Troubled Asset Relief Program: Status of Efforts to Address Transparency and Accountability Issues
GAO-09-296
Published: Jan 30, 2009. Publicly Released: Jan 30, 2009.
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Highlights
This is the second GAO report on the Troubled Asset Relief Program (TARP). It follows up on the nine recommendations from the December 2, 2008, report (GAO-09-161). It also reviews (1) the nature and purpose of activities that had been initiated under TARP as of January 23, 2009; (2) Treasury's Office of Financial Stability (OFS) hiring and transition efforts, use of contractors, and progress in developing a system of internal control; and (3) preliminary indicators of TARP's performance. To do this work, GAO reviewed signed agreements and other relevant documentation and met with officials from OFS, contractors, federal agencies, and some participating institutions.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Treasury | Treasury should expand the scope of planned monthly CPP surveys to include collecting at least some information from all institutions participating in the program to further improve the integrity, transparency, and accountability of the program and more clearly articulate and communicate a strategic vision. |
As recommended, beginning in March 2009, Treasury has been publishing a monthly survey of lending at all CPP institutions that includes data on loans outstanding to consumers and commercial entities and total loans outstanding.
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| Department of the Treasury | Treasury should ensure that future CPP agreements include a mechanism that will better enable Treasury to track the use of the capital infusions and seek to obtain similar information from existing CPP participants to further improve the integrity, transparency, and accountability of the program and more clearly articulate and communicate a strategic vision. | Although Treasury did not include a mechanism in the CPP agreements to track the use of capital funds, Treasury established a monthly bank lending survey of the 22 largest CPP institutions in February 2009 to monitor their lending and intermediation activities including their small business lending. Starting in August 2009, in conjunction with federal bank regulators, Treasury now publishes on a quarterly basis an evaluation of changes in regulatory financial data for all CPP reporting institutions and non-CPP institutions that focuses on three broad categories: on- and off-balance sheet items, performance ratios and asset quality measures. Since January 2009, all federal bank...
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| Department of the Treasury | Treasury should establish a process to ensure compliance with all CPP requirements, including those associated with limitations on dividends and stock repurchase restrictions to further improve the integrity, transparency, and accountability of the program and more clearly articulate and communicate a strategic vision. | Treasury hired nine asset management firms to provide market advice about investments in financial institutions and corporations participating in TARP programs, and help monitor compliance with limitations on compensation, dividend payments, and stock repurchases. Treasury finalized its oversight policies for asset managers in April 2010 and developed qualitative and quantitative performance metrics based on the managers? core functions and responsibilities in July 2010. Treasury has created policies for ensuring that CPP institutions comply with restrictions on executive compensation and excessive or luxury expenditures. The interim final executive compensation rule established the...
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| Department of the Treasury | Treasury should communicate a clearly articulated vision for TARP and how all individual programs are intended to work in concert to achieve that vision. This vision should incorporate actions to preserve homeownership. Once this vision is clearly articulated, Treasury should document needed skills and competencies to further improve the integrity, transparency, and accountability of the program and more clearly articulate and communicate a strategic vision. | In the TARP 60-day report, Troubled Asset Relief Program: March 2009 Status of Efforts to Address Transparency and Accountability Issues, we found that Treasury had taken action to communicate a clearly articulated vision for TARP that explained how individual programs were intended to work together in concert to achieve this vision. Specifically, on February 10, 2009, the administration announced the Financial Stability Plan and made public a fact sheet that clarified how each program would address the financial and housing crisis. Following the announcement of the Plan, Treasury began to document needed skills and competencies required to carry out TARP in regular meetings with the...
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| Department of the Treasury | Treasury should continue to expeditiously hire personnel needed to carry out and oversee TARP to further improve the integrity, transparency, and accountability of the program and more clearly articulate and communicate a strategic vision. | Since we issued our first TARP report in December 2008, Treasury has continuously improved upon its efforts to expedite hiring for its Office of Financial Stability (OFS) as we recommended. Specifically, as of August 3, 2009, Treasury reported that it had brought on board 194 full-time employees, including 19 detailees. This is a significant change from what we reported in our previous reports. Specifically, in December 2009, we reported that Treasury had 5 permanent staff and 137 detailees. Accordingly, Treasury has also become less reliant on OFS detailees over time as the TARP strategy has solidified. Treasury officials reported use of various hiring strategies to bring on board staff...
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| Department of the Treasury | Treasury should expedite efforts to ensure that sufficient personnel are assigned and properly trained to oversee the performance of all contractors, especially for contracts priced on a time-and-materials basis, and move toward fixed-price arrangements whenever possible as program requirements are better defined over time to further improve the integrity, transparency, and accountability of the program and more clearly articulate and communicate a strategic vision. | We made this recommendation in our second 60-day report on the Troubled Asset Relief Program (TARP) due to the importance of proper oversight of contractors, particularly those providing services on a time and materials basis. We reported in March 2009 that OFS had made progress in strengthening oversight of contractors and financial agents by ensuring sufficient personnel were assigned to oversight activities and that these personnel were appropriately trained. Treasury hired an executive-level contract administration manager for OFS, added staff to support TARP in the Procurement Services Division, and replaced all untrained executive-level Contracting Officers' Technical...
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| Department of the Treasury | Treasury should develop a comprehensive system of internal control over TARP activities, including policies, procedures, and guidance that are robust enough to ensure that the program's objectives and requirements are met to further improve the integrity, transparency, and accountability of the program and more clearly articulate and communicate a strategic vision. | In response to our recommendation, OFS adopted a framework for organizing the development and implementation of a comprehensive system of internal control for TARP activities. OFS also developed an organizational structure that defines lines of authority and implemented policies and procedures to help ensure that program objectives are met. Furthermore, OFS addressed the five areas of internal control as specified in our Standards for Internal Control in the Federal Government: control environment, risk assessment, control activities, information and communications, and monitoring. In subsequent work, we have continued to monitor internal controls and identify areas where certain...
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| Department of the Treasury | Treasury should develop and implement a well-defined and disciplined risk-assessment process, as such a process is essential to monitoring program status and identifying any risks of potential inadequate funding of announced programs to further improve the integrity, transparency, and accountability of the program and more clearly articulate and communicate a strategic vision. |
Treasury has developed and is currently implementing a risk assessment process. The process includes setting internal operational objectives, setting risk and other objectives, identifying major risks, designing and assigning responsibility for implementing risk mitigation actions, monitoring and reporting on risks, and testing risk mitigation actions. Treasury has completed the initial risk identification and assessment process, has established risk mitigation plans against high and medium risks, and has begun to address these risks.
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| Department of the Treasury | Treasury should review and renegotiate existing conflict-of-interest mitigation plans, as necessary, to enhance specificity and conformity with the new interim conflicts of interest regulation, and take continued steps to manage and monitor conflicts of interest and enforce mitigation plans to further improve the integrity, transparency, and accountability of the program and more clearly articulate and communicate a strategic vision. | Between January 2009 and January 2010, Treasury engaged in an active process to satisfactorily renegotiate five contracts or blanket purchase agreements, and one financial agency agreement that predated the TARP conflicts-of-interest rulemaking and enhanced specificity and conformity with the regulations. In addition, two more legal services contractors awarded separate new contracts after January 2009 for other services have contract provisions and mitigation plans in conformance with the TARP conflict of interest regulations. According to Treasury, the complex nature of these contracts and business relations with other firms meant that in some cases significant time was required to...
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