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Financial Audit: Resolution Trust Corporation's Internal Controls at December 31, 1992

AIMD-93-50 Published: Sep 28, 1993. Publicly Released: Sep 28, 1993.
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Highlights

GAO evaluated the Resolution Trust Corporation's (RTC) internal controls as of December 31, 1992, to determine whether the controls reasonably ensured that: (1) assets were safeguarded against loss from unauthorized use or disposition; (2) transactions complied with management's authority and laws and regulations; and (3) transactions were properly recorded, processed, and summarized in accordance with generally accepted accounting principles.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Resolution Trust Corporation The RTC Chief Financial Officer should direct RTC staff to use the Warranties and Representations Accounts Processing System (WRAPS) database to calculate future financial statement loss accruals for representations and warranties. WRAPS data should be tested for completeness and accuracy and the necessary adjustments made before the required reserve amounts are calculated for all sales.
Closed – Implemented
During 1993, RTC developed formal procedures for estimating its loss accrual in which the Warranties and Representations Accounts Processing System is the starting point. Additionally, RTC developed and implemented several major enhancements to the system which, combined with the formal procedures, help ensure the integrity of the data used to estimate the loss accrual. As a result of these actions, GAO found that the December 31, 1993, estimated loss accrual was reasonable.
Resolution Trust Corporation The RTC Chief Financial Officer should direct RTC staff to explain more clearly the check receipts reconciliation requirement in its Field Accounting Manual and include a specific reconciliation format to be followed. Field personnel in the remaining open offices should be trained to ensure procedures are properly implemented and consistently followed.
Closed – Implemented
RTC updated the Field Accounting Manual during 1993 and provided a standard format to ensure the uniform preparation of daily reconciliations of cash received. At the end of 1993, GAO found that all field offices performed the required reconciliation of checks received and processed.
Resolution Trust Corporation The RTC Chief Financial Officer should direct RTC staff to review the field offices' journal entry preparation and review processes to determine the reason for high error rates relating to wire disbursements. Based on the results of that review, control procedures should be strengthened or enforced accordingly and field offices should be periodically tested and evaluated to ensure required procedures are being followed.
Closed – Implemented
During 1993, RTC completed training initiatives to improve the accuracy of posting wire disbursements in the field offices. The results of GAO's 1993 testing showed an improvement in the error rate of posting wire disbursements such that the recommendation should be closed.

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Topics

Accounting errorsAccounting proceduresBank failuresData integrityFederal agency accounting systemsFinancial managementFinancial recordsInternal controlsLossesSavings and loan associations