For over 50 years, the savings and loan industry promoted home ownership through home mortgage lending and was the nation’s primary lender in the housing finance market. During the 1980s, the industry ran into financial difficulties, and the number of insolvent savings and loan institutions, also known as thrifts, rose dramatically. Between 1980 and 1988, over 500 thrifts failed—more than three and a half times as many as in the previous 45 years combined. Furthermore, hundreds more thrifts remained insolvent or appeared likely to become insolvent. Faced with a crisis of national dimensions, 1989 legislation, among other things, created RTC as a temporary mixed-ownership government corporation to resolve thrifts that were insolvent or in imminent danger of becoming insolvent. Initially, RTC was given 7 1/2 years to resolve the failed thrifts and dispose of their assets, but subsequent legislation reduced the time RTC will be in existence. The Federal Deposit Insurance Corporation (FDIC) is to inherit from RTC resolution responsibility for any thrifts that fail after July 1, 1995. RTC is scheduled to cease all of its operations on December 31, 1995, when any remaining RTC asset disposition workload and supporting operations are to be transferred to FDIC. As of February 1995, RTC estimated that assets with a book value of approximately $8 billion will be transferred to FDIC for disposition. GAO identified RTC as 1 of 18 high-risk areas that were particularly vulnerable to fraud, waste, and mismanagement. This identification was made mainly because of the large dollar value of the assets under RTC’s control, the heavy reliance to be placed on private sector contractors, and the need for strong management information systems and oversight capabilities. Because RTC has taken actions that improved its operations, the level of risk is not as great as it once was. Thus, as discussed in our February 1995 High-Risk Series report, we removed RTC’s high-risk designation. Also, in our High-Risk report, we stated that the transition of RTC operations and workload to FDIC by January 1996 is a continuing risk. The task of winding down a large and complex organization with thousands of personnel and billions of dollars in assets, while minimizing the adverse consequences, is a very difficult one. For a successful transition, RTC and FDIC will need to ensure that sufficient controls are in place over the assets that will be sold during the final year of RTC’s existence, as well as over the assets that will be transferred to FDIC. It is also important that the transition planners give early attention to the quality of data that FDIC will receive from RTC so that RTC will have sufficient time to prepare for and respond to FDIC’s information needs. Throughout RTC’s existence, its management and support systems have evolved in response to changing conditions and legislative mandates, as well as internal and external criticism of its operations. However, certain problems have continually hampered RTC’s ability to effectively accomplish its mission. These problems included weaknesses in its contracting system that contributed to excessive contract costs and in its automated systems that could not adequately support RTC’s asset management and disposition activities. In December 1993, due to concerns about RTC’s performance, Congress included in the RTC Completion Act a number of reforms to improve the management of RTC. Despite such problems and the difficult economic environment in which RTC had to operate, it has accomplished a great deal in resolving a large number of failed thrifts and selling assets during its relatively short existence. From its inception in August 1989 through December 1994, RTC accepted responsibility for 745 failed thrifts. Figure 1 shows the locations of the thrifts that were placed under RTC’s control. By the end of December 1994, RTC had resolved 744 of these 745 thrifts. It is currently working to resolve one New Jersey thrift; it expects to accomplish this resolution by March 31, 1995. RTC had under its control assets with a total book value of about $463 billion. As of November 30, 1994, RTC had disposed of about 93 percent of these assets ($432 billion) and had about $31 billion in assets remaining in its inventory. As shown in figure 2, RTC has classified most of these remaining assets as hard-to-sell. Performing 1-4 family mortgages ($5 billion) Other performing loans ($5 billion) Delinquent loans ($7 billion) Considered to be hard to sell by RTC. In his March 1993 testimony before the Senate Committee on Banking, Housing, and Urban Affairs, the former Secretary of the Treasury Lloyd Bentsen, speaking in his capacity as Chairman of the Thrift Depositor Protection Oversight Board, outlined a 9-point plan to help RTC improve its management practices. Later, a tenth item—the establishment of an interagency transition task force made up of RTC and FDIC personnel—was added to the plan to address the transfer of RTC’s personnel and systems to FDIC when RTC ceases operations on December 31, 1995. Secretary Bentsen said that such a task force was needed to help ensure an orderly transition to FDIC without impairing RTC’s operations. The RTC Completion Act, which became law in December 1993, included 21 management reforms—those in Secretary Bentsen’s 9-point plan along with 12 others. The establishment of the RTC/FDIC transition task force was not included among the 21 reforms but was required by a separate section in the act. For reporting purposes, we organized the 21 reforms into 4 categories that reflected the organizational components that would be responsible for taking the implementation actions. These categories are (1) RTC general management functions; (2) RTC resolution and disposition activities; (3) RTC contracting, including related MWOB activities; and (4) the Oversight Board reform. Appendix I includes more detailed information on the reforms in these categories and shows the progress RTC and the Oversight Board have made in implementing the 21 management reforms since we issued our interim report in June 1994. Our objectives for this report, as set forth in the RTC Completion Act, were to determine (1) the manner in which the 21 management reforms were being implemented and (2) the progress being made toward achieving full compliance. We accomplished these objectives through (1) interviews with responsible RTC headquarters and field officials and Oversight Board staff and (2) reviews of applicable statutes and RTC and Oversight Board documents, including status reports identifying actions taken to implement the reforms’ requirements, specific policies and procedures designed to implement the reforms, and recent Office of Inspector General (IG) reports that addressed areas related to the management reforms. Also, we obtained supporting documentation to determine the extent to which actions were taken to correct internal control weaknesses and implement audit recommendations and other management reforms. In addition, we used our other ongoing work at RTC to verify that planned actions to implement the reforms had been completed or were in process. For reporting purposes, we classified each of the 21 reforms into one of three status categories: (1) work in progress, (2) action taken/monitoring required, or (3) action completed. From January 18 through January 31, 1995, we discussed a draft of this report with RTC and the Oversight Board. Specifically, we discussed the detailed information on each of the 20 RTC reforms with the RTC senior officials responsible for implementing these reforms or their designated representatives. For the Oversight Board reform, we discussed detailed information with the individual on the Oversight Board staff who is responsible for monitoring the implementation of the reform. In addition, on February 7, 1995, we discussed the contents of the draft report with representatives from RTC’s Office of the CFO and Office of Planning, Research and Statistics, who are responsible for tracking RTC’s progress in implementing the reforms. These individuals agreed that the information in the report provided a fair and accurate summary of the manner in which RTC and the Oversight Board implemented the reforms and the progress they made to achieve full compliance. Also, these individuals agreed with our determinations of the implementation status for each of the 21 reforms. We included their comments where appropriate throughout the report. We did our work from June 1994 through January 1995 in accordance with generally accepted government auditing standards. Appendix II provides more detailed information on our objectives, scope, and methodology. Table 1 shows the implementation status we determined for each of the 10 reforms in this category. For two of the three completed reforms shown in table 1, RTC (1) in April 1993, created the Division of Minority and Women’s Programs and appointed a Vice President to head this division who also serves on RTC’s Executive Committee (reform 4); and (2) in June 1993, appointed a CFO who reports directly to RTC’s Chief Executive Officer (CEO) (reform 5). These actions were completed before the act became law in December 1993. For reform 21, which is the third completed reform, by the time the act became law, RTC had already initiated a program that included establishing client responsiveness units in its field offices. In August 1994, RTC completed updating its client responsiveness policy to emphasize the importance of this function and distributed the policy to all RTC personnel. As shown in table 1, the implementation status for six reforms is action taken/monitoring required. Highlights of some of the actions taken to implement these reforms are listed below. RTC updated its comprehensive business plan in August 1994, in part, to ensure that the requirements of the RTC Completion Act were included in the plan. (Reform 1). RTC established a management decision and audit follow-up process that encompasses all efforts to address findings, implement accepted recommendations, and verify completion of corrective actions. (Reform 9). RTC established and filled the position of Assistant General Counsel (AGC) for Professional Liability who is to manage the investigation, evaluation, and prosecution of all professional liability claims involving RTC and who has since submitted to Congress two semiannual reports that included information on various litigation activities. (Reform 10).