OIG Finds FHFA Adequately Supervises GSE Charitable Giving

This is the second of three evaluation
reports released by the Federal Housing Finance Agency’s (FHFA) Office of
Inspector General (OIG) regarding the oversight of activities of the government
sponsored enterprises (GSEs) Fannie Mae and Freddie Mac by FHFA.  This evaluation concerns the GSEs charitable
activities
after they were placed into government conservatorship under FHFA.

Prior to the beginning of the GSE conservatorships
the GSE’s were making substantial contributions to charitable
organizations.  In 2008 the combined
charitable giving of the two companies was $73 million.  Fannie Mae’s contributions consisted of those
channeled through the Fannie Mae Foundation and Freddie Mac’s contributions
consisted of those channeled through the Freddie Mac Foundation, in-kind
corporate support (employee salaries and office space) of the Foundation, and
contributions through the Freddie Mac Donor Advised Fund (DAF) program.  In addition, both corporations made direct
corporate contributions and matching donations for employees personal
charitable giving.

The OIG said that funding charitable
activities may have been appropriate for the GSEs acting as private businesses
but questions have arisen concerning whether it is still appropriate now that
both have substantial annual losses covered by taxpayer funds.  That prompted the OIG review of FHFA’s
oversight of,

  • Current
    and planned funding of Enterprise-sponsored charitable spending;
  • The
    nature of the charities supported by such spending; and
  • The
    policies and procedures established to control spending.

Charitable giving has continued since
the conservatorships were established, totaling $147 million from 2009 through
2011
. OIG found, however, that within months of becoming the GSE conservator,
FHFA established controls to ensure that charitable giving would be consistent
with the GSE’s housing missions, well managed and monitored and not politically
motivated.  In early 2010 FHFA issued
directions to phase out all of the GSE charitable giving and established target
dates for doing so.  By 2011 the GSE’s
combined annual donations leveled off at $50 million and corporate donations
are scheduled to end in 2013.

The Fannie Mae Foundation was dissolved
in 2009; however the legal structure of Freddie Mac’s operations made it more
difficult to terminate its charitable activities.  In 2009 the Freddie Mac Foundation submitted
a plan to wind down operations in approximately eight years but the Board was
subsequently directed to reevaluate that timetable.  According to Virginia Law and the IRS Code
the Foundation cannot be shut down until the funds in its trust are spent or
transferred to another qualifying foundation. Consequently the Foundation has
accelerated its giving in 2011 and will be terminated by 2014 or 2015.

Because
FHFA’s controls over charitable giving appear to be adequate and due to the
planned phase out of the charitable activities, OIG has decided there is no
need to conduct additional evaluations in this area.  However OIG will continue to monitor FHFA
oversight of the GSE’s charitable giving and will revisit the subject if
necessary.

OIG recommends that FHFA (1) continue to
monitor the GSE’s progress; and (2) continue to require the GSE’s to issue
quarterly reports on their charitable activities via their websites.  FHFA has concurred with these
recommendations.

…(read more)

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