1988 Financial Audit:
Federal Housing Administration
T-AFMD-89-17: Published: Sep 27, 1989. Publicly Released: Sep 27, 1989.
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GAO discussed its audit of the Federal Housing Administration's (FHA) financial statements. GAO noted that: (1) it was unable to express an opinion on the FHA financial statements because of uncertainties over potential losses from the diversion of property sales proceeds, overstatements of the values of foreclosed property, and the effects of other investigations; (2) FHA suffered major losses in its two largest funds; (3) the Department of Housing and Urban Development (HUD) failed to monitor functions involving large amounts of money that FHA delegated to third parties; (4) FHA does not have sufficient program-level information to properly manage its programs; (5) HUD internal controls over cash management and claims processing were weak; (6) HUD accounting staff did not maintain adequate documentation, perform general ledger reconciliations, or properly justify certain payments; and (7) HUD and FHA management did not take appropriate actions to correct weaknesses and problems that previous audits and investigations identified.
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: To aid in its oversight role, Congress should monitor HUD progress through an annual oversight hearing on the annual report from the Secretary which should include financial statements, the independent auditor's opinion, reports on internal controls and compliance, and management's report required by the Federal Managers' Financial Integrity Act.
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