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092651 1 (1969-12-17)

handle is hein.gao/gaobacwmu0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C 20548 CIVIL DIVISION DEC 17 1969 Dear Hr. Gulledge: We have made a survey of the administration of cost certification procedures relatig to the insurance of mortgage loans for multifamily housing projects by the San Francisco Insuring Office (S&10) or the Federal Housig Administraition (MA), Devartnent of Housing and Urban Development. Our survey vas made pursuant to the Budget and Accounting Act, 1921 (31 U.S.C. 53), and the Accounting and Auditing Act of 1950 (31 U.S.C. 67), and covered selected multifcmily housing projects that were given final endorsement for mortgage loan insurance by SF10 between February 2, 1968, and July 3, 1969. Cost certification procedures were established by FHA pursuant to the requirements of section 227 of the National Housing Act, as amended (12 U.S.C. 1715r). Section 227 of the act and FRA's applicable adminis- trative regulations require that, upon completion of a multifamily housing project, the mortgagor must submit and certify to FHA a statement of the actual cost incurred in developing the project, including the cost of land, construction, architect's fees, and other related items. Section 227 further requires that any excess of insured mortgage loan proceeds over a specified percentage of certified costs must be applied to a reduction of the prin- cipal of the insured mortgage loan. When the relationship between a mortgagor corporation and a builder is such that arm's-tength dealings between the parties cannot be expected, FRA regulations require that the builder submit to the mortgagor, for inclusion with its statement of actual costs to FRA, a certification of the actual cost incurred by the builder in the construction of the project. FHA regulations also require that the costs certified by mortgagors and builders be paid in cash within 45 days of final endorsement of the project for mortgage loan insurance. To test the effectiveness of SFIO's administration of FHA's cost certification procedures, we examined the cost certifications made by mort- gagors and, where /pp-ropriate, builders of the six projects listed below and, to the extent we deemed necessary, revieled the records if the mort- gagors and buildrs related to the costs incurred to complete the projects. BEST DOCUMENT AVAILABLE

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