EXHIBIT 2.-Federal Housing Administration, combined statement of income, expense, and reserves, for the year ended June 30, 1953 EXHIBIT 2.-Federal Housing Administration, combined statement of income, expense, and reserves, for the year ended June 30, 1953—Con. Title I Title II Title VI Title VII Title VIII Title NOTE.-The notes on p. 1451 are an integral part of this statement. EXHIBIT 4.-Federal Housing Administration, summary of insurance activity, June 30, 1953-Continued Rental projects were insured under the mutual mortgage insurance fund prior to the establishment of the Title II-Housing Insurance Fund on Feb. 3, 1938. At June 30, 1953, no insurance had been written under Title VII-Housing Investment Insurance Fund. NOTES TO FINANCIAL STATEMENTS [Referred to in exhibit tables pp. 1446 and 1448] 1. Certain real estate and defaulted mortgage notes which had been tendered to the Commissioner had not been officially accepted by FHA at June 30, 1953. FHA estimates that almost $6 million in debentures will be issued upon final acceptance, segregated as follows: Title I-Housing Insurance Fund $216,000, Mutual Mortgage Insurance Fund $376,200; Title II-Housing Insurance Fund $590,600, and War Housing Insurance Fund $4,776,800. The accrued debenture interest at June 30, 1953, is estimated at $53,700. When the assets are acquired, FHA will set up provisions for estimated future losses from current income at rates of 15 percent of the acquisition cost under titles I and II and 171⁄2 percent under title VI. 2. Statutory reserve applies to mutual insurance groups and is composed of net income available for Contingent losses, expenses, and group account participations- $117, 301, 384 Total____. 30, 966, 814 148, 268, 198 Prior to the enactment of the "Housing Amendments of 1953," the statutes required that an amount equal to 10 percent of the total premiums credited to the groups be transferred to the insurance reserve at termination of the group accounts. The new legislation directed that the 10 percent of premiums credited to group accounts be transferred to the insurance reserve as of July 1, 1953, without regard to termination dates. Accordingly, a transfer of $30,593,463 was made at the beginning of fiscal year 1954. The difference between the amount transferred and the amount available for transfer shown above consisted of collected premiums which had not as yet been credited to group accounts on June 30, 1953. 3. Under authority contained in the National Housing Act, as amended, funds were transferred between certain insurance Fund accounts as follows: 4. Net income does not include a provision for future losses that may result from insurance in force at June 30, 1953. Future losses inherent in insurance operations are not recognized until properties are acquired in settlement of claims. However, FHA does retain its cumulative income as an insurance reserve. 5. FHA is not required to pay the Government's share of the cost of retirement and disability benefits which inure to FHA employees. Based on the rate of contributions applicable to agencies that are subject to such payments, FHA's contribution would be about $1,554 500 for fiscal year 1953. If FHA were required to make such contributions, most of the cost would be charged to the mutual mortgage groups and would result in a savings to the Government. 6. Uncollected interest earned on defaulted property improvement loans and mortgage notes is not recorded as an asset on the balance sheet. Interest income for Title I-Insurance Fund represents cash collections of interest for the year on defaulted property improvement loans. FHA does not consider it practical to accrue interest on these defaulted loans because of the uncertainty of collection and the clerical expense involved. Interest collected on notes and mortgages held by FHA under titles other than Title I-Insurance Fund is not shown as interest income but is credited to the acquired properties account. Interest income shown for titles II and VI is imputed interest, on debentures redeemed before maturity, which has been added to the acquired properties account. 7. In the Mutual Mortgage Insurance Fund debenture interest may be charged to the Mutual Mortgage groups after the related property has been sold and final settlement made. This interest expense appears on the FHA statement as interest on debentures. Senator MAYBANK. Why wasn't the FHA checked before 1949? Mr. KANE. Before the GAO audited on a centralized type of audit basis. That type of audit does not go into the operations of the agency. Senator MAYBANK. I know that, but I want it for the record. When was it changed? Mr. KANE. It was changed in 1949, and when the agency was put under the audit of the Government Corporations Control Act. The Comptroller General endorsed that because it meant we would go into the agency and make a commercial-type audit, where we could do the operation and examine the books and records there. Senator MAYBANK. What law gives you the right to do that? |