Summary

The Resolution Trust Corporation (RTC) hired private sector contractors under Standard Asset Management and Disposition Agreements (SAMDA) to manage and dispose of assets from failed financial institutions; as of October 1993, nearly $24 billion in assets were being handled under nearly 300 SAMDA contracts. In April 1993, SAMDA established the Accelerated Expiration Program to cut its administrative expenses by terminating SAMDA contracts before their original expiration date. RTC's procedures for the program, however, did not ensure that RTC made cost effective decisions that were in its best interests. Although the program requirement for a written justification that accelerated expiration of a contract was in RTC's best interests, RTC had not estimated program benefits or related costs. Although program procedures include final contract reviews by independent auditors to determine whether the SAMDA contractors met their obligations, these reviews have been hindered because the SAMDA contractors did not have adequate records and some of the costs charged to RTC were based on unofficial contract interpretations made by local RTC oversight managers. In addition, few of the recommendations from the final reports were implemented because RTC officials believed that RTC's many contract interpretations made strict adherence to the recommendations impractical. RTC can remove the barriers to completion of the independent auditors' final reviews by requesting that its SAMDA oversight managers work with contractors to ensure that their record keeping complies with contract requirements before the independent auditors conduct their final reviews.

GAO found that: (1) RTC Accelerated Expiration Program procedures did not ensure that RTC made cost-effective decisions that were in its best interest; (2) an analysis of the related costs and benefits of accelerating the expiration of SAMDA contracts would have assisted RTC in determining whether these actions were in its best interest; (3) the program's procedures included final contract reviews by independent auditors to determine whether SAMDA contractors met their obligations, but poor contractor records and numerous contract interpretations hindered the final reviews; and (4) few of the independent auditors' recommendations were implemented because RTC officials believed that its numerous contract interpretations made strict adherence to the recommendations impractical.