GAO-13-324R Status of GAO Recommendations to Treasury

United States Government Accountability Office

Washington, DC 20548

March 8, 2013 

Congressional Committees

Subject: Troubled Asset Relief Program: Status of GAO Recommendations to Treasury

The Emergency Economic Stabilization Act of 2008 (EESA) authorized the creation of the 

Troubled Asset Relief Program (TARP) to address the most severe crisis that the financial 

system had faced in decades.1 EESA provided GAO with broad oversight authorities for 

actions taken under TARP and required that we report at least every 60 days on TARP 

activities and performance. Our oversight and reporting has resulted in 99 performance and 

financial statement audit recommendations to the U.S. Department of the Treasury 

(Treasury), the primary agency responsible for TARP programs. While Treasury has 

addressed most of our recommendations, some recommendations remain outstanding.

This 60-day report describes the status of our TARP recommendations to Treasury as of 

February 2013. In particular, this report discusses Treasury’s implementation of our 

recommendations, focusing particularly on two major TARP programs: the Capital Purchase 

Program (CPP), which supports certain U.S. financial institutions, and Making Home 

Affordable (MHA), which is a collection of housing programs designed to help homeowners 

avoid foreclosure. The report also addresses Treasury’s responses to our recommendations 

for improving internal controls over financial reporting for TARP that resulted from our audits 

of TARP’s financial statements.2

 

1

EESA, Pub. L. No. 110-343, Div. A,122 Stat. 3765 (2008), codified, as amended, at 12 U.S.C. §§ 5201 et seq. 

EESA was enacted on October 3, 2008. EESA originally authorized Treasury to purchase or guarantee up to 

$700 billion in troubled assets. The Helping Families Save Their Homes Act of 2009, Pub. L. No. 111-22, Div. A, 

123 Stat. 1632 (2009), amended EESA to reduce the maximum allowable amount of outstanding troubled assets 

under EESA by almost $1.3 billion, from $700 billion to $698.741 billion. The Dodd-Frank Wall Street Reform and 

Consumer Protection Act , Pub. L. No. 111-203, 124 Stat. 1376 (2010), (1) further reduced Treasury’s authority 

to purchase or insure troubled assets to a maximum of $475 billion and (2) prohibited Treasury, under EESA, 

from incurring any additional obligations for a program or initiative unless the program or initiative had already 

been initiated prior to June 25, 2010. 

Enclosure I provides the status of the recommendations 

2

See EESA, Pub. L. No. 110-343, Div. A, 122 Stat 3765 (Oct. 3, 2008), codified, as amended, at 12 U.S.C. §§ 

5201 et seq. Section 116(b) of EESA, 12 U.S.C. § 5226(b), requires that the Department of the Treasury (Treasury) 

annually prepare and submit to Congress and the public audited fiscal year financial statements for the Troubled 

Asset Relief Program (TARP) that are prepared in accordance with generally accepted accounting principles. Section 

116(b) further requires that GAO audit TARP’s financial statements annually in accordance with generally accepted 

accounting principles. We have performed four financial statement audits since TARP’s inception. See GAO, 

Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) Fiscal Years 2012 and 2011 

Financial Statements, GAO-13-126R (Washington, D.C.: Nov. 9, 2012); Financial Audit: Office of Financial 

Stability (Troubled Asset Relief Program) Fiscal Years 2011 and 2010 Financial Statements, GAO-12-169 

(Washington, D.C.: Nov. 10, 2011); Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) 

Fiscal Years 2010 and 2009 Financial Statements, GAO-11-174 (Washington, D.C.: Nov. 15, 2010); and 

Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) Fiscal Year 2009 Financial 

Statements, GAO-10-301 (Washington, D.C.: Dec. 9, 2009).
Page 2 GAO-13-324R Status of GAO Recommendations to Treasury

that we have made since 2008 in our performance audits (performance audit 

recommendations) and enclosure II provides the status of recommendations made in our 

financial statement audits (financial statement audit recommendations).

To determine the status of Treasury’s implementation of our TARP recommendations, we 

assessed relevant documentation from Treasury and interviewed Treasury officials. To 

determine the status of the financial statement audit recommendations, we relied on our 

annual audits of TARP’s financial statements. We conducted this performance audit from 

January through March 2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and conclusions based 

on our audit objectives. We believe that the evidence obtained provides a reasonable basis 

for our findings and conclusions based on our audit objectives.

Background

Of the TARP performance audit recommendations we have made, some have been 

program specific, while others have addressed cross-cutting issues such as staffing and 

communications. Our program-specific recommendations have focused on the following 

TARP initiatives:3

• Bank Investment Programs, which includes, among multiple programs:

 

o Capital Assessment Program (CAP), which was created to provide capital 

to institutions not able to raise it privately to meet Supervisory Capital

Assessment Program (SCAP)—or “stress test”—requirements. This program 

was never used.

o CPP, which was designed to provide capital to financially viable financial 

institutions through the purchase of preferred shares and subordinated 

debentures.

o The Community Development Capital Initiative (CDCI) provided capital to 

Community Development Financial Institutions by purchasing preferred stock.

• Credit Market Programs, which includes, among multiple programs:

o Term Asset-backed Securities Loan Facility (TALF) provided liquidity in 

securitization markets for various asset classes to improve access to credit 

for consumers and businesses.

o SBA 7(a) Securities Purchase Program provided liquidity to secondary 

markets for government-guaranteed small business loans in the Small 

Business Administration’s (SBA) 7(a) loan program.

• Other Programs, which includes:

o American International Group (AIG) Investment Program (formerly 

Systemically Significant Failing Institutions Program), which provided 

support to AIG to avoid disruptions to financial markets from its potential 

failure.

 

3

This list includes TARP programs for which we have made recommendations. As of January 2013, Treasury 

has exited its assistance for American International Group, Capital Asset Program, and Term Asset-backed 

Securities Loan Facility. For more information on all TARP programs, see GAO, Troubled Asset Relief Program: 

Treasury Sees Some Returns as It Exits Programs and Continues to Fund Mortgage Programs, GAO-13-192 

(Washington, D.C.: Jan. 7, 2013). 
Page 3 GAO-13-324R Status of GAO Recommendations to Treasury

o Automotive Industry Financing Program (AIFP), which aimed to prevent a 

significant disruption of the American automotive industry through 

government investments in the major automakers.

• MHA, which includes, among other housing programs:

o The Home Affordable Modification Program (HAMP) divides the cost of 

reducing monthly payments on first-lien mortgages between Treasury and 

mortgage holders/investors and provides financial incentives to servicers, 

borrowers, and mortgage holders/investors for loans modified under the 

program.

o The Second-Lien Modification Program provides incentives for second-lien 

holders to modify or extinguish a second-lien mortgage when a HAMP 

modification has been initiated on the first-lien mortgage for the same 

property.

o Home Affordable Foreclosure Alternatives provides incentives for short 

sales and deeds-in-lieu of foreclosure as alternatives to foreclosure for 

borrowers who are unable or unwilling to complete the HAMP first-lien 

modification process.

We have also made a number of financial statement audit recommendations to Treasury’s 

Office of Financial Stability (OFS), which is responsible for carrying out TARP activities 

within the department. Most of these recommendations relate to internal control deficiencies 

in OFS’s accounting and financial reporting processes.4 We made these recommendations 

as part our annual audits of TARP’s financial statement and reported on them directly to 

OFS management.5

Treasury Has Implemented Most of Our Performance Audit Recommendations, 

but Several Related to CPP and Housing Programs Remain Open

As of February 2013 our performance audits of the TARP programs have resulted in 66 

recommendations to Treasury. Of the 66 recommendations, Treasury has implemented 51, 

or approximately 77 percent (see fig. 1). Treasury has partially implemented 7 of the 

performance audit recommendations—that is, it has taken some steps toward 

implementation but needs to take more actions. Four performance audit recommendations 

remain open—that is, Treasury has not taken steps to implement them. Among these open 

recommendations are 2 recommendations directed at CPP and 2 recommendations directed 

at the MHA housing programs. Finally, with regard to 2 of the remaining 4 

recommendations, Treasury officials told us that they were not planning to take actions to 

implement them. For the other 2 recommendations, the TARP program evolved and the 

recommendations are no longer applicable. 

 

4

Section 101 of EESA, 12 U.S.C. § 5211, established OFS within the Department of the Treasury to implement 

TARP. 

5

We reported on the recommendations in the following management reports: Management Report: 

Improvements Are Needed in Internal Control over Financial Reporting for the Troubled Asset Relief Program, 

GAO-12-415R (Washington, D.C.: Feb. 13, 2012); Management Report: Improvements Are Needed in Internal 

Control Over Financial Reporting for the Troubled Asset Relief Program, GAO-11-434R (Washington, D.C.: Apr. 

18, 2011); and Management Report: Improvements Are Needed in Internal Control Over Financial Reporting for 

the Troubled Asset Relief Program, GAO-10-743R (Washington, D.C.: June 30, 2010).
Page 4 GAO-13-324R Status of GAO Recommendations to Treasury

Figure 1: Number and Status of TARP Recommendations to Treasury, as of February 

2013

Note: We categorized program-specific communication and staffing recommendations under the appropriate 

programs.

Treasury Has Not Fully Implemented Recommendations to Monitor Regulators’ 

Repayment Decisions and Report Separately on Remaining CPP Institutions

Treasury has taken action on several GAO recommendations for CPP, but it has taken 

limited steps to monitor regulators’ decisions on CPP repayments and has not reported 

separately on entities that have exited CPP versus those that remain in the program. To

date, Treasury has implemented 6 of our 9 recommendations for CPP. For example, in 

2010, we recommended that Treasury apply lessons learned from the implementation of 

CPP to similar programs, such as the Small Business Lending Fund (SBLF), and enhance 

procedural controls for addressing the risk of inconsistency in regulators’ decisions to not 

approve applicants.6

 

6

The Small Business Lending Fund (SBLF) was created by the Small Business Jobs Act of 2010, Pub. L. No. 

111-240, 124 Stat. 2504 (2010), enacted on September 27, 2010. SBLF is a capital support program that 

encourages small and midsize banks and community development loan funds to lend to small businesses.

Treasury implemented our recommendation by including a process for 

reviewing regulators' viability determinations for all eligible applicants to its SBLF. 

Specifically, in designing the SBLF investment decision procedures, Treasury included 

additional evaluation by a central application review committee for all eligible applicants that 

are not approved by their federal regulator. It also provides information from its evaluation to 
Page 5 GAO-13-324R Status of GAO Recommendations to Treasury

the regulator when their views differ. These steps help ensure that applicants will receive 

consistent treatment in investment decisions across different regulators.

However, Treasury has not fully implemented other CPP-related recommendations. For 

example, to exit the CPP program, institutions must obtain approval from their primary 

regulator by demonstrating that they are financially strong enough to repay their CPP 

investments. To better ensure that similar institutions were being treated consistently, in 

October 2010, we recommended that Treasury direct OFS to periodically collect and review 

information on the analysis supporting regulators’ decisions on CPP repayment requests 

and provide feedback for regulators’ consideration.7 Although Treasury officials told us that 

they agree with the intent of our recommendation, they have not implemented this 

recommendation, citing concerns that this recommendation raises questions about how to 

balance the goals of consistency and respect for the regulators’ independence. Treasury 

also stated that it does not have access to confidential supervisory information that 

regulators may use in making repayment decisions, potentially limiting the information 

collection and review envisioned in our recommendation. But as we noted in our 2010 

report, the two regulators responsible for most CPP repayment requests at the time 

document their analysis in a manner similar to the way that regulators document the 

analysis they send to Treasury when recommending CPP applicants. As a result, we 

recommended that Treasury direct OFS to collect and review this type of documentation. In 

February 2012, Treasury told us that their strategy for winding down the program was 

developed after consultation with federal banking regulators and they continue to 

communicate with regulators as the unwinding proceeds. However, Treasury has not altered 

its previous position—that is, according to Treasury, banking law provides the primary 

regulator of each institution with the authority to make repayment decisions, and Treasury is 

therefore not in a position to dictate criteria that the regulators should use in making such

decisions. According to Treasury, any differences in the regulators’ repayment decisions 

reflect the division of authority within the banking regulatory structure. We continue to 

believe that collection and review of such information from the bank regulators on the 

analysis and conclusions supporting their decisions to allow repayment of CPP investments 

would improve Treasury’s monitoring of these decisions.

In addition, Treasury has not taken steps to better ensure clarity in its CPP performance 

reporting by providing separate information on institutions that remain in the program versus 

those that have already exited. In March 2012 we reported that the remaining CPP 

institutions were financially weaker than institutions that had exited the program and 

institutions that did not receive CPP capital.8

 

7

See GAO, Troubled Asset Relief Program: June 2009 Status of Efforts to Address Transparency and 

Accountability Issues, GAO-09-658 (Washington, D.C.: June 17, 2009), and GAO-11-47.

In particular, we noted that the remaining CPP 

institutions tended to be less profitable and hold riskier assets than other institutions of 

similar asset size. For example, the remaining CPP institutions had significantly lower 

returns on average assets and higher percentages of noncurrent loans than did former CPP 

and non-CPP institutions. They also held less regulatory capital and reserves for covering 

losses. Although our analysis found differences in the financial health of remaining and 

former CPP institutions, we noted that Treasury’s quarterly financial analysis of CPP 

institutions did not distinguish between them. By not distinguishing between remaining and 

former CPP participants, Treasury misses an opportunity to provide greater transparency 

about the financial health of institutions remaining in CPP; thus we recommended that 

Treasury consider analyzing and reporting on remaining and former CPP participants 

8

GAO, Capital Purchase Program: Revenues Have Exceeded Investments, but Concerns about Outstanding 

Investments Remain, GAO-12-301 (Washington, D.C.: Mar. 8, 2012).
Page 6 GAO-13-324R Status of GAO Recommendations to Treasury

separately. In response to our recommendation, Treasury stated that it would carefully 

consider our recommendation and emphasized its ongoing commitment to keep the public 

informed of its progress in winding down CPP. More recently, Treasury has been reporting 

generally on the results of its CPP auctions and the status of institutions remaining in the 

CPP program, but it has not yet considered analyzing and reporting on remaining and 

former CPP participants separately.

Continued Attention Needed on Recommendations to Improve the Transparency 

and Accountability of Housing Programs

Since 2009, we have made 21 recommendations aimed at improving MHA and other TARPfunded housing programs.9

• In 2010, we reported that Treasury had not clearly informed borrowers that the 

HOPE Hotline could be used to raise concerns about servicers’ handling of HAMP 

loan modifications and to challenge potentially incorrect denials, likely limiting the 

number of borrowers who have used the hotline for these purposes.

As of February 2013, Treasury has implemented 12 of these 21 

recommendations. Examples of the actions that Treasury has taken to implement these 

recommendations include the following:

10

• In 2012, we reported that Treasury had not consolidated state performance reports 

under the Housing Finance Agency Innovation Fund for the Hardest Hit Housing 

Markets (Hardest Hit Fund) into a single report that would enhance transparency and 

provide policymakers and the public with a clearer understanding of the program’s 

overall status.

Treasury said 

that it had taken a number of actions in response to this recommendation, including 

using a variety of channels to promote the HOPE Hotline to the public as a resource 

for borrowers with questions and problems about their HAMP application, trial period 

plan, or permanent modification. For example, the hotline number is published on 

Treasury's MHA website, featured in media campaigns, and used in talking points for 

borrower/counselor events and media interviews. Further, Treasury's MHA program 

guidelines now require that servicers include in notices to borrowers who have 

requested a HAMP loan modification the telephone number for the HOPE Hotline, 

together with information on obtaining free help from Department of Housing and 

Urban Development (HUD)-approved housing counselors and assistance in 

understanding the notices themselves.

11

 

9

See GAO, Troubled Asset Relief Program: Treasury Actions Needed to Make the Home Affordable Modification 

Program More Transparent and Accountable, GAO-09-837 (Washington, D.C.: July 23, 2009); Troubled Asset 

Relief Program: Further Actions Needed to Fully and Equitably Implement Foreclosure Mitigation Programs, 

GAO-10-634 (Washington, D.C.: June 24, 2010); Troubled Asset Relief Program: Actions Needed by Treasury to 

Address Challenges in Implementing Making Home Affordable Programs, GAO-11-338T (Washington, D.C.: 

Mar. 2, 2011); Troubled Asset Relief Program: Treasury Continues to Face Implementation Challenges and Data 

Weaknesses in Its Making Home Affordable Program, GAO-11-288 (Washington, D.C.: Mar. 17, 2011); and 

Troubled Asset Relief Program: Further Actions Needed to Enhance Assessments and Transparency of Housing 

Programs, GAO-12-783 (Washington, D.C.: July 19, 2012). Additionally, we reported on results of a survey we 

conducted of housing counselors as part of our oversight of Treasury’s MHA program implementation. See GAO, 

Troubled Asset Relief Program: Results of Housing Counselors Survey on Borrowers’ Experiences with the 

Home Affordable Modification Program, GAO-11-367R (Washington, D.C.: May 26, 2011) and corresponding esupplement, GAO-11-368SP. 

 Treasury published a consolidated report for the third quarter of 

10GAO-10-634. The HOPE Hotline is a 24-hour telephone line that provides borrowers with free foreclosure 

prevention information and counseling. Treasury’s program administrator for HAMP contracted with the HOPE 

Hotline to handle incoming borrower calls about HAMP.

11GAO-12-783. 
Page 7 GAO-13-324R Status of GAO Recommendations to Treasury

2012 that included quarterly totals of unique borrowers receiving assistance, 

assistance provided, and administrative expenses across all state programs as well 

as cumulative totals. 

Seven of the 21 recommendations related to TARP-funded housing programs remain open 

or only partially implemented. For example, we reported in March 2011 that the majority of 

servicers for which readiness reviews had been conducted had not provided all the 

documentation required to demonstrate that the key tasks needed to support the newer 

MHA programs were in place, and consequently recommended that Treasury ensure that 

these servicers have the operational capacity and infrastructure in place to successfully 

implement the newer MHA programs. Further, as part of our June 2012 review of 

foreclosure mitigation efforts across the federal government, we reported that Treasury and 

the Federal Housing Administration (FHA) had not revised estimates of participation and 

costs under the FHA Refinance for Borrowers in Negative Equity Positions despite low 

participation levels. Under this program, Treasury will use up to $8 billion in TARP funds to 

pay a portion of claims for defaulted mortgages after FHA has paid its portion of claims. With 

participation to date much lower than expected and future participation unknown, the costs 

to Treasury of maintaining the $8 billion letter of credit facility may not be justified. As of 

February 2013, Treasury has not demonstrated that it has fully implemented these 

recommendations. 

Finally, Treasury officials told us that Treasury was not planning to take actions to implement 

the remaining two TARP-funded housing program recommendations. One recommendation 

focused on the requirement that borrowers with debt-to-income ratios over 55 percent obtain 

counseling and the other pertained to the criteria for determining when a borrower was in 

imminent danger of default. For the counseling-related recommendation, Treasury officials 

indicated that it had taken some action but did not plan to fully implement it, stating that 

Treasury considered it to be too burdensome for it and servicers. As a result, Treasury has 

no data on the extent that borrowers are obtaining the required counseling or whether the 

counseling provision is having its intended effect of limiting borrower redefaults. Regarding 

the other recommendation, Treasury officials told us that they believe that servicers and 

investors are in the best position to determine whether a borrower is in imminent danger of 

default and therefore plan to take no action. However, the results of our prior work showed 

that there were notable differences between the criteria used by servicers that we contacted 

that would result in similarly situated borrowers being treated differently. 

Treasury Has Implemented Almost All of the Recommendations Addressing 

OFS’s Internal Controls over Financial Reporting

TARP is required to annually prepare and issue audited financial statements prepared in 

accordance with U.S. Generally Accepted Accounting Principles (GAAP).

12

 

12Section 116(b) of EESA, 12 U.S.C. § 5226(b).

GAO is required 

to annually audit these statements to determine if: (1) OFS's financial statements for TARP 

are fairly presented in all material respects as of and for the year ended September 30; (2) 

OFS's internal control over financial reporting is effective as of September 30; and (3) there 

are any reportable noncompliance with selected provisions of laws and regulations that we 

test.
Page 8 GAO-13-324R Status of GAO Recommendations to Treasury

We have performed four annual audits of TARP’s financial statements and found that the 

financial statements were presented fairly, in all material respects, in conformity with GAAP 

for fiscal years 2009 through 2012.13 In addition, we found that OFS maintained, in all 

material respects, effective internal control over financial reporting for fiscal years 2009 

through 2012. However, during the course of these financial statement audits, we found that 

certain internal controls over financial reporting could be improved. As of September 30, 

2012, we separately made 33 recommendations to OFS, which were mostly related to 

internal control issues related to its accounting and financial reporting process.14 Of the 33 

recommendations we made, OFS implemented 32 (see enclosure II). The one outstanding 

recommendation was made as part of our fiscal year 2010 financial statement audit and has 

been partially implemented. In this instance, we recommended that OFS establish a 

mechanism for ensuring effective reviews of documentation attached to its journal entries 

(an accounting record for recording financial transactions into the general ledger), including 

that the reviews assess whether the supporting documentation is sufficient and consistent 

with the journal entry before the entry is recorded in the general ledger. For this outstanding 

recommendation, we found during our audit of the fiscal year 2012 financial statements that 

OFS had not effectively confirmed that adequate supporting documentation was attached for 

certain types of journal entries, which increases the risk that erroneous journal entries may 

be recorded in the general ledger and therefore could misstate the financial statements. We 

will follow up on this matter again during our audit of the fiscal year 2013 financial 

statements to determine if OFS has completed all the actions needed to close this 

recommendation as implemented. 

Agency Comments and Our Evaluation

We provided Treasury a draft copy of this report for review and comment and we received 

written comments from the Assistant Secretary for Financial Stability, which are reprinted in 

enclosure III. In its written comments, Treasury agreed with our characterization of the 

progress Treasury has made implementing our recommendations to improve the 

accountability and transparency of TARP. Treasury also stated that it has had certain 

concerns regarding some open recommendations, including one related to CPP due to the 

need to respect regulators’ independence. As we state in the report, we continue to maintain

that by collecting and reviewing information on CPP repayment decisions from bank 

regulators Treasury can improve its monitoring of those decisions and that doing so would 

not compromise the regulators’ independence. Treasury further stated that it will continue to 

work to address our four recommendations that remain open. We will continue to evaluate 

information that Treasury provides about its progress implementing the remaining open 

recommendations. Treasury also provided technical comments that we have incorporated 

as appropriate.

_____________

 

13See GAO, Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) Fiscal Years 2012 and 

2011 Financial Statements, GAO-13-126R (Washington, D.C.: Nov. 9, 2012); Financial Audit: Office of Financial 

Stability (Troubled Asset Relief Program) Fiscal Years 2011 and 2010 Financial Statements, GAO-12-169 

(Washington, D.C.: Nov. 10, 2011); Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) 

Fiscal Years 2010 and 2009 Financial Statements, GAO-11-174 (Washington, D.C.: Nov. 15, 2010); and 

Financial Audit: Office of Financial Stability (Troubled Asset Relief Program) Fiscal Year 2009 Financial 

Statements, GAO-10-301 (Washington, D.C.: Dec. 9, 2009).

14GAO-12-415R, GAO-11-434R, and GAO-10-743R.
Page 9 GAO-13-324R Status of GAO Recommendations to Treasury

We are sending copies of this report to the appropriate congressional committees. This 

report will also be available at no charge on our web site at http://www.gao.gov. 

If you or your staffs have any questions about this report, please contact A. Nicole Clowers 

at (202) 512-8678 or clowersa@gao.gov for questions about nonmortgage-related TARP 

programs, or Mathew Scire at (202) 512-8678 or sciremj@gao.gov for questions about 

mortgage-related TARP programs. Contact points for our Offices of Congressional Relations 

and Public Affairs may be found on the last page of this report. Key contributors to this 

report are listed in enclosure IV.

A. Nicole Clowers 

Director

Financial Markets and

 Community Investment

Mathew J. Scirè

Director

Financial Markets and

 Community Investment

Enclosures
Page 10 GAO-13-324R Status of GAO Recommendations to Treasury

List of Congressional Committees

The Honorable Barbara Mikulski 

Chairwoman 

The Honorable Richard C. Shelby 

Vice Chairman 

Committee on Appropriations 

United States Senate

The Honorable Tim Johnson 

Chairman 

The Honorable Mike Crapo 

Ranking Member 

Committee on Banking, Housing, and Urban Affairs 

United States Senate

The Honorable Patty Murray

Chairman 

The Honorable Jeff Sessions 

Ranking Member 

Committee on the Budget 

United States Senate

The Honorable Max Baucus

Chairman 

The Honorable Orrin G. Hatch 

Ranking Member 

Committee on Finance 

United States Senate

The Honorable Hal Rogers 

Chairman 

The Honorable Nita Lowey 

Ranking Member 

Committee on Appropriations 

House of Representatives

The Honorable Paul Ryan

Chairman

The Honorable Chris Van Hollen

Ranking Member 

Committee on the Budget 

House of Representatives

The Honorable Jeb Hensarling 

Chairman 

The Honorable Maxine Waters 

Ranking Member 

Committee on Financial Services 

House of Representatives

The Honorable Dave Camp 
Page 11 GAO-13-324R Status of GAO Recommendations to Treasury

Chairman 

The Honorable Sander Levin 

Ranking Member 

Committee on Ways and Means

House of Representative
Page 12 GAO-13-324R Status of GAO Recommendations to Treasury

Enclosure I 

Status of Troubled Asset Relief Program (TARP) Performance Audit 

Recommendations, as of February 2013

The following table summarizes the status of our TARP performance audit 

recommendations as of February 2013. We classify each recommendation as implemented, 

partially implemented (the agency took steps to implement the recommendation but more 

work remains), open (the agency has not taken steps to implement the recommendation), 

and closed, not implemented (the agency decided not to take action to implement the 

recommendation). The recommendations are listed by report.

Table 1: GAO Performance Audit Recommendations, February 2013

GAO recommendations Status 

Troubled Asset Relief Program: Additional Actions Needed to Better Ensure 

Integrity, Accountability, and Transparency: GAO-09-161, December 2, 2008

Work with the bank regulators to establish a systematic means of determining and 

reporting in a timely manner whether financial institutions’ activities are generally 

consistent with the purposes of the Capital Purchase Program (CPP) and help ensure 

an appropriate level of accountability and transparency. 

Implemented 

Develop a means to ensure that institutions participating in CPP comply with key 

program requirements (for example, executive compensation, dividend payments, and 

the repurchase of stock). 

Implemented 

Formalize the existing communication strategy to ensure that external stakeholders, 

including Congress, are informed about the program’s current strategy and activities 

and understand the rationale for changes in this strategy to avoid information gaps and 

surprises. 

Implemented 

Facilitate a smooth transition to the new administration by building on and formalizing 

ongoing activities, including ensuring that key Office of Financial Stability (OFS) 

leadership positions are filled during and after the transition. 

Implemented 

Expedite OFS’s hiring efforts to ensure that the Department of the Treasury (Treasury) 

has the personnel needed to carry out and oversee the Troubled Asset Relief Program 

(TARP). 

Implemented 

Ensure that sufficient personnel are assigned and properly trained to oversee the 

performance of all contractors, especially for contracts priced on a time-and-materials 

basis, and move toward fixed-price arrangements whenever possible. 

Implemented 

Continue to develop a comprehensive system of internal control over TARP, including 

policies, procedures, and guidance that are robust enough to protect taxpayers’ 

interests and ensure that the program objectives are being met. 

Implemented 

Issue final regulations on conflicts of interest involving Treasury’s agents, contractors, 

and their employees and related entities as expeditiously as possible and review and 

renegotiate mitigation plans, as necessary, to enhance specificity and compliance with 

the new regulations once they are issued. 

Implemented 

Institute a system to effectively manage and monitor the mitigation of conflicts of 

interest. 

Implemented 

Troubled Asset Relief Program: Status of Efforts to Address Transparency and 

Accountability Issues: GAO-09-296, January 30, 2009

Expand the scope of planned monthly CPP surveys to include collecting at least some 

information from all institutions participating in the program. 

Implemented 

Ensure that future CPP agreements include a mechanism that will better enable 

Treasury to track the use of the capital infusions and seek to obtain similar information 

from existing CPP participants. 

Implemented 

Establish a process to ensure compliance with all CPP requirements, including those 

associated with limitations on dividends and stock repurchase restrictions. 

Implemented 
Page 13 GAO-13-324R Status of GAO Recommendations to Treasury

GAO recommendations Status 

Communicate a clearly articulated vision for TARP and show how all individual 

programs are intended to work in concert to achieve that vision. This vision should 

incorporate actions to preserve homeownership. Once this vision is clearly articulated, 

Treasury should document needed skills and competencies. 

Implemented 

Continue to expeditiously hire personnel needed to carry out and oversee TARP. Implemented 

Expedite efforts to ensure that sufficient personnel are assigned and properly trained to 

oversee the performance of all contractors, especially for contracts priced on a timeand-materials basis, and move toward fixed-price arrangements whenever possible as 

program requirements are better defined over time. 

Implemented 

Develop a comprehensive system of internal control over TARP activities, including 

policies, procedures, and guidance that are robust enough to ensure that the program’s 

objectives and requirements are met. 

Implemented 

Develop and implement a well-defined and disciplined risk-assessment process, as 

such a process is essential to monitoring program status and identifying any risks of 

potential inadequate funding of announced programs. 

Implemented 

Review and renegotiate existing conflict-of-interest mitigation plans, as necessary, to 

enhance specificity and conformity with the new interim conflicts of interest regulation, 

and take continued steps to manage and monitor conflicts of interest and enforce 

mitigation plans. 

Implemented 

Troubled Asset Relief Program: March 2009 Status of Efforts to Address 

Transparency and Accountability Issues: GAO-09-504, March 31, 2009

Develop a communication strategy that includes building an understanding and support 

for the various components of the program. Specific actions could include hiring a 

communications officer, integrating communications into TARP operations, scheduling 

regular and ongoing contact with congressional committees and members, 

holding town hall meetings with the public across the country, establishing a counsel of 

advisors, and leveraging available technology. 

Implemented 

Require that American International Group, Inc. (AIG) seek concessions from 

stakeholders, such as management, employees, and counterparties, including seeking 

to renegotiate existing contracts, as appropriate, as it finalizes the agreement for 

additional assistance. 

Closed, not 

implemented 

Update OFS documentation of certain internal control procedures and the guidance 

available to the public on determining warrant exercise prices to be consistent with 

actual practices applied by OFS. 

Implemented 

Improve transparency pertaining to TARP program activities by reporting publicly the 

monies, such as dividends, paid to Treasury by TARP participants. 

Implemented 

Complete the review of, and as necessary renegotiate, the four existing vendor 

conflicts-of-interest mitigation plans to enhance specificity and conformity with the new 

interim conflicts-of-interest rule. 

Implemented 

Issue guidance requiring that key communications and decisions concerning potential 

or actual vendor-related conflicts of interest be documented. 

Implemented 

Troubled Asset Relief Program: June 2009 Status of Efforts to Address 

Transparency and Accountability Issues: GAO-09-658, June 17, 2009

Ensure that the warrant valuation process maximizes benefits to taxpayers and 

consider publicly disclosing additional details regarding the warrant repurchase 

process, such as the initial price offered by the issuing entity and Treasury’s 

independent valuations, to demonstrate Treasury’s attempts to maximize the benefit 

received for the warrants on behalf of the taxpayer. 

Implemented 

In consultation with the Chairmen of the Federal Deposit Insurance Corporation (FDIC) 

and the Chairman of the Board of Governors of the Federal Reserve System (Federal 

Reserve), the Comptroller of the Currency, and the Acting Director of the Office of Thrift 

Supervision, ensure consideration of generally consistent criteria by the primary federal 

regulators when considering repurchase decisions under TARP. 

(Note: The Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated the 

Office of Thrift Supervision.)

Open 

Fully implement a communication strategy that ensures that all key congressional 

stakeholders are adequately informed and kept up to date about TARP. 

Implemented 

Expedite efforts to conduct usability testing to measure the quality of users’ experiences 

with the financial stability website and measure customer satisfaction with the site, 

using appropriate tools such as online surveys, focus groups, and e-mail feedback 

forms. 

Implemented 

Explore options for providing to the public more detailed information on the costs of 

TARP contracts and agreements, such as a dollar breakdown of obligations and/or 

expenses. 

Implemented 
Page 14 GAO-13-324R Status of GAO Recommendations to Treasury

GAO recommendations Status 

To help improve the transparency of the Capital Assistance Program (CAP)—in 

particular the stress tests results—we recommend that the Director of Supervision and 

Regulation of the Federal Reserve consider periodically disclosing to the public the 

aggregate performance of the largest 19 U.S. bank holding companies against the more 

adverse scenario forecast numbers for the duration of the 2-year forecast period and 

whether or not the scenario needs to be revised. At a minimum, the Federal Reserve 

should provide the aggregate performance data to OFS program staff for any of the 19 

institutions participating in CAP or CPP. 

Implementeda 

Troubled Asset Relief Program: Treasury Actions Needed to Make the Home 

Affordable Modification Program More Transparent and Accountable: GAO-09-

837, July 23, 2009

Consider methods of monitoring whether borrowers with total household debt of more 

than 55 percent of their income who have been told that they must obtain housing 

counseling do so, and assess how this counseling affects the performance of modified 

loans to see if the requirement is having its intended effect of limiting redefaults. 

Closed, not 

implemented 

Reevaluate the basis and design of the Home Price Decline Protection (HPDP) 

program to ensure that Home Affordable Modification Program (HAMP) funds are being 

used efficiently to maximize the number of borrowers who are helped under HAMP and 

to maximize overall benefits of utilizing taxpayer dollars. 

Implemented 

Institute a system to routinely review and update key assumptions and projections 

about the housing market and the behavior of mortgage holders, borrowers, and 

servicers that underlie Treasury’s projection of the number of borrowers whose loans 

are likely to be modified under HAMP and revise the projection as necessary in order to 

assess the program’s effectiveness and structure. 

Implemented 

Place a high priority on fully staffing vacant positions in the Homeownership 

Preservation Office (HPO)—including filling the position of Chief Homeownership 

Preservation Officer with a permanent placement—and evaluate HPO’s staffing levels 

and competencies to determine whether they are sufficient and appropriate to 

effectively fulfill its HAMP governance responsibilities. 

Partially 

implemented 

Expeditiously finalize a comprehensive system of internal control over HAMP, including 

policies, procedures, and guidance for program activities, to ensure that the interests of 

both the government and taxpayer are protected and that the program objectives and 

requirements are being met once loan modifications and incentive payments begin. 

Implemented 

Expeditiously develop a means of systematically assessing servicers’ capacity to meet 

program requirements during program admission so that Treasury can understand and 

address any risks associated with individual servicers’ abilities to fulfill program 

requirements, including those related to data reporting and collection. 

Implemented 

Troubled Asset Relief Program: One Year Later, Actions Are Needed to Address 

Remaining Transparency and Accountability Challenges: GAO-10-16, October 8, 

2009

Consider TARP in a broad market context, and as part of determining whether to 

extend TARP, work with the Chairmen of the Federal Reserve and Federal Deposit 

Insurance Corporation (FDIC) to develop a coordinated framework and analytical basis 

to determine whether an extension is needed. And if so, clearly spell out what 

objectives and measures of any extended programs would be, along with anticipated 

costs and safeguards. 

Implemented 

Document its analytical decision-making process and clearly communicate the results 

to Congress and the American people for determining whether an extension is needed. 

Implemented 

Update its projected use of funds and if the program is extended, continue to reevaluate them on a periodic basis. Implemented 

Relief Program: Continued Stewardship Needed as Treasury Develops Strategies 

for Monitoring and Divesting Financial Interests in Chrysler and GM: GAO-10-151, 

November 2, 2009

Ensure that Treasury has the expertise needed to adequately monitor and divest the 

government’s investment in Chrysler Group LLC (Chrysler) and General Motors 

Company (GM), and obtain needed expertise in areas where gaps are identified (either 

through in-house or external means). 

Implemented 

Report to Congress on Treasury’s plans to assess and monitor the auto companies’ 

performance and ability to repay their loans. When reporting, balance the need for 

transparency with need to protect proprietary information. 

Implemented 

Develop criteria for evaluating the optimal method and timing for divesting the 

government’s ownership stake in Chrysler and GM, including evaluating the full range 

of available options, such as initial public offerings or private sales. 

Implemented 

Troubled Asset Relief Program: Treasury Needs to Strengthen Its Decision-
Page 15 GAO-13-324R Status of GAO Recommendations to Treasury

GAO recommendations Status 

Making Process on the Term Asset-Backed Securities Loan Facility: GAO-10-25, 

February 5, 2010

To enable GAO to audit TARP support for the Term Asset-Backed Securities Loan 

Facility (TALF) most effectively, Congress may wish to provide GAO with audit authority 

over all Federal Reserve operational and administrative actions taken with respect to 

TALF, together with appropriate access authority. 

Implementedb 

To improve transparency of decision making on the use of TARP funds for TALF and to 

ensure adequate monitoring of risks related to TALF collateral, given the distressed 

conditions in the commercial real estate market, as part of its ongoing monitoring of 

TALF collateral, the Secretary of the Treasury should direct OFS to continue to give 

greater attention to reviewing risks posed by commercial mortgage-backed securities. 

Implemented 

To improve transparency of decision making on the use of TARP funds for TALF and to 

ensure adequate monitoring of risks related to TALF collateral, the Secretary of the 

Treasury should direct OFS to strengthen the process for making major program 

decisions for TALF and document how it arrives at final decisions with the Federal 

Reserve and the Federal Reserve Bank of New York (FRBNY). Such decisions should 

include how Treasury considers expert and contractor recommendations and resolves 

those recommendations that differ from those of the Federal Reserve and FRBNY. 

Implemented 

To improve transparency of decision making on the use of TARP funds for TALF and to 

ensure adequate monitoring of risks related to TALF collateral, the Secretary of the 

Treasury should direct OFS to conduct a review of what data to track and metrics to 

disclose to the public in the event that TALF LLC purchases surrendered assets from 

FRBNY. Such data and metrics should relate to the purchase, management, and sale 

of assets in TALF LLC that potentially impact TARP funds. Metrics related to TALF LLC 

could include periodic reports on the date and purchase price of assets; fluctuations in 

the market value of assets held; the date, price, and rationale when assets are sold; 

and the total amount of loans outstanding to Treasury. 

Implemented 

Troubled Asset Relief Program: Further Actions Needed to Fully and Equitably 

Implement Foreclosure Mitigation Programs: GAO-10-634, June 24, 2010

Expeditiously establish clear and specific criteria for determining whether a borrower is 

in imminent default to ensure greater consistency across servicers. 

Closed, not 

implemented 

Expeditiously develop additional guidance for servicers on their quality assurance 

programs for HAMP, including greater specificity on how to categorize loans for 

sampling and what servicers should be evaluating in their reviews. 

Implemented 

Expeditiously specify which complaints servicers should track to ensure consistency 

and to facilitate program oversight and compliance. 

Implemented 

Expeditiously more clearly inform borrowers that the HOPE Hotline may also be used if 

they are having difficulty with their HAMP application or servicer or feel that they have 

been incorrectly denied HAMP, monitor the effectiveness of the HOPE Hotline as an 

escalation process for handling borrower concerns about potentially incorrect HAMP 

denials, and develop an improved escalation mechanism if the HOPE Hotline is not 

sufficiently effective. 

Implemented 

Expeditiously finalize and issue consequences for servicer noncompliance with HAMP 

requirements as soon as possible. 

Implemented 

Expeditiously report activity under the principal reduction program, including the extent 

to which servicers determined that principal reduction was beneficial to investors but did 

not offer it, to ensure transparency in the implementation of this program feature across 

servicers. 

Partially 

implemented 

Expeditiously finalize and implement benchmarks for performance measures under the 

first-lien modification program, as well as develop measures and benchmarks for the 

recently announced TARP-funded homeowner assistance programs. 

Partially 

implemented 

Expeditiously implement a prudent design for remaining TARP-funded housing 

programs. 

Partially 

implemented 

Troubled Asset Relief Program: Treasury’s Framework for Deciding to Extend 

TARP Was Sufficient, but Could Be Strengthened for Future Decisions: GAO-10-

531, June 30, 2010

Formalize and document coordination with the Chairman of the FDIC for decisions 

associated with the expiration of TARP (1) by including the Chairman at relevant 

Financial Stability Oversight Board (FinSOB) meetings, (2) through formal bilateral 

meetings, or (3) by utilizing other forums that accommodate more structured dialogue. 

Closed, not 

implementedc

Publicly identify clear program objectives, the expected impact of programs, and the 

level of additional resources needed to meet those objectives. Treasury should set 

quantitative program objectives for its small business lending programs and identify any 

additional data needed to make program decisions. 

Partially 

implemented 
Page 16 GAO-13-324R Status of GAO Recommendations to Treasury

GAO recommendations Status 

Troubled Asset Relief Program: Bank Stress Test Offers Lessons as Regulators 

Take Further Actions to Strengthen Supervisory Oversight: GAO-10-861, 

September 29, 2010

To gain a better understanding of the Supervisory Capital Assistance Program (SCAP) 

and inform the use of similar stress tests in the future, the Federal Reserve should 

compare the performance of the 19 largest bank holding companies against the more 

adverse scenario projections following the completion of the 2-year period covered in 

the SCAP stress test ending December 31, 2010, and disclose the results of the 

analysis to the public. 

Opena 

The Federal Reserve, in consultation with the other banking regulators, should develop 

a plan that reconciles the divergent views on transparency and allows for increased 

transparency in the regular supervisory process. Such a plan should, at a minimum, 

outline steps for releasing supervisory methodologies and analytical results for stress 

testing. 

Opena 

The Federal Reserve, in consultation with the other banking regulators, should develop 

more specific criteria to include in its guidance to examiners for assessing the quality of 

stress tests and how these tests inform bank holding companies’ capital adequacy 

planning. These guidelines should clarify the stress testing procedures already 

incorporated into banking regulations and incorporate lessons learned from SCAP. 

Opena 

The Federal Reserve, in consultation with the other banking regulators, should fully 

develop its plan for maintaining and improving the use of data, risk identification and 

assessment infrastructure, and requisite systems in implementing its supervisory 

functions and new responsibilities under the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act). This plan should also ensure the 

dissemination of these enhancements throughout the Federal Reserve System and 

other financial regulators, as well as new organizations established in the Dodd-Frank 

Act. 

Opena 

The Federal Reserve, in consultation with the other banking regulators, should take 

further steps to more effectively coordinate and communicate among the banking 

regulators, including that all applicable agencies are included in discussions and 

decisions regarding multiagency activities, such as horizontal examinations of financial 

institutions. 

Opena 

Troubled Asset Relief Program: Opportunities Exist to Apply Lessons Learned 

from the Capital Purchase Program to Similarly Designed Programs and to 

Improve the Repayment Process: GAO-11-47, October 4, 2010 

Apply lessons learned from the implementation of CPP to similar programs, such as 

Small business Lending Fund (SBLF), and enhance procedural controls for addressing 

the risk of inconsistency in regulators’ decisions on withdrawals. Specifically, establish a 

process for collecting information from federal bank regulators on all applicants that 

withdraw from consideration in response to a regulator’s recommendation, including the 

reasons behind the recommendation. Evaluate the information to identify trends or 

patterns that may indicate whether similar applicants were treated inconsistently across 

different regulators and take action, if necessary, to help ensure a more consistent 

treatment. 

Implemented 

Periodically collect and review certain information from federal bank regulators on the 

analysis and conclusions supporting their decisions on CPP repayment requests and 

provide feedback for the regulators’ consideration on the extent to which regulators are 

evaluating similar institutions consistently. 

Partially 

implemented

Troubled Asset Relief Program: Status of Programs and Implementation of GAO 

Recommendations: GAO-11-74, January 12, 2011

OFS should finalize a plan for addressing how it will manage its workforce, in particular 

term-appointed employees and key Senior Executive Service (SES) positions, including 

plans for various staffing scenarios. 

Implemented 

Troubled Asset Relief Program: Treasury Continues to Face Implementation 

Challenges and Data Weaknesses in Its Making Home Affordable Program: GAO11-288, March 17, 2011

Require servicers to advise borrowers to notify their second-lien servicers once a first 

lien has been modified under HAMP to reduce the risk that borrowers with modified first 

liens are not captured in the Lender Processing Services (LPS) matching database and, 

therefore, are not offered second-lien modifications. 

Implemented

Ensure that servicers demonstrate they have the operational capacity and infrastructure 

in place to successfully implement the requirements of the Second-Lien Modification 

(2MP), Home Affordable Foreclosure Alternatives (HAFA), and Principal Reduction 

Alternative (PRA) programs. 

Partially 

implemented
Page 17 GAO-13-324R Status of GAO Recommendations to Treasury

GAO recommendations Status 

Consider methods for better capturing outcomes for borrowers who are denied, 

cancelled, or redefaulted from HAMP, including more accurately reflecting what actions 

are completed or pending and allowing for the reporting of multiple concurrent 

outcomes, in order to determine whether borrowers are receiving effective assistance 

outside of HAMP and whether additional actions may be needed to assist them. 

Implemented 

Troubled Asset Relief Program: Further Actions Needed to Enhance 

Assessments and Transparency of Housing Programs: GAO-12-783, July 19, 2012

Treasury should expeditiously conduct a comprehensive risk assessment of HAMP Tier 

2, using the standards for internal control in the federal government as a guide.

Open 

Treasury should develop activity-level performance measures and benchmarks related 

to the HAMP Tier 2 program.

Implemented

Treasury should consolidate the state performance reports and financial reports, 

including administrative expenses, into a single Hardest Hit Fund report to provide 

policymakers and the public with the overall status of the program as well as the relative 

status and performance of the states’ efforts.

Implemented

Foreclosure Mitigation: Agencies Could Improve Effectiveness of Federal Efforts 

with Additional Data Collection and Analysis: GAO-12-296, June 28, 2012

Treasury and Federal Housing Administration (FHA) should update their estimates of 

participation in the FHA Short Refinance program given current participation rates and 

recent changes to the program. Treasury should then use these updated estimates to 

reassess the terms of the letter of credit facility and consider seeking modifications in 

order to help ensure that it meets Treasury’s needs cost-effectively.

Open

Capital Purchase Program: Revenues Have Exceeded Investments, but Concerns 

about Outstanding Investments Remain: GAO-12-301, March 8, 2012

The Secretary of the Treasury should consider analyzing and reporting on remaining 

and former CPP participants separately.

Open

Troubled Asset Relief Program: As Treasury Continues to Exit Programs, 

Opportunities to Enhance Communication on Costs Exist: GAO-12-229, January 

9, 2012

That the Secretary of the Treasury enhance Treasury’s communications with the public, 

in particular Treasury’s press releases, about TARP programs and costs by consistently 

including information on estimated lifetime costs, especially when reporting on program 

results. For example, Treasury should consider including lifetime cost estimates, or 

references to Treasury reports that include such information, in its press releases about 

specific programs.

Implemented

Source: GAO. 

Notes: This table includes only recommendations made to Treasury and the Board of Governors of the Federal 

Reserve System. Thus, it does not include a recommendation directed at the Secretary of Labor, along with a 

matter for congressional consideration, from the TARP report on Automotive Industry Financing Program (AIFP) 

(GAO-11-471). 

a

These recommendations were made to the Board of Governors of the Federal Reserve System. 

b

This is a matter for congressional consideration related to the TALF program.

c

Treasury has taken some action on this recommendation, but the action did not fully address the scope or timing

of the recommendation.
Page 18 GAO-13-324R Status of GAO Recommendations to Treasury

Enclosure II

Status of Troubled Asset Relief Program (TARP) Financial Audit Recommendations, 

as of February 2013

The following table summarizes the status of TARP financial audit recommendations that we 

have made as of February 2013. We classify each recommendation as either implemented, 

partially implemented (the agency took steps to implement the recommendation but more 

work remains), open (the agency has not taken steps to implement the recommendation), or

closed, not implemented (the agency decided not to take action to implement the 

recommendation). The recommendations are listed by report.

Table 2: GAO Financial Audit Recommendations, February 2013

GAO recommendations Status 

Management Report: Improvements Are Needed in Internal Control Over 

Financial Reporting for the Troubled Asset Relief Program: GAO-10-743R, June 

30, 2010 

Establish a mechanism for the effective implementation of the review and approval 

process for preparing the year-end financial statements and related disclosures, 

including management discussion and analysis, for TARP.

Implemented 

Develop and implement written procedures for identifying and evaluating modifications 

of direct loans, equity investments, and asset guarantees, to include: specific roles and 

responsibilities, criteria to identify modifications, documentation of management review 

and approval, and documentation of Office of Management and Budget approval of the 

modification subsidy cost estimate.

Implemented 

Finalize and implement OFS’s draft written procedures for identifying and evaluating 

any subsequent events that could have an effect on asset valuations and related 

disclosures.

Implemented 

Develop and implement written procedures for tracking the resolution of independent 

verification and validation findings related to OFS’s economic and financial models used 

for valuing TARP direct loans, equity investments, and asset guarantees.

Implemented 

Update existing procedures to include procedures for identifying and resolving 

economic and financial model error and warning messages, including requirements to 

maintain appropriate supporting documentation regarding the resolution of such 

instances.

Implemented 

Update OFS’s asset valuation procedures to include specific requirements for 

documenting the basis of economic and financial model assumption values derived 

from informed opinion (judgment) consistent with Federal Accounting Standards 

Advisory Board Technical Release 6.

Implemented 

Develop and implement written procedures for presenting income from direct loans and 

trust preferred securities in the Statement of Net Cost.

Implemented 

Develop and implement written procedures for identifying any year-end dividends 

declared but unpaid to OFS from TARP participants.

Implemented

Develop and implement written procedures for disclosing accrued interest receivable, 

dividends declared but unpaid, and, if applicable, distributions receivable from trust 

preferred securities in OFS’s financial statements for TARP.

Implemented 

Finalize and implement procedures for the preparation of the year-end financial 

statements to include all key preparation processes.

Implemented 

Develop and implement, as part of OFS’s oversight and monitoring activities, written 

procedures detailing steps to effectively oversee and determine the reasonableness of 

data provided by external asset managers, prior to the use of such data.

Implemented 

Develop and implement written procedures to document the rationale for established 

thresholds used in determining whether to investigate differences between the asset 

manager valuations and OFS’s internally developed asset valuations.

Implemented 
Page 19 GAO-13-324R Status of GAO Recommendations to Treasury

GAO recommendations Status 

Develop and implement written procedures detailing steps to be performed in 

overseeing and monitoring OFS’s financial agents, Federal National Mortgage 

Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie 

Mac), including internal controls over the existence and completeness of loan data used 

in the determination of the HAMP liability.

Implemented 

Develop written procedures for periodically estimating the HAMP liability. Implemented 

Develop and implement procedures to segregate the responsibilities for recording, 

approving, and reconciling information maintained in the accounting database used by 

OFS in the asset valuation process.

Implemented 

Enhance and implement specific written procedures to verify data inputs, including 

manual inputs, used in the economic and financial models for the valuation of TARP 

direct loans, equity investments, and asset guarantees, and help ensure that such 

verification is clearly documented.

Implemented 

Assess manual inputs used in the economic and financial models for the valuation of 

TARP direct loans, equity investments, and asset guarantees to determine the 

feasibility of reducing the number of manual inputs.

Implemented 

Develop, document, and implement a mechanism to track the location of executed 

agreements.

Implemented 

Develop and implement written procedures specifying detailed steps to be followed to 

reasonably ensure that warrant adjustments are properly recorded in the accounting 

database OFS uses for valuing TARP assets.

Implemented 

Establish procedures to effectively monitor the documentation of reconciliations of key 

documents related to disbursements to and refunds from The Bank of New York Mellon 

as prescribed in OFS’s written procedures.

Implemented 

Management Report: Improvements Are Needed in Internal Control Over 

Financial Reporting for the Troubled Asset Relief Program: GAO-11-434R, April

18, 2011

Establish a mechanism for ensuring that OFS personnel follow prescribed policies and 

procedures for (1) documenting execution of its OMB Circular No. A-123, 

Management’s Responsibility for Internal Control (A-123) process and thereby ensuring 

consistency among its A-123 documentation, existing policies and procedures, and 

actual practices executed by OFS personnel; and (2) performing testing on the 

operating effectiveness of OFS’s key internal controls in accordance with its A-123-

related policies and procedures.

Implemented 

Establish a mechanism for ensuring (1) that only those individuals specifically 

designated in OFS’s policies and procedures to review and approve period-end 

reconciliations conduct such procedures and (2) effective review of period-end 

reconciliations by the designated official.

Implemented 

Establish a mechanism for ensuring effective reviews of documentation attached to 

journal entries, including ensuring such reviews assess whether the supporting 

documentation is sufficient and consistent with the journal entry before such entries are 

recorded in the general ledger.

Partially 

implemented. 

Establish a mechanism for ensuring that changes to the assumptions used in the 

economic and financial models, and to data used in the models, are properly 

documented in accordance with OFS policies and procedures.

Implemented 

Establish a mechanism for ensuring that the economic and financial models are 

accurately updated to reflect any changes made to the data and/or assumptions used in 

the models in accordance with OFS policies and procedures.

Implemented 

Establish a mechanism for ensuring that changes in OFS’s Automotive Industry 

Financing Program (AIFP) valuation methodology, including the rationale for the 

changes, are documented in accordance with OFS policies and procedures.

Implemented 

Establish a mechanism for ensuring that asset valuations for certain direct loan and 

equity investment programs only reflect amounts outstanding as of fiscal year end in 

accordance with Statement of Federal Financial Accounting Standards No. 2, 

Accounting for Direct Loans and Loan Guarantees.

Implemented 

Establish a mechanism for ensuring that any housing program issues discussed at the 

OFS Compliance Committee meetings, which could have a financial statement impact, 

are sufficiently communicated to all applicable officials in OFS within 2 days as 

specified in the HAMP Compliance Committee charter.

Implemented 

Verify that the accrual calculated by IR2 (housing program system) appropriately 

accounts for mortgages which have reached their maximum incentive payment 

amounts.

Implemented 

Management Report: Improvements Are Needed in Internal Control over Financial 

Reporting for the Troubled Asset Relief Program: GAO-12-415R, February 13, 
Page 20 GAO-13-324R Status of GAO Recommendations to Treasury

GAO recommendations Status 

2012 

Revise OFS’s procedures related to recording and review of noncash transactions, to 

include requirements for the individual performing the quarterly noncash transactions 

analysis to provide adequate supporting documentation for the entire analysis and for 

the reviewer to review this information along with the entire Noncash Transaction 

Report to ensure that all necessary noncash transactions are identified and properly 

recorded in the general ledger.

Implemented 

Establish a mechanism for the effective implementation of the review process for 

recording warrant adjustments.

Implemented 

Develop and implement written procedures to provide reasonable assurance that Public 

Private Investment Funds equity distributions are properly recorded in the general 

ledger in accordance with OFS’s adopted accounting methodology.

Implemented 

Establish procedures for coordinating with the Treasury Chief Information Officer to 

ensure the timely installation of patches to the Core Information Transaction Flow 

System.

Implemented 

Source: GAO.
Page 21 GAO-13-324R Status of GAO Recommendations to Treasury

Enclosure III

Comments from the Department of the Treasury
Page 22 GAO-13-324R Status of GAO Recommendations to Treasury

Enclosure IV 

GAO Contact and Staff Acknowledgments 

GAO Contacts 

A. Nicole Clowers, (202) 512-8678 or clowersa@gao.gov 

Mathew J. Scire, (202) 512-8678 or sciremj@gao.gov 

Staff Acknowledgments 

In addition to the contacts named above, Lynda Downing, Harry Medina, Raymond 

Sendejas, and Karen Tremba (Assistant Directors), along with Kevin Averyt, Don Brown, 

Emily Chalmers, John Forrester, Christopher Forys, John Lord, and Marc Molino made 

key contributions to this report.

(250700)
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