Financial Management:

Analysis of Selected VA and FHA Housing Program Accounting Methods

AFMD-92-8: Published: Nov 25, 1991. Publicly Released: Nov 25, 1991.

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Pursuant to a congressional request, GAO compared certain accounting methods used by the Department of Veterans Affairs' (VA) housing credit assistance program with those the Federal Housing Administration uses for its Mutual Mortgage Insurance (MMI) Fund, focusing on how each agency handles: (1) losses from guaranteed or insured loans; (2) revenue from loan guarantee fees and insurance premiums; (3) the value of outstanding direct mortgage loans and property acquired through settlement of mortgage insurance or guarantor claims; and (4) administrative costs.

GAO found that: (1) the VA housing assistance program accrues guaranteed loan losses at loan origination, but the MMI Fund accrues such losses when an insured loan defaults; (2) timing differences in accruing loan losses are attributable to variations in the nature and purposes of the loan programs involved; (3) revenue from VA guaranteed loan fees and MMI Fund insurance premiums is recognized at the same time as the guaranteed or insured loan losses; (4) both entities value acquired property at the net amount of cash expected from the property's sale; (5) both entities offset the principal amount of direct mortgage loans with an allowance for loan losses, valuing loan assets at their net realizable value; and (6) in fiscal year 1992, the VA housing assistance program will include administrative costs as a program operation cost, as the MMI Fund currently does.