FHFA's watchdog reviews disclosures related to internships

The Federal Housing Finance Agency's Office of Inspector General recently found some lapses in reporting have occurred since the FHFA implemented policies aimed at weeding out undisclosed employee ties in internships.

However, the corrective policies implemented at the office's recommendation in 2019 still met their goal because the FHFA requires both interns and employees to disclose ties, and the former did even when the latter didn't, according to a report by the office of IG Brian Tomney.

The findings came after a review of 49 interns brought onboard between October 2020 and July 2022 as part of the agency's Pathways program for college students and recent graduates. Two of these interns had ties to agency employees.

"Neither of the two FHFA employees who had an applicable relationship complied with the Nepotism and Fraternization Policy's requirement that they disclose it," Wesley M. Philips, senior policy advisor, and Patrice Wilson, senior investigative evaluator, said in the report.

The FHFA was nevertheless aware of the program participants' employee ties because "a separate agency policy requires Pathways interns to disclose whether they are related to existing employees and that, in the present case, the interns had complied with that policy."

Improper influence related to opportunities available to college students has had a higher profile in the public discourse since a group of parents, including some celebrities, were found guilty of paying a man to guarantee university admissions for their kids through fraud and bribery.

That college admissions scandal made headlines in 2019, and in the same year, the inspector general's office found that although it had directed the FHFA to develop a policy related to the hiring of relatives after an anonymous hotline tip in 2011, the agency had not done so.

In 2011, the FHFA found that nine of 32 interns hired that summer were relatives of employees.

Relatives of FHFA employees aren't prohibited from working for the agency "when there is no direct reporting relationship and the relative is not in a position to influence or control the participant's appointment, employment, promotion or advancement within the agency."

The disclosure policies were drawn up after the IG's office found in the 2019 report that some employees had exercised actions it equated with improper influence, as defined by federal law.

"We identified two instances in which FHFA employees [names redacted] advocated for, or otherwise interceded, on behalf of their relatives who were seeking paid summer internships at FHFA, and we identified three instances in which FHFA hiring officials and an employee awarded preferential treatment to relatives of their fellow employees," the IG said in that report.

The Department of Housing and Urban Development also identified problems with improper influence and took action to address them in the latter half of the past decade.

In the most recent report by the FHFA's watchdog, Philips and Wilson appear satisfied that the current procedures in place have discouraged improper influence.

"We believe the Nepotism and Fraternization Policy's employee disclosure requirements are clear and help ensure the integrity of the intern hiring," they said.

Philips and Wilson said the IG's office will keep an eye on the agency's internship program and related disclosures.

"We are not reopening any of the recommendations from our 2019 Management Alert because FHFA adhered to its corrective actions," they said. "However, we believe that FHFA has a responsibility to ensure that employees who have an applicable relationship with Pathways interns comply with the Nepotism and Fraternization Policy's disclosure requirements, and we will monitor its efforts to do so."