Fannie Mae is one of the largest and most complex financial institutions in the world. Its accounting systems are vast, with more than 100 employees and managers operating an array of financial reporting systems, databases, modeling and projection programs.

Although there were many eyes focused on its accounting, only a single employee has been identified as raising concerns about Fannie Mae's financial reporting: Roger Barnes, a former manager in the company's controller's office who left Fannie Mae in November 2003.

According to the Office of Federal Housing Enterprise Oversight, Fannie's federal regulator, Barnes first raised concerns last year that were cited by OFHEO on Wednesday when it released its sharply critical report. In its report, the regulator said Barnes's cooperation "was important to our examination" of Fannie's accounting. Yet Barnes himself is not quoted directly in the report, and the agency hasn't disclosed anything about him or his whereabouts. Phone calls to people bearing his name in the Washington area yielded no results.

Fannie Mae declined to comment on Barnes's role.

According to the report, Barnes first raised concerns internally about Fannie's accounting procedures in July 2003. In a July 29 e-mail he sent to Sam Rajappa, Fannie Mae's senior vice president in charge of auditing oversight, Barnes aired concerns about how Fannie was amortizing certain items in its investment portfolio.

One of Fannie Mae's most important accounting rules requires that certain costs or benefits incurred when a mortgage or mortgage security is purchased be recognized over the life of the mortgage. The most basic illustration of this is when Fannie Mae buys a mortgage for a higher price than its face value, paying a premium. If the mortgage has an expected life of 10 years, Fannie Mae must spread the cost of the premium over 10 years. This allotting of costs is called amortization.

Barnes, according to OFHEO's report, recognized significant problems in how Fannie, which has nearly $900 billion in mortgage-related investments, was estimating amortization costs -- as well as problems in the quality of the data that went into the estimates and in managerial oversight.

For instance, one person oversaw both forecasting of certain amortization costs and determining whether adjustments needed to be made to correct inaccurate forecasts. Separating such functions is a standard safeguard against common accounting mistakes or fraud.

Barnes's job was to oversee how actual amortization costs are calculated. Actual amortization rates often deviate from forecasts based on a variety of factors such as an increase in the rate mortgages are being paid off early or other economic factors.

At a crucial July 8, 2003, meeting, Barnes told Fannie Mae's Rajappa that he was concerned about an instruction he received to change a "factor" that he was using to gauge the actual amortization expense, saying the change appeared designed to cause the real amortization expense to "agree" with management's forecast amortization expense.

According to the report, what Barnes was saying was clear to J. Timothy Howard, Fannie Mae's chief financial officer: Barnes believed someone was manipulating the process to achieve a desired result. OFHEO investigators asked Howard, who attended the meeting with Barnes and Rajappa, if he believed Barnes was alleging that results had been intentionally misstated.

"Well, he alleged that was intentional misstatement," Howard told OFHEO's interviewer. Others at the July 8 meeting, however, including Rajappa, who was conducting the internal investigation of Barnes's concerns, said they did not think Barnes was alleging an intentional misstatement.

Rajappa went on to investigate Barnes's concerns, nonetheless, culminating in an Aug. 14, 2003, presentation to Fannie's board of directors audit committee. OFHEO criticized Rajappa's investigation as having a "lack of diligence," saying Rajappa did not "exercise due professional care." OFHEO found that Rajappa never concluded that the change Barnes was asked to make was valid. Rajappa had made several requests for documentation on the change, but the documentation was never provided by key Fannie employees. "It was precisely at this point that [Rajappa's office] concluded its investigation," OFHEO said.

It is unclear how Barnes's concerns came to the regulators' attention.

The amount of the change was small, just $6.5 million, yet OFHEO zeroed in on it as an example of the risks and problems in Fannie Mae's controls and accounting systems.