Resolution Trust Corporation:

Analysis of Selected Asset Sales and Financial Data

GGD-94-37: Published: Feb 1, 1994. Publicly Released: Feb 1, 1994.

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J. William Gadsby
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GAO reviewed the costs and revenues associated with Resolution Trust Corporation (RTC) assets under standard asset management and disposition agreement (SAMDA) contracts, focusing on: (1) holding costs and revenues; (2) holding times; (3) net recovery rates; and (4) how RTC could use asset information to maximize recoveries.

GAO found that: (1) it could not determine holding costs and revenues, holding times, and net recovery rates for most RTC assets due to the lack of uniform reporting requirements for financial data and RTC failure to provide SAMDA contractors with final sales information in a timely manner; (2) RTC has improved its Asset Manager System (AMS) by establishing uniform reporting requirements for asset sales and financial data and recording the results of auctions and portfolio sales; (3) complete revenue and expense data are available for about one-third of RTC assets; (4) two-thirds of RTC inventory assets incurred net holding costs and one-third produced net holding revenues; (5) 55 percent of RTC disposed assets incurred net holding costs and 45 percent produced net holding revenues; (6) net holding costs for all real estate assets tend to vary according to the asset's book value; (7) the average holding time for disposed assets is 232 days and 389 days for assets still in inventory; (8) net recovery rates for disposed assets average about 51 percent of their book value and 78 percent of the RTC estimated recovery value; and (9) RTC could use asset sales information to plan its asset disposition strategies and maximize recoveries.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: RTC incorporated the Summary of Recovery Rates for RTC Sales Initiatives, a comparative analysis, into its update of its Business Plan. This analysis included transactions occurring through December 1994, and included a comparison of all the major sales methods used by RTC. The analysis compares pre-sale asset valuation, gross sales price, net sales proceeds, and adjusted net sales proceeds but does not consider holding cost and holding times. RTC's information systems still do not capture this information and because of RTC's approaching sunset, no systems changes are planned to enable RTC to capture and use these data in calculating true net recoveries on the sale of assets. GAO concurs with RTC's position that it is not economically feasible to make further information system changes at this stage in RTC's life, and GAO is therefore closing this recommendation.

    Recommendation: To help RTC manage its assets, the President and Chief Executive Officer, RTC, should use the asset sales and financial data being collected in AMS to analyze holding costs and revenues, holding times, and recovery rates of its assets. RTC should use the results of these analyses as one of many factors to better manage its assets and direct its disposition efforts in order to increase net recoveries.

    Agency Affected: Resolution Trust Corporation


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