To determine the nature and purpose of TARP activities from January 30, 2009, through March 27, 2009, unless noted, and the status of actions taken in response to our recommendations from our prior reports, we reviewed documents from OFS that described the amounts, types, and terms of Treasury’s purchases of preferred stocks and warrants under the Capital Purchase Program (CPP), the Systemically Significant Failing Institutions Program (SSFI), the Automotive Industry Financing Program (AIFP), the Targeted Investment Program (TIP), the Capital Assistance Program (CAP), and the Term Asset-Backed Securities Loan Facility (TALF). We also reviewed documentation and interviewed officials from OFS responsible for selecting financial institutions to participate in CPP. Additionally, we contacted officials from the four federal banking regulators—the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve), and the Office of Thrift Supervision (OTS)—to obtain information on their process for reviewing CPP applications, the status of pending applications, and their examination process for reviewing uses of CPP funds and compliance with TARP requirements. Also, we have developed an approach to determine the extent to which the review and approval process for CPP applications has been consistently applied across financial institutions. Specifically, we have collected documentation supporting all funding decisions for the period covering October 28, 2008, through January 31, 2009, and are in the process of reviewing these decisions. For SSFI and TALF, we reviewed program revisions and agreements, as appropriate, and contacted officials from OFS. To describe Treasury’s efforts to preserve homeownership, we reviewed announcements, fact sheets, and program guidelines issued by Treasury and held meetings to discuss these documents with OFS. To describe how Treasury estimated the cost of the loan modification program and the number of borrowers it expected to reach, we reviewed written explanations of OFS’s projections. To discuss the cross-agency effort to design and plan the implementation of the loan modification program, we reviewed Financial Agent Agreements that Treasury executed with Fannie Mae and Freddie Mac, and met with representatives of Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency (FHFA), Federal Housing Administration (FHA), OCC, and OTS. To assess the progress of OFS’s hiring efforts, we reviewed OFS’s workforce planning documents, updated organizational chart, and OFS job announcements posted on USAJOBS. To assess its performance, we reviewed our prior work on human capital flexibilities, organizational transformation, and strategic workforce planning. In addition, we met with a variety of Treasury and OFS officials to discuss their approach to staffing the office in the near and long terms and their strategies for recruiting qualified individuals. We also discussed Treasury’s efforts to coordinate its recruitment and hiring efforts, including its use of human capital flexibilities, with officials from the Office of Personnel Management (OPM). To assess OFS’s use of contractors and financial agents to support TARP administration and operation for the period of January 21 through March 13, 2009, we reviewed information from Treasury for new (1) contracts and financial agency agreements and (2) task orders, modifications, and amendments involving ongoing contracts and financial agency agreements. We also identified any small and/or disadvantaged business contractors or subcontractors providing TARP services and supplies. To obtain information concerning (1) the progress of ongoing actions taken by OFS and Treasury in response to our recommendation to improve oversight of TARP contractors and financial agents and (2) OFS’s reliance on contractors and financial agents to perform a range of professional and financial services in support of key TARP programs, we reviewed applicable documents and interviewed officials from Treasury and two TARP contractors and one financial agent. To assess OFS’s progress responding to our recommendation for addressing potential conflicts of interest for new contractors and financial agents, we reviewed solicitation and contract documentation describing organizational and personal conflicts-of-interest issues and mitigation plans to address those issues. We interviewed officials and senior managers from Treasury and the TARP contractors and financial agent to obtain information on OFS’s and contractor’s policies and processes to ensure compliance with TARP conflicts of interest requirements. To assess the status of internal controls related to TARP activities and the status of TARP’s consideration of accounting and reporting topics, we reviewed documents provided by OFS and conducted interviews and made inquiries with officials from OFS, including the Chief Financial Officer, Deputy Chief Financial Officer, Cash Management Officer, Director of Internal Controls, and their representatives. Additionally, we made inquiries with contractor personnel, including PricewaterhouseCoopers. To evaluate selected internal control activities related to the CPP and SSFI programs, we designed tests using the OFS’s process flows, narratives, risk matrices, and high-level operational procedures. For CPP, we made a statistical selection of 45 unique transactions for the 4 months ending January 31, 2009, using a monetary unit sampling (probability proportionate to size) methodology. For this sample, we tested selected CPP control activities related to asset purchases and dividend receipts. For SSFI, we tested the only SSFI transaction completed as of March 27, 2009, including selected control activities related to dividends. In our initial report under the mandate, we identified a preliminary set of indicators on the state of credit and financial markets that might be suggestive of the performance and effectiveness of TARP. We consulted Treasury officials and other experts and analyzed available data sources and the academic literature. We selected a set of preliminary indicators that offered perspectives on different facets of credit and financial markets, including perceptions of risk, cost of credit, and flows of credit to businesses and consumers. We assessed the reliability of the data upon which the indicators are based and found that, despite certain limitations, they were sufficiently reliable for our purposes. To update the indicators in this report, we primarily used data from the Federal Reserve. As these data are widely used, including by GAO and the Federal Reserve, and are considered to be a reliable and often definitive source for banking sector data, we conducted only a limited review of the data but ensured that the trends we found were consistent with other research. We also relied on data from the Chicago Board Options Exchange (CBOE), Inside Mortgage Finance, Treasury, and Global Insight. We have relied on CBOE and Global Insight data for past reports, and we determined that, considered together, these auxiliary data were sufficiently reliable for the purpose of presenting and analyzing trends in financial markets. The data from Treasury’s survey of lending at the top 20 CPP recipients (as of December 31, 2008) are based on internal reporting from participating institutions, and the definitions of loan categories may vary across banks. Because the data are unique, we are not able to benchmark the origination levels against historical lending or seasonal patterns at these institutions. Based on discussions with Treasury and our review of the data, we found that the data are sufficiently reliable for the purpose of documenting trends in lending. The survey data will prove valuable for more thorough analyses of lending activity in future reports. We plan to continue to monitor the issues highlighted in our prior reports, as well as future and ongoing capital purchases, other more recent transactions undertaken as part of TARP, and the status of other aspects of TARP. Together with the Special Inspector General for TARP, we also plan to review the payment of taxes by the recipients of TARP funds. We conducted this performance audit between February 2009 and March 2009 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. Treasury has engaged in a variety of activities to address instability in the financial markets (see fig. 1). Leading up to the transition to the new administration, Treasury made additional equity purchases in financial institutions under CPP and invested in and announced future plans to support the automotive industry under AIFP. Following the transition to the new administration on January 20, 2009, Treasury continued to make additional equity investments in financial institutions under CPP, announced plans to restructure the assistance previously provided to Citigroup Inc. (Citigroup) and American International Group, Inc. (AIG), and launched TALF, a consumer lending facility established by the Federal Reserve Bank of New York for which Treasury originally pledged support in November 2008. In addition, the new administration announced its plan to pursue new initiatives under the authority of the act. As we described in our January 2009 report, the act created other oversight entities in addition to our oversight responsibilities, including the Congressional Oversight Panel (COP), the Special Inspector General for TARP (SIGTARP), and the Financial Stability Oversight Board (FinSOB). We are coordinating our work with COP, SIGTARP, and FinSOB, and are meeting with officials from these entities to share information and effectively make use of our combined resources. These meetings help to ensure that we collaborate appropriately and eliminate unnecessary duplication of effort. After we issued our January 2009 report on TARP, COP issued reports in February and March 2009. COP’s February 2009 report focused on the methods Treasury used to make equity investments in financial institutions under the CPP and concluded that Treasury paid substantially more for the assets it purchased under TARP than their then-current market value. COP’s March 2009 report reviewed Treasury’s plans to mitigate foreclosures, in particular Treasury’s Homeowner Affordability and Stability Plan.