Resolution Trust Corporation:

Status of Management Efforts to Control Costs

GGD-94-19: Published: Oct 28, 1993. Publicly Released: Oct 28, 1993.

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GAO reviewed the Resolution Trust Corporation's (RTC) efforts to monitor and control its liquidation costs.

GAO found that: (1) RTC has incurred millions in unnecessary or questionable costs because it has not adequately controlled costs by adopting a stronger budget process, emphasizing cost control, and using expense accounting information to identify excess costs or expense reductions; (2) RTC efforts to improve operations and control costs have been hampered by requirements that RTC simultaneously establish operations while disposing of numerous failed thrifts, uncertain workloads and funding, and an emphasis by management on rapid asset sales; (3) RTC efforts to strengthen the budget process and control costs include developing expense, revenue, and performance measurement reports that link operational goals to budgeted expenses, addressing account data accuracy and consistency problems, and appointing a chief financial officer (CFO) to oversee all financial management activities; and (4) the success of RTC cost control efforts will depend on management commitment to use these processes to search for cost reduction opportunities.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The President and Chief Executive Officer (CEO), RTC, should emphasize controlling and minimizing agency operating expenses as a part of the RTC management reform agenda. As a part of this process, the CEO should support the CFO as the responsible official for controlling agency costs.

    Agency Affected: Resolution Trust Corporation

    Status: Closed - Implemented

    Comments: RTC appointed a CFO who reports directly to the Corporation's Chief Executive Officer. The CFO oversees all RTC financial management activities, including budgeting, planning, and management control. Consequently, due to having an independent office of the CFO and an unified organization for financial control, RTC now has the mechanism in place to deal with cost control and cost containment.

    Recommendation: The President and CEO, RTC, should emphasize controlling and minimizing agency operating expenses as a part of the RTC management reform agenda. As a part of this process, the CEO should identify specific areas in which RTC can minimize expenses.

    Agency Affected: Resolution Trust Corporation

    Status: Closed - Implemented

    Comments: In formulating the 1994 budget, each major RTC component was charged with examining activities and incorporating in its request reduced spending consistent with more efficient operations and within targeted levels of spending. Later, the levels were reduced and further adjustments were made in the 1994 spending plans. Also, based on the first 6 months of 1994, spending was below budget, in part because of measures implemented to control expenses. RTC's Office of Budget and Planning estimates that, for the year, expenses may be as much as 15 percent less than the amount budgeted.

    Recommendation: The President and CEO, RTC, should emphasize controlling and minimizing agency operating expenses as a part of the RTC management reform agenda. As a part of this process, the CEO should continue efforts to strengthen the budget process as a tool for fiscal control.

    Agency Affected: Resolution Trust Corporation

    Status: Closed - Implemented

    Comments: RTC has taken steps to further improve its budget process. It has provided evidence that its efforts to strengthen the budget process continue to be effective in providing expense information to managers and fostering cost-consciousness throughout RTC.

    Recommendation: The President and CEO, RTC, should emphasize controlling and minimizing agency operating expenses as a part of the RTC management reform agenda. As a part of this process, the CEO should improve the usefulness of expenses accounting information as a managerial tool.

    Agency Affected: Resolution Trust Corporation

    Status: Closed - Implemented

    Comments: RTC has implemented a new financial management system that allows for more detailed analysis of expenses, and has set up more specific accounts to facilitate analysis. RTC has also implemented a number of fiscal integrity improvements. GAO coordinated with AIMD in determining whether RTC's actions on this recommendation had been responsive.

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