OIG Finds FHFA Adequately Supervises GSE Charitable Giving

This is the second of three evaluationrnreports released by the Federal Housing Finance Agency’s (FHFA) Office ofrnInspector General (OIG) regarding the oversight of activities of the governmentrnsponsored enterprises (GSEs) Fannie Mae and Freddie Mac by FHFA.  This evaluation concerns the GSEs charitablernactivities after they were placed into government conservatorship under FHFA. </p

Prior to the beginning of the GSE conservatorshipsrnthe GSE’s were making substantial contributions to charitablernorganizations.  In 2008 the combinedrncharitable giving of the two companies was $73 million.  Fannie Mae’s contributions consisted of thosernchanneled through the Fannie Mae Foundation and Freddie Mac’s contributionsrnconsisted of those channeled through the Freddie Mac Foundation, in-kindrncorporate support (employee salaries and office space) of the Foundation, andrncontributions through the Freddie Mac Donor Advised Fund (DAF) program.  In addition, both corporations made directrncorporate contributions and matching donations for employees personalrncharitable giving. </p

The OIG said that funding charitablernactivities may have been appropriate for the GSEs acting as private businessesrnbut questions have arisen concerning whether it is still appropriate now thatrnboth have substantial annual losses covered by taxpayer funds.  That prompted the OIG review of FHFA’srnoversight of,</p<ul class="unIndentedList"<liCurrentrnand planned funding of Enterprise-sponsored charitable spending;</li<liThernnature of the charities supported by such spending; and</li<liThernpolicies and procedures established to control spending.</li</ul

Charitable giving has continued sincernthe conservatorships were established, totaling $147 million from 2009 throughrn2011. OIG found, however, that within months of becoming the GSE conservator,rnFHFA established controls to ensure that charitable giving would be consistentrnwith the GSE’s housing missions, well managed and monitored and not politicallyrnmotivated.  In early 2010 FHFA issuedrndirections to phase out all of the GSE charitable giving and established targetrndates for doing so.  By 2011 the GSE’srncombined annual donations leveled off at $50 million and corporate donationsrnare scheduled to end in 2013.</p

The Fannie Mae Foundation was dissolvedrnin 2009; however the legal structure of Freddie Mac’s operations made it morerndifficult to terminate its charitable activities.  In 2009 the Freddie Mac Foundation submittedrna plan to wind down operations in approximately eight years but the Board wasrnsubsequently directed to reevaluate that timetable.  According to Virginia Law and the IRS Codernthe Foundation cannot be shut down until the funds in its trust are spent orrntransferred to another qualifying foundation. Consequently the Foundation hasrnaccelerated its giving in 2011 and will be terminated by 2014 or 2015. </p

BecausernFHFA’s controls over charitable giving appear to be adequate and due to thernplanned phase out of the charitable activities, OIG has decided there is nornneed to conduct additional evaluations in this area.  However OIG will continue to monitor FHFArnoversight of the GSE’s charitable giving and will revisit the subject ifrnnecessary.</p

OIG recommends that FHFA (1) continue tornmonitor the GSE’s progress; and (2) continue to require the GSE’s to issuernquarterly reports on their charitable activities via their websites.  FHFA has concurred with thesernrecommendations.

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