The Financial Control over the National Flood Insurance Program

Previous reports have called attention to numerous weaknesses in the accounting system of the National Flood Insurers Association's ability to generate accurate financial data. These weaknesses, it was advised, could adversely affect the Government's ability to determine amounts payable to the Association, determine flood insurance premium rates, prepare financial statements, and make management decisions. The Inspector General of the Department of Housing and Urban Development (HUD) reviewed the financial control problems with the Association and concluded that neither the Federal Insurance Administration nor the Association possessed the needed technical staff expertise to properly monitor and direct the development and implementation of an automated system for the program. The two organizations were also found to be involved in frequent disagreements over their respective authorities. HUD, in negotiations with the Association, tried to assert additional regulatory control over the national flood insurance program as part of an attempt to renew the existing agreement. However, the Association notified HUD that it did not intend to renew the agreement. A new contract has been granted to Eds Federal Corporation to operate the program as a fiscal agent. An audit of the program will be conducted starting in December 1977.