The Federal Housing Finance Agency Office of the Inspector General (FHFA) said the process Fannie Mae’s Audit Committee used to select a candidate for the Chief Audit Executive (CAE) position was haphazard at best, on Tuesday. According to the Office of the Inspector General (OIG), the CAE was hired through a flawed process and had conflicts of interest that would affect his position.
Hiring of the current CAE, John Forlines, was flawed for multiple reasons, according to FHFA. One, he had not been identified for the CAE role in the senior management’s Succession Plan. The Succession Plan found that there was no internal candidate who was “ready now” for the CAE position and that a permanent successor would require an “external” candidate. Fannie Mae decided to compile a list of internal candidate six months after the Succession Plan was released.
That list included the Chief Credit Officer (CCO), Forlines at the time, of Fannie Mae’s largest business unit, the Single-Family Business Group (Single Family). Over the following week, two Audit Committee members interviewed some candidates on this list and selected the CCO, even though his professional audit experience did not meet the audit qualifications deemed “preferable” in the CAE position description and he was burdened by significant conflicts because of his management responsibilities in Single-Family.
The FHFA, which regulates Fannie Mae, also failed to oversee the hiring of the CEA position properly, according to the Inspector General. While several senior FHFA officials questioned the robustness of the hiring process among themselves, none of them voiced their concerns to the audit committee.
The report didn’t mention any problems resulting from the selection or say what prompted the evaluation, which was released more than a year after the chief audit executive, John Forlines, started the job. The report didn’t call for an immediate action regarding the position or refer to the CAE by name. Instead it urged for more FHFA oversight of Fannie Mae’s audit committee and better communication between FHFA staff members, as well as other recommendations. The report didn’t reveal what prompted the evaluation. Mr. Forlines was appointed in October 2013.