GAO reviewed the conduct of financial institution liquidations by the National Credit Union Administration (NCUA) to assess the economy and efficiency of the agency's program to liquidate failed institutions. GAO examined the following: (1) control over assets, including valuation, marketing, monitoring, and disposition; and (2) appropriateness of expenses incurred.

GAO approved of the recent efforts by NCUA to improve the management of the National Credit Union Administration Share Insurance Fund (NCUSIF). However, more still needs to be done to deal with the problem of reducing the net cost to the fund of liquidating a credit union. GAO estimated that in 1980 NCUSIF recovered from liquidation proceedings only about 60 percent of the outlays it incurred in liquidating credit unions. Net losses for both voluntary and involuntary liquidation activities totalled about $27.6 million in 1980. The implementation of changes already adopted and those recommended in this report should reduce the loss rate from liquidations by as much as 20 to 30 percent. Recent changes have been made to accelerate loan sales, offset shares of member accounts against loans that are delinquent, transfer shares to loans on small accounts, eliminate loan servicing activities at National headquarters, allocate all costs incurred in liquidation to individual cases, and improve cost and expense data collection. NCUA should take additional steps to maximize the value of the loan portfolios of insolvent credit unions. Unclaimed liabilities should not be trusteed, and procedures for unclaimed shares should be simplified. More active NCUA supervision is needed to ensure compliance with policies intended to reduce the net cost of liquidation.