accrued interest, are reported as debt in HUD’s consolidated financial
statements. The PIH Low Rent Public Housing Loan Program and the Housing for the Elderly
or Handicapped fund were financed through borrowings from the Federal Financing Bank or the
U.S. Treasury prior to the Department’s conversion of these programs to grant programs. The
Department also borrowed funds from the private sector to assist in the construction and




                                                 40
rehabilitation of low rent housing projects under the PIH Low Rent Public Housing Loan
Program. Repayments of these long-term borrowings have terms up to 40 years.
In accordance with Credit Reform accounting, FHA also borrows from the U.S. Treasury when
cash is needed in its financing accounts. Usually, the need for cash arises when FHA has to
transfer the negative credit subsidy amount related to new loan disbursements, and existing loan
modifications from the financing accounts to the general fund receipts account (for cases in
GI/SRI funds) or the liquidating account (for cases in MMI/CMHI funds). In some instances,
borrowings are also needed to transfer the credit subsidy related to downward re-estimates from
the GI/SRI financing account to the GI/SRI receipt account or when available cash is less than
claim payments due.

J. Liability for Loan Guarantees
The net potential future losses related to FHA’s central business of providing mortgage insurance
are accounted for as Loan Guarantee Liability in the consolidated balance sheets. As required by
SFFAS No. 2, the Loan Guarantee Liability includes the Credit Reform related Liabilities for
Loan Guarantees (LLG) and the pre-Credit Reform Loan Loss Reserve (LLR).
The LLG is calculated as the net present value of anticipated cash outflows for defaults, such as
claim payments, premium refunds, property costs to maintain foreclosed properties less
anticipated cash inflows such as premium receipts, proceeds from asset sales and principal and
interest on Secretary-held notes.
HUD records loss estimates for its single family LLR and multifamily LLR mortgage insurance
programs operated through FHA. FHA records loss estimates for its single family programs to
provide for anticipated losses incurred (e.g., claims on insured mortgages where defaults have
taken place but claims have not yet been filed). Using the net cash flows (cash inflows less cash
outflows), FHA computes an estimate based on conditional claim rates and loss experience data,
and adjusts the estimates to incorporate management assumptions about current economic
factors. FHA records loss estimates for its multifamily programs to provide for anticipated
outflows less anticipated inflows. Using the net present value of claims less premiums, fees, and
recoveries, FHA computes an estimate based on conditional claim rates, prepayment rates, and
recovery assumptions based on historical experience.
Ginnie Mae also establishes loss reserves to the extent management believes issuer defaults are
probable and FHA, USDA, and PIH insurance or guarantees are insufficient to recoup Ginnie
Mae expenditures.
K. Full Cost Reporting
Beginning in FY 1998, SFFAS No. 4, Managerial Cost Accounting Concepts and Standards for
the Federal Government, required that full costing of program outputs be included in Federal
agency financial statements. Full cost reporting includes direct, indirect, and inter-entity costs.
For purposes of the consolidated department financial statements, HUD identified each



                                                 41
responsible segment’s share of the program costs or resources provided by HUD or other Federal
agencies.

L. Accrued Unfunded Leave and Federal Employees Compensation Act
(FECA) Liabilities
Annual leave and compensatory time are accrued as earned and the liability is reduced as leave is
taken. The liability at year-end reflects cumulative leave earned but not taken, priced at current
wage rates. Earned leave deferred to future periods is to be funded by future appropriations. To
the extent that current or prior year appropriations are not available to fund annual leave earned
but not taken, funding will be obtained from future financing sources. Sick leave and other types
of leave are expensed as taken.

M. Retirement Plans
The majority of HUD’s employees participate in either the Civil Service Retirement System
(CSRS) or the Federal Employees Retirement System (FERS). FERS went into effect pursuant
to Public Law 99-335 on January 1, 1987. Most employees hired after December 31, 1983, are
automatically covered by FERS and Social Security. Employees hired before January 1, 1984,
can elect to either join FERS and Social Security or remain in CSRS. HUD expenses its
contributions to the retirement plans.
A primary feature of FERS is that it offers a savings plan whereby HUD automatically
contributes one percent of pay and matches any employee contribution up to five percent of an
individual’s basic pay. Under CSRS, employees can contribute up to $18,000 of their pay to the
savings plan, but there is no corresponding matching by HUD. Although HUD funds a portion
of the benefits under FERS relating to its employees and makes the necessary withholdings from
them, it has no liability for future payments to employees under these plans, nor does it report
CSRS or FERS assets, accumulated plan benefits, or unfunded liabilities applicable to its
employees’ retirement plans.
N. Fiduciary Funds
Ginnie Mae has immaterial fiduciary activities which involve the collection or receipt and
subsequent disposition of cash in which non-Federal entities have an ownership interest.
Fiduciary assets are not assets of Ginnie Mae or the Federal Government. The fiduciary assets
held by Ginnie Mae include unclaimed MBS Certificate Holders payments and escrow funds
held in trust. The amount of escrows reported by Ginnie Mae for FY 2016 and FY 2015 were
$49 million and $89 million, respectively.
O. Indian Housing Block Grant Program (IHBG)
The Indian Housing Block Grant Program (IHBG) program is authorized under the Native
American Housing Assistance and Self Determination Act of 1996 (NAHASDA). The IHBG is
a highly unusual dual-purpose grant program. Its primary purpose is to provide formula grants



                                               42
for a range of eligible affordable housing activities (section 202 of such Act) on Indian
reservations and in other Indian areas. Under section 204(b) of such Act and implementing
regulations, recipients are authorized to invest its IHBG block grant funds for up to five years
“for the purposes of carrying out affordable housing activities in investment securities and other
obligations as approved by the Secretary.” The investments are to be made only in securities
guaranteed or insured by the United States, and income from these investments remain with the
recipients for use on housing related activities. By the five-year deadline, recipients must either
spend the funds on eligible affordable housing activities or return the funds to HUD. The control
and ownership of the funds during the investment period resides with the grantees.
IHBG recipients must meet certain criteria to be eligible to invest IHBG funds. Total invested
IHBG funds were approximately $260 million as of September 30, 2016, and $273 million as of
September 30, 2015.

Note 3: Entity and Non-Entity Assets
Non-entity assets consist of assets that belong to other entities but are included in the
Department’s consolidated financial statements and are offset by various liabilities to accurately
reflect HUD’s net position. The Department’s non-entity assets principally consist of: (1) U.S.
deposit of negative credit subsidy in the GI/SRI general fund receipt account, (2) escrow monies
collected by FHA that are either deposited at the U.S. Treasury or in minority-owned banks or
invested in U.S. Treasury securities, and (3) cash remittances from Section 8 bond refunding
deposited in the General Fund of the Treasury.
HUD’s assets as of September 30, 2016 and 2015, were as follows (dollars in millions):
Description                                                                       2016                                  2015
                                                                       Entity   Non-Entity     Total         Entity   Non-Entity     Total
Intragovernmental
  Fund Balance with Treasury (Note 4)                              $    73,145 $       53 $     73,198   $    94,651 $       40 $     94,691
  Short-Term Investments (Note 6)                                       15,954          -       15,954        12,923          -       12,923
  Long-Term Investments Held-To-Maturity (Note 6)                       36,398          -       36,398        14,754          -       14,754
  Accounts Receivable, Net (Note 7)                                          1          -            1             -          -            -
  Other Assets (Note 12)                                                    43          -           43             9          -            9
Total Intragovernmental Assets                                     $ 125,541 $         53 $ 125,594      $ 122,337 $         40 $ 122,377
  Cash and Other Monetary Assets (Note 5)                                 60            -        60              -           45        45
  Investments (Note 6)                                                    31            -        31             31            -        31
  Accounts Receivable, Net (Note 7)                                      493          118       611            686           94       780
  Loans Receivable and Related Foreclosed Property, Net (Note 8)      19,372          104    19,476         14,832          133    14,965
  Other Non-Credit Reform Loans Receivable, Net (Note 9)               2,680            -     2,680          3,227            -     3,227
  General Property, Plant and Equipment, Net (Note 10)                   381            -       381            329            -       329
  PIH Prepayments (Note 11)                                              380            -       380            672            -       672
  Other Assets (Note 12)                                                  53            -        53              8           37        45
Total Assets                                                       $ 148,991    $     275    $ 149,266   $ 142,122    $     349    $ 142,471




                                                                   43
Note 4: Fund Balance with the U.S. Treasury
The U.S. Treasury, which, in effect, maintains HUD’s bank accounts, processes substantially all
of HUD’s receipts and disbursements. HUD’s fund balances with the U.S. Treasury as of
September 30, 2016 and 2015, were as follows (dollars in millions):
                              Description                     2016          2015

                              Revolving Funds             $    22,311   $    40,170
                              Appropriated Funds               49,794        53,241
                              Trust Funds                         200            14
                              Other                               893         1,266
                              Total - Fund Balance        $ 73,198      $    94,691


The Department’s Fund Balance with Treasury includes receipt accounts established under
current Federal Credit Reform legislation and cash collections deposited in restricted accounts
that cannot be used by HUD for its programmatic needs. These designated funds established by
the Department of Treasury are classified as suspense and/or deposit funds and consist of
accounts receivable balances due from the public. A Statement of Budgetary Resources is not
prepared for these funds since any cash remittances received by the Department are not defined
as a budgetary resource.
In addition to fund balance, contract and investment authority are also a part of HUD’s funding
sources. Contract authority permits an agency to incur obligations in advance of an
appropriation, offsetting collections, or receipts to make outlays to liquidate the obligations.
HUD has permanent indefinite contract authority. Since Federal securities are considered the
equivalent of cash for budget purposes, investments in them are treated as a change in the mix of
assets held, rather than as a purchase of assets.




                                                     44
HUD’s fund balances with the U.S. Treasury as reflected in the entity’s general ledger as of
September 30, 2016 and 2015, were as follows (dollars in millions):
   S tatus of Resources - 2016

                                                         Obligated Unfilled               S tatus of
                                 Unobligated Unobligated  Not Yet  Customer                  Total                          Other          Total
   Description                    Available  Unavailable Disbursed  Orders                Resources         Fund Balance   Authority     Resources

   FHA                           $      5,644      $   48,486   $    2,995    $    (35)   $     57,090      $     20,820   $   36,270    $   57,090
   Ginnie M ae                            195             162          515           -             872               856           16           872
   Section 8 Rental Assistance            763             166        8,902           -           9,831             9,831            -         9,831
   PIH Loans and Grants                    88              20        4,411           -           4,519             4,519            -         4,519
   Homeless Assistance Grants           2,216             756        2,391           -           5,363             5,363            -         5,363
   Section 202/811                        226             411        1,642          (1)          2,278             2,278            -         2,278
   CDBG                                 7,442             580       11,337           -          19,359            19,359            -        19,359
   Home                                   231              34        2,965           -           3,230             3,230            -         3,230
   Section 235/236                         10              37          743           -             789               789            -           789
   All Other                            1,108           1,335        3,235         (57)          5,621             5,609           12         5,621
   Total                         $     17,923      $   51,987   $   39,136    $    (93)   $ 108,952         $     72,654   $   36,298    $ 108,952


   S tatus of Resources Covered by Fund Balance
                                                                                                                Non-
                                                                                                            Budgetary:
                                                                                                             S uspense,
                                                         Obligated Unfilled                                 Deposit and
                                 Unobligated Unobligated  Not Yet  Customer                    Fund           Receipt      Total Fund
   Description                    Available  Unavailable Disbursed  Orders                    Balance        Accounts       Balance

   FHA                           $      5,644      $   12,216   $    2,995    $    (35)         20,820      $         -    $   20,820
   Ginnie M ae                            195             146          516           -             857              523         1,380
   Section 8 Rental Assistance            763             166        8,902           -           9,831                -         9,831
   PIH Loans and Grants                    88              20        4,411           -           4,519                -         4,519
   Homeless Assistance Grants           2,216             756        2,391           -           5,363                -         5,363
   Section 202/811                        226             411        1,642          (1)          2,278                -         2,278
   CDBG                                 7,442             580       11,337           -          19,359                -        19,359
   Home                                   231              34        2,965           -           3,230                -         3,230
   Section 235/236                         10              37          742           -             789                -           789
   All Other                            1,108           1,322        3,235         (57)          5,608               21         5,629
   Total                         $     17,923      $   15,688   $   39,136    $    (93)   $     72,654      $       544    $   73,198


   S tatus of Resources Covered by Other Authority

                                                         Obligated Unfilled               Permanent
                                 Unobligated Unobligated  Not Yet  Customer               Indefinite         Investment    Borrowing
   Description                    Available  Unavailable Disbursed  Orders                 Authority          Authority    Authority

   FHA                           $             -   $      36    $        -    $      -    $             -   $        36    $        -
   Ginnie M ae                                 -          16             -           -                  -            16             -
   Section 8 Rental Assistance                 -           -             -           -                  -             -             -
   PIH Loans and Grants                        -           -             -           -                  -             -             -
   Section 202/811                             -           -             -           -                  -             -             -
   Section 235/236                             -           -             -           -                  -             -             -
   All Other                                   -          12             -           -                  -             -            12
   Total                         $             -   $      64    $        -    $      -    $             -   $        52    $       12


   S tatus of Receipt Account Balances                          Breakdown of All Other
                                      Fund                                                                                    Fund
   Description                       Balance                    Description                                                  Balance
   FHA                           $          -                   All Other HUD suspense/deposit funds                       $       21
   Ginnie M ae                            523                                                                                        -
   Section 8 Rental Assistance              -                   Total                                                      $       21
   All Other                               21
   Total                         $        544




                                                                             45
   S tatus of Resources - 2015

                                                         Obligated Unfilled               S tatus of
                                 Unobligated Unobligated  Not Yet  Customer                  Total                       Other          Total
   Description                    Available  Unavailable Disbursed  Orders                Resources      Fund Balance   Authority     Resources

   FHA                           $      3,565      $   47,154   $    3,050    $    (15)   $   53,754     $     39,057   $   14,697    $   53,754
   Ginnie M ae                              6          14,066          584           -        14,656            1,733       12,923        14,656
   Section 8 Rental Assistance            698              92        8,902           -         9,692            9,692            -         9,692
   PIH Loans and Grants                   113              43        4,711           -         4,867            4,867            -         4,867
   Homeless Assistance Grants           2,086             539        2,536           -         5,161            5,161            -         5,161
   Section 202/811                        253             188        1,964           -         2,405            2,405            -         2,405
   CDBG                                 9,021               8       12,495           -        21,524           21,524            -        21,524
   Home                                   237              27        3,184           -         3,448            3,448            -         3,448
   Section 235/236                         31              32          951           -         1,014            1,014            -         1,014
   All Other                              594           1,175        3,665         (56)        5,378            5,366           12         5,378
   Total                         $     16,604      $   63,324   $   42,042    $    (71)   $ 121,899      $     94,267   $   27,632    $ 121,899


   S tatus of Resources Covered by Fund Balance
                                                                                                             Non-
                                                                                                         Budgetary:
                                                                                                          S uspense,
                                                         Obligated Unfilled                              Deposit and
                                 Unobligated Unobligated  Not Yet  Customer                 Fund           Receipt      Total Fund
   Description                    Available  Unavailable Disbursed  Orders                 Balance        Accounts       Balance

   FHA                           $      3,565      $   32,457   $    3,050    $    (15)   $   39,057     $         -    $   39,057
   Ginnie M ae                              6           1,143          584           -         1,733             409         2,142
   Section 8 Rental Assistance            698              92        8,902           -         9,692               -         9,692
   PIH Loans and Grants                   113              43        4,711           -         4,867               -         4,867
   Homeless Assistance Grants           2,086             539        2,536           -         5,161               -         5,161
   Section 202/811                        253             188        1,964           -         2,405               -         2,405
   CDBG                                 9,021               8       12,495           -        21,524               -        21,524
   Home                                   237              27        3,184           -         3,448               -         3,448
   Section 235/236                         31              32          951           -         1,014               -         1,014
   All Other                              594           1,163        3,665         (56)        5,366              15         5,381
   Total                         $     16,604      $   35,692   $   42,042    $    (71)   $   94,267     $       424    $   94,691


   S tatus of Resources Covered by Other Authority

                                                         Obligated Unfilled               Permanent
                                 Unobligated Unobligated  Not Yet  Customer               Indefinite      Investment    Borrowing
   Description                    Available  Unavailable Disbursed  Orders                 Authority       Authority    Authority

   FHA                           $             -   $   14,697   $        -    $      -    $          -   $     14,697   $        -
   Ginnie M ae                                 -       12,923            -           -               -         12,923            -
   Section 8 Rental Assistance                 -            -            -           -               -              -            -
   PIH Loans and Grants                        -            -            -           -               -              -            -
   Section 202/811                             -            -            -           -               -              -            -
   Section 235/236                             -            -            -           -               -              -            -
   All Other                                   -           12            -           -               -              -           12
   Total                         $             -   $   27,632   $        -    $      -    $          -   $     27,620   $       12


   S tatus of Receipt Account Balances                          Breakdown of All Other
                                      Fund                                                                                 Fund
   Description                       Balance                    Description                                               Balance
   FHA                           $          -                   All Other HUD suspense/deposit funds                    $       15
   Ginnie M ae                            409                                                                                     -
   Section 8 Rental Assistance              -                   Total                                                   $       15
   All Other                               15
   Total                         $        424


An immaterial difference exists between HUD’s recorded Fund Balances with the U.S. Treasury
and the U.S. Department of Treasury’s records. It is the Department’s practice to adjust its



                                                                             46
records to agree with Treasury’s balances at the end of the fiscal year. The adjustments are
reversed at the beginning of the following fiscal year.
As the result of one our new internal controls, HUD initiated a project which quickly identified
weaknesses in the validation of the general ledger and sub-ledger balances. Although a number
of historical items have been resolved, efforts were still underway on September 30, 2016, to
research, analyze, and resolve the remaining historical items. HUD has assessed the available
information for the remaining items and determined there are no supportable financial statement
impacts to record.

Note 5: Cash and Other Monetary Assets
Cash and other monetary assets consist of cash that is received by the Ginnie Mae’s Master
Subservicers, but has not yet been transmitted to Ginnie Mae. As of September 30, 2016
and 2015, deposits in transit were $60 million and $45 million, respectively.

Note 6: Investments
The U.S. Government securities are non-marketable intra-governmental securities. Interest rates
established by the U.S. Treasury as of September 30, 2016, were 0.11 percent. During FY 2016,
the interest rate was 0.18 percent. The amortized cost and estimated market value of investments
in debt securities as of September 30, 2016 and 2015, were as follows (dollars in millions):
                                           Amortized
                                           (Premium)/           Accrued            Net           Market
            Long-Term        Cost      Discount, Net            Interest       Investments       Value

           FY 2016       $    36,310   $            54      $          34      $    36,398   $     36,423
           FY 2015       $    14,731   $            10      $          13      $    14,754   $     14,764



            Short-Term       Cost          Amortized            Accrued            Net           Market

           FY 2016       $    15,954   $                -   $              -   $    15,954   $     15,802
           FY 2015       $    12,923   $                -   $              -   $    12,923   $     12,923


Investments in Private-Sector Entities
These investments in private-sector entities are the result of FHA’s participation in the
Accelerated Claims Disposition Demonstration program and Risk Sharing Debentures as
discussed in Note 2G.




                                                    47
The following table presents financial data on FHA’s investments in Risk Sharing Debentures as
of September 30, 2016 and 2015 (dollars in millions):
                                                                Share of
                             Beginning          Net         Earnings or        Return of                      Ending
                                 Balance    Acquisition         Losses         Investment      Redeemed       Balance

   2016
   601 Program               $          -   $          -    $              -   $           -   $      -   $          -
   Risk Sharing Debentures             31              -                   -               -          -             31
   Total                     $         31   $          -    $              -   $           -   $      -   $         31

   2015
   601 Program               $         41   $         19    $              -   $           -   $     (29) $         31
   Risk Sharing Debentures              -              -                   -               -           -             -
   Total                     $         41   $         19    $              -   $           -   $    (29) $          31




Note 7: Accounts Receivable (Net)
The Department’s accounts receivable represent Section 8 year-end settlements, claims to cash
from the public, state and local authorities for bond refunding, Section 236 excess rental income,
sustained audit findings, refunds of overpayment, FHA insurance premiums, and foreclosed
property proceeds.
A 100 percent allowance for loss is established for all delinquent accounts 90 days and over for
bond refunding. The allowance for loss methodology adjusts the total delinquencies greater than
90 days by the effects of economic stress factors, which include likely payoffs, foreclosures,
bankruptcies, and hardships of the project. Adjustments to the bond refunding allowance for loss
account are done every quarter to ensure they are deemed to be necessary.
For Section 236 excess rental income, the allowance for loss consists of 10 percent of the
receivables with a repayment plan plus 95 percent of the receivables without a repayment plan.
Adjustments to the excess rental income allowance for loss account are done biannually to
ensure they are deemed necessary.
Section 8 Settlements
Prior to January 1, 2005, the Housing Choice Voucher (HCV) Program’s Section 8 subsidies
were disbursed based on estimated amounts due under the contracts. At the end of each year, the
actual amount due under the contracts was determined. The excess of subsidies paid to PHAs
during the year over the actual amount due was reflected as an accounts receivable in the balance
sheet. These receivable amounts were “collected” by offsetting such amounts with subsidies due
to the PHAs in subsequent periods. On January 1, 2005, Congress changed the basis of the
program funding from a “unit-based” process with program variables that affected the total
annual Federal funding need, to a “budget-based” process that limits the Federal funding to




                                                           48
PHAs to a fixed amount. Under this “budget-based” process, a year-end settlement process to
determine actual amounts due is no longer applicable. Effective January 1, 2012, PIH reinstated
the year-end settlement process for the HCV Program in accordance with its cash management
policies. However, as reported by the OIG’s Internal Control Report, the results of PIH’s cash
reconciliation reviews are not reflected in the Department’s financial statements. The PIH
reviews have not been completed on a timely basis and the required standard general ledger
transactions have not been recorded in the Department’s accounting systems.
Bond Refunding
Many of the Section 8 projects constructed in the late 1970s and early 1980s were financed with
tax exempt bonds with maturities ranging from 20 to 40 years. The related Section 8 contracts
provided that the subsidies would be based on the difference between what tenants could pay
pursuant to a formula and the total operating costs of the Section 8 project, including debt
service. The high interest rates during the construction period resulted in high subsidies. When
interest rates came down in the 1980s, HUD was interested in getting the bonds refunded. One
method used to account for the savings when bonds are refunded (PHAs sell a new series of
bonds at a lower interest rate, to liquidate the original bonds), is to continue to pay the original
amount of the bond debt service to a trustee. The amounts paid in excess of the lower
“refunded” debt service and any related financing costs, are considered savings. One-half of
these savings are provided to the PHA, the remaining one-half is returned to HUD. As of
September 30, 2016 and 2015, HUD was due $10 million and $14 million, respectively.
Section 236 Excess Rental Income
The Excess Rental Income receivable account represents the difference between the amounts that
projects reported to HUD’s lockbox as owing (in use prior to August 2008) and the actual
amount collected. On a monthly basis, projects financed under Section 236 of the National
Housing Act must report the amount of rent collected in excess of basic rents and remit those
funds to the Department. Unless written authorization is given by the Department to retain the
excess rental income, the difference must be remitted to HUD. Generally, the individual
amounts owing under Excess Rental Income receivables represent monthly reports remitted
without payment. After 2008, any remittances owed by individuals are collected through
PAY.GOV as well as the required HUD documents.
Other Receivables
Sustained audit costs include sustained audit findings, refunds of overpayment, FHA insurance
premiums and foreclosed property proceeds due from the public.




                                                 49
The following shows accounts receivable as reflected in the Balance Sheet as of
September 30, 2016 and 2015 (dollars in millions):
                                                    2016                                2015
                                         Gross                               Gross
                                       Accounts Allowance                  Accounts Allowance
    Description                        Receivable for Loss Total, Net      Receivable for Loss Total, Net

    Intragovernmental                   $      1    $        -   $     1   $       -   $      -   $     -
    Public
       Sustained Audit Costs            $     125   $         - $    125   $     158   $      - $     158
       Bond Refundings                         10             -       10          13          -        13
       Section 8 Settlements                   59             -       59          17          -        17
       Section 236 Excess Rental Income         5            (1)       4           5         (1)        4
       Other Receivables:                       -                                  -
         FHA                                  531        (288)       243         453        (322)     131
         Ginnie Mae                           294        (189)       105         649        (241)     408
         Other Receivables                     67          (2)        65          51          (2)      49
    Total Accounts Receivable           $   1,092   $   (480) $      612   $   1,346   $   (566) $    780




Note 8: Direct Loans and Loan Guarantees, Non-Federal
Borrowers
HUD reports direct loan obligations or loan guarantee commitments made prior to FY 1992 and
the resulting direct loans or defaulted guaranteed loans, net of allowance for estimated
uncollectible loans or estimated losses.
The FHA insures Home Equity Conversion Mortgages (HECM), also known as reverse
mortgages. These loans are used by senior homeowners age 62 and older to convert the equity in
their home into monthly streams of income and/or a line of credit to be repaid when they no
longer occupy the home. Unlike ordinary home equity loans, a HUD reverse mortgage does not
require repayment as long as the home is the borrower’s principal residence.
The FHA also administers the HOPE for Homeowners (H4H) program. The program was
established by Congress to help those at risk of default and foreclosure refinance into more
affordable, sustainable loans.
The allowance for loan losses for the Flexible Subsidy Fund and the Housing for the Elderly and
Disabled Program is determined as follows:
Flexible Subsidy Fund
There are four parts to the calculation of allowance for loss: (1) loss rate for loans written-off,
(2) loss rate for restructured loans, (3) loss rate for loans paid-off, and (4) loss rate for loans
delinquent or without repayment activity for 30 years. Loss rates for parts 1 and 3 are based on
actual historical data derived from the previous three years. The loss rates for parts 2 and 4 are
provided by or agreed to by the Housing Office of Evaluation.




                                                        50
Housing for the Elderly and Disabled Program
There are three parts to the calculation of allowance for loss: (1) loss rate for loans issued a
Foreclosure Hearing Letter, (2) loss rate for the estimated number of foreclosures in the current
year, and (3) loss rate for loans delinquent for more than 180 days. Loss rates for parts 1 and 2
are determined by actual historical data from the previous five years. Loss rate for part 3 is
determined or approved by the Housing Office of Evaluation.
Direct loan obligations or loan guarantee commitments made after FY 1991, and the resulting
direct loans or defaulted guaranteed loans, are governed by the FCRA and are recorded as the net
present value of the associated cash flows (i.e., interest rate differential, interest subsidies,
estimated delinquencies and defaults, fee offsets, and other cash flows).
The subsidy rates disclosed pertain only to the current year’s cohorts. These rates cannot be
applied to the direct loans and guarantees of loans disbursed during the current reporting year to
yield the subsidy expense. The subsidy expense for new loans and loan guarantees reported in
the current year result from disbursement of loans from both current year cohorts and prior
year(s) cohorts. The subsidy expense reported in the current year also includes modifications
and re-estimates.
The following is an analysis of loan receivables, loan guarantees, liability for loan guarantees,
and the nature and amounts of the subsidy costs associated with the loans and loan guarantees for
FY 2016 and FY 2015:
A. List of HUD’s Direct Loan and/or Guarantee Programs:
   1. FHA
       a) MMI/CMHI Direct Loan Program
       b) GI/SRI Direct Loan Program
       c) MMI/CMHI Loan Guarantee Program
       d) GI/SRI Loan Guarantee Program
       e) H4H Loan Guarantee Program
       f) HECM Program
   2. Housing for the Elderly and Disabled
   3. All Other
       a) CPD Revolving Fund
       b) Flexible Subsidy Fund
       c) Section 108 Loan Guarantees
       d) Indian Housing Loan Guarantee Fund



                                                51
        e) Loan Guarantee Recovery Fund
        f) Native Hawaiian Housing Loan Guarantee Fund
        g) Title VI Indian Housing Loan Guarantee Fund
        h) Green Retrofit Direct Loan Program
        i) Emergency Homeowners’ Loan Program
B. Direct Loans Obligated Pre-1992 (Allowance for Loss Method)
(dollars in millions):
                                                                                    2016
                                                                                                                        Value of
                                                  Loans                                                            Assets Related
                                                Receivable,         Interest    Allowance for   Foreclosed             to Direct
     Direct Loan Programs                         Gross          Receivable     Loan Losses         Property           Loans, Net

     FHA
      a) MMI/CHMI Direct Loan Program       $              -    $           -   $            - $               -   $              -
      b) GI/SRI Direct Loan Program                        8               13               (4)                -                 17
     Housing for the Elderly and Disabled              1,167               14              (10)                -              1,171
     All Other                                                                               -
      a) CPD Revolving Fund                                 5               -               (5)                1                 1
      b) Flexible Subsidy Fund                            405              57              (45)                -               417
     Total                                  $          1,585    $          84   $          (64) $              1   $         1,606

                                                                                    2015
                                                                                                                        Value of
                                                  Loans                                                            Assets Related
                                                Receivable,         Interest    Allowance for   Foreclosed              to Direct
    Direct Loan Programs                          Gross          Receivable     Loan Losses         Property           Loans, Net

    FHA
     a) MMI/CHMI Direct Loan Program        $              -    $           -   $            - $               -   $              -
     b) GI/SRI Direct Loan Program                        14               12               (6)                -                 20
    Housing for the Elderly and Disabled               1,412               15              (11)                -              1,416
    All Other                                                                                -
     a) CPD Revolving Fund                                  5               -               (5)                2                     2
     b) Flexible Subsidy Fund                             428              72              (39)                -                   461
    Total                                   $          1,859    $          99   $          (61) $              2   $         1,899




                                                                52
C. Direct Loans Obligated Post-1991 (dollars in millions):
                                                                                                       2016
                                                                                                                                            Value of
                                                             Loans                                                                          Assets
                                                         Receivable,          Interest        Allowance for           Foreclosed           Related to
Direct Loan Programs                                         Gross        Receivable          Loan Losses              Property        Direct Loans

FHA
 a) MMI/CHMI Direct Loan Program                         $         -      $              -    $               (3) $                -   $              (3)
 b) GI/SRI Direct Loan Program                                   554                     1                    27                   -                 582
All Other
 a) Green Retrofit Program                               $           57   $              1    $            (53) $                  -   $                5
 b) Emergency Homeowners' Loan Program                            34                     -    $            (35)                    -                  (1)
 c) EHLP Receipt Account                                         104                     -                   -                     -                 104
Total                                                    $       749      $              2    $           (64) $                   -   $          687



                                                                                                       2015
                                                                                                                                           Value of
                                                             Loans                                                                          Assets
                                                         Receivable,          Interest        Allowance for           Foreclosed           Related to
Direct Loan Programs                                         Gross        Receivable          Loan Losses             Property         Direct Loans

FHA
 a) MMI/CHMI Direct Loan Program                         $         -      $              -    $               (3) $                -   $              (3)
 b) GI/SRI Direct Loan Program                                   103                     -                    34                   -                 137
All Other
  a) Green Retrofit Program                              $           63   $              1    $            (66) $                  -   $               (2)
 b) Emergency Homeowners' Loan Program                            50                     -                 (50)                    -                   -
 c) EHLP Receipt Account                                         133                     -                   -                     -                 133
Total                                                    $       349      $              1    $           (85) $                   -   $          265


D. Total Amount of Direct Loans Disbursed (Post-1991) (dollars in millions):
                                                                                    Current             Prior
                              Direct Loan Programs                                   Year               Year

                              FHA Risk Sharing Program                          $            452   $           103
                              All Other
                               a) Green Retrofit Program                        $              -   $              -
                               b) Emergency Homeowners' Loan Program                           -                  -
                              Total                                             $            452   $          103




                                                                53
E. Subsidy Expense for Direct Loans by Program and Component (dollars in
millions):
E1. Subsidy Expense for New Direct Loans Disbursed (dollars in millions):
                                                                                                  2016
                                                           Interest                          Fees and Other
             Direct Loan Programs                     Differential            Defaults           Collections                     Other                        Total

             FHA Risk Sharing Program                  $            (68) $               4   $                  (9) $                       21        $               (52)
             All Other
              a) Green Retrofit Program                $              -   $              -   $                   -       $                   -        $                   -
              b) Emergency Homeowners' Loan Program                   -                  -                       -                           -                            -
             Total                                     $         (68) $                  4   $              (9) $                           21        $             (52)


                                                                                                  2015
                                                           Interest                          Fees and Other
         Direct Loan Programs                         Differential            Defaults            Collections                     Other                           Total

         FHA Risk Sharing Program                     $             (5) $                -    $                  (3) $                           (1) $                        (9)
         All Other
          a) Green Retrofit Program                   $               -   $              -    $                      -       $                    -       $                    -
          b) Emergency Homeowners' Loan Program                       -                  -                           -                            -                            -
         Total                                        $             (5) $                -    $                 (3) $                         (1) $                           (9)


E2. Modifications and Re-estimates (dollars in millions):
                                                                                               2016
                                                                      Total       Interest Rate   Technical                                Total
                     Direct Loan Programs                       Modification Re-estimates             Re-estimates                Re-estimates

                     FHA Risk Sharing Program                   $              - $                - $                        - $                          -
                     All Other
                      a) Green Retrofit Program                 $              - $                - $                      - $                       -
                      b) Emergency Homeowners' Loan Program                    -                  -                      (13)                      (13)
                     Total                                      $              - $                - $                    (13) $                    (13)

                                                                                               2015
                                                                      Total       Interest Rate   Technical                                Total
                     Direct Loan Programs                       Modification Re-estimates             Re-estimates                 Re-estimates

                     FHA Risk Sharing Program                   $              - $                 - $                           - $                          -
                     All Other
                      a) Green Retrofit Program                 $              - $                 - $                           - $                          -
                      b) Emergency Homeowners' Loan Program                    -                   -                             -                            -
                     Total                                      $              - $                 - $                           - $                          -


E3. Total Direct Loan Subsidy Expense (dollars in millions):
                                                                                         Current                     Prior
                             Direct Loan Programs                                            Year                    Year

                             FHA Risk Sharing Program                                $              (52) $                         (8)
                             All Other
                             a) Green Retrofit Program                               $                  -   $                          -
                             b) Emergency Homeowners' Loan Program                                  (13)                               -
                             Total                                                   $              (65) $                         (8)




                                                                       54
F. Subsidy Rates for Direct Loans by Program and Component:
Budget Subsidy Rates for Direct Loans
                                                                                   2016
                                                   Interest                   Fees and Other
      Direct Loan Programs                       Differential    Defaults       Collections        Other              Total

      FHA Risk Sharing Program                           0.0%          2.6%             (7.1%)           0.0%           (4.5%)
      All Other
       a) Green Retrofit Program                        41.0%        42.6%               0.0%         (1.3%)             82.3%
       b) Emergency Homeowners' Loan Program             0.0%         0.0%               0.0%        (97.7%)           (97.7%)

                                                                                   2015
                                                   Interest                   Fees and Other
      Direct Loan Programs                       Differential    Defaults       Collections        Other           Total

      FHA Risk Sharing Program                         (6.1%)         0.5%              (3.9%)       (1.3%)            (10.8%)
      All Other
       a) Green Retrofit Program                        41.0%        42.7%               0.0%        (1.3%)             82.3%
       b) Emergency Homeowners' Loan Program             0.0%         0.0%               0.0%         97.7%             97.7%




G. Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1991
Direct Loans) (dollars in millions):
             Beginning Balance, Changes, and Ending Balance                           FY 2016            FY 2015

             Beginning balance of the subsidy cost allowance                      $         85       $          152

             Add: subsidy expense for direct loans disbursed
             during the reporting years by component:                                         -                   -
              a) Interest rate differential costs                                           (68)                 (5)
              b) Default costs (net of recoveries)                                            4                   -
              c) Fees and other collections                                                  (9)                 (3)
              d) Other subsidy costs                                                         21                  (1)
             Total of the above subsidy expense components                                  (52)                 (9)
             Adjustments:
              a) Loan modifications                                                          -                    -
              b) Fees received                                                               1                    -
              c) Foreclosed properties acquired                                              -                    -
              d) Loans written off                                                         (15)                 (31)
              e) Subsidy allowance amortization                                             82                    1
              f) Other                                                                       -                   (4)
             Ending balance of the subsidy cost allowance before re-estimates              101                  109
             Add or subtract subsidy re-estimates by component:
              a) Interest rate re-estimate                                                   2                    -
              b) Technical/default re-estimate                                              33                  (24)
             Total of the above re-estimate components                                      35                  (24)
             Ending balance of the subsidy cost allowance                         $        136       $          85




                                                            55
H. Defaulted Guaranteed Loans from Pre-1992 Guarantees (Allowance for
Loss Method) (dollars in millions):
                                                                     2016
                             Defaulted                                                                  Value of Assets
                             Guaranteed                                                                    Related to
                               Loans                                                Foreclosed             Defaulted
                             Receivable,        Interest      Allowance for Loan     Property,      Guaranteed Loans
                               Gross           Receivable and Interest Losses          Net              Receivable, Net
    FHA
     MMI/CMHI
     a) Single Family    $                21 $             - $                (5) $           7 $                         23
     b) Multi Family                       -               -                   -              -                            -
     c) HECM                               -               -                   -              -                            -
     GI/SRI
     a) Single Family    $                 - $             - $                (3) $           9 $                            6
     b) Multi Family                   1,780            230                 (817)              1                       1,194
     c) HECM                               4              2                   (5)             (2)                         (1)
    Total                $          1,805      $        232   $             (830) $          15     $              1,222




                                                                     2015
                              Defaulted                                                              Value of Assets
                             Guaranteed                                                                   Related to
                               Loans                                                Foreclosed            Defaulted
                             Receivable,        Interest      Allowance for Loan Property,          Guaranteed Loans
                               Gross           Receivable and Interest Losses          Net              Receivable, Net
     FHA
      MMI/CMHI
      a) Single Family   $                 22 $            - $                (7) $           7 $                       22
      b) Multi Family                       -              -                   -              -                          -
      c) HECM                               -              -                   -              -                          -
      GI/SRI
      a) Single Family   $                 - $            - $                 (4) $           9 $                      5
      b) Multi Family                  1,946            234                 (808)             1                    1,373
      c) HECM                              4              2                   (5)            (2)                      (1)
     Total               $          1,972      $        236   $             (824) $          15     $             1,399




                                                   56
I. Defaulted Guaranteed Loans from Post-1991 Guarantees (dollars in millions):
                                                                                          2016
                                                Defaulted                                                                     Value of Assets
                                                Guaranteed                         Allowance for                                 Related to
                                                  Loans                            Subsidy Cost        Foreclosed                Defaulted
                                                Receivable,         Interest           (Present            Property,      Guaranteed Loans
                                                  Gross            Receivable           Value)              Gross             Receivable, Net

FHA
 MMI/CMHI
 a) Single Family                          $           10,320 $            5       $        (7,327) $           2,817 $                     5,815
 b) Multi Family                                            -              -                     -                  -                           -
 c) HECM                                                4,472          2,350                (1,580)                36                       5,278
 GI/SRI
 a) Single Family                          $                350 $          -       $          (241) $               73 $                       182
 b) Multi Family                                            735            -                  (365)                  1                         371
 c) HECM                                                  3,594        1,830                (1,279)                132                       4,277
 H4H
 a) Single Family                          $                  5 $              -   $              (5) $              1    $                         1
All Other
 a) Indian Housing Loan Guarantee                             -                -                   -                37                          37
 b) Native Hawaiian Housing Loan Guarantee                    -                -                   -                (1)                         (1)
Total                                      $          19,476       $   4,185       $      (10,797) $           3,096      $             15,960


                                                                                          2015
                                                 Defaulted                                                                 Value of Assets
                                                Guaranteed                         Allowance for                                Related to
                                                  Loans                            Subsidy Cost        Foreclosed               Defaulted
                                                Receivable,         Interest           (Present        Property,          Guaranteed Loans
                                                  Gross            Receivable           Value)             Gross              Receivable, Net

 FHA
  MMI/CMHI
  a) Single Family                          $             8,802 $          -       $       (7,053) $           3,130 $                   4,879
  b) Multi Family                                             -            -                    -                  -                         -
  c) HECM                                                 2,182          992                 (790)                10                     2,394
  GI/SRI
  a) Single Family                          $               292 $          1       $         (233) $              94 $                     154
  b) Multi Family                                           655            -                 (272)                 1                       384
  c) HECM                                                 3,106        1,517               (1,172)               101                     3,552
  H4H
  a) Single Family                          $                 4 $          -       $              2    $            1 $                         7
 All Other
  a) Indian Housing Loan Guarantee                            -            -                      -                31                         31
  b) Native Hawaiian Housing Loan Guarantee                   -            -                      -                (1)                        (1)
 Total                                      $         15,041       $   2,510       $       (9,518) $          3,367       $            11,400


                                                                                                                    2016                2015
Total Credit Program Receivables and Related Foreclosed Property, Net                                          $19,476              $14,965




                                                              57
J. Guaranteed Loans Outstanding (dollars in millions):
J1. Guaranteed Loans Outstanding (dollars in millions):
                                                                      2016
                                                  Outstanding
                                                   Principal,
                                                Guaranteed Loans,        Amount of Outstanding
                     Loan Guarantee Programs       Face Value             Principal Guaranteed

                     FHA Programs
                      a) MMI/CMHI Funds         $         1,207,833          $         1,097,974
                      b) GI/SRI Funds                       127,737                      115,318
                      c) H4H Progam                              91                           83
                     All Other                                7,855                        7,850
                       Total                    $        1,343,516           $        1,221,225


                                                                      2015
                                                  Outstanding
                                                   Principal,
                                                Guaranteed Loans,        Amount of Outstanding
                      Loan Guarantee Programs      Face Value             Principal Guaranteed

                      FHA Programs
                       a) MMI/CMHI Funds        $         1,168,560      $           1,065,896
                       b) GI/SRI Funds                      123,399                    112,063
                       c) H4H Progam                             98                         92
                      All Other                               7,321                      7,317
                         Total                  $        1,299,378       $          1,185,368




J2. Home Equity Conversion Mortgage Loans Outstanding (dollars in millions):
                                                                               Cumulative
                                   2016 Current Year            Current Outstanding     Maximun Potential
    Loan Guarantee Programs          Endorsements                    Balance                Liability

    FHA Programs                    $           14,612         $                 104,648           $   148,097



                                                                               Cumulative
                                   2015 Current Year            Current Outstanding     Maximun Potential
    Loan Guarantee Programs          Endorsements                    Balance                Liability

    FHA Programs                   $            15,890          $                 105,471          $   149,645




                                                     58
J3. New Guaranteed Loans Disbursed (dollars in millions):
                                                                                 2016
                                                   Outstanding Principal,                 Amount of Outstanding
                  Loan Guarantee Programs       Guaranteed Loans, Face Value               Principal Guaranteed

                  FHA Programs
                   a) MMI/CMHI Funds            $                       221,841       $                      219,866
                   b) GI/SRI Funds                                       12,224                               12,168
                   c) H4H Program                                             -                                    -
                  All Other                                                 980                                  979
                    Total                       $                      235,045        $                     233,013




                                                                               2015
                                                   Outstanding Principal,                 Amount of Outstanding
                  Loan Guarantee Programs       Guaranteed Loans, Face Value               Principal Guaranteed

                  FHA Programs
                   a) MMI/CMHI Funds            $                       213,125      $                       211,322
                   b) GI/SRI Funds                                       11,366                               11,311
                   c) H4H Program                                             -                                    -
                  All Other                                               1,008                                1,008
                     Total                      $                      225,499       $                      223,641


K. Liability for Loan Guarantees (Estimated Future Default Claims,
Pre-1992) (dollars in millions):
                                                                               2016
                                       Liabilities for Losses on       Liabilities for Loan
                                        Pre-1992 Guarantees,           Guarantees for Post-
                                       Estimated Future Default         1991 Guarantees             Total Liabilities For Loan
        Loan Guarantee Programs                  Claims                  (Present Value)                   Guarantees

        FHA Programs                   $                      -    $                      (2,360)   $                  (2,360)
        All Other                                             -                              303                          303
          Total                        $                      -    $                      (2,057)   $                  (2,057)


                                                                                  2015
                                       Liabilities for Losses on       Liabilities for Loan
                                        Pre-1992 Guarantees,           Guarantees for Post-
                                       Estimated Future Default         1991 Guarantees             Total Liabilities For Loan
       Loan Guarantee Programs                   Claims                  (Present Value)                   Guarantees

       FHA Programs                    $                      7    $                      14,733     $                  14,740
       All Other                                              -                              289                           289
         Total                         $                      7    $                      15,022     $                 15,029




                                                              59
L. Subsidy Expense for Post-1991 Guarantees:
L1. Subsidy Expense for Loan Guarantees (dollars in millions):
                                                                                   2016
                                              Endorsement         Default           Fees             Other            Subsidy
        Loan Guarantee Programs                 Amount           Component        Component        Component          Amount

        FHA
         a) MMI/CMHI Funds, Excluding HECM    $    221,841       $    5,587   $       (16,461) $         1,791   $        (9,083)
         b) MMI/CMHI Funds, HECM                    14,612              844              (945)               -              (101)
         c) GI/SRI Funds                            12,224              181              (661)               -              (480)
         d) H4H Program                                  -                -                 -                -                 -
        All Other                                        -               12                 -                -                12
        Total                                 $   248,677        $    6,624   $      (18,067) $         1,791    $       (9,652)




                                                                                   2015
                                              Endorsement         Default           Fees         Other               Subsidy
         Loan Guarantee Programs                Amount           Component        Component    Component             Amount

         FHA
          a) MMI/CMHI Funds, Excluding HECM   $    213,125       $    5,684 $         (18,706) $             - $        (13,022)
          b) MMI/CMHI Funds, HECM                   15,890              991            (1,055)               -              (64)
          c) GI/SRI Funds                           11,366              191              (703)               -             (512)
          d) H4H Program                                 -                -                 -                -                -
         All Other                                       -                8                 -                -                8
         Total                                $   240,381        $    6,874   $      (20,464) $              - $       (13,590)


L2. Modification and Re-estimates (dollars in millions):
                                                                              2016

                                           Total             Interest Rate             Technical                     Total
      Loan Guarantee Programs           Modifications        Re-estimates             Re-estimates               Re-estimates

      FHA
       a) MMI/CMHI Funds                $            -       $                -       $            (7,897)       $          (7,897)
       b) GI/SRI Funds                               -                        -                      (225)                    (225)
      All Other                                      -                        -                       (28)                     (28)
      Total                             $            -       $                -       $        (8,150)           $         (8,150)


                                                                                  2015

                                          Total              Interest Rate                Technical                      Total
    Loan Guarantee Programs            Modifications         Re-estimates                Re-estimates                Re-estimates

    FHA
     a) MMI/CMHI Funds                 $             -       $                -       $            (2,295)       $              (2,295)
     b) GI/SRI Funds                                 -                        -                    (1,026)                      (1,026)
    All Other                                        -                        -                       (12)                         (12)
    Total                              $             -       $                -       $            (3,333)       $             (3,333)




                                                            60
L3. Total Loan Guarantee Subsidy Expense (dollars in millions):
                    Loan Guarantee Programs    Current Year         Prior Year
                    FHA
                     a) MMI/CMHI Funds         $     (17,081)   $        (15,380)
                     b) GI/SRI Funds                    (704)             (1,539)
                     c) H4H Program                        -                   -
                    All Other                  $         (17)   $             (5)
                    Total                      $    (17,802)    $       (16,924)




M. Subsidy Rates for Loan Guarantees by Programs and Component:
Budget Subsidy Rates for Loan Guarantees for FY 2016 Cohorts
                                                                Fees and Other
       Loan Guarantee Program                        Default      Collections       Total

       FHA Programs
        MMI/CMHI
          Single Family - Forward                        2.3%              (6.1%)    (3.8%)
          Single Family - HECM                           5.8%              (6.5%)    (0.7%)
          Single Family - Refinancing                   10.0%             (10.0%)      0.0%
          Multi Family - Section 213                     0.0%                0.0%      0.0%
        GI/SRI Funds
       Apartments - NC/SC                                2.4%              (5.2%)    (2.7%)
       Apartments - NC/SC04/01/2016                      1.9%              (4.3%)    (2.4%)
       Apartments - Refinance                            0.3%              (5.0%)    (4.7%)
       Apartments Refinance - 04/01/16                   0.3%              (3.9%)    (3.6%)
       Healthcare
       MM - FHA Full Insurance - Health Care             4.0%              (7.4%)    (3.4%)
       MF- - Hospitals                                   3.2%              (6.5%)    (3.2%)
        H4H Programs
         Single Family - Section 257                     0.0%               0.0%      0.0%
       All Other Programs
        CDBG, Section 108(b)                             0.0%               0.0%      0.0%
        Loan Guarantee Recovery                         50.0%               0.0%     50.0%
        Indian Housing (weighted average)                0.6%               0.0%      0.6%
        Native Hawaiian Housing                          0.5%               0.0%      0.5%
        Title VI Indian Housing                         11.5%               0.0%     11.5%




                                               61
Budget Subsidy Rates for Loan Guarantees for FY 2015 Cohorts

                                                            Fees and Other
     Loan Guarantee Program                      Default      Collections    Total

     FHA Programs
      MMI/CMHI
        Single Family - Forward                      2.7%           (9.9%)    (7.2%)
        Single Family - HECM                         6.2%           (6.6%)    (0.4%)
        Single Family - Refinancing                 10.1%          (10.1%)      0.0%
        Multi Family - Section 213                   0.0%             0.0%      0.0%
      GI/SRI
       Multifamily
        Apartments                                   2.5%           (6.2%)    (3.7%)
        Apartments Refinance                         0.3%           (5.0%)    (4.7%)
      Healthcare
        Residential Care                             3.8%           (8.0%)    (4.2%)
        Hospitals                                    2.6%           (7.1%)    (4.5%)
      H4H
       Single Family - Section 257                   0.0%            0.0%      0.0%
     All Other Programs
      CDBG, Section 108(b)                           2.4%            0.0%      2.4%
      Loan Guarantee Recovery                       50.0%            0.0%     50.0%
      Indian Housing (weighted average)              1.3%            0.0%      1.3%
      Native Hawaiian Housing                        0.6%            0.0%      0.6%
      Title VI Indian Housing                       11.2%            0.0%     11.2%




                                          62
N. Schedule for Reconciling Loan Guarantee Liability Balances (Post-1991
Loan Guarantees) (dollars in millions):
 Beginning Balance, Changes, and Ending Balance                             2016                2015

 Beginning balance of the loan guarantee liability                     $          15,571    $      32,919
 Add: subsidy expense for guaranteed loans disbursed during
 the reporting years by component:
       (a) Interest supplement costs                                                 -                   -
       (b) Default costs (net of recoveries)                                    6,623               6,875
       (c) Fees and other collections                                         (18,067)            (20,465)
       (d) Othe subsidy costs                                                   1,791                   -
     Total of the above subsidy expense components                     $          (9,653)   $     (13,590)
 Adjustments:
     (a) Loan guarantee modifications                                                -                   -
     (b) Fees Received                                                         14,029              13,288
     (c) Interest supplemental paid                                                  -                   -
     (d) Foreclosed property and loans acquired                                11,165              13,561
     (e) Claim payments to lenders                                            (22,445)            (26,642)
     (f) Interest accumulation on the liability balance                          (177)                580
     (g) Other                                                                    828                 364
 Ending balance of the subsidy cost allowance before re-estimates      $           9,318    $      20,480
 Add or Subtract subsidy re-estimates by component:
     (a) Interest rate re-estimate                                                (3,549)                -
     (b) Technical/default re-estimate                                            (6,272)          (3,877)
     (c) Adjustment of prior years credit subsidy re-estimates                         -           (1,032)
      Total of the above re-estimate components                                   (9,821)          (4,909)
 Ending balance of the subsidy cost allowance                          $           (503)    $     15,571
 Less: unrealized Ginnie Mae claims from defaulted loans               $          (1,554)   $      (2,098)
 Ending balance of the subsidy cost allowance                          $      (2,057)       $     13,473


O. Administrative Expenses (dollars in millions):
                        Loan Guarantee Program                2016         2015

                        FHA                               $      586   $     557
                        All Other                                              -
                        Total                             $     586    $     557




                                                     63
Note 9: Other Non-Credit Reform Loans
The following shows HUD’s Other Non-Credit Reform Loans Receivable as of
September 30, 2016 and 2015 (dollars in millions):
                                                                                                               2016
                                                                                               Allowance for Loan Losess Due
                                                                        Ginnie Mae Reported    to Payment of Probable Claims         Value of Assets Related to
   Description                                                               Balances                      by FHA                              Loans

   Mortgage Loans Held for Investment                               $                  3,471   $                      (1,243)    $                          2,228
   Advances Against Defaulted Mortgage-Backed Security Pools, net                         20                                -                                  20
   Properties Held for Sale, net                                                          41                                -                                  41
   Foreclosed Property                                                                   595                            (217)                                 378
   Short Sale Claims Receivable                                                          106                              (93)                                 13
   Total                                                            $                  4,233   $                     (1,553)     $                         2,680




                                                                                                               2015
                                                                                               Allowance for Loan Losess Due
                                                                        Ginnie Mae Reported    to Payment of Probable Claims          Value of Assets Related to
  Description                                                                Balances                      by FHA                               Loans

  Mortgage Loans Held for Investment                                $                  4,362   $                      (1,334)    $                           3,028
  Advances Against Defaulted Mortgage-Backed Security Pools, net                         119                                -                                  119
  Properties Held for Sale, net                                                           30                                -                                   30
  Foreclosed Property                                                                    769                            (719)                                   50
  Short Sale Claims Receivable                                                            45                              (45)                                   -
  Total                                                             $                  5,325   $                      (2,098)    $                           3,227


Other Non-Credit Reform Loans consists of Ginnie Mae Advances Against Defaulted Mortgage-
Backed Security Pools, Mortgage Loans Held for Investment, Short Sale Claims Receivable, and
Foreclosed Property. Below is a description of each type of asset recorded by Ginnie Mae.
Mortgage Loans Held for Investment (HFI)
When a Ginnie Mae issuer defaults, Ginnie Mae is required to step into the role of the issuer and
make the timely pass-through payments to investors, and subsequently, assumes the servicing
rights and obligations of the issuer’s entire Ginnie Mae guaranteed, pooled loan portfolio of the
defaulted issuer. Ginnie Mae utilizes the MSSs to service these portfolios. There are currently
two MSSs for Single Family and one MSS for Manufactured Housing defaulted issuers. These
MSSs currently service 100 percent of all non-pooled loans.
In its role as servicer, Ginnie Mae assesses individual loans within its pooled portfolio to
determine whether the loan must be purchased out of the pool as required by the Ginnie Mae
MBS Guide. Ginnie Mae purchases mortgage loans out of the MBS pool when:
   A. Mortgage loans are uninsured by the FHA, USDA, VA or PIH
   B. Mortgage loans were previously insured but insurance is currently denied (collectively
      with A, referred to as uninsured mortgage loans)




                                                                               64
Ginnie Mae has the option to purchase mortgage loans out of the MBS pool when:
   C. Mortgage loans are insured but are delinquent for more than 90 and 120 days based on
      management discretion for manufactured housing and single family loans, respectively.
For the years ended September 30, 2016 and 2015, the majority of purchased mortgage loans were
bought out of the pool due to borrower delinquency of more than three months.
Ginnie Mae has the ability and the intent to hold these acquired loans for the foreseeable future
or until maturity. Therefore, Ginnie Mae classifies the mortgage loans as HFI. The mortgage
loans HFI are reported net of allowance for loan losses.
Ginnie Mae evaluates the collectability of all purchased loans and assesses whether there is
evidence of credit deterioration subsequent to the loan’s origination and if it is probable, at
acquisition, that Ginnie Mae will be unable to collect all contractually required payments
receivable. Ginnie Mae considers guarantees and insurance from FHA, USDA, VA, and PIH in
determining whether it is probable that Ginnie Mae will collect all amounts due according to the
contractual terms.
For FHA insured loans, Ginnie Mae expects to collect the full amount of the unpaid principal
balance and debenture rate interest (only for months allowed in the insuring agency’s timeline),
when the insurer reimburses Ginnie Mae subsequent to filing a claim. As a result, these loans
are accounted for under ASC Subtopic 310-20, Receivables – Nonrefundable Fees and Other
Costs. In accordance with ASC 310-20-30-5, these loans are recorded at the unpaid principal
balance which is the amount Ginnie Mae pays to repurchase these loans. Accordingly, Ginnie
Mae recognizes interest income on these loans on an accrual basis at the debenture rate for the
number of months allowed under the insuring agency’s timeline.
Ginnie Mae performs periodic and systematic reviews of its loan portfolios to identify credit
risks and assess the overall collectability of the portfolios for the estimated uncollectible portion
of the principal balance of the loan. As a part of this assessment, Ginnie Mae incorporates the
probable recovery amount from mortgage insurance (e.g., FHA, USDA, VA, or PIH) based on
established insurance rates. Additionally, Ginnie Mae reviews the delinquency of mortgage
loans, industry benchmarks, as well as the established rates of insurance recoveries from
insurers. Ginnie Mae records an allowance for the estimated uncollectible amount. The
allowance for loss on mortgage loans HFI represents management’s estimate of probable credit
losses inherent in Ginnie Mae’s mortgage loan portfolio. The allowance for loss on mortgage
loans HFI is netted against the balance of mortgage loans HFI.
Ginnie Mae records a charge-off as a reduction to the allowance for loan losses when losses are
confirmed through the receipt of assets in full satisfaction of a loan, such as the receipt of claims
proceeds from an insuring agency or underlying collateral upon foreclosure.
The fair value option was not elected by Ginnie Mae for any recognized loans on its balance
sheet in 2016 and 2015. The fair value option allows certain financial assets, such as acquired



                                                 65
loans, to be reported at fair value (with unrealized gains and losses reported in the Statement of
Revenues and Expenses). Ginnie Mae reserves the right to elect the fair value option for newly
acquired loans in future periods. As the fair value option was not elected and Ginnie Mae has
the ability and the intent to hold these acquired loans for the foreseeable future or until maturity,
the mortgage loans were classified as loans HFI and reported at amortized cost (net of allowance
for loan losses).
Management is currently pursuing marketing activities to potentially sell loans currently
recognized on Ginnie Mae’s balance sheet. Once a plan of sale is developed and loans are
clearly identified for sale, Ginnie Mae will reclassify the applicable loans from HFI to HFS (held
for sale). For loans which Ginnie Mae initially classifies as held for investment and
subsequently transfers to HFS, those loans should be recognized at the lower of cost or fair value
until sold. As of the year ended September 30, 2016 and 2015, Ginnie Mae has no loans
classified as HFS.
Please note that management is currently assessing current and historic loan accounting for
potential restatement.
Mortgage loans HFI, net as of September 30, 2016 and 2015, was $3.5 billion and $4.4 billion,
respectively based on probable claims paid by FHA and recognized as an elimination in the
Department’s financial statements.
Advances against Defaulted Mortgage-Backed Security Pools
Advances represent loan pass-through payments made to fulfill Ginnie Mae’s guaranty of timely
principal and interest payments to MBS security holders. Per U.S. GAAP, Ginnie Mae is
required to report advances net of an allowance to the extent that management believes that they
will not be collected. The allowance is estimated based on historical loss experience of future
collections from the borrowers, proceeds from the sale of the property, or recoveries from third-
party insurers such as FHA, USDA, VA, and PIH.
Once Ginnie Mae purchases the loans from the pools, the associated advances are reclassified to
the appropriate asset class. The advances balance is $21 million in FY 2016 and $119 million in
FY 2015.
Properties Held for Sale, Net
Properties held for sale represent assets for which Ginnie Mae has received the title of the
underlying collateral (e.g. completely foreclosed upon and repossessed) and intends to sell the
collateral. For instances in which Ginnie Mae does not convey the property to the insuring
agency, Ginnie Mae holds the title until the property is sold. As the properties are available for
immediate sale in their current condition and are actively marketed for sale, they are to be
recorded at the fair value of the asset less the estimated cost to sell with subsequent declines in
the fair value below the initial acquired property cost basis recorded through the use of a
valuation allowance. The Properties Held for Sale balance is one of the line items for which



                                                 66
Ginnie Mae Management is currently performing an assessment related to the recognition and
measurement as compared to US GAAP requirements. Currently, Ginnie Mae does not have
access to broker price opinions or other fair value data for acquired properties. A further
assessment of data availability is currently being performed. Properties Held for Sale, net, as of
September 30, 2016 and 2015, was $41 million and $30 million, respectively.
Foreclosed Property
Ginnie Mae records foreclosed property when a MSS receives marketable title to a property
which has completed the foreclosure process in the respective state. The asset is measured as the
principal and interest of a loan which is in the process of being conveyed to an insuring agency,
net of an allowance. These assets are conveyed to the appropriate insuring agency within six
months. Foreclosed property has previously been placed on nonaccrual status after the loan was
repurchased from a pool. These properties differ from properties held for sale because they will
be conveyed to an insuring agency, and not sold by the MSS.
The allowance for foreclosed property is estimated based on actual and expected recovery
experience including expected recoveries from FHA, USDA, VA, and PIH. The aggregate of the
foreclosed property and the allowance for foreclosed property is the amount that Ginnie Mae
determines to be collectible. Ginnie Mae records a charge-off as a reduction to the allowance for
loan losses when losses are confirmed through the receipt of assets in full satisfaction of a loan,
such as the receipt of claims proceeds from an insuring agency. Management is currently
assessing current and historic accounting practices for potential restatement. Foreclosed
Property, net as of September 30, 2016, was $596 million, and, net as of September 30, 2015,
was $769 million.
Short Sale Claims Receivable
As an alternative to foreclosure, a property may be sold for its appraised value even if the sale
results in a short sale where the proceeds are not sufficient to pay off the mortgage. Ginnie
Mae’s MSSs analyze mortgage loans HFI for factors such as delinquency, appraised value of the
loan, and market in locale of the loan to identify loans that may be short sale eligible. These
transactions are analyzed and approved by Ginnie Mae’s MBS program office.
For FHA insured loans, for which the underlying property was sold in a short sale, the FHA
typically pays Ginnie Mae the difference between the proceeds received from the sale and the
total contractual amount of the mortgage loan and interest at the debenture rate. Hence, Ginnie
Mae does not incur any losses as a result of the short sale of an FHA insured loan. Ginnie Mae
records a short sale claims receivable while it awaits repayment of this amount from the insurer.
For short sales claims receivable for which Ginnie Mae believes that collection is not probable,
Ginnie Mae records an allowance for short sales claims receivable. The allowance for short sales
claims receivable is estimated based on actual and expected recovery experience including
expected recoveries from FHA, USDA, VA, and PIH. The aggregate of the short sales




                                                67
receivable and the allowance for short sales receivable is the amount that Ginnie Mae determines
to be collectible. Ginnie Mae records a charge-off as a reduction to the allowance for loan losses
when losses are confirmed through the receipt of claims in full satisfaction of a loan from an
insuring agency. Management is currently assessing current and historic accounting practices for
potential restatement. Short Sale Claims Receivable, net as of September 30, 2016 and 2015,
was $107 and $45 million, respectively.

Note 10: General Property, Plant, and Equipment (Net)
General property, plant, and equipment consists of furniture, fixtures, equipment and data
processing software used in providing goods and services that have an estimated useful life of
two or more years. Purchases of $100,000 or more are recorded as an asset and depreciated over
their estimated useful life on a straight-line basis with no salvage value. Capitalized replacement
and improvement costs are depreciated over the remaining useful life of the replaced or
improved asset. Generally, the Department’s assets are depreciated over a four-year period,
unless it can be demonstrated that the estimated useful life is significantly greater than four
years.
The following shows general property, plant, and equipment as of September 30, 2016, and
September 30, 2015 (dollars in millions):
 Description                                             2016                                         2015
                                                     Accumulated                                  Accumulated
                                                    Depreciation and       Book                  Depreciation and       Book
                                            Cost     Amortization          Value        Cost      Amortization          Value

 Equipment                              $       9   $            (3)   $        6   $        7   $             -    $        7
 Leasehold Improvements                         -                 -             -            -                 -             -
 Internal Use Software                        217              (172)           45          186              (152)           34
 Internal Use Software in Development         330                 -           330          288                 -           288
 Total                                  $     556   $          (175)   $     381    $     481    $          (152)   $     329




Note 11: PIH Prepayments
HUD’s assets include the Department’s estimates for restricted net position (RNP) balances
maintained by Public Housing Authorities under the Housing Choice Voucher Program. RNP
balances represent disbursements to PHAs that are in excess of their expenses. PHAs can use
RNP to cover any valid housing assistance program (HAP) expenses. PIH has estimated RNP
balances of $209 million and $171 million for FY 2016 related to the Housing Choice Voucher
and Moving to Work Programs.




                                                             68
Note 12: Other Assets
The following shows HUD’s Other Assets as of September 30, 2016 and 2015 (dollars in
millions):
                                                                                             2016
      Description                                             FHA          Ginnie Mae      Section 8          All Other             Total

      Intragovernmental Assets:
         Other Assets                                    $           -     $         -     $           5      $         38     $            43
      Total Intragovernmental Assets                                 -               -               5                  38                  43
      Public:
        Mortgagor Reserves for Replacement - Cash        $          30     $         -     $          -       $           -    $            30
        Other Assets                                                23               -               -                   -                  23
      Total                                              $          53     $         -     $         5        $         38     $            96


                                                                                             2015
      Description                                             FHA          Ginnie Mae      Section 8          All Other             Total

      Intragovernmental Assets:
         Other Assets                                    $           1     $         -     $           4      $          4     $             9
      Total Intragovernmental Assets                                1                -               4                   4                   9
      Public:
        Mortgagor Reserves for Replacement - Cash        $          37     $         -     $          -       $           -    $            37
        Other Assets                                                 8               -               -                   -                   8
      Total                                              $          46     $         -     $         4        $          4     $            54




Note 13: Liabilities Covered and Not Covered by Budgetary
Resources
The following shows HUD’s liabilities as of September 30, 2016 and 2015 (dollars in millions):

 Description                                                        2016                                                2015
                                                    Covered     Not-Covered        Total             Covered        Not-Covered          Total
 Intragovernmental
    Accounts Payable                            $          24   $          -   $         24      $             16   $           -    $           16
    Debt                                               31,002              -         31,002                27,150               -            27,150
    Other Intragovernmental Liabilities                 2,832            192          3,024                 3,132              16             3,148
 Total Intragovernmental Liabilities            $      33,858 $          192   $     34,050      $         30,298   $          16    $       30,314
   Accounts Payable                                     1,006              -          1,006                   966               -               966
   Accrued Grant Liabilities                            2,663              -          2,663                 2,388               -             2,388
   Liabilities for Loan Guarantees                     (2,057)             -         (2,057)               13,473               -            13,473
   Debt                                                     8              -              8                     8               -                 8
   Federal Employee and Veterans' Benefits                  -             64             64                     -              69                69
   Loss Liability                                           3              -              3                     -               -                 -
   Other Liabilities                                    1,235            132          1,367                 1,105             134             1,239
 Total Liabilities                              $     36,716    $        388   $    37,104       $         48,238   $         219    $      48,457


HUD’s other governmental liabilities principally consist of Ginnie Mae’s deferred revenue,
FHA’s special receipt account, and the Department’s payroll costs. Further disclosures of
HUD’s other liabilities are also found in Note 17.




                                                                    69
Note 14: Debt
Several HUD programs have the authority to borrow funds from the U.S. Treasury for program
operations. Additionally, the National Housing Act authorizes FHA, in certain cases, to issue
debentures in lieu of cash to pay claims. Also, PHAs and TDHEs borrowed funds from the
private sector and from the Federal Financing Bank (FFB) to finance construction and
rehabilitation of low rent housing. HUD is repaying these borrowings on behalf of the PHAs and
TDHEs.
The following shows HUD borrowings, and borrowings by PHAs/TDHEs for which HUD is
responsible for repayment, as of September 30, 2016 (dollars in millions):
                                                      Beginning        Net             Ending
               Description                             Balance      Borrowings         Balance

                 Debt to the Federal Financing Bank   $       103   $       452   $          555
                 Debt to the U.S. Treasury                 27,047         3,400           30,447
                 Held by the Public                             8             -                8
                   Total                              $    27,158   $     3,852   $       31,010

               Classification of Debt:
                Intragovernmental Debt                                            $       31,002
                Debt held by the Public                                                        8
               Total                                                              $      31,010


The following shows HUD borrowings, and borrowings by PHAs/TDHEs for which HUD is
responsible for repayment, as of September 30, 2015 (dollars in millions):
                                                      Beginning        Net            Ending
                 Description                           Balance      Borrowings        Balance

                  Debt to the Federal Financing Bank $          -   $      122    $         122
                  Debt to the U.S. Treasury                27,661         (633)          27,028
                  Held by the Public                            9           (1)               8
                       Total                          $    27,670   $     (512)   $      27,158

                 Classification of Debt:
                  Intragovernmental Debt                                          $      27,150
                  Debt held by the Public                                                     8
                 Total                                                            $     27,158



The purpose of these borrowings is discussed in the following paragraphs.

Borrowings from the U.S. Treasury
In FY 2016 and FY 2015, FHA borrowed $30.9 billion and $27 billion, respectively, from the
U.S. Treasury. In accordance with Credit Reform accounting, FHA borrows from the U.S.
Treasury when cash is needed in its financing accounts. Usually, the need for cash arises when
FHA has to transfer the negative credit subsidy amounts related to new loan disbursements and
existing loan modifications from the financing accounts to the general fund receipt account (for




                                                          70
cases in GI/SRI funds) or to the capital reserve account (for cases in MMI/CMHI funds). In
some instances, borrowings are also needed to transfer the credit subsidy related to downward re-
estimates when available cash is less than claim payments due. These borrowings carried
interest rates ranging from 1.02 percent to 7.59 percent during FY 2016.
Borrowings from the Federal Financing Bank (FFB) and the Public
During the 1960s, 1970s, and 1980s, PHAs obtained loans from the private sector and from the
FFB to finance development and rehabilitation of low rent housing projects. HUD is repaying
these borrowings on behalf of the PHAs, through the Low Rent Public Housing program. For
borrowings from the public, interest is payable throughout the year.
Before July 1, 1986, the FFB purchased notes issued by units of general local government and
guaranteed by HUD under Section 108. These notes had various maturities and carried interest
rates that were one-eighth of one percent above rates on comparable Treasury obligations. The
FFB held substantially all outstanding notes, and no note purchased by the FFB has ever been
declared in default. In March of FY 2010, HUD repaid all FFB borrowings for the Low Rent
Public Housing program.
Debentures Issued to Claimants
The National Housing Act authorizes FHA, in certain cases, to issue debentures in lieu of cash to
settle claims. FHA-issued debentures bear interest at rates established by the U.S. Treasury.
There were no debentures issued in FY 2013. Interest rates related to the outstanding debentures
ranged from 4.00 percent to 13.375 percent in FY 2011. Debentures may be redeemed by
lenders prior to maturity to pay mortgage insurance premiums to FHA, or they may be called
with the approval of the Secretary of the U. S. Treasury.

Note 15: Federal Employee and Veterans’ Benefits
HUD is a non-administering agency; therefore, it relies on cost factors and other actuarial
projections provided by the Department of Labor (DOL) and Office of Personnel Management
(OPM). HUD’s imputed costs consist of two components, pension and health care benefits.
During FY 2016, HUD recorded imputed costs of $67 million which consisted of $23 million for
pension and $44 million for health care benefits. During FY 2015, HUD recorded imputed costs
of $65 million which consisted of $27 million for pension and $38 million for health care
benefits. These amounts are reported by OPM and charged to expense with a corresponding
amount considered as an imputed financing source in the Statement of Changes in Net Position.
HUD also accrues the portion of the estimated liability for disability benefits assigned to the
agency under the Federal Employee Compensation Act (FECA), administered and determined by
the DOL. The liability, based on the net present value of estimated future payments based on a
study conducted by DOL, was $64 million as of September 30, 2016, and $69 million as of




                                               71
September 30, 2015. Future payments on this liability are to be funded by future financing
sources.
In addition to the imputed costs of $67 million noted above, HUD recorded net benefit expenses
totaling $49 million for FY 2016 and $179 million for FY 2015.

Note 16: MBS Loss Liability
Liability for loss on MBS program guaranty (MBS loss liability) represents the loss contingency
that arises from the guaranty obligation that Ginnie Mae has to the MBS holders as a result of a
probable issuer default. In FY2016, Ginnie Mae recorded $3 million in loss reserves. The
issuers have the obligation to make timely principal and interest payments to investors, however,
in the event whereby the issuer defaults, Ginnie Mae steps in and continues to make the
contractual payments to investors. The contingent aspect of the guarantee is measured under
ASC Subtopic 450-20, Contingencies – Loss Contingencies.
Ginnie Mae’s Office of Enterprise Risk (ERO) utilizes Corporate Watch to assist in the analysis
of potential defaults. Corporate Watch assigns each issuer an internal risk grade using an
internally developed proprietary risk-rating methodology. The objective of the methodology is
to identify those Ginnie Mae issuers that display an elevated likelihood of default relative to their
peers. To this end, the methodology assigns each active Issuer a risk grade ranging from 1-8,
with 1 representing a low probability of default and 8 representing an elevated probability of
default. A higher probability of default would arise from an observed weakness in an entity's
financial health. Those Issuers with an elevated probability of default are assigned an internal
risk grade of 7 or 8 and are automatically included in Risk Category I of the Watch List. ERO
prepares written financial reviews on all Issuers appearing in Risk Category I of Watch List to
assess the level of on-going monitoring needed to ensure that these Issuers remain viable Ginnie
Mae counterparties or to take other mitigation actions.




                                                 72
Note 17: Other Liabilities
The following shows HUD’s Other Liabilities as of September 30, 2016 (dollars in millions):

                                                              Non-
    Description                                              Current        Current         Total
    Intragovernmental Liabilities
       FHA Special Receipt Account Liability             $          -   $       2,765   $      2,765
       Unfunded FECA Liability                                     15               -             15
       Employer Contributions and Payroll Taxes                     -               9              9
       Miscellaneous Receipts Payable to Treasury                   -             221            221
       Advances to Federal Agencies                                 -              14             14
    Total Intragovernmental Liabilities                  $         15   $       3,009   $      3,024
    Other Liabilities
      FHA Other Liabilities                              $          -   $        543    $       543
      FHA Escrow Funds Related to Mortgage Notes                    -            312            312
      Ginnie Mae Deferred Income                                  292             20            312
      Deferred Credits                                              -              4              4
      Deposit Funds                                                 -              9              9
      Accrued Unfunded Annual Leave                                77              -             77
      Accrued Funded Payroll Benefits                               -             32             32
      Contingent Liability                                         55              -             55
      Other                                                         7             16             23
    Total Other Liabilities                              $        446   $      3,945    $     4,391


The following shows HUD’s Other Liabilities as of September 30, 2015 (dollars in millions):
                                                              Non-
    Description                                              Current        Current         Total
    Intragovernmental Liabilities
       FHA Special Receipt Account Liability             $          -   $       2,889   $      2,889
       Unfunded FECA Liability                                     16               -             16
       Employer Contributions and Payroll Taxes                     -               5              5
       Miscellaneous Receipts Payable to Treasury                   -             228            228
       Advances to Federal Agencies                                 -              10             10
    Total Intragovernmental Liabilities                  $         16   $       3,132   $      3,148
    Other Liabilities
      FHA Other Liabilities                              $          -   $        412    $       412
      FHA Escrow Funds Related to Mortgage Notes                    -            314            314
      Ginnie Mae Deferred Income                                  273             34            307
      Deferred Credits                                              -             18             18
      Deposit Funds                                                 -             13             13
      Accrued Unfunded Annual Leave                                79              -             79
      Accrued Funded Payroll Benefits                               -             32             32
      Contingent Liability                                         55              -             55
      Other                                                         7              2              9
    Total Other Liabilities                              $        430   $      3,957    $     4,387


Special Receipt Account Liability
The special receipt account liability is created from negative subsidy endorsements and
downward credit subsidy in the GI/SRI special receipt account.




                                                    73
Note 18: Financial Instruments with Off-Balance Sheet Risk
Some of HUD’s programs, principally those operated through FHA and Ginnie Mae, enter into
financial arrangements with off-balance sheet risk in the normal course of their operations.
A. FHA Mortgage Insurance
The outstanding principal of FHA’s guaranteed loans (face value) as of September 30, 2016
and 2015, was $1.3 trillion and $1.3 trillion, respectively. The amount of outstanding principal
guaranteed (insurance-in-force) as of September 30, 2016 and 2015, was $1.2 trillion and $1.2
trillion, respectively, as disclosed in Note 8J. The maximum claim amount (MCA) outstanding
for FHA’s reverse mortgage insurance program (HECM) as of September 30, 2016 and 2015,
was $148 billion and $150 billion, respectively. As of September 30, 2016 and 2015, the
insurance-in-force (the outstanding balance of active loans) was $105 billion and $105 billion,
respectively, as disclosed in Note 8J. The HECM insurance in force includes balances drawn by
the mortgagee, interest accrued on the balances drawn, service charges, and mortgage insurance
premiums. The maximum claim amount is the dollar ceiling to which the outstanding loan
balance can grow before being assigned to FHA.
B. Ginnie Mae Mortgage-Backed Securities
Ginnie Mae financial instruments with off-balance sheet risk include guarantees of MBS and
commitments to guarantee MBS. The securities are backed by pools of FHA, USDA, VA, and
PIH mortgage loans. Ginnie Mae is exposed to credit loss in the event of non-performance by
other parties to the financial instruments. The total amount of Ginnie Mae guaranteed securities
outstanding at September 30, 2016 and 2015, was approximately $1.7 trillion and $1.6 trillion,
respectively. However, Ginnie Mae’s potential loss is considerably less because of the financial
strength of the Department’s issuers. Additionally, in the event of default, the underlying
mortgages serve as primary collateral and FHA, USDA, VA, and PIH insurance or guarantee
indemnifies Ginnie Mae for most losses.
During the mortgage closing period and prior to granting its guaranty, Ginnie Mae enters into
commitments to guarantee MBS. The commitment ends when the MBS are issued or when the
commitment period expires. Ginnie Mae’s risks related to outstanding commitments are much
less than for outstanding securities due, in part, to Ginnie Mae’s ability to limit commitment
authority granted to individual issuers of MBS. Outstanding commitments as of
September 30, 2016 and 2015, were $96 billion and $129 billion, respectively. Generally,
Ginnie Mae’s MBS pools are diversified among issuers and geographic areas. No significant
geographic concentrations of credit risk exist; however, to a limited extent, securities are
concentrated among issuers.
In FY 2016 and FY 2015, Ginnie Mae issued a total of $103 billion and $93 billion, respectively,
in its multi-class securities program. The estimated outstanding balance for the complete multi-
class securities program (REMICs, Platinum’s, etc.) at September 30, 2016 and 2015, were



                                               74
$474 billion and $473 billion, respectively. These guaranteed securities do not subject Ginnie
Mae to additional credit risk beyond that assumed under the MBS program.

C. Section 108 Loan Guarantees
Under HUD’s Loan Guarantee (Section 108) program, recipients of the CDBG Entitlement
Grant program funds may pledge future grant funds as collateral for loans guaranteed by HUD
(these loans were provided from private lenders since July 1, 1986). Section 108 provides
entitlement communities with a source of financing for projects that are too large to be financed
from annual grants. The amount of loan guarantees outstanding as of September 30, 2016 and
2015, was $2 billion and $2 billion, respectively. HUD’s management believes its exposure in
providing these loan guarantees is limited, since loan repayments can be offset from future
CDBG Entitlement Program Funds and, if necessary, other funds provided to the recipient by
HUD. HUD has never had a loss under this program since its inception in 1974.

Note 19: Contingencies
Lawsuits and Other
The general counsel has reviewed FHA’s legal actions and claims for FY 2016 and determined
as of September 30, 2016, that the ultimate resolution of legal actions would not affect FHA’s
consolidated financial statements. As a result, no contingent liability has been recorded.

HUD is party to a number of claims and tort actions related to lawsuits brought against it
concerning the implementation or operation of its various programs. A union grievance case,
Fair and Equitable Arbitration Remedy, FMCS No. 03-07743, 66 FLRA 867, was filed based on
alleged violations of articles of the parties’ Collective Bargaining Agreement. The grievance
alleged that HUD failed to treat employees fairly and equitably based upon the manner in which
the Agency posted and subsequently selected candidates from job advertisements and vacancy
announcements. Although the litigation is not final, the estimated potential loss is probable at
this time and as a result, the Department has recorded a contingent liability of $55 million in its
financial statements. Pending litigation on this case will likely take one or many years to
resolve. The Union’s version of compliance could cost up to $665 million, including attorney’s
fees, if the parties do not resolve this matter, and if the Union gets all of its requested
relief. Other ongoing suits cannot be reasonably determined at this time and in the opinion of
management and general counsel, the ultimate resolution of the other pending litigation will not
have a material effect on the Department’s financial statements.

Note 20: Funds from Dedicated Collections
Funds from dedicated collections are financed by specifically identified revenues and are
required by statute to be used for designated activities or purposes.




                                                75
Ginnie Mae
Ginnie Mae is a self-financed government corporation, whose program operations are financed
by a variety of fees, such as guaranty, commitment, new issuer, handling, and transfer servicing
fees, which are to be used only for Ginnie Mae’s legislatively authorized mission. In FY 2016,
Ginnie Mae was authorized to use $23 million for payroll and payroll related expense, funded by
commitment fees.

Rental Housing Assistance Fund
The Housing and Urban Development Act of 1968 authorized the Secretary to establish a
revolving fund into which rental collections in excess of the established basic rents for units in
Section 236 subsidized projects would be deposited. The Housing and Community Development
Amendment of 1978 authorized the Secretary, subject to approval in appropriation acts, to
transfer excess rent collections received after 1978 to the Troubled Projects Operating Subsidy
program, renamed the Flexible Subsidy Fund. Prior to that time, collections were used for
paying tax and utility increases in Section 236 projects. The Housing and Community
Development Act of 1980 amended the 1978 Amendment by authorizing the transfer of excess
rent collections regardless of when collected.
Flexible Subsidy
The Flexible Subsidy Fund assists financially troubled subsidized projects under certain FHA
authorities. The subsidies are intended to prevent potential losses to the FHA fund resulting
from project insolvency and to preserve these projects as a viable source of housing for low and
moderate-income tenants. Priority was given with Federal insurance-in-force and then to those
with mortgages that had been assigned to the Department.

American Recovery and Reinvestment Act Programs (Recovery Act)
The Recovery Act includes $14 billion for 17 programs at HUD which are distributed across
three themes that align with the broader Recovery goals. A further discussion of HUD’s
accomplishments under the Recovery Act program can be found at www.hud.gov/recovery.

Manufactured Housing Fees Trust Fund
The National Manufactured Housing Construction and Safety Standards Act of 1974, as
amended by the Manufactured Housing Improvement Act of 2000, authorizes development and
enforcement of appropriate standards for the construction, design, and performance of
manufactured homes to assure their quality, durability, affordability, and safety.
Fees are charged to the manufacturers for each manufactured home transportable section
produced and will be used to fund the costs of all authorized activities necessary for the
consensus committee (HUD) and its agents to carry out all aspects of the manufactured housing
legislation. The fee receipts are permanently appropriated and have helped finance a portion of




                                               76
the direct administrative expenses incurred in program operations. Activities are initially
financed via transfer from the Manufactured Housing General Fund.
The following shows funds from dedicated collections as of September 30, 2016 (dollars in
millions):
                                                                      Tenant         Project
                                                                      Based          Based           Rental                  Manufactued                                          Total
                                                                      Rental         Rental      Housing        Flexible    Housing Fees Recovery                               Earmarked
                                                   Ginnie Mae Assistance Assistance Assistance                  Subsidy      Trust Fund Act Funds      Other     Eliminations     Funds
Balance Sheet

Fund Balance w/Treasury                             $    1,379 $           12 $            18 $               9 $    433 $           14 $       9 $            - $         13 $     1,887
Cash and Other Monetary Assets                              60              -               -                 -        -              -         -              -            -          60
Investments                                             15,954              -               -                 -        -              -         -              -            -      15,954
Accounts Receivable                                        113              -               -                 4        -              -         5              -            -         122
Loans Receivable                                         4,233              -               -                 -      417              -         -              -            -       4,650
Other Non-Credit Reform Loans Receivable                    83              -               -                 -        -              -         -              -            -          83
General Property, Plant and Equipment                        -              -               -                 -        -              -         1              -            -           1
Other                                                        -              -               -                 -        -              -         -              -            -           -
Total Assets                                        $ 21,822 $             12 $           18 $            13 $       850 $           14 $      15 $            - $        13 $ 22,757

Debt - Intragovernmental                            $          - $             - $             - $            - $          - $        - $       5 $            - $          - $         5
Accounts Payable - Intragovernmental                                           -               -              -            -          -         -              -            -           -
Accounts Payable - Public                                    113               -               -              -            -          3         -              -            -         116
Loan Guarantees                                                -               -               -              -            -          -         -              -            -           -
Loss Liability                                                 -               -               -              -            -          -         -              -            -           -
Other Liabilities - Intragovernmental                          -               -               -              -            -          -         -              -            -           -
Other Liabilities - Public                                   323               -               -              -            -          -         -              -            -         323
            Total Liabilities                       $        436 $             - $             - $            - $          - $        3 $       5 $            - $          - $       444

Unexpended Appropriations                           $        - $           12 $            18 $           (5) $      (377) $          - $      10 $            - $          - $      (342)
Cumulative Results of Operations                        21,386              -               -             18        1,227            11         -              -           13      22,655
            Total Net Position                      $   21,386 $           12 $            18 $           13 $       850 $           11 $      10 $            - $         13 $    22,313
Total Liabilities and Net Position                  $ 21,822 $             12 $           18 $            13 $       850 $           14 $      15 $            - $        13 $ 22,757

Statement of Net Cost For the Period Ended

Gross Costs                                         $      432 $           33 $            34 $               - $      (4) $          15 $     16 $            - $          - $        526
Less Earned Revenues                                    (1,646)             -               -                 -        (4)           (12)       -              -            -       (1,662)
Net Costs                                           $ (1,214) $            33 $           34 $                - $      (8) $          3 $      16 $            - $          - $ (1,136)

Statement of Changes in Net Position for the Period Ended

Net Position Beginning of Period                    $   20,175 $             8 $            9 $           12 $       839 $           14 $      55 $            - $          - $    21,112
Correction of Errors                                        (7)              -              -              -           -              -         -              -            -          (7)
Appropriations Received                                      -               -              -              -           -              -         -              -            -           -
Transfers In/Out Without Reimbursement                       -              37             43              -           -              -       (13)             -           13          80
Imputed Costs                                                -               -              -              -           -              -         -              -            -           -
Donations and Forfeitures of Cash & Cash Equivalents         -               -              -              -           -              -         -              -            -           -
Penalties, Fines, and Administrative Fees Revenue            4               -              -              -           -              -         -              -            -           4
Other Adjustments                                            -               -              -              1           3              -       (16)             -            -         (12)
Net Cost of Operations                                   1,214             (33)           (34)             -           8             (3)      (16)             -            -       1,136
Change in Net Position                              $       1,218 $            4 $             9 $            1 $     11 $            (3) $   (45) $           - $         13 $     1,208
Net Position End of Period                          $ 21,386 $             12 $           18 $            13 $       850 $           11 $      10 $            - $        13 $ 22,313




                                                                                                 77
The following shows funds from dedicated collections as of September 30, 2015 (dollars in
millions):
                                                                      Tenant         Project
                                                                      Based          Based           Rental                    Manufactued                                Total
                                                                      Rental         Rental      Housing          Flexible    Housing Fees   Recovery                 Earmarked
                                                   Ginnie Mae Assistance Assistance Assistance                    Subsidy      Trust Fund    Act Funds      Other         Funds
Balance Sheet

Fund Balance w/Treasury                             $    2,142 $               8 $             9 $            8 $      380 $           14 $         42 $            - $     2,603
Cash and Other Monetary Assets                              45                 -               -              -          -              -            -              -          45
Investments                                             12,923                 -               -              -          -              -            -              -      12,923
Accounts Receivable                                        131                 -               -              4          -              -           18              -         153
Loans Receivable                                             -                 -               -              -        459              -           (2)             -         457
Other Non-Credit Reform Loans Receivable                 5,325                 -               -              -          -              -            -              -       5,325
General Property, Plant and Equipment                       58                 -               -              -          -              -            -              -          58
Other                                                        -                 -               -              -          -              -            -              -           -
Total Assets                                        $ 20,624 $                 8 $             9 $        12 $         839 $           14 $        58 $             - $ 21,564

Debt - Intragovernmental                            $          - $             - $             - $             - $           - $         - $         3 $            - $         3
Accounts Payable - Intragovernmental                                           -               -               -             -           -           -              -           -
Accounts Payable - Public                                    135               -               -               -             -           -           -              -         135
Loan Guarantees                                                -               -               -               -             -           -           -              -           -
Loss Liability                                                 -               -               -               -             -           -           -              -           -
Other Liabilities - Intragovernmental                          -               -               -               -             -           -           -              -           -
Other Liabilities - Public                                   314               -               -               -             -           -           -              -         314
            Total Liabilities                       $        449 $             - $             - $             - $           - $         - $         3 $            - $       452

Unexpended Appropriations                           $        1 $               8 $             9 $         - $         (376) $          - $         55 $            - $      (303)
Cumulative Results of Operations                        20,174                 -               -          12          1,215            14            -              -      21,415
            Total Net Position                      $   20,175 $               8 $             9 $        12 $         839 $           14 $         55 $            - $    21,112
Total Liabilities and Net Position                  $ 20,624 $                 8 $             9 $        12 $         839 $           14 $        58 $             - $ 21,564

Statement of Net Cost For the Period Ended

Gross Costs                                         $     (234) $          23 $            16 $               (3) $       3 $            9 $        79 $            - $       (107)
Less Earned Revenues                                    (1,551)             -               -                 (2)        (3)           (11)          -              -       (1,567)
Net Costs                                           $ (1,785) $            23 $           16 $            (5) $              - $        (2) $      79 $             - $ (1,674)

Statement of Changes in Net Position for the Period Ended

Net Position Beginning of Period                    $   18,390 $            31 $           25 $           10 $         838 $           12 $        157 $            - $    19,463
Correction of Errors                                         -               -              -             (3)            -              -            -              -          (3)
Appropriations Received                                      -               -              -              -             -              -            -              -           -
Transfers In/Out Without Reimbursement                       -               -              -              -             -              -            -              -           -
Imputed Costs                                                1               -              -              -             -              -            -              -           1
Donations and Forfeitures of Cash & Cash Equivalents         -               -              -              -             -              -            -              -           -
Penalties, Fines, and Administrative Fees Revenue            -               -              -              -             1              -            -              -           1
Other Adjustments                                           (1)              -              -              -             -              -          (23)             -         (24)
Net Cost of Operations                                   1,785             (23)           (16)             5             -              2          (79)             -       1,674
Change in Net Position                              $       1,785 $        (23) $         (16) $              5 $            1 $        2 $       (102) $           - $     1,652
Net Position End of Period                          $ 20,175 $                 8 $             9 $        12 $         839 $           14 $        55 $             - $ 21,112



Note 21: Intragovernmental Costs and Exchange Revenue
The data below shows HUD’s intragovernmental costs and earned revenue separately from
activity with the public. Intragovernmental transactions are exchange transactions made between
two reporting entities within the Federal government. Intragovernmental costs are identified by
the source of the goods and services; both the buyer and seller are Federal entities. Revenues
recognized by the Department may also be reported as non-Federal if the goods or services are




                                                                                        78
subsequently sold to the public. Public activity involves exchange transactions between the
reporting entity and a non-Federal entity.
The following shows HUD’s intragovernmental costs and exchange revenue (dollars in
millions):
                                                                           Low Rent
                              Federal                   Section 8 Public Housing Homeless                     Housing for    Community                                                Financial
           2016
                              Housing                     Rental           Loans and       Assistance         the Elderly Development                                             Statement
                          Administration Ginnie Mae Assistance              Grants             Grants         and Disabled Block Grants           HOME All Other Eliminations Consolidating

Intragovernmental
  Costs                   $        1,239 $        4 $           49 $                29 $              6 $              17 $          18       $         4       $         513     $               - $        1,879
Public Costs                     (18,997)       428         30,604               2,966            1,951               957         6,268             1,163               5,838                     -         31,178
       Subtotal Costs     $      (17,758) $     432 $       30,653 $             2,995 $          1,957 $             974 $       6,286       $     1,167       $       6,351     $               - $       33,057
Unassigned Costs                                                                                                                                                $         262                       $          262
       Total Costs                                                                                                                                                                                  $       33,319

Intragovernmental
  Earned Revenue          $       (1,151) $      (84) $            -   $               -   $             - $             - $          - $               - $               (20) $                  - $       (1,255)
Public Earned Revenue                (67)     (1,562)              -                   -                5            (109)            -                 -                 (17)                    -         (1,750)
   Total Earned Revenue           (1,218)     (1,646)              -                   -                5            (109)            -                 -                 (37)                    -         (3,005)
Net Cost of Operations    $      (18,976) $   (1,214) $     30,653 $             2,995 $          1,962 $             865 $       6,286 $           1,167 $             6,576 $                   - $       30,314




                                                                           Low Rent
                              Federal                   Section 8 Public Housing Homeless                     Housing for Community                                                       Financial
           2015
                              Housing                     Rental           Loans and       Assistance the Elderly Development                                                         Statement
                          Administration Ginnie Mae Assistance              Grants             Grants         and Disabled Block Grants           HOME All Other Eliminations Consolidating

Intragovernmental
  Costs                   $        1,206 $         4 $          70 $                37 $               13 $            47 $           20      $          8          $      316        $               - $     1,721
Public Costs                     (17,409)       (238)       29,412               2,798              1,881             990          7,547             1,233               5,755                        -      31,969
       Subtotal Costs     $      (16,203) $     (234) $     29,482 $             2,835 $            1,894 $          1,037 $       7,567      $      1,241          $    6,071        $               - $    33,690
Unassigned Costs                                                                                                                                                    $      218                          $       218
       Total Costs                                                                                                                                                                                      $    33,908

Intragovernmental
  Earned Revenue          $       (1,791) $     (128) $            -   $               -   $            (4) $            - $              - $               - $            (12) $                     - $    (1,935)
Public Earned Revenue                (58)     (1,427)              -                   -                  -          (136)                -                 -              (17)                       -      (1,638)
   Total Earned Revenue           (1,849)     (1,555)              -                   -                (4)          (136)                -                 -              (29)                       -      (3,573)
Net Cost of Operations    $      (18,052) $   (1,789) $     29,482 $             2,835 $            1,890 $           901 $        7,567 $           1,241 $             6,260 $                      - $    30,335




                                                                                               79
Note 22: Total Cost and Earned Revenue by Budget Functional
Classification
The following shows HUD’s total cost and earned revenue by budget functional classification for
FY 2016 (dollars in millions):
        Budget Functional Classification       Gross Cost    Earned Revenue    Net Cost
        Intragovernmental:
          Commerce and Housing Credit           $   1,246    $       (1,236)   $     10
          Community and Regional Development           70                (6)         64
          Income Security                             350               (12)        338
          Administration of Justice                     4                             4
          Other Multiple Functions                    211                (1)        210
          Total Intragovernmental                   1,881            (1,255)        626
        With the Public:
         Commerce and Housing Credit            $ (18,486)   $       (1,749)   $ (20,235)
         Community and Regional Development         6,393                 -        6,393
         Income Security                           43,145                 -       43,145
         Administration of Justice                     74                (1)          73
         Other Multiple Functions                      50                 -           50
           Total with the Public                $ 31,176     $       (1,750)   $ 29,426

        Not Assigned to Programs:
         Income Security                             262                  -         262
           Total with the Public                $    262     $            -    $    262

        TOTAL:
         Commerce and Housing Credit            $ (17,240)   $       (2,985)   $ (20,225)
         Community and Regional Development         6,463                (6)       6,457
         Income Security                           43,757               (12)      43,745
         Administration of Justice                     78                (1)          77
         Other Multiple Functions                    261                 (1)        260
        TOTAL:                                  $ 33,319     $      (3,005)    $ 30,314




                                               80
The following shows HUD’s total cost and earned revenue by budget functional classification for
FY 2015 (dollars in millions):
         Budget Functional Classification        Gross Cost    Earned Revenue    Net Cost
         Intragovernmental:
           Commerce and Housing Credit            $   1,212    $       (1,920)   $    (708)
           Community and Regional Development            86                 -           86
           Income Security                              424               (15)         409
           Other Multiple Functions                      (1)               (1)          (2)
           Total Intragovernmental                    1,721            (1,936)        (215)
         With the Public:
          Commerce and Housing Credit             $ (17,734)   $       (1,629)   $ (19,363)
          Community and Regional Development          7,659                 -        7,659
          Income Security                            41,676                (7)      41,669
          Administration of Justice                      61                (1)          60
          Other Multiple Functions                      307                 -          307
           Total with the Public                  $ 31,969     $       (1,637)   $ 30,332

         Not Assigned to Programs:
          Income Security                              218                  -         218
           Total with the Public                  $    218     $            -    $    218

         TOTAL:
          Commerce and Housing Credit             $ (16,522)   $       (3,549)   $ (20,071)
          Community and Regional Development          7,745                 -        7,745
          Income Security                            42,318               (22)      42,296
          Administration of Justice                      61                (1)          60
          Other Multiple Functions                      306                (1)         305
         TOTAL:                                   $ 33,908     $      (3,573)    $ 30,335


Note 23: Expenditures by Strategic Goals
As HUD updated its Strategic Plan to address the economic and community development issues
the nation is facing, five Strategic Goals were identified. This note presents the expenditures
incurred by HUD’s various programs in achieving these goals. A description of each Strategic
Goal is presented below and additional information is found in the Strategic Plan section of the
AFR.
Goal 1: Strengthen the nation’s housing market to bolster the economy and protect consumers
Goal 2: Meet the need for quality affordable rental homes
Goal 3: Utilize housing as a platform for improving quality of life
Goal 4: Build inclusive and sustainable communities free from discrimination
Goal 5: Transform the way HUD does business




                                                81
The following table shows the expenditures allocated to HUD’s Strategic Goals for FY 2016
(dollars in millions):

                                             Goal 1           Goal 2      Goal 3       Goal 4        Goal 5           Total
                 Programs
 FHA                                        $ (12,335)        $ (2,846)   $    (759)   $ (3,036)     $       -    $ (18,976)
 Ginnie Mae                                      (910)            (304)           -           -              -       (1,214)
 Section 8 Rental Assistance                        -          25,066           200       5,387              -       30,653
 Low Rent Public Housing Loans and Grants         419            2,197           75         304              -        2,995
 Homeless Assistance Grants                         -            1,373          589           -              -        1,962
 Housing for the Elderly and Disabled               -              538           76         251              -          865
 Community Development Block Grants             1,257              314          943       3,772              -        6,286
 HOME                                             315              630            -         222              -        1,167
 All Other Programs                               365            3,696          805       1,365             83        6,314
                     Total                    (10,889)         30,664         1,929       8,265             83       30,052

                                                               Costs Not Assigned To Programs                     $      262

                                                                                            Total                      30,314




The following table shows the expenditures allocated to HUD’s Strategic Goals for FY 2015
(dollars in millions):

                                             Goal 1           Goal 2      Goal 3        Goal 4           Goal 5        Total
                Programs
FHA                                         $ (11,734)        $ (2,708)   $    (722)   $ (2,888)     $        -    $ (18,052)
Ginnie Mae                                     (1,342)            (447)           -           -               -       (1,789)
Section 8 Rental Assistance                         -          24,109           192       5,181               -       29,482
Low Rent Public Housing Loans and Grants          396            2,080           71         288               -        2,835
Homeless Assistance Grants                          -            1,323          567           -               -        1,890
Housing for the Elderly and Disabled                -              561           79         261               -          901
Community Development Block Grants              1,513              379        1,135       4,540               -        7,567
HOME                                              335              670            -         236               -        1,241
All Other Programs                                206            3,793          769       1,242              32        6,042
                    Total                     (10,626)         29,760         2,091       8,860              32       30,117

                                                               Costs Not Assigned To Programs                      $      218

                                                                                             Total                      30,335


Note 24: Net Costs of HUD’s Cross-Cutting Programs
This note provides a categorization of net costs for several major program areas whose costs
were incurred among HUD’s principal organizations previously discussed under Section 1 of the
report. Costs incurred under HUD’s other programs represent activities which support the
Department’s strategic goal to develop and preserve quality, healthy, and affordable homes.




                                                         82
The following table shows the cross-cutting of HUD’s major program areas that incur costs that
cross multiple program areas for FY 2016 (dollars in millions):
                                                   Public and                       Community
                                                     Indian                        Planning and
    HUD's Cross-Cutting Programs                    Housing          Housing       Development        Other       Consolidated


    S ection 8
    Intragovernmental Gross Costs                  $      36         $      13     $         -    $           -   $        49
    Intragovernmental Earned Revenues                      -                 -               -                -             -
    Intragovernmental Net Costs                    $      36         $      13     $         -    $           -   $        49

    Gross Costs with the Public                    $   19,869        $   10,652    $        83    $           -   $    30,604
    Earned Revenues                                         -                 -              -                -             -
    Net Costs with the Public                      $   19,869        $   10,652    $        83    $           -        30,604

    Net Program Costs                              $   19,905        $   10,665    $        83    $           -   $    30,653


    Homeless Assistance Grants
    Intragovernmental Gross Costs                  $        -        $         -   $         -    $           6   $         6
    Intragovernmental Earned Revenues                       -                  -             -                -             -
    Intragovernmental Net Costs                    $        -        $         -   $         -    $           6   $         6

    Gross Costs with the Public                    $        -        $         -   $     1,914    $       37      $     1,951
    Earned Revenues                                         -                  -             -             5                5
    Net Costs with the Public                      $        -        $         -   $     1,914    $       42      $     1,956

    Net Program Costs                              $        -        $         -   $     1,914    $       48      $     1,962


    CDBG
    Intragovernmental Gross Costs                  $        -        $      17     $         -    $           -   $        17
    Intragovernmental Earned Revenues                       -                -               -                -             -
    Intragovernmental Net Costs                    $        -        $      17     $         -    $           -   $        17

    Gross Costs with the Public                    $       2         $     954     $         -    $         -     $       956
    Earned Revenues                                        -                 -               -           (108)           (108)
    Net Costs with the Public                      $       2         $     954     $         -    $      (108)    $       848

    Net Program Costs                              $       2         $     971     $         -    $      (108)    $       865


    All Other
    Intragovernmental Gross Costs                  $     128         $     109     $        38    $      238      $       513
    Intragovernmental Earned Revenues                      -                 -               -           (20)             (20)
    Intragovernmental Net Costs                    $     128         $     109     $        38    $      218      $       493

    Gross Costs with the Public                    $    4,812        $     214     $       550    $      262      $     5,838
    Earned Revenues                                         -                -               -           (17)             (17)
    Net Costs with the Public                      $    4,812        $     214     $       550    $      245      $     5,821

    Net Program Costs                              $    4,940        $     323     $       588    $      463      $     6,314

    Costs Not Assigned to Programs                 $      89         $     104     $        69    $           -   $       262

    Net Program Costs (including indirect costs)   $    5,029        $     427     $       657    $      463      $     6,576




                                                                83
The following table shows the Department’s cross-cutting costs among its major program areas
for FY 2015 (dollars in millions):
                                                Public and                       Community
                                                  Indian                        Planning and
 HUD's Cross-Cutting Programs                    Housing          Housing       Development        Other       Consolidated


 S ection 8
 Intragovernmental Gross Costs                  $      37         $      32     $         -    $           -   $        69
 Intragovernmental Earned Revenues                      -                 -               -                -             -
 Intragovernmental Net Costs                    $      37         $      32     $         -    $           -   $        69

 Gross Costs with the Public                    $   19,053        $   10,281    $        80    $        (2)    $    29,412
 Earned Revenues                                         -                 -              -              -               -
 Net Costs with the Public                      $   19,053        $   10,281    $        80    $        (2)         29,412

 Net Program Costs                              $   19,090        $   10,313    $        80    $        (2)    $    29,481


 Homeless Assistance Grants
 Intragovernmental Gross Costs                  $        -        $         -   $         -    $       13      $        13
 Intragovernmental Earned Revenues                       -                  -            (4)            -               (4)
 Intragovernmental Net Costs                    $        -        $         -   $        (4)   $       13      $         9

 Gross Costs with the Public                    $        -        $         -   $     1,850    $       31      $     1,881
 Earned Revenues                                         -                  -             -             -                -
 Net Costs with the Public                      $        -        $         -   $     1,850    $       31      $     1,881

 Net Program Costs                              $        -        $         -   $     1,846    $       44      $     1,890


 CDBG
 Intragovernmental Gross Costs                  $        -        $         -   $        20    $           -   $        20
 Intragovernmental Earned Revenues                       -                  -             -                -             -
 Intragovernmental Net Costs                    $        -        $         -   $        20    $           -   $        20

 Gross Costs with the Public                    $      55         $         -   $     7,456    $       36      $     7,547
 Earned Revenues                                        -                   -             -             -                -
 Net Costs with the Public                      $      55         $         -   $     7,456    $       36      $     7,547

 Net Program Costs                              $      55         $         -   $     7,476    $       36      $     7,567


 All Other
 Intragovernmental Gross Costs                  $      86         $     153     $        50    $        27     $       316
 Intragovernmental Earned Revenues                      7                (1)              4            (23)            (13)
 Intragovernmental Net Costs                    $      93         $     152     $        54    $           4   $       303

 Gross Costs with the Public                    $    4,886        $     353     $       550    $       (34)    $     5,755
 Earned Revenues                                         -              (15)              -             (1)            (16)
 Net Costs with the Public                      $    4,886        $     338     $       550    $       (35)    $     5,739

 Net Program Costs                              $    4,979        $     490     $       604    $       (31)    $     6,042

 Costs Not Assigned to Programs                 $      63         $     102     $        53    $           -   $       218

 Net Program Costs (including indirect costs)   $    5,042        $     592     $       657    $       (31)    $     6,260




                                                             84
Note 25: FHA Net Costs
FHA reports its insurance operations in three overall program areas: Single Family Forward
Mortgages, Multifamily/Healthcare Mortgages, and Home Equity Conversion Mortgages
(HECM). FHA operates these programs primarily through four insurance funds: Mutual
Mortgage Insurance (MMI), General Insurance (GI), Special Risk Insurance (SRI), and
Cooperative Management Housing Insurance (CMHI), with the MMI fund being the largest.
There is a fifth fund, Hope for Homeowners (H4H), which became operational in FY 2009 and
which contains minimal activity.
FHA encourages homeownership through its Single Family Forward programs (Section 203(b),
which is the largest program, and Section 234) by making loans readily available with its
mortgage insurance programs. These programs insure mortgage lenders against losses from
default, enabling those lenders to provide mortgage financing on favorable terms to homebuyers.
Multifamily Housing Programs (Section 213, Section 221(d)(4), Section 207/223(f), and
Section 223(a)(7)) provide FHA insurance to approved lenders to facilitate the construction,
rehabilitation, repair, refinancing, and purchase of multifamily housing projects such as
apartment rentals, and cooperatives. Healthcare programs (Section 232 and Section 242) enable
low cost financing of health care facility projects and improve access to quality health care by
reducing the cost of capital. The HECM program provides eligible homeowners who are
62 years of age and older access to the equity in their property with flexible terms.
The following table shows Net Cost detail for the FHA (dollars in millions):
                                                                              Fiscal Year 2016
                                      Single Family                       Multifamily/Healthcare            Administrative
                                    Forward Program     HECM Program             Program                       Costs              Total
Costs
Intragovernmental Gross Costs       $           791     $         234     $                      196    $                17   $            1,238
Intragovernmental Earned Revenues              (662)             (403)                           (85)                     -               (1,150)
Intragovernmental Net Costs         $           129     $        (169)    $                      111    $                17   $              88

Gross Costs with the Public         $        (18,763)   $        (306)    $                  (518)      $               591   $       (18,996)
Earned Revenues                                  (14)              (1)                        (53)                        -               (68)
Net Costs with the Public           $        (18,777)   $        (307)    $                  (571)      $               591   $       (19,064)

Net Program Costs                   $       (18,648)    $        (476)    $                  (460)      $              608    $      (18,976)


                                                                            Fiscal Year 2015
                                      Single Family                       Multifamily/Healthcare            Administrative
                                    Forward Program     HECM Program             Program                       Costs              Total
Costs
Intragovernmental Gross Costs       $            955    $          59     $                      177    $                16   $            1,207
Intragovernmental Earned Revenues             (1,133)            (584)                           (74)                     -               (1,791)
Intragovernmental Net Costs         $          (178)    $        (525)    $                      103    $                16   $            (584)

Gross Costs with the Public         $        (13,284)   $       (3,994)   $                  (699)      $               567   $       (17,410)
Earned Revenues                                  (11)               (1)                       (46)                        -               (58)
Net Costs with the Public           $        (13,295)   $       (3,995)   $                  (745)      $               567   $       (17,468)

Net Program Costs                   $       (13,473)    $      (4,520)    $                  (642)      $              583    $      (18,052)




                                                                 85
Note 26: Commitments under HUD’s Grant, Subsidy, and Loan
Programs
A. Contractual Commitments
HUD has entered into extensive long-term commitments that consist of legally binding
agreements to provide grants, subsidies or loans. Commitments become liabilities when all
actions required for payment under an agreement have occurred. The mechanism for funding
subsidy commitments generally differs depending on whether the agreements were entered into
before or after 1988.
With the exception of the Housing for the Elderly and Disabled and Low Rent Public Housing
Loan Programs (which have been converted to grant programs), Section 235/236, and a portion
of “All Other” programs, HUD management expects all of the programs to continue to incur new
commitments under authority granted by Congress in future years. However, estimated future
commitments under such new authority are not included in the amounts below.
Prior to fiscal 1988, HUD’s subsidy programs, primarily the Section 8 program and the
Section 235/236 programs, operated under contract authority. Each year, Congress provided
HUD the authority to enter into multiyear contracts within annual and total contract limitation
ceilings. HUD then drew on and continues to draw on permanent indefinite appropriations to
fund the current year’s portion of those multiyear contracts. Because of the duration of these
contracts (up to 40 years), significant authority exists to draw on the permanent indefinite
appropriations. Beginning in FY 1988, the Section 8 and the Section 235/236 programs began
operating under multiyear budget authority whereby the Congress appropriates the funds “up-
front” for the entire contract term in the initial year.
HUD’s commitment balances are based on the amount of unliquidated obligations recorded in
HUD’s accounting records with no provision for changes in future eligibility, and thus are equal
to the maximum amounts available under existing agreements and contracts. Unexpended
appropriations and cumulative results of operations shown in the Consolidated Balance Sheet
comprise funds in the U.S. Treasury available to fund existing commitments that were provided
through “up-front” appropriations and also include permanent indefinite appropriations received
in excess of amounts used to fund the pre-1988 subsidy contracts and offsetting collections.
FHA enters into long-term contracts for both program and administrative services. FHA funds
these contractual obligations through appropriations, permanent indefinite authority, and
offsetting collections. The appropriated funds are primarily used to support administrative
contract expenses while the permanent indefinite authority and the offsetting collections are used
for program services.




                                               86
The following shows HUD’s obligations and contractual commitments under its grant, subsidy,
and loan programs as of September 30, 2016 (dollars in millions):
                                                                                      Undelivered Orders

                                                   Unexpended      Permanent          Investment              Offsetting       Undelivered Orders -
    Programs                                   Appropriations        Indefinite           Authority       Collections          Obligations, Unpaid

   FHA                                         $          125 $               80 $                    - $           1,989      $             2,194
   Ginnie Mae                                               1                     -                   -               447                      448
   Section 8 Rental Assistance                           8,898                    -                   -                    -                 8,898
   Low Rent Public Housing Loans and Grants              4,041                    -                   -                    -                 4,041
    Homeless Assistance Grants                           2,215                    -                   -                    -                 2,215
    Housing for the Elderly and Disabled                 1,623                    -                   -                    -                 1,623
   Community Development Block Grants                    9,588                    -                   -                    -                 9,588
   HOME Partnership Investment Program                   2,647                    -                   -                    -                 2,647
    Section 235/236                                        742                    -                   -                    -                   742
    All Other                                            2,739                    -                   -                    -                 2,739
    Total                                      $       32,619    $            80      $          -        $        2,436       $           35,135


The following shows HUD’s obligations and contractual commitments under its grant, subsidy,
and loan programs as of September 30, 2015 (dollars in millions):
                                                                                      Undelivered Orders

                                                   Unexpended    Permanent            Investment              Offsetting       Undelivered Orders -
    Programs                                   Appropriations        Indefinite        Authority          Collections          Obligations, Unpaid

    FHA                                        $           140 $              79 $                    - $           1,825      $            2,044
    Ginnie Mae                                               3                 -                      -               402                     405
    Section 8 Rental Assistance                          8,896                 -                      -                 -                   8,896
    Low Rent Public Housing Loans and Grants             4,359                 -                      -                 -                   4,359
    Homeless Assistance Grants                           2,389                 -                      -                 -                   2,389
    Housing for the Elderly and Disabled                 1,939                 -                      -                 -                   1,939
    Community Development Block Grants                  10,950                 -                      -                 -                  10,950
    HOME Partnership Investment Program                  2,855                 -                      -                 -                   2,855
    Section 235/236                                        951                 -                      -                 -                     951
    All Other                                            3,336                 -                      -                 -                   3,336
    Total                                      $       35,818 $              79       $         -         $        2,227       $          38,124


B. Administrative Commitments
In addition to the above contractual commitments, HUD has entered into administrative
commitments which are reservations of funds for specific projects (including those for which a
contract has not yet been executed) to obligate all or part of those funds. Administrative
commitments become contractual commitments upon contract execution.




                                                                 87
The following chart shows HUD’s administrative commitments as of September 30, 2016
(dollars in millions):
                                                                                 Reservations
                                                                          Permanent
                                                        Unexpended        Indefinite               Offsetting               Total
       Programs                                     Appropriations Appropriations               Collections            Reservations

       Section 8 Rental Assistance                  $           194   $                    -   $               -       $            194
       Low Rent Public Housing Loans and Grants               7,436                        -                   -                   7,436
       Homeless Assistance Grants                               226                        -                   -                    226
       Housing for the Elderly and Disabled                     232                        -                   -                    232
       Community Development Block Grants                         9                        -                   -                         9
       HOME Partnership Investment Program                      140                        -                   -                    140
       Section 235/236                                            -                        -                   -                      -
       All Other                                                266                        -                   -                    266
       Total                                        $        8,503    $                    -   $               -       $       8,503


The following chart shows HUD’s administrative commitments as of September 30, 2015
(dollars in millions):
                                                                                Reservations
                                                                          Permanent
                                                        Unexpended        Indefinite           Offsetting                  Total
         Programs                                   Appropriations Appropriations              Collections         Reservations

         Section 8 Rental Assistance                $           155 $                  - $                 -       $               155
         Low Rent Public Housing Loans and Grants                9                     -                   -                        9
         Homeless Assistance Grants                             107                    -                   -                       107
         Housing for the Elderly and Disabled                   106                    -                   -                       106
         Community Development Block Grants                   7,868                    -                   -                  7,868
         HOME Partnership Investment Program                    227                    -                   -                       227
         Section 235/236                                          -                    -                   -                         -
         All Other                                              182                    -                   -                       182
         Total                                      $        8,654    $                - $                 -       $         8,654


Note 27: Disaster Recovery Relief Efforts
Over the past years, the Department has developed an allocation process which focuses on
unanticipated disaster recovery needs. Administered by the Office of Community Planning and
Development, disaster recovery funds supplements the Federal Management Agency, the Small
Business Administration, and the United States Army Corps of Engineers. The Department’s
funds must supplement, not replace, other sources of federal disaster recovery assistance. The
funding is provided by grants to assist cities, counties, and States recover from Presidentially-
declared disasters. Recent disaster recovery events include severe flooding in the upper
Midwest, hurricanes in the Gulf Costs and severe weather systems, including Hurricane Sandy
devastating the Mid-Atlantic region.




                                                           88
The following table shows the status of budgetary resources information for HUD’s programs
funded under the Community Development Block Grant Program to support disaster relief as of
September 30, 2016 (dollars in millions):

                           Budgetary Resources                                        Total
                           Unobligated Balance, beginning of period              $            8,091
                           Recoveries                                                             -
                           Budget Authority                                                       -
                           Spending Authority from Offsetting Collections                         -
                           Non-Expenditure Transfers, net                                         -
                           Other Balances Withdrawn                                               -
                           Total Budgetary Resources                             $            8,091


                           Status of Budgetary Resources
                           Obligations Incurred                                  $            1,670
                           Unobligated Balance, available                                     6,421
                           Unobligated Balance, not available                                     -
                           Total Status of Budgetary Resources                   $            8,091

                           Change in Obligated Balance
                           Obligated Balance, net beginning of period            $             6,107
                           Obligations Incurred                                                1,670
                           Gross Outlays                                                      (3,011)
                           Recoveries                                                              -
                           Obligated Balance, net end of period                  $            4,766

                           Net Outlays                                           $            3,011


The data below displays cumulative activity for the four largest state recipients of HUD disaster
assistance since the inception of the program. The obligations incurred and gross outlays shown
above represent fiscal year activity (dollars in millions).
                                                           Obligations          Outlays            Unliquidated

            Louisiana                                  $           14,621   $        13,568    $            1,053
            Mississippi                                             5,539             5,220                   319
            Texas                                                   3,751             3,044                   707
            Florida                                                   393               380                    13
            Other States                                            2,287             2,604                  (317)
            Total                                      $           26,591   $        24,816    $           1,775




                                                              89
The following table shows the status of budgetary resources information for HUD’s programs
funded under the Community Development Block Grant Program to support disaster relief as of
September 30, 2015 (dollars in millions):
                        Budgetary Resources                                             Total
                        Unobligated Balance, beginning of period                $                11,618
                        Recoveries                                                                    -
                        Budget Authority                                                              -
                        Spending Authority from Offsetting Collections                                -
                        Non-Expenditure Transfers, net                                                -
                        Other Balances Withdrawn                                                      -
                        Total Budgetary Resources                               $            11,618

                        Status of Budgetary Resources
                        Obligations Incurred                                    $                 3,527
                        Unobligated Balance, available                                            8,091
                        Unobligated Balance, not available                                            -
                        Total Status of Budgetary Resources                     $            11,618


                        Change in Obligated Balance
                        Obligated Balance, net beginning of period              $                 6,012
                        Obligations Incurred                                                      3,527
                        Gross Outlays                                                            (3,432)
                        Recoveries                                                                    -
                        Obligated Balance, net end of period                    $                6,107

                        Net Outlays                                             $                3,432


The data below displays cumulative activity for the four largest state recipients of HUD disaster
assistance since the inception of the program. The obligations incurred and gross outlays shown
above represent fiscal year activity (dollars in millions).
                                                        Obligations          Outlays             Unliquidated

                Louisiana                           $           14,621 $            13,348 $               1,273
                Mississippi                                      5,539               5,060                   479
                Texas                                            3,752               2,689                 1,063
                Florida                                            393                 370                    23
                Other States                                     2,287               2,478                  (191)
                Total                               $           26,592   $          23,945   $             2,647


Note 28: Apportionment Categories of Obligations Incurred
Budgetary resources are usually distributed in an account or fund by specific time periods,
activities, projects, objects, or a combination of these categories. Resources apportioned by
fiscal quarters are classified as Category A apportionments. Apportionments by any other
category would be classified as Category B apportionments.




                                                           90
HUD’s categories of obligations incurred were as follows (dollars in millions):
                                                            Category A   Category B        Total
                                         2016
                                         Direct             $      912   $   105,436   $    106,348
                                         Reimbursable                -         3,827          3,827
                                         Total              $      912   $ 109,263     $ 110,175


                                                            Category A Category B          Total
                                         2015
                                         Direct             $      984 $     112,448 $      113,432
                                         Reimbursable                -         5,754          5,754
                                         Total              $      984   $ 118,202     $ 119,186




Note 29: Explanation of Differences between the Statement of
Budgetary Resources and the Budget of the United States
Government
The President’s Budget containing actual FY 2016 data is not available for comparison to the
Statement of Budgetary Resources. Actual FY 2016 data will be available in the Appendix to
the Budget of the United States Government, FY 2018.
For FY 2015, an analysis to compare HUD’s Statement of Budgetary Resources to the
President’s Budget of the United States was performed to identify any differences.
The following shows the difference between Budgetary Resources reported in the Statement of
Budgetary Resources and the President’s Budget for FY 2015 (dollars in millions):
                                                                                                                              Distributed
                                                                                           Budgetary Obligations              Offsetting       Net
                                                                                           Resources           Incurred        Receipts       Outlays
Combined Statement of Budgetary Resources                                                  $ 199,100       $     119,190      $   (2,844) $     51,883
Difference #1 - Resources related to HUD's expired accounts
                not reported in the President's Budget                                             (891)             (57)              -                -
Difference #2 - Offsetting receipts included in the President's Budget                                -                -               9                -
Difference #3 - Offsetting receipts not included in the President's Budget                            -                   -            3                -
Difference #4 - Ginnie Mae amounts from temporary reduction of prior year                             -               (1)                 -          (1)
                balances
Difference #5 - Ginnie Mae amounts precluded from obligation                                         -                 -                  -          -
Difference #6 - Rounding issues                                                                     11                (3)                 -     (1,728)
United States Budget                                                                       $ 198,220       $ 119,129          $   (2,832) $ 50,154



Note 30: Reconciliation of Net Cost of Operations to Budget
This note (formerly the Statement of Financing) links the proprietary data to the budgetary data.
Most transactions are recorded in both proprietary and budgetary accounts. However, because
different accounting bases are used for budgetary and proprietary accounting, some transactions




                                                                    91
may appear in only one set of accounts. The Reconciliation of Net Cost of Operations to Budget
is as follows for the periods ending September 30, 2016 and 2015 (dollars in millions):
                                                                                           2016             2015

Budgetary Resources Obligated
Obligations Incurred                                                                   $   110,175      $   119,186
Spending Authority from Offsetting Collections and Recoveries                              (62,121)         (68,862)
Obligations Net of Offsetting Collections                                              $    48,054      $    50,324
Offsetting Receipts                                                                         (2,302)          (2,844)
Net Obligations                                                                        $    45,752      $    47,480

Other Resources
Transfers In/Out Without Reimbursement                                                 $       187      $           -
Imputed Financing from Costs Absorbed by Others                                                158                 65
FHA Transfers Out to U.S. Dept. of Treasury for negative subsidies                          (2,601)          (3,679)
CFO Other Resources                                                                               -               4
Net Other Resources Used to Finance Activities                                         $    (2,256)     $    (3,610)
Total Resources Used to Finance Activities                                             $    43,496      $    43,870

Resources Used to Finance Items Not Part of the Net Cost of Operations
Change in Budgetary Resources Obligated for Goods/Services/Benefits
 Services Ordered but Not Yet Provided                                                 $      3,318     $     2,895
Credit Program Resources that Increase LLG or Allowance for Subsidy                             517         (14,729)
Credit Program Resources not Included in Net Cost (Surplus) of Operations                          -         62,726
Resources that Finance the Acquisition of Assets or Liquidation of Liabilities             (49,155)         (49,265)
Resources that Fund Expenses from Prior Periods                                             (6,886)             (19)
Other Changes to Net Obligated Resources Not Affecting Net Cost of Operations               57,953                -
Other                                                                                        (218)           16,015
Total Resources Used to Finance Items Not Part of Net Cost of Operations               $      5,529     $    17,623


Total Resources Used to Finance the Net Cost of Operations                             $    49,025      $    61,493
Components of Net Cost of Operations Not Requiring/Generating Resources in the
Current Period
Upward/Downward Re-estimates of Credit Subsidy Expense                                 $    (9,737)     $    (4,917)
Increase in Exchange Revenue Receivable from the Public                                       (109)            (139)
Change in Loan Loss Reserve                                                                       (7)              (1)
Revaluation of Assets or Liabilities                                                               -               19
Depreciation and Amortization                                                                     21            (11)
Changes in Bad Debt Expenses Related to Credit Reform Receivables                                  5            (42)
Reduction of Credit Subsidy Expense from Guarantee Endorsements and Modifications           (9,716)         (13,607)
Increase in Annual Leave Liability                                                                57                -
Other                                                                                          775          (12,460)
Total Components of Net Cost of Operations Not Requiring/Generating Resources in the
Current Period                                                                         $    (18,711)    $    (31,158)

Net Cost of Operations                                                                 $    30,314      $    30,335




                                                              92
Note 31: Restatement of the Department’s Fiscal Year 2015
Financial Statements
Restatement of FHA’s Fiscal Year 2015 Financial Statements
In FY 2016, FHA corrected material misstatements identified by OIG in the Consolidated
Balance Sheet (BS), the Statement of Net Cost (SNC) and the Statement of Changes in Net
Position (SCNP) to recognize the reduction of accrued expenses in the Home Equity Conversion
Mortgage (HECM) cash flow model assumptions used to calculate the agency’s Liability for
Loan Guarantees (LLG). Historically reported property Maintenance and Operating (M&O)
management expenses inadvertently included accrued costs that resulted in FHA’s LLG to be
overstated by $830 million in FY 2014 and $833 million in FY 2015. As a result, the overstated
total gross cost of HECM expenses reported on the SNC for FY 2014 caused the cumulative
results of operations reported on the SCNP to be understated by $1.4 billion. The same
correction was made in the calculation of the FY 2015 model expense rate assumptions however,
there was less of a net impact on FY 2015 reporting. The net effect of the error for both years,
offset by the adjustment for the annual reestimates, resulted in the overall HECM gross cost
reported on the SNC in FY 2015 to be overstated by $1.4 million and the cumulative result of
operations on the SCNP to be understated by $835 million.
Maintenance and Operating (M&O) expenses represent primarily Management and Marketing
contract expenses maintained in the SAMS property management system. FHA uses M&O
expenses in the cash flow model assumptions to calculate the LLG. In FY 2014 and FY 2015,
the M&O expense reports FHA received for HECM showed significant increases in M&O
expenses over previous years. FHA initially attributed the increases to an increase in expenses
related to HECM property sales and projected the increase to level off and return to previous
levels. In FY 2016, further research of the M&O data found that accrued costs (interest, service
fees from assignment to conveyance, and mortgage insurance premiums) were being incorrectly
included in the M&O expenses. These activities were inappropriate to include since they do not
represent cash flows.
FHA has restated its FY 2015 financial statements to correct the reported balance of the LLG in
the current period. Due to the imminent publishing of the FY 2016 audited financial statements,
the FY 2015 restatement will be presented comparatively. Recalculation of the FY 2014
corrected LLG and net costs of operations are reflected in the restated FY 2015 beginning
balance of the Statement of Changes in Net Position. The restatement will affect the line
balances of the Loan Receivables and Related Foreclosed Property, Other Liabilities, LLG and
Current Year Results of Operations on the Balance Sheet; the HECM Gross Cost with the Public
on the Statement of Net Cost; the Changes in Net Position beginning balance, Other Financing
Sources and Net Costs of Operations on the Statement of Changes in Net Position; and related
footnotes.




                                               93
Restatement of Ginnie Mae’s Fiscal Year 2015 Statement of Budgetary
Resources
Ginnie Mae’s Statement of Budgetary Resources (SBR) for fiscal year FY 2015 was restated to
correct material errors resulting from the inability of Ginnie Mae’s accounting system (GFAS) to
support and perform budgetary accounting and reporting functions. GFAS has since been
configured to perform this task. Furthermore, Ginnie Mae has completed its data migration and
reconciliation efforts related to its budgetary accounting process. The reconciliation effort
identified root causes related to the initial system configuration, as well as errors in the
unautomated budgetary resources recording process. As a result, Ginnie Mae has recorded
adjustments to obligations incurred, which was understated by $39 million. The restated SBR
also reflects an error correction, which preclosed apportioned resources with an impact of
$1 billion, thereby understating apportioned resources and overstating unapportioned resources.




                                              94
                                                                                  September 30, 2015      September 30, 2015
                                   Balance Sheet                                 Consolidated Financial Consolidated Financial
                                (dollars in millions)
                                                                                  Statements (without      Statements (with
                                                                                      restatement)           restatement)              Change
ASSETS
 Intragovernmental
   Fund Balance with Treasury (Note 4)                                           $              94,691                 94,691      $               -
   Short-Term Investments (Note 6)                                                              12,923                 12,923                      -
   Long-Term Investments Held-To-Maturity (Note 6)                                              14,754                 14,754                      -
   Other Assets (Note 12)                                                                            9                      9                      -
 Total Intragovernmental                                                         $             122,377                122,377      $               -

 Cash and Other Monetary Assets (Note 5)                                         $                  45                     45      $               -
 Investments (Note 6)                                                                               31                     31                      -
 Accounts Receivable, Net (Note 7)                                                                 780                    780                      -
 Direct Loan and Loan Guarantees, Net (Note 8)                                                  14,425                 14,965                   (540)
 Other Non-Credit Reform Loans (Note 9)                                                          3,227                  3,227                      -
 General Property, Plant and Equipment, Net (Note 10)                                              329                    329                      -
 PIH Prepayments (Note 11)                                                                         672                    672                      -
 Other Assets (Note 12)                                                                             45                     45                      -
TOTAL ASSETS                                                                     $             141,931                142,471      $            (540)

LIABILITIES
 Intragovernmental Liabilities
   Accounts Payable (Note 13)                                                    $                  15                     16      $              (1)
   Debt (Note 14)                                                                               27,150                 27,150                      -
   Other Intragovernmental Liabilities (Note 17)                                                 2,610                  3,148                   (538)
 Total Intragovernmental                                                         $              29,775                 30,314      $            (539)

 Accounts Payable (Note 13)                                                      $                 966                    966      $              -
 Accrued Grant Liabilities (Note 13)                                                             2,388                  2,388                     -
 Loan Guarantee Liability (Note 8)                                                              14,307                 13,473                   834
 Debt Held by the Public (Note 14)                                                                   8                      8                     -
 Federal Employee and Veteran Benefits (Note 15)                                                    69                     69                     -
 Loss Reserves (Note 16)                                                                             -                    -                       -
 Other Governmental Liabilities (Note 17)                                                        1,239                  1,239                     -
TOTAL LIABILITIES                                                                $              48,752                 48,457      $            295

 Commitments and Contingencies (Note 19)                                                             55                       55                   -

Net Position
 Unexpended Appropriations - Funds From Dedicated Collections (Note 20)          $                (320)                  (320) $                   -
 Unexpended Appropriations - Other Funds                                                        51,435                 51,435                      -
 Cumulative Results of Operations - Funds From Dedicated Collections (Note 20)                  21,417                 21,417                      -
 Cumulative Results of Operations - Other Funds                                                 20,647                 21,482                   (835)
 TOTAL NET POSITION - Funds From Dedicated Collections                                          21,097                 21,097                      -
 TOTAL NET POSITION - All Other Funds                                                           72,082                 72,917                   (835)
Total Net Position                                                               $              93,179                 94,014 $                 (835)

Total Liabilities and Net Position                                               $             141,931                142,471      $            (540)



                                                                   September 30, 2015       September 30, 2015
                          Statement of Net Cost                   Consolidated Financial Consolidated Financial
                           (dollars in millions)
                                                                   Statements (without       Statements (with
                                                                       restatement)             restatement)                Change
          Program Costs

            Gross Costs                                           $               33,910 $                 33,908 $                        2
             Less: Earned Revenue                                                 (3,573)                  (3,573)                     -
            Net Program Costs                                     $               30,337 $                 30,335 $                        2

          Net Cost of Operations                                  $               30,337 $                 30,335 $                        2




                                                                        95
                                              September 30, 2015      September 30, 2015
      Statement of Changes in Net Position   Consolidated Financial Consolidated Financial
              (dollars in millions)
                                              Statements (without         Statements (with
                                                 restatement)              restatement)             Change

Cumulative Results of Operations:
Beginning Balances                           $              23,685 $                  25,055 $               (1,370)
Adjustments                                                                                                       -
 Corrections of Errors                                          (3)                       (3)                     -
Beginning Balances, As Adjusted              $              23,682 $                  25,052 $               (1,370)

Budgetary Financing Sources:
Other Adjustments                            $                   - $                       - $                    -
Appropriations Used                                         52,993                    52,993                      -
Non-exchange Revenue                                             3                         3                      -

Other Financing Sources (Non-Exchange):
Imputed Financing                            $                  65 $                      65 $                   -
Other                                                       (4,342)                   (4,879)                  537

Total Financing Sources                                     48,719                    48,182                   537
Net Cost of Operations                                     (30,337)                  (30,335)                   (2)
Net Change                                   $              18,382 $                  17,847 $                 535

Cumulative Results of Operations             $             42,064     $              42,899     $             (835)



Unexpended Appropriations:
Beginning Balances                           $              56,220 $                  56,221 $                   (1)
Adjustments
 Changes in Accounting Principles                                -                         -                      -
 Corrections of Errors                                         574                       574                      -
Beginning Balances, As Adjusted              $              56,794 $                  56,795 $                   (1)

Budgetary Financing Sources:
Appropriations Received                      $              47,639    $               47,639    $                -
Appropriations Transferred In/Out                                -                         -                     -
Other Adjustments                                             (325)                     (325)                    -
Appropriations Used                                        (52,993)                  (52,994)                    1
Total Budgetary Financing Sources            $              (5,679)   $               (5,680)   $                1
Unexpended Appropriations                    $              51,115    $               51,115    $                -
Net Position                                 $              93,179    $               94,014    $             (835)




                                                    96
                                                                                  September 30, 2015     September 30, 2015
                     Statement of Budgetary Resources                            Consolidated Financial Consolidated Financial
                            (dollars in millions)                                 Statements (without        Statements (with
                                                                                     restatement)             restatement)            Change
Budgetary Resources:
Unobligated Balance, Brought Forward                                             $              84,489   $               84,489 $               -
Adjustments to Unobligated Balance Brought Forward, October 1                                        -                      (13)               13

Unobligated balance from prior year budget authority, net                        $              84,489 $                 84,476 $              13
Recoveries of Prior Year Unpaid Obligations                                                      1,107                    1,113                (6)
Other changes in unobligated balance                                                              (709)                    (708)               (1)
Unobligated balance from prior year budget authority, net                        $              84,887 $                 84,881 $               6

Appropriations (discretionary and mandatory)                                     $              47,458   $               47,458   $             -
Borrowing Authority (discretionary and mandatory)                                               12,146                   12,146                 -
Contract Authority (discretionary and mandatory)                                                     -                        -                 -
Budget Authority from non expenditure transfers, net                                                 -                        -                 -
Spending Authority from offsetting collections                                   $              54,610   $               54,610                 -
Total Budgetary Resources                                                        $             199,101   $              199,095   $             6

Status of Budgetary Resources:

 Direct                                                                          $             113,432   $              113,433   $             (1)
 Reimbursable                                                                                    5,754                    5,787                (33)
 Subtotal                                                                        $             119,186   $              119,220   $            (34)

 Apportioned                                                                     $              16,604   $               17,593   $         (989)
 Exempt from Apportionment                                                                           -                        -                -
 Unapportioned                                                                                  63,311                   62,283   $        1,028
 Subtotal                                                                        $              79,915   $               79,876   $           39
Total Status of Budgetary Resources                                              $             199,101   $              199,096   $            5

Change in Obligated Balance:

Unpaid Obligations:
Unpaid obligations, brought forward, Oct 1                                       $              43,598 $                 43,598 $                -
Adjustments to unpaid obligations, start of year (+ or -)                                            -                       13                (13)
Obligations incurred                                                                           119,186                  119,221                (35)
Outlays (gross) (-)                                                                           (119,635)                (119,635)                 -
Actual transfers, unpaid obligations (net) (+ or -)                                                  -                        -                  -
Recoveries of prior year unpaid obligations (-)                                                 (1,107)                  (1,113)                 6

Unpaid obligations, end of year                                                  $              42,042   $               42,084   $            (42)

Uncollected Payments:
Uncollected payments, Fed sources, brought forward, Oct 1 (-)                    $                  (64) $                   (65) $              1
Adjustment to uncollected payments, Fed sources, start of year (+ or -)                               -                        -                 -
Change in uncollected payments, Fed sources (+ or -)                                                 (6)                      (5)               (1)
Actual Transfers, uncollected payments from Federal sources (net) (+ or -)                            -                        -                 -

Uncollected payments, Fed sources, end of year (-)                               $                  (70) $                   (70) $              -

Memorandum Entries
Obligated balance, start of year (+ or -)                                        $              43,534   $               43,533   $              1
Obligated balance, end of year (net)                                             $              41,972   $               42,014   $            (42)

BUDGET AUTHORITY, NET:
Budget authority, gross (discretionary and mandatory)                            $             114,212 $                114,213 $               (1)
Actual offsetting collections (discretionary and mandatory) (-)                                (67,752)                 (67,751)                (1)
Change in uncollected customer payments from Federal Sources                                         -                       (5)                 5
Anticipated offsetting collections (discretionary and mandatory) (+ or -)                            -                        -                  -
Budget Authority, net (discretionary and mandatory) Subtotal                     $              46,460 $                 46,457 $                3

Outlays, net (discretionary and mandatory)
Gross Outlays                                                                    $             119,635 $                119,635 $                -
Actual offsetting collections (discretionary and mandatory) (-)                                (67,749)                 (67,748)                (1)
Outlays, net (discretionary and mandatory)                                       $              51,886 $                 51,887 $               (1)

Distributed offsetting receipts                                                  $              (2,844) $                (2,844) $               -
Agency Outlays, net (discretionary and mandatory)                                $              49,042 $                 49,043 $               (1)




                                                                            97
Required Supplementary Stewardship Information
Introduction
This narrative provides information on resources utilized by HUD that do not meet the criteria
for information required to be reported or audited in HUD’s financial statements but are,
nonetheless, important to understand investments made by HUD for the benefit of the Nation.
The stewardship objective requires that HUD also report on the broad outcomes of its actions
associated with these resources. Such reporting will provide information that will help the reader
to better assess the impact of HUD’s operations and activities.
HUD’s stewardship reporting responsibilities extend to the investments made by a number of
HUD programs in Non-Federal Physical Property, Human Capital, and Research and
Development. Due to the relative immateriality of the amounts and in the application of the
related administrative costs, most of the investments reported reflect direct program costs only.
The investments addressed in this narrative are attributable to programs administered through the
following divisions/departments:
      Community Planning and Development (CPD),
      Public and Indian Housing (PIH), and
      Office of Lead Hazard Control and Healthy Homes (OLHCHH).

Overview of HUD’s Major Programs
CPD seeks to develop viable communities by promoting integrated approaches that provide
decent housing, a suitable living environment, and expanded economic opportunities for low-
and moderate-income persons. HUD makes stewardship investments through the following CPD
programs:
      Community Development Block Grants (CDBG) are provided to state and local
       communities, which use these funds to support a wide variety of community development
       activities within their jurisdictions. These activities are designed to benefit low- and
       moderate-income persons, aid in the prevention of slums and blight, and meet other
       urgent community development needs. State and local communities use the funds as they
       deem necessary, as long as the use of these funds meet at least one of these objectives. A
       portion of the funds supports the acquisition, construction or rehabilitation of permanent,
       residential structures that qualify as occupied by and benefiting low- and moderate-
       income persons, while other funds help to provide employment and job training to low-
       and moderate-income persons.
      Disaster Recovery Assistance (Disaster Grants/CDBG-DR) is a CDBG program that
       helps state and local governments recover from major natural disasters. A portion of
       these funds can be used to acquire, rehabilitate, construct, or demolish physical property.



                                               98
      The HOME Investment Partnerships Program (HOME) provides formula grants to
       states and localities (used often in partnership with local nonprofit groups) to fund a wide
       range of activities that build, buy, and/or rehabilitate affordable housing for low-income
       persons.
      Homeless – Continuum of Care (CoC) The Supportive Housing Program (SHP) was
       repealed and replaced by the Continuum of Care (CoC) Program effective FY 2012. The
       CoC is a body of stakeholders in a specific geographic area that plans and implements
       homeless assistance strategies (including the coordination of resources) to address the
       critical needs of homeless persons and facilitate their transition to jobs and independent
       living.
      Emergency Solutions Grants (ESG) provide formula funding to local units of
       government for homelessness prevention and to improve the number and quality of
       emergency and transitional shelters for homeless individuals and families.
      Neighborhood Stabilization Program (NSP) stabilizes communities that have suffered
       from foreclosures and abandonment. Through the purchase and redevelopment of
       foreclosed and abandoned homes and residential properties, and by providing technical
       assistance (NSP TA), the goal of the program is being realized.
      Housing Opportunities for People with HIV/AIDS (HOPWA) provides education
       assistance and an array of housing subsidy assistance and supportive services to assist
       low-income families and individuals who are living with the challenges of HIV/AIDS
       and risks of homelessness.
      Rural Innovation Fund (RIF) offers grants throughout the nation to address distressed
       housing conditions and concentrated poverty. The grants promote an ‘entrepreneurial
       approach’ to affordable housing and economic development in rural areas by providing
       job training, homeownership counseling and affordable housing to residents of rural and
       tribal communities.
      Community Compass (formerly OneCPD) provides technical assistance and capacity
       building to CPD grantees including onsite and remote training, workshops, and 1:1
       assistance.
PIH ensures safe, decent, and affordable housing, creates opportunities for residents’ self-
sufficiency and economic independence, and assures the fiscal integrity of all program
participants. HUD makes stewardship investments through the following PIH programs:
      Indian Community Development Block Grants (ICDBG) provide funds to Indian
       organizations to develop viable communities, including decent housing, a suitable living
       environment, and economic opportunities, principally for low and moderate-income
       recipients.




                                                99
      The Native Hawaiian Housing Block Grant (NHHBG) program provides an annual
       block grant to the Department of Hawaiian Home Lands (DHHL) for a range of
       affordable housing activities to benefit low-income Native Hawaiians eligible to reside
       on the Hawaiian home lands. The DHHL has the authority under the NHHBG program
       to develop new and innovative affordable housing initiatives and programs based on local
       needs, including down payment and other mortgage assistance programs, transitional
       housing, domestic abuse shelters, and revolving loan funds.
      Indian Housing Block Grants (IHBG) provide funds needed to allow tribal housing
       organizations to maintain existing units and to begin development of new units to meet
       their critical long-term housing needs.
      HOPE VI Revitalization Grants (HOPE VI) provide support for the improvement of
       the living environment of public housing residents in distressed public housing units.
       Some investments support the acquisition, construction or rehabilitation of property
       owned by the PHA, state or local governments, while others help to provide education
       and job training to residents of the communities targeted for rehabilitation.
      Choice Neighborhoods grants transform distressed neighborhoods and public and
       assisted projects into viable and sustainable mixed-income neighborhoods by linking
       housing improvements with appropriate services, schools, public assets, transportation,
       and access to jobs.
      The Public Housing (PH) Capital Fund provides grants to PHAs to improve the
       physical conditions and to upgrade the management and operation of existing public
       housing.
The OLHCHH program seeks to eliminate childhood lead poisoning caused by lead-based paint
hazards and to address other childhood diseases and injuries, such as asthma, unintentional
injury, and carbon monoxide poisoning, caused by substandard housing conditions.
      The Lead Technical Assistance Division, in support of the Departmental Lead Hazard
       Control program, supports technical assistance and the conduct of technical studies and
       demonstrations to identify innovative methods to create lead-safe housing at reduced
       cost. In addition, these programs are designed to increase the awareness of lead
       professionals, parents, building owners, housing and public health professionals, and
       others with respect to lead-based paint and related property-based health issues.
      Lead Hazard Control Grants help state and local governments and private
       organizations and firms control lead-based paint hazards in low-income, privately owned
       rental, and owner-occupied housing. The grants build program and local capacity and
       generate training opportunities and contracts for low-income residents and businesses in
       targeted areas.




                                              100
RSSI Reporting – HUD’s Major Programs
Non-Federal Physical Property
Investment in Non-Federal Physical Property: Non-Federal physical property investments
support the purchase, construction, or major renovation of physical property owned by state and
local governments. These investments support HUD’s strategic goals to increase the availability
of decent, safe, and affordable housing and to strengthen communities. Through these
investments, HUD serves to improve the quality of life and economic vitality. The table below
summarizes material program investments in Non-Federal Physical Property, for fiscal years
2012 through 2016.
                             Investments in Non-Federal Physical Property
                                       Fiscal Year 2012 – 2016
                                               (Dollars in millions)
            Program                             2012       2013         2014       2015         2016
            CPD
             CDBG                              $1,115     $1,129         $986       $922         $996
             Disaster Grants 1                   $332       $330         $319       $394         $412
             HOME                                 $23        $21          $24        $18          $14
             SHP/CoC - Homeless 2                 $11         $1           $1         $0           $3
             NSP 3                                $16         $6           $1         $1           $1
             RIF 4                                 $0         $3           $1         $0           $0
            PIH
             ICDBG 5                             $117        $54          $60         $0         $115
             NHHBG                                $13        $12          $10         $9           $0
             IHBG 6                              $271       $268         $244       $290         $208
             HOPE VI                             $122       $127          $82        $57          $63
                                          7
             Choice Neighborhoods                  $0         $3          $22        $43          $70
             PH Capital Fund                   $2,223     $1,798       $1,706     $1,916       $1,830
            TOTAL                             $4,243     $3,752        $3,456    $3,650       $3,712



       Notes:
       1. Disasters are unpredictable, which causes material fluctuations resulting in the prior years’
           numbers being updated.
       2. Low dollar value was due to shrinking resources for new programs.
       3. Program is nearing closeout, and the prior years’ numbers were updated to reflect more
           accurate data.
       4. Rural Innovation Fund was reported for the first time in FY 2012, however the amount was not
           material to be included in the FY 2012 AFR. More than 15 grantees have completed their projects
           before FY 2015 as the grant period draws to a close. Amount reported for FY 2015, estimated, due to
           reports for the second half of the FY not being due until 10/30/15, is not material to be included in the
           AFR.
       5. Grants funded in 2015 were awarded in February, 2016.
       6. Historical amounts were updated to reflect corrections made since the last report.
       7. Choice Neighborhoods reported separately from HOPE VI for the first time in FY 2012,
           however the amount was not material to be included in the FY 2012 AFR.




                                                        101
Human Capital
Investment in Human Capital: Human Capital investments support education and training
programs that are intended to increase or maintain national economic productive capacity. These
investments support HUD’s strategic goals, which are to promote self-sufficiency and asset
development of families and individuals; improve community quality of life and economic
vitality; and ensure public trust in HUD. The following table summarizes material program
investments in Human Capital, for fiscal years 2012 through 2016.
                                    Investments in Human Capital
                                       Fiscal Year 2012 – 2016
                                             (Dollars in millions)

       Program                                     2012        2013       2014       2015       2016
       CPD
        CDBG                                        $29         $24        $26        $25        $21
        Disaster Grants 1                          $171        $311       $809       $379       $400
        ESG                                          $4          $3         $3         $3         $3
        NSP TA 2                                     $1          $1         $0         $0         $0
        SHP/CoC - Homeless                          $33         $31        $26        $25        $16
        HOPWA                                        $1          $1         $1         $0         $0
        Community Compass 3                          $5         $21        $29        $38        $48
       PIH
        IHBG                                         $1          $1         $1          $2         $1
        HOPE VI                                     $15         $12        $14          $5         $5
        Choice Neighborhoods 4                       $0          $2         $3          $5        $12
       OLHCHH
        Lead Technical Assistance                     $0             $0      $1         $0         $0
       TOTAL                                       $260        $407       $913       $482       $506




       Notes:
       1. Prior years’ amounts were updated because Disaster Grants activities were previously
           comingled with other activities.
       2. Program is nearing closeout, hence the reduced expenditures in FY 2014, FY 2015 and FY
           2016.
       3. The FY 2016 expenditure increase is due to increased technical assistance and TA to PIH
           grantees and housing authorities, as well as intensive training and direct TA for grantee
           compliance with new AFFH requirements.
       4. Choice Neighborhoods reported separately from HOPE VI for the first time in FY 2012,
           however the amount was not material to be included in the FY 2012 AFR.
Results of Human Capital Investments: The table on the next page presents the results
(number of people trained) of human capital investments made by HUD’s CPD, PIH, and
OLHCHH programs for fiscal years 2012 through 2016.




                                                     102
                             Results of Investments in Human Capital
                                    Number of People Trained
                                      Fiscal Year 2012 – 2016

       Program                                2012          2013      2014       2015       2016
       CPD
        CDBG                                 65,741         68,236   54,350     51,808     47,805
                                1
        SHP/CoC - Homeless                   27.4%          16.5%    11.9%        N/A        N/A
        HOPWA                                 1,426          1,595    1,415      1,064        502
        NSP TA 2                              1,414          6,995    1,397        811         27
        RIF 3                                     0          1,048      279        397          0
                                4
        Community Compass                      N/A           9,791   13,722     31,631     32,823
       PIH
        NHHBG 5                               0                  0         0         0         113
             6
        IHBG                                770              1,077     1,167     1,756       1,752
        HOPE VI (see table on page 7 )
        Choice Neighborhoods (see table on page 8 )
       OLHCHH
        Lead Technical Assistance              600         590         1,069      512       2,120
       TOTAL                                69,951      89,332       73,399    87,979     85,142


       Notes:
       1. SHP/CoC- Homeless results are expressed in terms of percentage of persons exiting the
           programs having employment income. Goals are changing, and the data is not available to
           compare FY 2015 or FY 2016 to the prior year based on the old goal.
       2. As of FY 2012, NSP TA outcomes data were under development in the Disaster Recovery
           Grant Reporting System. Performance measures were developed that will allow for more
           accurate and comprehensive tracking of outcomes. The number of people trained was further
           updated in FY 2013, FY 2014 and FY 2015 because of more reliable data. The program is
           nearing closeout, hence the reduced numbers of people trained in FY 2014 through FY 2016.
       3. FY 2012 was the first year of reporting Rural Innovation Fund’s results of investments in
           human capital in the RSSI, however the amount was not material to be included in the FY
           2012 AFR. Expenditures under investments for human capital, in FY 2012 through FY 2015,
           were also not material to be included in the AFRs. More than 15 grantees have completed
           their projects before FY 2015 as the grant period draws to a close. The number of people
           trained in FY2015 was corrected based on the last approved QPR. The final reporting period
           for the RIF program was 09/30/2015.
       4. FY 2013 was the first year of reporting Community Compass’, formerly OneCPD’s, results of
           investments in human capital in the RSSI. The FY 2015 reported number has been revised, in
           order to make the FY 2015 and FY 2016 data comparable, with the same data elements, e.g.,
           live in-person and remote; self-paced on line, and recorded trainings.
       5. A lack of S&E funding prevented ONAP from offering training in FY 2012-2015. Grantee
           received training from HUD staff and, in FY 2016, from two contracted training providers.
           Amount invested in FY 2016 was not material to be included in the AFR.
       6. New training funds were offered through a Notice of Funding Availability (NOFA)
           competition for contractors to provide training in FY 2015-2017.
HOPE VI/Choice Neighborhoods Results of Investments in Human Capital: Since the
inception of the HOPE VI program in FY 1993, the program has made significant investments in
Human Capital related initiatives (i.e., education and training). The following table presents




                                                      103
HOPE VI’s key cumulative performance information for fiscal years 2012, 2013, 2014, 2015 and
2016, since the program’s inception.
                              Key Results of HOPE VI Program Activities
                                       Fiscal Years 2012 – 2016
                                  2012          2012              %            2013          2013              %
    HOPE VI Service            Enrolled     Completed      Completed        Enrolled     Completed      Completed
  Employment Preparation,
  Placement, & Retention 1         82,630           N/A            N/A         84,792            N/A              N/A
  Job Skills Training
  Programs                         33,566         17,753           53%         34,664         18,322              53%
  High School Equivalent
  Education                        17,684          5,164           29%         18,206           5,263             29%
  Entrepreneurship Training         3,672          1,613           44%          3,730           1,635             44%
  Homeownership
  Counseling                       16,163          6,964           43%         16,504           7,046             43%
                                  2014          2014              %            2015          2015              %
    HOPE VI Service            Enrolled     Completed      Completed        Enrolled     Completed      Completed
  Employment Preparation,
  Placement, & Retention 1         85,997           N/A            N/A         87,005            N/A              N/A
  Job Skills Training
  Programs                         35,001         18,536           53%         35,364         18,685              53%
  High School Equivalent
  Education                        18,389          5,315           29%         18,533           5,334             29%
  Entrepreneurship Training         3,746          1,649           44%          3,755           1,654             44%
  Homeownership
  Counseling                       16,650          7,160           43%         16,837           7,350             44%
                                  2016          2016              %
    HOPE VI Service            Enrolled     Completed      Completed

  Employment Preparation,
  Placement, & Retention 1        87,564            N/A            N/A
  Job Skills Training
  Programs                         35,675         18,877           53%
  High School Equivalent
  Education                        18,705          5,381           29%
  Entrepreneurship Training         3,795          1,682           44%
  Homeownership
  Counseling                       17,399          7,804           45%

    Notes:
        1. Completion data for this service is not provided, as all who enroll are considered recipients of the
           training.
The table on the next page presents Choice Neighborhoods cumulative performance information
for fiscal years 2014, 2015 and 2016.




                                                       104
                      Key Results of Choice Neighborhoods Program Activities
                                    Fiscal Years 2014 – 2016

                     Choice Neighborhoods Service                     2014 1           2015           2016

           Current Total Original Assisted Residents                   5,813           7,017        10,089
           Current Total Original Assisted Residents in Case
           Management                                                  2,900           3,063         4,882

           High School Graduation Rate 2                                 N/A            N/A            N/A
           Number of Residents (in Case Management) Who
           Completed Job Training or Other Workforce
           Development Programs                                          411            867            343

   Notes:
       1. 2014 was the first year of reporting results for Choice Neighborhoods Human Capital Investments.
       2. Program level High School Graduation Rate date is currently not available for 2014, 2015 and 2016
          due to metric only requiring individual grantees to enter rates and not numerator and denominator.

Research and Development
Investments in Research and Development: Research and development investments support
(a) the search for new knowledge and/or (b) the refinement and application of knowledge or
ideas, pertaining to development of new or improved products or processes. Research and
development investments are intended to increase economic productive capacity or yield other
future benefits.
As such, these investments support HUD’s strategic goals, which are to increase the availability
of decent, safe, and affordable housing in America’s communities; and ensure public trust in
HUD.
The following table summarizes HUD’s research and development investments, for fiscal years
2012 through 2016.
                             Investments in Research and Development
                                     Fiscal Year 2012 – 2016
                                             (Dollars in millions)


               Program                          2012         2013    2014      2015      2016
               OLHCHH
                Lead Hazard Control                    $1      $2       $3        $4           $5
               TOTAL                               $1          $2      $3         $4           $5




                                                       105
Results of Investments in Research and Development: In support of HUD’s lead hazard
control initiatives, the OLHCHH program has conducted various studies. Such studies have
contributed to an overall reduction in the per-housing unit cost of lead hazard evaluation and
control efforts over the last decade. More recently, as indicated in the following table, increased
supply and labor costs have contributed to increases in the per-housing unit cost. The per-
housing unit cost varies by geographic location and the grantees’ level of participation in control
activities. These studies have also led to the identification of the prevalence of related hazards.


                      Results of Research and Development Investments
                                   Fiscal Year 2012 – 2016
                                             (Dollars)

               Program                    2012          2013   2014     2015     2016
               OLHCHH
               Lead Hazard Control
               Per-Housing Unit Cost     $5,763     $6,321     $7,755   $8,909   $9,048

               TOTAL                    $5,763 $6,321 $7,755 $8,909 $9,048




                                                  106
Required Supplementary Information
Presented on the following pages are the additional disaggregated financial statements broken
out by HUD’s major lines of business (i.e. responsibility segments) to supplement the financial
statements shown earlier in the section.




                                              107
                                                                                                                            U.S. Department of Housing and Urban Development
                                                                                                                                        Consolidating Balance Sheet
                                                                                                                                   For the Period Ending September 2016
                                                                                                                                             Dollars in Millions


                                                                                                                     Government
                                                                                               Federal Housing National Mortgage                       Public and Indian                     Housing for the       Community
                                                                                                Administration        Association    Section 8 Rental Housing Loans and         Homeless        Elderly and Development Block                          Financial Statement
                                                                                       1                (FHA)           (GNMA)             Assistance      Grants (PIH) Assistance Grants          Disabled Grants (CDBG)        HOME      All Other          Eliminations     Consolidating


       Intragovernmental:
         Fund balance with Treasury (Note 4)                                               $           20,820 $            1,379 $           9,831 $            4,519 $            5,363 $           2,279 $          19,358 $   3,230 $      6,419 $                   - $          73,198
         Short-term Overnight Investments (Note 6)                                                          -             15,954                 -                  -                  -                 -                 -         -            -                     -            15,954
         Long-term Investments held to maturity (Note 6)                                               36,398                  -                 -                  -                  -                 -                 -         -            -                     -            36,398
         Accounts Receivable, Net (Note 7)                                                                  0                  7                 -                  -                  -                 0                 -         -            1                    (7)                1
         Other Assets (Note 12)                                                                             -                  -                 5                  0                  1                 0                 -         1           39                    (3)               43
       Total Intragovernmental Assets                                                                  57,218             17,340             9,836              4,520              5,364             2,279            19,358     3,231        6,459                   (10)          125,594

       Cash (Note 5)                                                                                        -                 60                 -                  -                  -                 -                 -         -            -                     -                60
       Investments (Note 6)                                                                                31                  -                 -                  -                  -                 -                 -         -            -                     -                31
       Accounts Receivable, Net (Note 7)                                                                  243                106                68                 42                  2                14                10         0          125                     -               611
       Direct Loan and Loan Guarantees, Net (Note 8)                                                   17,742                  -                 -                  -                  -             1,171                 -         -          563                     -            19,476
       Other Non-Credit Reform Loans (Note 9)                                                               -              4,235                 -                  -                  -                 -                 -         -            -                (1,555)            2,680
       General Property, Plant, and Equipment (Note 10)                                                     -                 83                 -                  -                  -                 -                 -         -          298                     -               381
       PIH Prepayments (Note 11)                                                                            -                  -               380                  -                  -                 -                 -         -            -                     -               380
       Other Assets (Note 12)                                                                              53                  0                 -                  0                  -                 -                 -         -            0                     -                53
       Total Assets                                                                                    75,287             21,824            10,285              4,561              5,366             3,464            19,368     3,231        7,445                (1,565)          149,266




108
      Liabilities:
       Intragovernmental:
         Accounts Payable (Note 13)                                                        $                7 $                - $               - $                - $                - $               - $               - $       - $        24 $                   (7) $             24
         Debt (Note 14)                                                                                30,873                  -                 -                  -                  -                 -                 -         -         128                      -            31,001
         Other Intragovernmental Liabilities (Note 17)                                                  2,765                  0                 9                  2                 10                 -                 -         -         241                     (3)            3,025
       Total Intragovernmental Liabilities                                                             33,645                  0                 9                  2                 10                 -                 -         -         393                    (10)           34,050

       Accounts Payable (Note 13)                                                                         495                113                 4                 13                  8                6                 42        7           318                     -             1,006
       Accrued Grant Liabilities (Note 13)                                                                  -                  -                 -                353                168               14              1,707      312           109                     -             2,663
       Loan Guarantees (Note 8)                                                                          (806)                 -                 -                  -                  -                -                  -        -           303                (1,555)           (2,057)
       Debt Held by the Public (Note 14)                                                                    0                  -                 -                  8                  -                -                  -        -             -                     -                 8
       Federal Employee and Veterans Benefits (Note 15)                                                     -                  -                 -                  -                  -                -                  -        -            64                     -                64
       Loss Reserves (Note 16)                                                                              -                  3                 -                  -                  -                -                  -        -             -                     -                 3
       Other Governmental Liabilities (Note 17)                                                           854                322                 0                  -                  -                0                  -        -           191                     -             1,367
      Total Liabilities                                                                                34,189                438                14                376                186               20              1,749      319         1,378                (1,565)           37,104

      Commitments and Contingencies (Note 19)                                                               -                  -                 -                  -                  -                 -                 -         -          55                      -                55

      Net Position:
       Unexpended Appropriations - Funds From Dedicated Collections (Note 20)                               -                  -                30                  -                  -                 -                 -         -         (373)                    -              (342)
       Unexpended Appropriations - All Other Funds                                                        414                  -            10,182              4,158              5,178             1,904            17,608     2,912        4,900                     -            47,257
       Cumulative Results of Operations - Funds From Dedicated Collections (Note 20)                        -             21,386                 -                  -                  -                 -                 -         -        1,256                    13            22,655
       Cumulative Results of Operations - All Other Funds                                              40,683                  -                59                 27                  2             1,540                11         0          283                   (13)           42,592
      Total Net Position - Funds From Dedicated Collections                                                 -             21,386                30                  -                  -                 -                 -         -          883                    13            22,313
      Total Net Position - All Other Funds                                                 $           41,098 $                - $          10,240 $            4,185 $            5,180 $           3,444 $          17,619 $   2,912 $      5,184 $                 (13) $         89,849
      Total Net Position                                                                   $           41,098 $           21,386 $          10,271 $            4,185 $            5,180 $           3,444 $          17,619 $   2,912 $      6,067 $                   - $         112,162
      Total Liabilities and Net Position                                                   $           75,287 $           21,824 $          10,285 $            4,561 $            5,366 $           3,464 $          19,368 $   3,231 $      7,445 $              (1,565) $        149,266

      The accompanying notes are an integral part of these statements
      Figures may not add to totals because of rounding.
                                                                                                              U.S. Department of Housing and Urban Development
                                                                                                                         Consolidating Balance Sheet
                                                                                                               For the Period Ending September 2015 (Restated)
                                                                                                                              (Dollars in Millions)


                                                                                                       Government
                                                                                 Federal Housing National Mortgage                      Public and Indian                    Housing for the       Community                           Financial
                                                                                  Administration        Association   Section 8 Rental Housing Loans and         Homeless       Elderly and Development Block                         Statement
                                                                                          (FHA)           (GNMA)            Assistance      Grants (PIH) Assistance Grants         Disabled Grants (CBDG)       HOME    All Other   Eliminations   Consolidating
      ASSETS
       Intragovernmental
        Fund balance with Treasury (Note 4)                                              39,057              2,142             9,692             4,866              5,161            2,405            21,524    3,448      6,396                         94,691
        Short-Term Investments ( Note 6)                                                                    12,923                                                                                                                                       12,923
        Long-Term Investments held to maturity ( Note 6)                                 14,754                                                                                                                                                          14,754
        Other Assets (Note 12)                                                                1                                    4                                                                                1          3                              9
        Total Intragovernmental Assets                                                   53,811             15,065             9,696             4,866              5,161            2,405            21,524    3,449      6,399                        122,377
        Cash (Note 5)                                                                                           45                                                                                                                                           45
        Investments (Note 6)                                                                 31                                                                                                                                                              31
        Accounts Receivable, Net (Note 7)                                                   408                131               33                 55                  8               14                12       1         119                            780
        Direct Loan and Loan Guarantees, Net (Note 8)                                    12,923                                                                                      1,417                                   625                         14,965
        Other Non-Credit Reform Loans (Note 9)                                                               5,325                                                                                                                      (2,098)           3,227
        General Property, Plant, and Equipment (Note 10)                                                        58                                                                                                           271                            329
        PIH Prepayments (Note 11)                                                                                               672                                                                                                                         672
        Other Assets (Note 12)                                                               45                                                                                                                                                              45
      TOTAL ASSETS                                                                       67,218             20,624            10,401             4,921              5,169            3,836            21,536    3,450      7,414        (2,098)         142,471


      LIABILITIES




109
       Intragovernmental Liabilities
        Accounts payable (Note 13)                                                            1                  -                -                  -                  -               -                  -       -          15             -               16
        Debt (Note 14)                                                                   27,023                  -                -                  -                  -               -                  -       -         127             -           27,150
        Other Intragovernmental Liabilities (Note 17)                                     2,889                  -               13                  2                  5               -                  -       -         239             -            3,148
        Total Intragovernmental Liabilities                                              29,913                  -               13                  2                  5               -                  -       -         381             -           30,314
        Accounts payable (Note 13)                                                          545                135                7                 17                 15               1                 30       6         210             -              966
        Accrued Grant Liabilities (Note 13)                                                   -                  -                -                330                132              24              1,514     324          64             -            2,388
        Loan Guarantees (Note 8)                                                         15,283                  -                -                  -                  -               -                  -       -         289        (2,098)          13,473
        Debt Held by the Public (Note 14)                                                     0                  -                -                  8                  -               -                  -       -           -             -                8
        Federal Employee and Veterans Benefits (Note 15)                                      -                  -                -                  -                  -               -                  -       -          69             -               69
        Other Governmental Liabilities (Note 17)                                            726                314                1                  -                  -               -                  -       -         198             -            1,239
      TOTAL LIABILITIES                                                                  46,466                449               21                357                152              25              1,544     330       1,211        (2,098)          48,457

       Commitments and Contingencies (Note 19)                                                -                  -                -                  -                  -               -                  -       -          55             -               55

      NET POSITION
       Unexpended Appropriations - Funds From Dedicated Coll. (Note 20)                       -                  1                17                18                 17                -                 -        5      (363)             -            (305)
       Unexpended Appropriations - Other Funds                                              871                  -            10,363             4,549              4,996            2,273            19,991    3,115      5,262             -           51,420
       Cumulative Results of Operations - Funds From Dedicated Coll. (Note 20)                -             20,174                 -                 -                  -                -                 -        -      1,243             -           21,417
       Cumulative Results of Operations - Other Funds                                    19,881                  -                 -                (3)                 4            1,538                 1        -         61             -           21,482
       TOTAL NET POSITION - Funds From Dedicated Collections                                  -             20,175                17                18                 17                -                 -        5        880             -           21,112
       TOTAL NET POSITION - All Other Funds                                              20,752                  -            10,363             4,546              5,000            3,811            19,992    3,115      5,323             -           72,902
      TOTAL NET POSITION                                                                 20,752             20,175            10,380             4,564              5,017            3,811            19,992    3,120      6,203             -           94,014
      TOTAL LIABILITIES AND NET POSITION                                                 67,218             20,624            10,401             4,921              5,169            3,836            21,536    3,450      7,414        (2,098)         142,471

      The accompanying notes are an integral part of these statements.
      Figures may not add to totals because of rounding.
                                                                                                                U.S. Department of Housing and Urban Development
                                                                                                                         Consolidating Statement of Net Cost
                                                                                                             For the Periods Ending September 2016 and 2015 (Restated)
                                                                                                                                (Dollars in Millions)

                                                                                              Government
                                                                        Federal Housing National Mortgage                      Public and Indian                    Housing for the       Community
                                                                         Administration        Association   Section 8 Rental Housing Loans and         Homeless       Elderly and Development Block                       Financial Statement
                                  2016                                           (FHA)           (GNMA)            Assistance      Grants (PIH) Assistance Grants         Disabled Grants (CDBG)       HOME    All Other          Eliminations   Consolidating

      Intragovernmental Gross Costs (Note 21)                                    1,239                  4               49                 29                  6              17                 18       4        513                      -           1,879
      Less: Intragovernmental Earned Revenue                                    (1,151)               (84)               -                 (0)                 -              (0)                 -       -        (20)                     0          (1,255)
          Intragovernmental Net Costs                                               87                (80)              49                 29                  6              17                 18       4        494                      0             624

      Gross Costs With the Public                                              (18,997)               427           30,604              2,965              1,951              957             6,269    1,163      5,838                     -          31,177
      Less: Earned Revenues From the Public                                        (67)            (1,562)               -                  0                  5             (108)                -        -        (17)                    -          (1,749)
         Net Costs With the Public                                             (19,064)            (1,135)          30,604              2,966              1,956              849             6,269    1,163      5,821                     -          29,428
      Total Net Cost                                                           (18,976)            (1,215)          30,653              2,995              1,962              865             6,286    1,167      6,314                     0          30,052

      Net program costs including Assumption Changes                           (18,976)            (1,215)          30,653              2,995              1,962             865              6,286    1,167      6,314                     0          30,052



      Costs Not Assigned to Programs                                                 -                   -                -                 -                  -                -                 -        -       263                     (1)           262
      Less: Earned Revenues Not Attributed to Programs                               -                   -                -                 -                  -                -                 -        -         -                      0              0




110
      Net Cost of Operations                                                   (18,976)            (1,215)          30,653              2,995              1,962             865              6,286    1,167      6,577                    (1)         30,313




                                                                                              Government
                                                                        Federal Housing National Mortgage                      Public and Indian                    Housing for the       Community
                                 2015                                    Administration        Association   Section 8 Rental Housing Loans and         Homeless       Elderly and Development Block                       Financial Statement
                               (Restated)                                        (FHA)           (GNMA)            Assistance      Grants (PIH) Assistance Grants         Disabled Grants (CDBG)       HOME    All Other          Eliminations   Consolidating

      PROGRAM COSTS

         Gross Costs (Note 21)                                                (16,203)              (234)           29,482              2,835              1,894            1,037             7,567    1,241      6,071                    -          33,690
         Less: Earned Revenues                                                  (1,849)           (1,555)                -                  -                 (4)           (136)                 -        -        (29)                   -          (3,573)
         Net Program Costs                                                    (18,051)            (1,789)           29,482              2,835              1,890             901              7,567    1,241      6,042                    -          30,117

      Net Program Costs including Assumption Changes                          (18,051)            (1,789)           29,482              2,835              1,890             901              7,567    1,241      6,042                    -           30,117

         Costs Not Assigned to Programs                                             -                   -                -                  -                  -               -                  -        -       218                     -             218
      Net Cost of Operations                                                  (18,051)             (1,789)          29,482              2,835              1,890             901              7,567    1,241      6,260                    -           30,335


      The accompanying notes are an integral part of these statements
      Figures may not add to totals because of rounding.
                                                                             U.S. Department of Housing and Urban Development
                                                                              Consolidating Statement of Changes in Net Position
                                                                                    For the Period Ending September 2016
                                                                                             (Dollars in Millions)
                                                                 Government                     Public and
                                                   Federal          National                        Indian                               Community
                                                  Housing          Mortgage         Section 8     Housing        Homeless Housing for Development                                   Financial
                                             Administration       Association         Rental    Loans and       Assistance  the Elderly Block Grants                               Statement
                                                     (FHA)          (GNMA)         Assistance Grants (PIH)         Grants and Disabled       (CDBG)       HOME        All Other Eliminations      Total

Net Position - Beginning of Period
    Funds From Dedicated Collections:                   -             20,174             -            -               -            -            -            -           1,243           -      21,417
    All Other Funds:                                 19,046              -               -                (3)              5     1,538              (0)      -              61           -      20,647
Beginning Balances                                   19,046           20,174             -                (3)              5     1,538              (0)      -           1,304           -      42,064

Adjustments
 Changes in Accounting Principles
    Funds From Dedicated Collections:                   -                -               -            -               -            -            -            -             -             -          -
    All Other Funds:                                    -                -               -            -               -            -            -            -             -             -          -
 Corrections of Errors
    Funds From Dedicated Collections:                  -                     (5)         -            -               -            -            -            -             -             -          (5)
    All Other Funds:                                   835               -               -            -               -            -            -            -             -             -         835

Beginning Balances, As Adjusted
    Funds From Dedicated Collections:                   -             20,169             -            -               -            -            -            -           1,243           -      21,412
    All Other Funds:                                 19,882              -               -                (3)              5     1,538              (0)      -              61           -      21,482
Total Beginning Balances, as Adjusted                19,882           20,169             -                (3)              5     1,538              (0)      -           1,304           -      42,894


Other Adjustments (+/-)
    Funds From Dedicated Collections:                   -                    (1)         -            -               -            -            -            -             -             -              (1)
    All Other Funds:                                    -                -               -            -               -            -            -            -             -             -          -

Appropriations Used
   Funds From Dedicated Collections:                    -                -               68             8              6          -             -             0              7           -          89
   All Other Funds:                                   3,393              -           30,471         2,913          1,916          904         6,230       1,143          7,401           -      54,372

Nonexchange Revenue
   Funds From Dedicated Collections:                    -                    2           -            -               -            -            -            -              3            -           4
   All Other Funds:                                     -                -               -            -               -                15       -            -            186            -         201

Donations and Forfeitures of Cash and Cash
Equivalents
    Funds From Dedicated Collections:                   -                -               -            -               -            -            -            -             -             -          -
    All Other Funds:                                    -                -               -            -               -            -            -            -             -             -          -

Transfers-In/Out Without Reimbursement
    Funds From Dedicated Collections:                   -                -               -            -               -            -            -            -             -            -           -
    All Other Funds:                                    -                -               -            -               -           (122)         -            -             -            122         -

Other
    Funds From Dedicated Collections:                   -                -              -             -               -            -            -            -             -             -          -
    All Other Funds:                                    -                -              173           104                 37           71           66           24       (475)          -          -


Donations and Forfeitures of Property
   Funds From Dedicated Collections:                    -                -               -            -               -            -            -            -             -             -          -
   All Other Funds:                                     -                -               -            -               -            -            -            -             -             -          -

Transfers-In/Out Without Reimbursement
    Funds From Dedicated Collections:                  -                 -               -            -               -            -            -            -             (13)           13        -
    All Other Funds:                                   480               -               -            -               -            -            -            -            (345)         (136)       -

Imputed Financing
   Funds From Dedicated Collections:                    -                    1           -            -               -            -            -            -            -              -           1
   All Other Funds:                                         15           -               -            -               -            -            -            -            142            -         158

Other
    Funds From Dedicated Collections:                   -                -               -            -               -            -            -            -              13           -           13
    All Other Funds:                                 (2,063)             -               -            -               -            -            -            -            (107)          -       (2,170)

Total Financing Sources
    Funds From Dedicated Collections:                   -                    2           68             8              6          -             -             0              9             13      107
    All Other Funds:                                  1,825              -           30,644         3,017          1,953          867         6,296       1,167          6,803           (13)   52,560
Total Financing Sources                               1,825                  2       30,712         3,025          1,959          867         6,296       1,168          6,812           -      52,667

Net Cost of Operations
    Funds From Dedicated Collections:                   -              1,216             (68)          (8)             (6)         -            -             (0)            3           -        1,137
    All Other Funds:                                 18,976              -           (30,585)      (2,987)         (1,956)        (865)      (6,286)      (1,167)       (6,580)          -      (31,451)

Net Change
    Funds From Dedicated Collections:                   -              1,218             -            -               -            -            -            -             13             13     1,244
    All Other Funds:                                 20,802              -                   59           30              (3)           2           10            0       223            (13)   21,109

Cumulative Results of Operations
   Funds From Dedicated Collections:                    -             21,387             -            -               -            -            -            -           1,256             13   22,655
   All Other Funds:                                  40,683              -                   59           27               2     1,540              10            0        283           (13)   42,592
Cumulative Results of Operations                     40,683           21,387                 59           27               2     1,540              10            0      1,539           -      65,247

Figures may not add to totals because of rounding.




                                                                                                          111
                                                                           U.S. Department of Housing and Urban Development
                                                                            Consolidating Statement of Changes in Net Position
                                                                            For the Period Ending September 2016 (continued)
                                                                                           (Dollars in Millions)

                                                               Government                     Public and
                                                  Federal         National                        Indian                            Community
                                                 Housing         Mortgage         Section 8     Housing     Homeless Housing for Development                                    Financial
                                            Administration      Association         Rental    Loans and    Assistance  the Elderly Block Grants                                Statement
                                                    (FHA)         (GNMA)         Assistance Grants (PIH)      Grants and Disabled       (CDBG)       HOME         All Other Eliminations      Total

Net Position - Beginning of Period
    Funds From Dedicated Collections:                  -                   1            3            18          17           -            -             5            (363)          -         (320)
    All Other Funds:                                   871             -           10,378         4,550       4,996         2,272       19,991       3,115           5,262           -       51,434
Beginning Balances                                     871                 1       10,381         4,568       5,013         2,272       19,991       3,120           4,898           -       51,114

Adjustments
 Changes in Accounting Principles
    Funds From Dedicated Collections:                   -              -               -            -            -            -            -            -              -             -          -
    All Other Funds:                                    -              -               -            -            -            -            -            -              -             -          -
 Corrections of Errors                                                                                                                                                                          -
    Funds From Dedicated Collections:                   -                  (1)          15          -            -            -            -            -              -             -           13
    All Other Funds:                                    -              -               (15)         -            -            -            -            -              -             -          (15)

Beginning Balances, as Adjusted                                                                                                                                                                 -
    Funds From Dedicated Collections:                  -               -               18            18          17           -            -             5            (363)          -         (306)
    All Other Funds:                                   871             -           10,363         4,550       4,996         2,272       19,991       3,115           5,262           -       51,419
Total Beginning Balances, as Adjusted                  871             -           10,381         4,568       5,013         2,272       19,991       3,120           4,898           -       51,113


Appropriations Received
   Funds From Dedicated Collections:                    -              -              -             -           -            -             -           -               -             -          -
   All Other Funds:                                   3,437            -           30,249         2,548       2,250          583         3,860         950           7,212           -       51,089

Appropriations Transferred-In/Out
   Funds From Dedicated Collections:                    -              -                   80       -            -            -            -            -              -             -           80
   All Other Funds:                                     -              -                   41       (22)         -            -                (1)      -              (98)          -          (80)

Other Adjustments (+/-)
    Funds From Dedicated Collections:                   -              -               -            (10)        (11)          -            -                (5)         (2)          -          (27)
    All Other Funds:                                   (501)           -               -             (5)       (151)          (47)         (11)             (9)        (74)          -         (799)

Appropriations Used
   Funds From Dedicated Collections:                    -              -               (68)          (8)          (6)         -            -             (0)            (7)          -          (89)
   All Other Funds:                                  (3,393)           -           (30,471)      (2,913)      (1,916)        (904)      (6,230)      (1,143)        (7,401)          -      (54,372)

Total Budgetary Financing Sources
    Funds From Dedicated Collections:                   -              -               13           (18)        (17)          -            -            (5)             (9)          -          (36)
    All Other Funds:                                   (456)           -             (182)         (391)        182          (368)      (2,382)       (202)           (362)          -       (4,161)
Total Budgetary Financing Sources                      (456)           -             (169)         (409)        166          (368)      (2,382)       (208)           (371)          -       (4,197)

Total Unexpended Appropriations
    Funds From Dedicated Collections:                  -               -               30             0         -             -            -           -              (373)          -         (342)
    All Other Funds:                                   415             -           10,182         4,158       5,178         1,905       17,608       2,912           4,900           -       47,257
Total Unexpended Appropriations                        415             -           10,212         4,158       5,178         1,905       17,608       2,912           4,528           -       46,915

Net Position
    Funds From Dedicated Collections:                   -           21,386             30             0         -             -            -           -               884             13    22,313
    All Other Funds:                                 41,098            -           10,240         4,185       5,180         3,444       17,619       2,912           5,184           (13)    89,849
Net Position                                         41,098         21,386         10,271         4,185       5,180         3,444       17,619       2,912           6,069           -      112,162

Figures may not add to totals because of rounding.




                                                                                                        112
                                                                        U.S. Department of Housing and Urban Development
                                                                         Consolidating Statement of Changes in Net Position
                                                                         For the Period Ending September 2015 (Restated)
                                                                                        (Dollars in Millions)
                                                                                                          Cumulative Results of Operations
                                                               Government                   Public and
                                                   Federal        National                      Indian                             Community
                                                  Housing        Mortgage       Section 8     Housing      Homeless Housing for Development                                    Financial
                                             Administration     Association       Rental    Loans and     Assistance  the Elderly Block Grants                                Statement
                                                     (FHA)        (GNMA)       Assistance Grants (PIH)       Grants and Disabled      (CDBG)       HOME          All Other Eliminations Consolidating
Net Position - Beginning of Period
Funds From Dedicated Collections             $            - $       18,385 $          -    $        - $          -    $        - $           - $        -    $      1,237 $          -   $    19,621
  All Other Funds                                     3,384              -            -            (4)           -         1,951             1          -             102            -         5,434
Beginning Balances                                    3,384         18,385            -            (4)           -         1,951             1          -           1,339            -        25,055
Adjustments
Changes in Accounting Principles
Funds From Dedicated Collections                          -             -             -             -            -            -              -          -              -             -             -
  All Other Funds                                         -             -             -             -            -            -              -          -              -             -             -
Corrections of Errors
Funds From Dedicated Collections                          -             -             -             -            -            -              -          -             (3)            -            (3)
  All Other Funds                                         -             -             -             -            -            -              -          -              -             -             -
Beginning Balances, As Adjusted
Funds From Dedicated Collections                          -         18,385            -             -            -             -             -          -           1,234            -        19,619
  All Other Funds                                     3,384              -            -            (4)           -         1,951             1          -             102            -         5,434
Total Beginning Balances, As Adjusted                 3,384         18,385            -            (4)           -         1,951             1          -           1,336            -        25,053
Budgetary Financing Sources
Other Adjustments (Rescissions, etc)
Funds From Dedicated Collections                          -             -             -             -            -            -              -          -              -             -             -
  All Other Funds                                         -             -             -             -            -            -              -          -              -             -             -
Appropriations Used
Funds From Dedicated Collections                          -             -            39            (1)           -            -             75          2               -            -           115
  All Other Funds                                     2,206             -        29,245         2,720        1,850          946          7,423      1,210           7,278            -        52,878
Non-exchange Revenue
Funds From Dedicated Collections                          -             -             -             -            -            -              -          -              3             -             3
  All Other Funds                                         -             -             -             -            -            -              -          -              -             -             -
Donations/Forfeitures-Cash and Cash
Equivalents
Funds From Dedicated Collections                          -             -             -             -            -            -              -          -              -             -             -
  All Other Funds                                         -             -             -             -            -            -              -          -              -             -             -

Transfers In/Out Without Reimbursement
Funds From Dedicated Collections                          -             -             -             -            -            -              -          -              -             -             -
  All Other Funds                                         -             -             -             -            -         (544)             -          -            544             -             -
Other Budgetary Financing Sources
Funds From Dedicated Collections                          -             -             -             -            -            -               -         -              -             -             -
  All Other Funds                                         -             -           198           116           44           86              69        29           (542)            -            (0)
Other Financing Sources:
Donations and Forfeitures of Property
Funds From Dedicated Collections                          -             -             -             -            -            -              -          -              -             -             -
  All Other Funds                                         -             -             -             -            -            -              -          -              -             -             -

Transfers In/Out Without Reimbursement
Funds From Dedicated Collections                          -             -             -             -            -            -              -          -              -             -             -
  All Other Funds                                       442             -             -             -            -            -              -          -           (442)            -             0
Imputed Financing From Costs Absorbed
From Others
Funds From Dedicated Collections                          -             -             -             -            -            -              -          -              -             -             -
  All Other Funds                                        15             -             -             -            -            -              -          -             50             -            65
Other
Funds From Dedicated Collections                          -             -             -             -            -            -              -          -              -             -             -
  All Other Funds                                    (4,216)            -             -             -            -            -              -          -           (663)            -        (4,879)
Total Financing Sources
Funds From Dedicated Collections                          -             1             5            (1)           -            -             75          2               3            -            86
  All Other Funds                                    (1,554)            -        29,477         2,836        1,894          488          7,492      1,239           6,225            -        48,096
Total Financing Sources                              (1,554)            1        29,482         2,835        1,894          488          7,567      1,241           6,228            -        48,182

Net Cost of Operations
Funds From Dedicated Collections                          -          1,788          (39)             1           -            -            (75)        (2)             6             -         1,680
  All Other Funds                                    18,051              -      (29,444)       (2,835)      (1,890)        (901)        (7,492)    (1,239)        (6,266)            -       (32,015)
Net Change
Funds From Dedicated Collections                          -          1,789            -             -            -            -              -          -              9             -         1,797
  All Other Funds                                    16,497              -            -             1            4         (413)             -          -            (41)            -        16,048
Total All Funds
Funds From Dedicated Collections                          -         20,174            -             -            -             -             -          -           1,243            -        21,417
  All Other Funds                                    19,881              -            -            (3)           5         1,538             -          -              61            -        21,482
Total All Funds                                      19,881         20,174            -            (3)           5         1,538             -          -           1,304            -        42,899

Figures may not add to totals because of rounding.




                                                                                                   113
                                                                       U.S. Department of Housing and Urban Development
                                                                        Consolidating Statement of Changes in Net Position
                                                                   For the Period Ending September 2015 (Restated) (continued)
                                                                                       (Dollars in Millions)
                                                                                                            Unexpended Appropriations
                                                               Government                  Public and
                                                   Federal        National                     Indian                             Community
                                                  Housing        Mortgage      Section 8     Housing      Homeless Housing for Development                                  Financial
                                             Administration     Association      Rental    Loans and     Assistance  the Elderly Block Grants                              Statement
                                                     (FHA)        (GNMA)      Assistance Grants (PIH)       Grants and Disabled      (CDBG)        HOME       All Other Eliminations Consolidating
Net Position - Beginning of Period
Funds From Dedicated Collections             $            - $           2 $          1 $          17 $         16 $          - $            90 $        7 $      (355) $          -   $     (221)
  All Other Funds                                       872             -       10,001         4,767        4,853        2,683          24,366      3,432        5,468            -        56,442
Beginning Balances                                      872             2       10,002         4,784        4,869        2,683          24,456      3,439        5,113            -        56,220
Adjustments
Changes in Accounting Principles
Funds From Dedicated Collections                          -             -            -             -            -            -               -          -           -             -             -
  All Other Funds                                         -             -            -             -            -            -               -          -           -             -             -
Corrections of Errors
Funds From Dedicated Collections                          -             -            -             -            -            -               -          -           -             -             -
  All Other Funds                                         -             -          574             -            -            -               -          -           -             -           574
Beginning Balances, As Adjusted                                                                                                                                                                 -
Funds From Dedicated Collections                          -             2            -            17           17            -              90          7        (355)            -         (222)
  All Other Funds                                       872             -       10,575         4,767        4,853        2,683          24,366      3,432        5,468            -        57,016
Total Beginning Balances, As Adjusted                   872             2       10,575         4,784        4,870        2,683          24,456      3,439        5,113            -        56,794
Budgetary Financing Sources
Appropriations Received
Funds From Dedicated Collections                          -             -            -             -            -            -               -          -            -            -             -
  All Other Funds                                     2,235             -       29,034         2,523        2,135          555           3,066        900        7,191            -        47,639
Appropriations Transfers In/Out
Funds From Dedicated Collections                          -             -           56             -            -            -               -          -           -             -            56
  All Other Funds                                         -             -            -           (16)           -            -               -          -         (40)            -           (56)
Other Adjustments (Rescissions, etc)
Funds From Dedicated Collections                          -            (1)           -             -            -            -             (16)         -          (7)            -          (24)
  All Other Funds                                       (30)            -            -            (4)        (142)         (20)            (18)        (7)        (80)            -         (301)
Appropriations Used
Funds From Dedicated Collections                          -             -          (39)             1           -            -             (75)        (2)          -             -          (115)
  All Other Funds                                    (2,206)            -      (29,245)       (2,720)      (1,850)        (946)         (7,423)    (1,210)     (7,278)            -       (52,878)
Other Financing Sources:
Total Financing Sources
Funds From Dedicated Collections                          -            (1)          17             1            -            -             (90)       (2)          (7)            -           (83)
  All Other Funds                                        (1)            -         (211)        (217)          143         (411)         (4,375)     (317)        (207)            -        (5,596)
Total Financing Sources                                  (1)           (1)        (194)        (217)          143         (411)         (4,466)     (319)        (214)            -        (5,679)

Net Change
Funds From Dedicated Collections                          -             1           18            18           17            -               -          5        (363)            -         (305)
  All Other Funds                                       871             -       10,363         4,550        4,996        2,272          19,991      3,115        5,262            -        51,420
Total Unexpended Appropriations                         871             1       10,381         4,568        5,013        2,272          19,991      3,120        4,898            -        51,115

Total All Funds
Funds From Dedicated Collections                          -         20,175          18            18           17            -               -          5          880            -        21,112
  All Other Funds                                    20,752              -      10,363         4,547        5,000        3,811          19,991      3,115        5,323            -        72,902
Net Position                                         20,752         20,175      10,381         4,564        5,017        3,811          19,991      3,120        6,202            -        94,014

Figures may not add to totals because of rounding.




                                                                                                  114
                                                                                                                 U.S. Department of Housing and Urban Development
                                                                                                                   Combining Statement of Bundgetary Resources
                                                                                                                        For the Period Ending September 2016
                                                                                                                                 (Dollars in Millions)

                                                                                                                                                                                                                                                   Total Non
                                                                                             Government                  Public and                                                                                          Government Other Non Budgetary
                                                                                                National                     Indian                           Community                                                         National Budgetary    Credit
                                                                             Federal Housing   Mortgage      Section 8     Housing     Homeless Housing for Development                                    Federal Housing     Mortgage     Credit Program
                                                                              Administration Association       Rental Loans and       Assistance the Elderly Block Grants                         Budgetary Administration Administration Program Financing
                                                                           1          (FHA)     (GNMA)      Assistance Grants (PIH)      Grants and Disabled     (CDBG)     HOME      All Other       Total Non Budgetary Non-Budgetary Accounts Accounts          Total
Budgetary Resources:
 Unobligated Balance Brought Forward, October 1                                      16,733       12,873         790           156       2,626          441        9,029      264        1,349      44,260        33,986        1,158        472      35,616     79,876
 Adjustments to Unobligated Balance Brought Forward, October 1                            -            -           -             -           5            -            -        -            2           7            (3)           -          -          (3)         4
 Unobligated Balance Brought Forward, Oct 1, As Adjusted                             16,733       12,873         790           156       2,631          441        9,029      264        1,350      44,267        33,983        1,158        472      35,613     79,880
 Recoveries of Prior Year Unpaid Obligations                                            241           17         126            14         389           40            9       29          175       1,039           463            -          -         463      1,502
 Other Changes in Unobligated Balance                                                  (681)          (1)          0           (17)       (161)        (169)         (10)     (14)         (37)     (1,089)            -            -         (0)         (0)    (1,089)
Unobligated Balance From Prior Year Budget Authority, Net                            16,293       12,889         916           153       2,859          312        9,027      279        1,489      44,217        34,446        1,158        472      36,076     80,293
 Appropriations                                                                       3,431            -      30,370         2,529       2,250          583        3,859      950        7,283      51,256             -            -          -           -     51,256
 Borrowing Authority                                                                      -            -           -             -           -            -            -        -            -           -        13,076            -          2      13,078     13,078
 Contract Authority                                                                       -            -           -             -           -            -            -        -            -           -             -            -          -           -          -
 Spending Authority From Offsetting Collections                                      25,010        3,267           -             0           -          369            -        -           59      28,705        19,800        2,765         92      22,657     51,362
Total Budgetary Resources                                                            44,734       16,156      31,285         2,682       5,109        1,265       12,886    1,229        8,831     124,178        67,322        3,924        565      71,811    195,989

Status of Budgetary Resources
  New obligations and upward adjustments (total)
  Direct                                                                              6,976          24       30,357         2,572       2,128         626         4,866      964        6,815      55,328        50,911            -        109      51,020    106,348
  Reimbursable                                                                            -         196            -             2           9           1             -        -            8         214             -        3,613          -       3,613      3,827
Subtotal                                                                              6,976         219       30,357         2,574       2,137         627         4,866      964        6,823      55,542        50,911        3,613        109      54,633    110,175
 Unobligated Balances, End of Year
 Apportioned, unexpired account                                                          70           81         763            89       2,216          226        7,441      231        1,030      12,147         5,574          114         88       5,776     17,923
 Exempt From Apportionment, unexpired accounts                                            -            -           -             -           -            -            -        -            -           -             -            -          -           -          -
 Unapportioned, unexpired accounts                                                   37,648       15,851         166             2         195          356          574        2          844      55,639        10,837          197        368      11,402     67,041
 Unexpired unobligated balance, end of year                                          37,718       15,932         928            91       2,412          582        8,015      233        1,874      67,786        16,411          311        456      17,178     84,964
 Expired unobligated balance, end of year                                                40            4           0            18         560           55            6       32          134         850           -            -          -           -          850
 Total unobligated balance, end of year (total)                                      37,758       15,937         928           109       2,972          637        8,021      265        2,008      68,636        16,411          311        456      17,178     85,814
 Total Status of Budgetary Resources                                                 44,734       16,156      31,285         2,683       5,109        1,265       12,886    1,229        8,831     124,178        67,322        3,924        565      71,811    195,989

 Change in Obligated Balance
 Unpaid Obligations:
 Unpaid Obligations, Brought Forward, October 1                                         565          330        8,902        4,710        2,536       1,964       12,495     3,184       4,617      39,303         2,485          294          2       2,781      42,084
 Adjustment to Unpaid Obligations, Start of Year                                          -            -            -            -           (5)          -            -         -          (3)         (8)            3            -          -           3          (5)
 New Obligations and Upward Adjustments                                               6,976          219       30,357        2,574        2,137         627        4,866       964       6,823      55,543        50,911        3,613        109      54,633     110,176
 Outlays (gross)                                                                     (6,953)        (221)     (30,231)      (2,860)      (1,887)       (910)      (6,015)   (1,154)     (7,290)    (57,520)      (50,286)      (3,656)      (106)    (54,048)   (111,568)
 Actual Transfers, Unpaid Obligations                                                     -            -            -            -            -           -            -         -           -           -             -            -          -           -           -
 Recoveries of Prior Year Unpaid Obligations                                           (241)         (17)        (126)         (14)        (389)        (40)          (9)      (29)       (175)     (1,039)         (463)           -          -        (463)     (1,502)
 Unpaid Obligations, End of Year (gross)                                                346          311        8,902        4,410        2,391       1,642       11,337     2,965       3,973      36,278         2,650          251          5       2,906      39,184
 Uncollected Payments:
 Uncollected Payments, Fed Sources, Brought Forward, Oct 1                              (15)           -            -            -            -           -            -         -          (3)        (18)           (0)          (0)       (56)        (56)        (74)
 Adjustment to Uncollected Payments, Fed Sources, Start of Year                           -            -            -            -            -           -            -         -           -           -             -            -          -           -           -
 Change in Uncollected Customer Payments, Fed Sources                                   (20)           -            -            -            -          (1)           -         -          (2)        (23)            -            0          5           5         (18)
 Actual Transfers, Uncollected Payments, Fed sources                                      -            -            -            -            -           -            -         -           -           -             -            -          -           -           -
 Uncollected Payments, Fed sources, End of Year                                         (35)           -            -            -            -          (1)           -         -          (5)        (41)           (0)           -        (52)        (51)        (92)
 Memorandum (non-add) Entries:
 Obligated Balance, Start of Year                                                      550          330        8,902         4,710       2,531        1,964       12,495    3,184        4,611      39,277         2,488         294         (54)      2,728     42,005
 Obligated Balance, End of Year                                                        311          311        8,902         4,410       2,391        1,641       11,337    2,965        3,967      36,237         2,650         251         (47)      2,855     39,092

 Budget Authority and Outlays, Net:
 Budget Authority, Gross (discretionary and mandatory)                               28,441        3,267      30,370         2,529       2,250          953        3,859      950        7,342      79,961        32,876        2,765         94      35,735    115,696
 Actual Offsetting Collections (discretionary and mandatory)                        (24,991)      (3,381)         (0)           (1)         (1)        (369)          (1)      (0)         (81)    (28,825)      (29,027)      (2,766)       (97)    (31,889)   (60,714)
 Change in Uncollected Customer Payments from Fed sources
 (discretionary and mandatory)                                                          (20)           -            -            -            -          (1)           -         -          (2)        (23)            -            0            5         5         (18)

 Recoveries of prior year paid obligations (discretionary and mandatory)                  1            0           0             1           1           0             1        0           24          28             -            -            -         -         28
 Anticipated Offsetting Collections (discretionary and mandatory)                         -            -           -             -           -           -             -        -            -           -             -            -            -         -          -
 Budget Authority, Net (discretionary and mandatory)                                  3,431         (114)     30,370         2,529       2,250         583         3,859      950        7,283      51,141         3,849            0            1     3,851     54,992
 Outlays, Gross (discretionary and mandatory)                                         6,953          221      30,231         2,860       1,887          910        6,015    1,154        7,290      57,520        50,286        3,656        106      54,048    111,568
 Actual Offsetting Collections (discretionary and mandatory)                        (24,991)      (3,381)         (0)           (1)         (1)        (369)          (1)      (0)         (81)    (28,825)      (29,027)      (2,766)       (97)    (31,889)   (60,714)
 Outlays, Net (discretionary and mandatory)                                         (18,038)      (3,160)     30,231         2,859       1,886          541        6,014    1,154        7,209      28,695        21,259          891          9      22,159     50,854
 Distributed Offsetting Receipts                                                     (2,000)         -            (5)          -           -           -             -        -           (297)     (2,302)          -           -           -           -       (2,302)
 Agency Outlays, Net (discretionary and mandatory)                                  (20,038)      (3,160)     30,226         2,859       1,886         541         6,014    1,154        6,912      26,393        21,259         891             9    22,159     48,552

 Figures may not add to totals because of rounding.




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                                                                                                                               U.S. Department of Housing and Urban Development
                                                                                                                                  Combining Statement of Bundgetary Resources
                                                                                                                                For the Period Ending September 2015 (Restated)
                                                                                                                                               (Dollars in Millions)
                                                                                                                                                                                                                                     Government
                                                                                              Government                   Public and                                                                                                   National                            Total
                                                                                                 National                      Indian                            Community                                                             Mortgage              Other NonBudgetary
                                                                              Federal Housing Mortgage         Section 8     Housing      Homeless Housing for Development                                           Federal Housing Association     NonBudgetary Credit Program Financial
                                                                               Administration Association        Rental Loans and        Assistance the Elderly Block Grants                            Budgetary     Administration        Non     Credit Program     Financing Statement
                                                                                       (FHA)    (GNMA)        Assistance Grants (PIH)       Grants and Disabled     (CDBG)      HOME       All Other        Total     Non Budgetary Budgetary              Accounts      Accounts Eliminations        Total
Budgetary Resources:
 Unobligated Balance Brought Foward, October                                  $       8,152 $      9,029 $         736 $         150 $      2,460 $       570 $      12,177 $      200 $      1,255 $     34,729 $          45,569 $      3,751 $            440 $        49,760 $          - $     84,489
 Adjustments to Unobligated Balance, Brought Forward, October 1                           -          (13)            -             -            -           -             -          -            -          (13)                -            -                -               -            -          (13)
 Unobligated balance brought forward, October 1, adjusted                             8,152        9,016           736           150        2,460         570        12,177        200        1,255       34,716            45,569        3,751              440          49,760            -       84,477
 Recoveries of prior year unpaid obligations                                             50             7          107            26          274          44            24         19          166          716               382            1               14             397            -        1,113
 Other changes in unobligated balance                                                 (241)           (1)            -            (4)       (142)        (188)          (34)        (7)         (92)       (708)                 -            -                -               -            -        (708)
Unobligated balance from prior year budget authority, net                             7,961        9,022           843           172        2,592         426        12,167        212        1,329       34,724            45,951        3,752              454          50,157            -       84,881

 Appropriations (discretionary and mandatory)                                         2,225            -        29,090         2,507        2,135          555        3,066        900        6,980    47,458                    -            -                -               -            -    47,458
 Borrowing Authority (discretionary and mandatory)                                        -            -             -             -            -            -            -          -            -         -               12,146            -                -          12,146            -    12,146
 Contract Authority (discretionary and mandatory)                                         -            -             -             -            -            -            -          -            -         -                    -            -                -               -            -         -
 Spending Authority from offsetting collections                                      21,716        4,247             -             -            7          127            -          -           62    26,158               25,563        2,817               72          28,452            -    54,610
Total Budgetary Resources                                                     $      31,902 $     13,269 $      29,933 $       2,679 $      4,735 $      1,108 $     15,233 $    1,112 $      8,371 $ 108,340 $             83,660 $      6,569 $            526 $        90,755 $          - $ 199,096

Status of Budgetary Resources:
Obligations Incurred
   Direct                                                                            15,170           22        29,143         2,522        2,109         666         6,204        848        7,016       63,700            49,673            -               59          49,732            -      113,433
   Reimbursable                                                                           -          246             -             -            -           -             -          -            3          249                 -        5,538                -           5,538            -        5,787
Subtotal                                                                             15,170          268        29,143         2,522        2,109         666         6,204        848        7,019       63,949            49,673        5,538               59          55,271            -      119,220

Unobligated Balances
  Apportioned                                                                            56          128           698           113        2,086          254        9,021        237          523    13,116                3,509          867              102           4,478            -    17,594
  Exempt from Apportionment                                                               -            -             -             -            -            -            -          -            -         -                    -            -                -               -            -         -
 Unapportioned                                                                       16,676       12,873            92            44          540          188            8         27          829    31,275               30,478          164              365          31,007            -    62,282
 Subtotal                                                                            16,732       13,001           790           157        2,626          442        9,029        264        1,352    44,391               33,987        1,031              467          35,485            -    79,876
Total Status of Budgetary Resources                                           $      31,902 $     13,269 $      29,933 $       2,679 $      4,735 $      1,108 $     15,233 $    1,112 $      8,371 $ 108,340 $             83,660 $      6,569 $            526 $        90,756 $          - $ 199,096

Change in Obligated Balance
 Unpaid Obligations:
  Unpaid obligations, brought forward, Oct 1                                             587          281         8,865         4,871       2,605        2,303       12,861      3,568        5,147       41,087              2,229         265               17            2,511           -        43,598
  Adjustments to unpaid obligations, start of year (+ or -) (Note 28)                      -           13             -             -           -            -            -           -           -            13                 -           -                -                -           -            13
  Obligations Incurred                                                                15,170          268       29,143          2,522       2,109          666        6,204         848       7,019       63,950            49,673        5,538               59          55,271            -      119,221
  Outlays, (gross) (-)                                                              (15,142)        (202)      (28,999)       (2,657)      (1,904)       (962)       (6,547)    (1,213)     (7,383)      (65,009)          (49,035)      (5,532)             (59)        (54,627)           -     (119,635)
  Actual Transfers, unpaid obligations (net) (+ or -)                                      -            -             -             -           -            -            -           -           -             -                 -           -                -                -           -             -
  Recoveries of prior year unpaid obligations (-)                                        (50)          (7)        (107)           (26)       (274)         (44)         (24)       (19)       (166)         (716)             (382)          (1)             (14)           (397)           -       (1,113)
 Unpaid obligations, end of year (gross)                                                 565          353         8,902         4,710       2,536        1,963       12,494      3,184        4,617       39,324              2,485         271                3            2,758           -        42,082

 Uncollected Payments:
  Uncollected payments, Fed sources, brought forward, Oct 1 (-)                          (8)            -            -              -           -            -            -          -           (3)         (12)                -           (2)             (51)            (53)           -          (65)
  Adjustments to uncollected payments, Fed sources, start of year (Note 28)               -             -            -              -           -            -            -          -            -            -                 -            -                -               -            -            -
  Change in uncollected customer payments, Fed sources (+ or -)                          (6)            -            -              -           -            -            -          -            -           (6)                -            2               (1)               1           -           (5)
  Actual Transfers, uncollected payments, Fed sources (net) (+ or -)                      -             -            -              -           -            -            -          -            -            -                 -            -                -               -            -            -
 Uncollected payments, Fed sources, end of year (-)                                     (14)            -            -              -           -            -            -          -           (3)         (18)                -           (0)             (52)            (52)           -          (70)

Obligated balance, start of year (+ or -)                                               577          294         8,865         4,871        2,605        2,303       12,861      3,568        5,144       41,087             2,230          264              (36)           2,458           -       43,544
Obligated balance, end of year (net)                                          $         550 $        353 $       8,902 $       4,710 $      2,536 $      1,964 $     12,495 $    3,184 $      4,612 $     39,305 $           2,485 $        270 $            (50) $         2,705 $         - $     42,010

Budget Authority and Outlays, Net:
 Budget authority, gross (discretionary and mandatory)                                23,941       4,247        29,090         2,508        2,141         682         3,066        900        7,039       73,615            37,708         2,817              73          40,598            -      114,213
 Actual offsetting collections (discretionary and mandatory) (-)                    (21,710)      (4,361)            -             -           (6)       (506)            -          -          (60)     (26,642)          (38,213)      (2,819)             (77)        (41,108)           -      (67,751)
 Change in Uncollected Customer Payments From Fed Sources (Dis and Man)
 (+ or -)                                                                                (6)           -             -             -            -           -             -          -            -           (6)                -            2               (1)               1           -           (5)
 Anticipated offsetting collections (discretionary and mandatory) (+ or -)                -            -             -             -            -           -             -          -            -            -                 -            -                -               -            -            -
Budget Authority, net (discretionary and mandatory)                                   2,225         (114)       29,090         2,507        2,135         176         3,066        900        6,980       46,965              (505)           -               (5)           (510)           -       46,455

 Outlays, gross (discretionary and mandatory)                                         15,142          202       28,999         2,657        1,904         962         6,547      1,213        7,383       65,009            49,035         5,532              59          54,627            -      119,635
 Actual offsetting collections (discretionary and mandatory) (-)                    (21,710)      (4,358)            -             -           (6)       (506)            -          -          (60)     (26,639)          (38,213)      (2,819)             (77)        (41,108)           -      (67,748)
Outlays, net (discretionary and mandatory)                                           (6,568)      (4,156)       28,999         2,657        1,898         456         6,547      1,213        7,323       38,368            10,822         2,714             (18)         13,518            -        51,887

 Distributed offsetting receipts                                                     (2,797)           -             -             -            -           -             -          -          (47)      (2,844)                -            -                -               -            -       (2,844)
Agency Outlays, net (discretionary and mandatory)                             $      (9,365) $    (4,156) $     28,999 $       2,657 $      1,898 $       456 $       6,547 $    1,213 $      7,276 $     35,525 $          10,822 $      2,714 $            (18) $       13,518 $          - $     49,043

Figures may not add to totals because of rounding.




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