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Explain Entity Audit Plan of Agp With Athourity Objectives

Explain Entity Audit Plan of Agp With Athourity Objectives

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Report to Congressional Committees
 
United States Government Accountability Office
GAOTROUBLED ASSETRELIEF PROGRAMStatus of Efforts to Address Transparencyand AccountabilityIssues
January 2009GAO-09-296
 
What GAO Found
United States Government Accountability Office
Why GAO Did This Study
H
ighlights
Accountability Integrity Reliability
 
January 2009
 
TROUBLEDASSET RELIEF PROGRAM
S
tatu
s
of Effort
s
to Addre
ss
Tran
s
parency andAccountability I
ss
ue
s
 
Highlights ofGAO-09-296, a report tocongressional committees
This is the second GAO report onthe Troubled Asset Relief Program(TARP). It follows up on the ninerecommendations from theDecember 2, 2008, report (GAO-09-161). It also reviews (1) the natureand purpose of activities that hadbeen initiated under TARP as of  January 23, 2009; (2) Treasury’sOffice of Financial Stability (OFS)hiring and transition efforts, use of contractors, and progress indeveloping a system of internalcontrol; and (3) preliminaryindicators of TARP’s performance.To do this work, GAO reviewedsigned agreements and otherrelevant documentation and metwith officials from OFS,contractors, federal agencies, andsome participating institutions.
What GAO Recommend
s
 Treasury has taken important stepsto implement all nine previousrecommendations, but has yet tofully address eight. This reportincludes recommendations thatTreasury further expand its effortsto monitor how CPP recipients areusing program funds and moreclearly articulate and communicatea strategic vision for the program. Addressing these and otherrecommendations would helpensure greater accountability andtransparency and better enableTreasury to effectively manageTARP. Treasury generally agreedwith the contents of the report andnoted that while progress has beenmade in overseeing the program, itagreed that more work needs to bedone.
 As of January 23, 2009, Treasury had disbursed about $293.7 billion of the $700billion in program funds (see table). Most of the funds (about $194.2 billion)went to purchase preferred shares of 317 financial institutions under theCapital Purchase Program (CPP)—Treasury’s primary vehicle under TARP forstabilizing financial markets. GAO’s previous report emphasized the lack of monitoring and reporting for CPP investments and recommended strongermeasures for ensuring that participating institutions use the funds to meet the program’s purpose and comply with CPP requirements on, for example,executive compensation and dividend payments. In response to ourrecommendation, Treasury developed plans to survey the largest twentyinstitutions monthly to monitor lending and other activities and analyzequarterly monitoring data (call reports) for all institutions. While the monthlysurvey is a step toward greater transparency and accountability for the largestinstitutions, we continue to believe that additional action is needed to betterensure that all participating institutions are accountable for their use of  program funds.
S
tatu
s
of TARP Fund
s
a
s
of January 23, 2009 (dollar
s
in billion
s
)Pro
g
ram Di
s
bur
s
ed
Capital Purchase Program $194.2Systemically Significant Failing Institutions 40.0Targeted Investment Program 40.0Term Asset-backed Securities Loan Facility 0.0Automotive Industry Financing Program 19.5Citigroup Asset Guarantee 0.0Bank of America Asset Guarantee 0.0
Total
s
$293.7
Source: Treasury OFS, unaudited.
Treasury has continued to develop a system for detecting noncompliance withkey requirements of the program but has not yet finalized its plans. Further,Treasury has made limited progress in formatting articulating andcommunicating an overall strategy for TARP, continuing to respond toinstitution- and industry-specific needs by, for example, making further capital purchases and offering loans to the automobile industry. In addition, it has not yet developed a strategic approach to explain how its various programs worktogether to fulfill TARP’s purposes or how it will use the remaining TARPfunds. While GAO does not question the need for swift responses in thecurrent economic environment, the lack of a clearly articulated vision hascomplicated Treasury’s ability to effectively communicate to Congress, thefinancial markets, and the public on the benefits of TARP and has limited itsability to identify personnel needs.
To view the full product, including the scopeand methodology, click onGAO-09-296.For more information, contact ThomasMcCool at (202) 512-2642 ormccoolt@gao.gov.
 
United States Government Accountability Office
 
Hi
g
hli
g
ht
s
of GAO-09-296 (continued)
Timeline of Programs and Selected Actions under TARP, October 2008–January 2009
Octo
b
erNovem
b
er
20092008
12/5:
Tre
asu
ryp
u
rch
as
e
s
 
ab
o
u
t $3.8
b
illion inpreferred
s
tock
a
nd w
a
rr
a
nt
s
 from 35 fin
a
nci
a
lin
s
tit
u
tion
s
 
u
nder CPP.
12/12:
Tre
asu
ry p
u
rch
as
e
s
 
ab
o
u
t $2.5
b
illion inpreferred
s
tock
a
nd w
a
rr
a
nt
s
from 28 fin
a
nci
a
lin
s
tit
u
tion
s
 
u
nder CPP.
12/2
3
:
Tre
asu
ryp
u
rch
as
e
s
 
ab
o
u
t $1.9
b
illion inpreferred
s
tock
a
nd w
a
rr
a
nt
s
 from 43fin
a
nci
a
lin
s
tit
u
tion
s
 
u
nder CPP.
10/ 
3
:
Congre
ss
 p
ass
e
s
P.L. 110-343,EmergencyEconomic
S
t
ab
iliz
a
tion Act (the
a
ct), which
au
thorized TARP.
10/14:
Tre
asu
ry
a
nno
u
nce
s
th
a
t it will p
u
rch
as
e
u
p to $250
b
illion in fin
a
nci
a
l firm
s
’ preferred
s
tock
u
nder TARP vi
a
CPP.Nine m
a
 jor fin
a
nci
a
l in
s
tit
u
tion
s
 
a
gree to p
a
rticip
a
te in CPP.Tre
asu
ry i
ssu
e
s
exec
u
tive compen
sa
tion g
u
ideline
s
forthree TARP progr
a
m
a
re
as
: CPP, Tro
ub
led A
ss
et A
u
ctionProgr
a
m,
a
nd
S
y
s
temic
a
lly
S
ignific
a
nt F
a
iling In
s
tit
u
tion
s
 (
SS
FI).
10/20:
Tre
asu
ry, the Feder
a
l Re
s
erve, the Office of the Comptrollerof the C
u
rrency, the Office of Thrift
Su
pervi
s
ion,
a
nd the Feder
a
lDepo
s
it In
su
r
a
nce Corpor
a
tion (FDIC) i
ssu
e
a
pplic
a
tion g
u
ideline
s
 
a
nd other doc
u
ment
s
for
a
ll
ba
nk
s
wi
s
hing to p
a
rticip
a
te in CPP.
10/28:
Tre
asu
ry di
sbu
r
s
e
s
c
a
pit
a
l injection
s
to 8 of the 9
ba
nk
s
 
s
l
a
ted to p
a
rticip
a
te in the fir
s
t ro
u
nd of the CPP,re
su
lting in the p
u
rch
as
e of $115
b
illion in preferred
s
tock
a
nd w
a
rr
a
nt
s
from 8 n
a
tion
a
l fin
a
nci
a
l in
s
tit
u
tion
s
.
11/14:
Tre
asu
ryp
u
rch
as
e
s
 
ab
o
u
t$33.6
b
illion inpreferred
s
tock
a
ndw
a
rr
a
nt
s
from 21fin
a
nci
a
l in
s
tit
u
tion
s
 
u
nder CPP.
11/25:
Tre
asu
ry
a
nno
u
nce
s
 
a
lloc
a
tion of $20
b
illion to
ba
ck Term A
ss
et-
ba
cked
S
ec
u
ritie
s
Lo
a
n F
a
cility(TALF),
a
$200
b
illion lending f
a
cility for the con
su
mer
ass
et-
ba
cked
s
ec
u
ritie
s
m
a
rket e
s
t
ab
li
s
hed
b
y theFeder
a
l Re
s
erve B
a
nk of New York.Tre
asu
ry p
u
rch
as
e
s
$40
b
illion in preferred
s
tock
a
ndw
a
rr
a
nt
s
from AIG
u
nder
SS
FI,
as
 
a
nno
u
nced onNovem
b
er 10, 2008.
11/10:
Tre
asu
ry
a
nno
u
nce
s
 th
a
t it will p
u
rch
as
e $40
b
illionin
s
enior preferred
s
tock fromthe Americ
a
n Intern
a
tion
a
lGro
u
p (AIG)
u
nder
SS
FI.
12/19:
Tre
asu
ry p
u
rch
as
e
s
 
ab
o
u
t $2.8
b
illion in preferred
s
tock
a
nd w
a
rr
a
nt
s
from 49 fin
a
nci
a
l in
s
tit
u
tion
s
 
u
nder CPP.Tre
asu
ry
a
nno
u
nce
s
pl
a
n for
s
t
ab
ilizing the
au
tomotiveind
us
try
u
nder the A
u
tomotive Ind
us
try Fin
a
ncing Progr
a
m(AIFP).
12/ 
3
1:
Tre
asu
ry p
u
rch
as
e
s
 
ab
o
u
t $15
b
illion in preferred
s
tock
a
nd w
a
rr
a
nt
s
from
s
even fin
a
nci
a
l in
s
tit
u
tion
s
 
u
nder CPP.Tre
asu
ry p
u
rch
as
e
s
$20
b
illion in preferred
s
tock
a
nd w
a
rr
a
nt
s
 from Citigro
u
p th
a
t it
a
nno
u
nced on Novem
b
er 23, 2008,
u
nder the newly cre
a
ted T
a
rgeted Inve
s
tment Progr
a
m (TIP).Tre
asu
ry lo
a
n
s
$4
b
illion to GM
a
nd commit
s
to lo
a
n $5.4
b
illion on J
a
n
ua
ry 16, 2009.Tre
asu
ry provide
s
Congre
ss
with report on AGP,
a
progr
a
m tog
ua
r
a
ntee tro
ub
led
ass
et
s
m
a
nd
a
ted
u
nder
S
ection 102 of the
a
ct.
11/2
3
:
Tre
asu
ry, FDIC,
a
nd the Feder
a
lRe
s
erve enter into
a
n
a
greement withCitigro
u
p to provide
a
p
a
ck
a
ge ofg
ua
r
a
ntee
s
, liq
u
idity
a
cce
ss
,
a
ndc
a
pit
a
l, incl
u
ding eq
u
ity inve
s
tment of$20
b
illion in Citigro
u
p.
11/21:
Tre
asu
ryp
u
rch
as
e
s
 
ab
o
u
t$2.9
b
illion inpreferred
s
tock
a
nd w
a
rr
a
nt
s
 from 23 fin
a
nci
a
lin
s
tit
u
tion
s
 
u
nderCPP.
Decem
b
erJ
a
n
ua
ry
12/29:
Tre
asu
ry
a
nno
u
nce
s
p
u
rch
as
e of $5
b
illion in
s
enior preferred eq
u
ity from GMACLLC
a
nd
a
gree
s
to lo
a
n $1
b
illion to
su
pport it
s
reorg
a
niz
a
tion
as
 
a
 
ba
nk holding comp
a
ny.
1/2:
Tre
asu
ry provide
s
 progr
a
m de
s
criptionfor the TIP.Tre
asu
ry complete
s
$4
b
illion lo
a
n tr
a
n
sa
ctionwith Chry
s
ler HoldingLLC
as
p
a
rt of AIFP. 
1/9:
Tre
asu
ryp
u
rch
as
e
s
 
ab
o
u
t$14.8
b
illion inpreferred
s
tock
a
ndw
a
rr
a
nt
s
from 43fin
a
nci
a
l in
s
tit
u
tion
s
 
u
nder CPP.
1/16:
Tre
asu
ry
a
nno
u
nce
s
th
a
t it will m
a
ke
a
$1.5
b
illion lo
a
n to
a
 
s
peci
a
l p
u
rpo
s
e entitycre
a
ted
b
y Chry
s
ler Fin
a
nci
a
l to fin
a
nce the exten
s
ion of new con
su
mer
au
to lo
a
n
s
 
as
 p
a
rt of AIFP.Tre
asu
ry, the Feder
a
l Re
s
erve,
a
nd FDIC
a
nno
u
nce the term
s
of the g
ua
r
a
ntee
a
greement with Citigro
u
p
a
nno
u
nced on Novem
b
er 23, 2008, providing protection
a
g
a
in
s
tthe po
ss
i
b
le lo
ss
e
s
on
a
n
ass
et pool of
a
pproxim
a
tely $301
b
illion of lo
a
n
s
 
a
nd
s
ec
u
ritie
s
.Tre
asu
ry, the Feder
a
l Re
s
erve,
a
nd FDIC enter into
a
n
a
greement tod
a
y with B
a
nk ofAmeric
a
to provide g
ua
r
a
ntee
s
, liq
u
idity
a
cce
ss
,
a
nd c
a
pit
a
l, incl
u
ding protection
a
g
a
in
s
tpo
ss
i
b
le lo
ss
e
s
on
a
pproxim
a
tely $118
b
illion
ass
et
s
 
a
nd p
u
rch
as
e of $20
b
illion inpreferred
s
tock
u
nder TIP.Tre
asu
ry p
u
rch
as
e
s
 
ab
o
u
t $1.5
b
illion in preferred
s
tock
a
nd w
a
rr
a
nt
s
from 39 in
s
tit
u
tion
s
 
u
nder CPP.
1/21:
 Tre
asu
rylo
a
n
s
 
a
n
a
ddition
a
l$5.4
b
illionto GM.
1/2
3
:
Tre
asu
ryp
u
rch
as
e
s
 
ab
o
u
t$386 million inpreferred
s
tock
a
ndw
a
rr
a
nt
s
from 23in
s
tit
u
tion
s
 
u
nderCPP.
S
o
u
rce: GAO.
 GAO’s previous report also included recommendations about OFS’s management infrastructure, including hiring,contract oversight, and internal controls. Treasury has taken steps to address our recommendations, but still facesseveral challenges. First, it took proactive steps to help ensure a smooth transition to the new administration bykeeping positions filled and using an expedited hiring process, including direct hire authority.
 
Moreover, after losingsome potential candidates because of conflicts of interest, Treasury is asking candidates to address potential conflictsearlier in the recruitment process to avoid unnecessary delays in finalizing employment offers. However, it continues toface difficulty providing competitive salaries to attract skilled employees. Also, given the program’s evolving nature andthe likelihood of changes under the new administration, Treasury will need to identify OFS’s long-term organizationalneeds. OFS continues to rely on detailees and contractors to carry out program functions. Second, consistent with ourrecommendation about contracting oversight, Treasury has enhanced such oversight by tracking costs, schedules, and performance and addressing the training requirements of personnel who oversee the contracts. As we previouslyrecommended, Treasury needs to continue to identify and mitigate conflicts of interest in contracting. Similarly, OFShas adopted a framework for organizing the development and implementation of its system of internal control forTARP activities, which is consistent with our recommendation. OFS plans to use this framework to develop specificstandards and policies, drive communications on expectations, and measure effectiveness of internal control policiesand procedures. However, it has yet to implement a disciplined risk-assessment process.Given the recency of program actions and time lags in the reporting of available data, GAO continues to believe that itis too early in the program’s implementation to see measurable results in many areas. Even with more time and betterdata, it will remain difficult to separate the impact of TARP activities from the effect of other economic forces. Someindicators suggest that the cost of credit has declined in interbank, mortgage, and corporate debt markets since theDecember report. However, while perceptions of risk (as measured by premiums over Treasury securities) havedeclined in interbank markets, they changed very little in corporate bond and mortgage markets. Finally, as GAO alsonoted in December, these indicators may be suggestive of TARP’s ongoing impact, but no single indicator or set of indicators can provide a definitive determination of the program’s effects because of the range of actions that havebeen and are being taken to address the current crisis. GAO will continue to refine and monitor the indicators goingforward.

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