Troubled Asset Relief Program: March 2009 Status of Efforts to Address Transparency and Accountability Issues
GAO-09-504
Published: Mar 31, 2009. Publicly Released: Mar 31, 2009.
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Highlights
GAO's third report on the Troubled Asset Relief Program (TARP) follows up on recommendations from the January 28, 2009, report (GAO-09-296). It also reviews (1) the nature and purpose of activities that had been initiated under TARP as of March 27, 2009; (2) the Department of Treasury's Office of Financial Stability's (OFS) hiring efforts, use of contractors, and progress in developing an internal control system; and (3) TARP performance indicators. For this work, GAO reviewed signed agreements and other relevant documentation and met with officials from OFS, contractors, and federal agencies. As of March 27, 2009, Treasury had disbursed $303.4 billion of the $700 billion in TARP funds. Most of the funds (almost $199 billion) went to purchase preferred shares of 532 financial institutions under the Capital Purchase Program (CPP), Treasury's primary vehicle under TARP for stabilizing financial markets.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Treasury | As it continues to improve the integrity, accountability, and transparency of the program, the Secretary of the Treasury should develop a communication strategy that includes building an understanding and support for the various components of the program. Specific actions could include hiring a communications officer, integrating communications into TARP operations, scheduling regular and ongoing contact with congressional committees and members, holding town hall meetings with the public across the country, establishing a counsel of advisors, and leveraging available technology. |
Treasury has taken several steps to improve its communication strategy for TARP, , including launching its FinancialStability.gov Web site in March 2009 and forming a working group to help ensure that Treasury's communications strategy addresses both internal and external communications. Treasury officials told us that key components of the strategy include (1) coordinating communication among OFS and Treasury's Office of Public Affairs and Office of Legislative Affairs to ensure that congressional and other external stakeholders receive timely information, (2) continuously improving the financial stability Web site, and (3) conducting outreach across the country on the homeownership preservation programs. To support these efforts, Treasury recently hired a communications director for OFS in June 2010 who will coordinate with Treasury's Office of Public Affairs and Office of Legislative Affairs and help to carry out its communication strategy.
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| Department of the Treasury | As it continues to improve the integrity, accountability, and transparency of the program, the Secretary of the Treasury should require that AIG seek concessions from stakeholders, such as management, employees, and counterparties, including seeking to renegotiate existing contracts, as appropriate, as it finalizes the agreement for additional assistance. |
Treasury did not implement this recommendation.
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| Department of the Treasury | As it continues to improve the integrity, accountability, and transparency of the program, the Secretary of the Treasury should update OFS documentation of certain internal control procedures and the guidance available to the public on determining warrant exercise prices to be consistent with actual practices applied by OFS. |
Treasury has completed documentation of Capital Purchase Program (CPP) process flows, risk and compliance matrices, and narrative on June 30, 2009. Treasury has clarified its procedures for determining warrant exercise prices by updating its FAQs on CPP repayment and CAP and posting the updated FAQs on its FinancialStability.gov website. The remaining guidance documents on Treasury's website for determining the warrant exercise prices addresses different types of institutions. For example, Treasury told us at the time that any new CPP applicants would most likely be non-public institutions for which these guidance documents would not apply and were concerned about legal repercussions if they removed or modified the older guidance. As such, Treasury does not believe the remaining guidance are no longer relevant and therefore does not plan on further addressing the inconsistency.
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| Department of the Treasury | As it continues to improve the integrity, accountability, and transparency of the program, the Secretary of the Treasury should improve transparency pertaining to TARP program activities by reporting publicly the monies, such as dividends, paid to Treasury by TARP participants. |
Treasury now includes dividends and interest received in its periodic reports to Congress that are also posted to the www.financialstability.gov Web site and plans to provide dividend information by institution on the Web site.
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| Department of the Treasury | As it continues to improve the integrity, accountability, and transparency of the program, the Secretary of the Treasury should complete the review of, and as necessary renegotiate, the four existing vendor conflicts-of-interest mitigation plans to enhance specificity and conformity with the new interim conflicts-of-interest rule. |
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 develop new mitigation plans that appropriately meet the provisions of the regulations. Consistent with our recommendation, Treasury has renegotiated the four mitigation plans to conform to Treasury's conflict of interest rules.
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| Department of the Treasury | As it continues to improve the integrity, accountability, and transparency of the program, the Secretary of the Treasury should issue guidance requiring that key communications and decisions concerning potential or actual vendor-related conflicts of interest be documented. |
In response, between March and October 2009, Treasury completed a series of actions to strengthen conflict-of-interest guidance and procedures consistent with this recommendation. More specifically, in an effort to improve the monitoring of contracts and formally document conflict-of-interest processes, Treasury has taken several steps. For example, it developed and implemented conflicts-of-interest procedures and distributed guidance documents to Treasury contracting staff and TARP contractors and financial agents that include detailed workflow charts depicting the standardized processes for the review and disposition of conflict-of-interest inquiries. Also, Treasury implemented an improved internal reporting database for documenting and tracking all conflict-of-interest inquiries and requests for conflicts-of-interest waivers. Treasury's guidance was sent to contractors and financial agents in July 2009, along with a request that all inquiries related to conflicts of interest be submitted via email to the "TARP.COI" mailbox created in April 2009 for contractors and financial agents to document communications to Treasury. With these actions, Treasury's processes for managing and monitoring conflicts of interest among contractors and financial agents matured such that key communications and decisions will be adequately documented.
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