Asset Management System:

Liquidation of Failed Bank Assets Not Adequately Supported by FDIC System

IMTEC-93-8: Published: Feb 3, 1993. Publicly Released: Feb 3, 1993.

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Pursuant to a congressional request, GAO reviewed the Federal Deposit Insurance Corporation's (FDIC) Division of Liquidation's operating requirements, focusing on whether: (1) FDIC was following asset management requirements at three regional offices; and (2) the Liquidation Asset Management Information System (LAMIS) and manual asset files are providing sufficient activity administration and oversight information.

GAO found that: (1) FDIC has failed to liquidate many failed bank assets or maximize cash recoveries on bank assets; (2) FDIC has failed to follow credit and operational requirements including collecting payments from delinquent borrowers, timely pursuing foreclosure of delinquent loans, collecting $1.4 million in collateral income, and protecting real estate and other collateral valued at $79,000; (3) FDIC information on asset values and status was inaccurate and incomplete because of LAMIS database limitations, poor system design and adaptability, and the burden of managing paper files; (4) LAMIS limitations were largely due to inadequate translation of business needs to functional system requirements, failure to implement functionality requirements, and insufficient oversight of LAMIS use; (5) improvements that would increase and satisfy FDIC automation and information needs include standardizing information maintained in consolidated offices, and providing easier access to asset information which supports foreclosure oversight, real estate management, and asset marketing; and (6) FDIC has contracted for better strategic business and information resources management planning processes to better address corporate-wide systems requirements.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: In March 1996, FDIC began implementing an eight-step system development life-cycle methodology. In 1997, FDIC then issued a systems development life-cycle methodology directive that requires all systems projects to follow this methodology. In regard to the Division of Liquidation, FDIC initiated a project in 1994 to identify its information needs and translate them into an information system that would support asset management and disposition. However, FDIC management raised concerns about the project's cost-effectiveness and a scaled-back project was subsequently developed. In December 1996, FDIC management approved a project to strategically address its information needs for asset liquidation. Although FDIC maintains that it plans to complete this project, little progress has been made to date. As a result, given the length of time since our recommendation and the lack of progress, it appears unlikely that this part of the recommendation will be implemented.

    Recommendation: To ensure that automated systems adequately support the Division of Liquidation's operational requirements for managing loan and real estate assets, as part of the FDIC effort to strengthen strategic business and information resources management plans, the Acting Chairman, FDIC, should establish a systems design process that will effectively address asset liquidation needs. Such a process must include identifying, prioritizing, and translating the Division of Liquidation's operational requirements into effective automated systems.

    Agency Affected: Federal Deposit Insurance Corporation

 

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