Examination of the Financial Statements of FHA Insurance Operations--Fiscal Year 1978

An examination was made of the financial statements on the insurance operations of the Federal Housing Administration (FHA) for the 12-month period ended September 30, 1978. Information about the program's operation and financial condition was also reviewed.

During the fiscal year ended September 30, 1978, FHA reported a net loss of $314.9 million in the operations of its four mortgage insurance funds. The loss was $177.8 less than the loss of the previous year. The insurance funds had a combined cumulative deficit of $2.4 billion at September 30, 1978, primarily the result of cumulative losses in the General and Special Risk Insurance Funds. Due to a number of serious accounting deficiencies disclosed by the review, GAO could not express an opinion on the FHA financial statements as of September 30, 1978. Similarly, no opinion could be expressed on the last report for the 15-month period ended September 30, 1976. Beginning with fiscal year 1977, GAO has monitored the progress of FHA in correcting accounting problems. Some of the financial statement balances previously not reconciled to detail records were reconciled and a large effort was initiated to review computerized premium and fee files to increase their accuracy and auditability. However, the major problems concerning the accountability of premiums and fees were not resolved at September 30, 1978. GAO did not plan to review the FHA financial statements for fiscal year 1979 for purposes of expressing an opinion; rather, GAO planned to concentrate on reviewing those areas where FHA was having difficulty with accounting controls or other accounting functions affecting its ability to produce reasonably accurate accounting records.