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AFMD-81-93 1 (1981-09-21)

handle is hein.gao/gaobabckp0001 and id is 1 raw text is: WASHINGTON, D.C. 20548 ACCOUNTING AND FINANCIAL. MANAGEMINT DIVISION B-203633 SEPTEMBER 21, 1981 The Honorable Louis 0. Giuffrida Director, Federal Emergency Management Agency 116398 Dear Mr. Giuffrida: Subject: Terminating the Audit of the National Flood Insurance Program's Fiscal 1980 Financial Statements (AFMD-81-93) In July 1980, we began auditing the Federal Insurance Admin- istration's (FIA's) National Flood Insurance Program (NFIP). The objective of the audit was to express an opinion on the NFIP's fiscal 1980 financial statements. We will not meet this objec- tive, however, because the Federal Emergency Management Agency (FEMA) has been unable to produce financial statements for NFIP. Pursuant to the Government Corporation Control Act, our re- port to the Congress on NFIP was due April 15, 6-1/2 months after the close of the fiscal year. Since that date has passed and we have entered the last quarter of fiscal 1981, it was no longer useful for us to continue auditing the 1980 statements. Accord- ingly, we stopped the 1980 audit and redirected our efforts toward a more indepth study of the internal control system. FEMA's inability to produce financial statements for NFIP is due to several problems which must be addressed. The rest of this report discusses these problems and recommends corrective action. BACKGROUND The National Flood Insurance Act of 1968 (42 U.S.C. 4001) subjects NFIP to the Government Corporation Control Act (31 U.S.C. 841-869) which, in turn, requires the preparation of annual finan- cial statements. In order to produce financial statements that are in accordance with generally accepted accounting principles, it is essential to have an accounting and reporting system that provides accurate, complete, and timely reports which can be used to prepare such financial statements. In the case of NFIP, three entities are ultimately responsible for financial statements-- Electronic Data Systems Federal Corporation (EDSF) and FIA share operating responsibility, and FEMA has primary reporting responsi- bility. All three entities must ensure that all transactions af- fecting NFIP are accounted for and reported properly within reason- able time limits. (920020)

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