FHA Internal Controls

Pursuant to a congressional request, GAO reviewed two internal control reports issued in 1991 on the Federal Housing Administration's (FHA) single- and multifamily housing loan insurance programs, focusing on materially significant financial and management internal control weaknesses reported for the first time. GAO found that: (1) an independent accounting firm identified 206 internal control weaknesses in both FHA programs, 29 percent being newly reported; (2) the accounting firm considered 11 of 147 previously reported weaknesses and 8 of 59 newly reported weaknesses to be materially significant; (3) the single family program had 133 reported weaknesses, 34 being new, which mainly affected mortgage premium and insurance claims processing, mortgage note servicing, and property disposition; (4) the multifamily program had 73 weaknesses, 25 being new, affecting mainly property disposition, mortgage premium processing and distribution, mortgage note servicing, and project monitoring; and (5) FHA generally agreed with the findings, and has taken actions, such as developing a comprehensive risk-based internal control system, to correct all the reported material weaknesses, but it is too early to tell if the improvements have been effective.