Resolution Trust Corporation:

Disposal of Furniture, Fixtures, and Equipment Needs Improvement

GGD-92-112: Published: Aug 13, 1992. Publicly Released: Aug 13, 1992.

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Pursuant to a congressional request, GAO reviewed how the Resolution Trust Corporation (RTC) manages and disposes of furniture, fixtures, and equipment (FF&E) from failed thrifts, including such unusual assets as aircraft and artwork.

GAO found that: (1) although RTC has developed policies and procedures for managing and disposing of FF&E, its controls over those assets do not ensure that they are disposed of economically and efficiently while maximizing revenues; (2) the RTC policy regarding FF&E donations states that items determined to have nominal value should be donated to nonprofit organizations, but the policy does not define nominal value and is silent on when it would be more cost-effective to donate items before attempting to market them; (3) RTC failure to promptly inventory and appraise FF&E hampers marketing efforts, and RTC needs to ensure that it has adequate internal controls over high-risk assets that exceed the nominal value criteria; (4) the RTC nationwide inventory control system fails to provide an accurate and complete FF&E inventory because inventory remains on the system well after it had been sold and because there are mass deletions of inventory from the system without verification; and (5) although RTC has abandoned its national FF&E inventory system, it needs to develop accurate inventories at each thrift to help local officials quickly establish control over and dispose of those assets.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On June 1, 1993, RTC issued Circular 1800.8. This directive requires the maintenance of logs or other records of property donations including the basis for determining that the property has nominal value. It defines nominal value as when the aggregate holding and marketing costs are approximately equal to or greater than the proceeds expected from the sale of the property. It defines holding costs as storage, management (which woud include appraisal costs), and transportation costs; and marketing costs as all costs associated with the sale of property.

    Recommendation: RTC should ensure that marketing and disposition plans for FF&E assets adequately document the inventory appraisal, shipping, and storage costs used to select the most cost effective disposition method.

    Agency Affected: Resolution Trust Corporation

  2. Status: Closed - Implemented

    Comments: On June 1, 1993, RTC issued Circular 1800.8. This directive defines nominal value as the estimated value of one or more FF&E assets when the aggregate holding and marketing costs of managing and disposing of the property are approximately equal to or greater than the proceeds expected from the sale of the property.

    Recommendation: RTC should define nominal value in dollar terms for FF&E purposes.

    Agency Affected: Resolution Trust Corporation

  3. Status: Closed - Implemented

    Comments: On June 1, 1993, RTC issued Circular 1800.8. This directive allows nominal valued FF&E assets to be donated to nonprofit organizations or agencies with or without marketing efforts.

    Recommendation: RTC should eliminate the requirement that nominal value FF&E assets must be marketed before they can be donated to nonprofit organizations or agencies, provided RTC determines that donating those assets would be more cost-effective than holding and selling them.

    Agency Affected: Resolution Trust Corporation

  4. Status: Closed - Implemented

    Comments: On June 1, 1993, RTC issued Circular 1800.8. This directive allows poor condition and outdated items to be donated to nonprofit organizations and agencies even if they exceed the nominal value criteria when marketing efforts have been unsuccessful.

    Recommendation: RTC should permit low-value items that exceed the nominal value criteria but are in poor condition or outdated to be donated to nonprofit organizations or agencies provided RTC determines that donating those assets would be more cost-effective than holding and selling them.

    Agency Affected: Resolution Trust Corporation

  5. Status: Closed - Implemented

    Comments: On June 1, 1993, RTC issued Circular 1800.0. This directive requires that FF&E inventories be completed within 30 days of intervestion, and an appraisal to be completed within 90 days.

    Recommendation: RTC should strengthen the internal controls over FF&E assets at each thrift by setting a target for completing their inventory and appraisals after a thrift comes under RTC control and holding managing agents accountable for meeting the target date.

    Agency Affected: Resolution Trust Corporation

 

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