Resolution Trust Corporation: Controls Over Asset Valuations Do Not Ensure Reasonable Estimates

RTC's Vice President for Resolution has directed that the senior AVR staff in each office coordinate closely and ensure that the AVR methodology, policies, and procedures are complied with by both RTC personnel and outside contractors. He advised GAO in August 1994 that management reviews by senior AVR personnel are being conducted in conjunction with every AVR done. A formal checklist evidencing the review is prepared in order to determine that work done was in accordance with the instructions for each review, as well as in conformance with the AVR methodology. The checklist is initially completed for every AVR done by the project specialist assigned to the AVR and reviewed by either the AVR coordinator or the assistant AVR coordinator. The checklist is maintained as part of the permanent thrift resolution files along with the AVR report.

The AVR methodology was revised on August 30, 1993, to include, verbatim, the specific requirements of this recommendation. These requirements were retained in the latest revisions to the methodology made on April 19, 1994.

This recommendation was based on a requirement in the 1991 version of RTC's AVR methodology which required AVR contractors to use, whenever possible, RTC comparable sales figures as a benchmark. After considering the pros and cons of providing such data, RTC decided to delete this requirement from the AVR methodology when it was revised in August 1993. AVR contractors may use RTC sales figures from comparables in their reviews, but they are not required to do so. RTC's action is a viable solution to the noncompliance deficiency identified during GAO's review and GAO concurs that this action is an acceptable alternative implementation of the recommendation.

On September 7, 1993, RTC issued new procedures to control and monitor the implementation of ARES. Controls were put in place to ensure that the latest version of ARES was used on each AVR. Also, project specialists were required to obtain feedback from the contractors or RTC personnel assigned to the AVR on problems they encountered using the ARES program. On each AVR, a random sample of at least six asset review sheets is checked against the RTC controlled version of ARES to ensure the integrity of the program in use on that AVR. In April 1994, these procedures were revised to provide the project specialists additional guidance on steps to be taken to verify and document the integrity of the results obtained using ARES.