Federal Housing Administration Fund's 1988 Financial Statements
AFMD-90-36: Published: Feb 9, 1990. Publicly Released: Feb 9, 1990.
- Full Report:
GAO examined the Federal Housing Administration (FHA) Fund's consolidated statements of financial condition as of September 30, 1988, and the related statements of operations and changes in financial position for the period then ended.
GAO found that: (1) as a result of the audit, FHA adjusted its financial statements to show its actual loss of $4.2 billion and cumulative deficit of $2.9 billion; (2) losses primarily resulted from an increased number of defaults in economically stressed regions, sales of foreclosed properties at less than carrying values, and the failure of several large coinsurers; (3) the full extent of losses attributable to program fraud and abuse was unknown; (4) FHA lacked an accurate inventory of foreclosed property; (5) the failure of several large coinsurers presented a potential for significant losses in the FHA General Insurance Fund; (6) serious internal accounting control weaknesses existed in third-party monitoring, financial management systems, insurance program design, cost and claims settlement, and the performance of basic accounting functions; (7) FHA did not fully comply with the Debt Collection Act; and (8) Department of Housing and Urban Development (HUD) activities for correcting long-standing FHA accounting and financial management problems included appointing a HUD chief financial officer and a FHA controller, establishing a task force to improve controls and systems, increasing monitoring of private-sector third parties, redirecting FHA accounting and computer systems to generate more timely and accurate financial and program management data, performing an independent actuarial analysis of the Mutual Mortgage Insurance and General Insurance funds, and publishing annual audited financial statements.
Matter for Congressional Consideration
Status: Closed - Implemented
Comments: As a result of the HUD scandals, large FHA losses, and GAO testimony, Congress passed Public Law 101-235 on December 15, 1989, requiring that FHA establish an agency controller and have annual financial audits. Price Waterhouse is currently conducting a 1989 audit of FHA and a procurement for fiscal years 1990 through 1994 financial audits is in process. Annual reports will follow.
Matter: Congress should, through its appropriation, authorization, and oversight committees, hold annual hearings on the actions of FHA to ensure that FHA resolves the financial management problems identified, including evaluating its systems, correcting the material weaknesses identified, and ensuring that similar problems do not occur in the future. To assist in its oversight role, Congress should require the Secretary of Housing and Urban Development to provide audited financial statements, reports on internal accounting controls and compliance, and management's report required by the Federal Managers' Financial Integrity Act.