To assess OFS’s  progress in maintaining the appropriate infrastructure to manage and  oversee the performance of TARP financial agents and contractors and  address conflicts of interest that could arise with the use of private sector  sources, we reviewed various documents and interviewed OFS officials  regarding recent changes in organizational roles and responsibilities  within OFS and its policies and procedures regarding (1) management and  oversight of TARP financial agents and contractors and (2) monitoring and  oversight activities by the OFS team responsible for financial agent and  contractor compliance with TARP conflicts-of-interest requirements. As shown in table 1, participants have repaid more than $200 billion. These differences will also affect the ultimate cost of TARP. The estimated value of TARP’s $142.5 billion in direct loans and equity  investments is net of a $36.7 billion subsidy cost allowance—primarily the  difference between the amounts paid by OFS for the direct loans and  equity investments and the reported value of such assets. The reported net  cost of TARP transactions from inception through September 30, 2010,  was $18.5 billion. Moreover, a number of key TARP-funded housing programs  are still in the early stages of implementation. However, this stability is fragile. For example, on September 30, 2010, the  Assistant Secretary of Financial Stability resigned and this key leadership  position is temporarily filled. Further, filling key leadership positions that are under limited-term Senior  Executive Service appointments will be a challenge. Since then, the Home Ownership  Preservation Office has not yet conducted a workforce assessment,  despite the recent addition of several new programs. OFS Maintained Effective Internal Control over Its Financial Reporting as of September 30, 2010, and Has Taken Steps to Develop a System of Internal Control for TARP Programs

In our December 2008 report, shortly after TARP was created, we  highlighted the importance of internal control and recommended that  Treasury continue to develop a comprehensive system of internal control  over TARP, including policies and procedures for program activities that  were robust enough to ensure that the objectives and requirements of  TARP programs were being met. As a result, even as some  programs have ramped up to address specific issues, many others have  either expired or are already winding down. Conclusions

TARP programs implemented over the last 2 years covered a broad range  of activities: they were designed to inject capital into financial institutions,  address issues in the securitization markets, provide assistance to the  automobile industry and AIG, and offer incentives for modifying  residential mortgages, among other things. While additional programs—AIG and PPIP—remain active, others have  closed but have substantial outstanding balances that will require  Treasury’s ongoing attention and oversight. Although OFS has become a more stable organization over the past year,  with more than 200 employees, it faces new challenges as the TARP  authority to make new commitments has expired, some programs wind  down, and others continue to operate. For example:    OFS has begun to take steps that will help to retain staff, but staff  retention could be a significant challenge for OFS, as term appointees  making up more than half of its workforce. While OFS has begun to assess  options for future staff needs, including succession planning for senior  positions, its workforce plan has not been updated since March 2009 to  reflect the changing environment. Without a plan that considers various  scenarios, particularly the potential outflow of term employees, OFS may  find itself unprepared to adequately manage and oversee the TARP  investments and programs that remain. Treasury also had a differing view on the number of our prior  recommendations that it had fully or partially implemented. Reconciliation of the status of our recommendations was  ongoing at the close of our review and going forward, as we have  previously discussed with OFS officials, we will continue to review and  consider any additional support and documentation related to the progress  of actions taken to address our recommendations and will continue to  update the status of the recommendations as appropriate. Therefore, we recommend that OFS take the  following action:    OFS should finalize a plan for addressing how it will manage its  workforce, in particular term-appointed employees and key SES positions,  including plans for various staffing scenarios. Troubled Asset Relief Program: Status of Government Assistance  Provided to AIG.
Why GAO Did This Study

Since the Troubled Asset Relief Program (TARP) was implemented, GAO has issued more than 40 reports containing more than 60 recommendations to the Department of the Treasury (Treasury). This report assesses the status of Treasury's implementation of GAO's recommendations and current condition of TARP. Specifically, this 60-day report provides information on (1) the condition and status of active TARP programs; (2) Treasury's progress in implementing an effective management structure, including staffing for the Office of Financial Stability (OFS), overseeing contractors, and establishing a comprehensive system of internal control; and (3) trends in the status of key relevant economic indicators. GAO reviewed relevant documentation from various TARP programs and met with OFS officials and financial regulators. GAO also used information from existing reports and ongoing work.

What GAO Found

TARP programs implemented over the last 2 years covered a broad range of activities, including injecting capital into financial institutions; addressing issues in the securitization markets; providing assistance to the automobile industry and American International Group, Inc. (AIG); and offering incentives for modifying residential mortgages, among other things. While some programs have been terminated, others remain active, including those that focus on preserving homeownership and providing assistance to AIG, and require continued monitoring. Further, the Homeownership Preservation Office has not yet conducted a workforce assessment, despite the recent addition of several new programs. In prior work GAO has identified a number of weaknesses in Treasury's implementation of the Home Affordable Modification Program (HAMP), and a number of homeowner preservation initiatives have not yet reported activity. Other TARP programs have ended or are winding down. As of September 30, 2010, OFS reported $179.2 billion in gross outstanding direct loans and equity investments with a subsidy cost allowance of $36.7 billion resulting in a net balance of $142.5 billion. The reported net cost of TARP transactions from inception through September 30, 2010, was $18.5 billion; however, the ultimate cost of TARP will change as a result of (1) differences between the estimated values and the amounts that OFS will ultimately realize (as the assumptions and estimates underlying the valuation of direct loans and equity investments are inherently subject to substantial uncertainty); and (2) further disbursements, such as those relating to the housing programs which are not subject to repayment. For example, the proposed restructuring of AIG, if implemented, will likely affect TARP's ultimate cost. Although OFS staffing has become more stable over the past year, with more than200 employees, its stability remains fragile as it faces new challenges. For example, while it has filled key leadership positions, the Assistant Secretary of Financial Stability resigned in September 2010 and this key leadership position is temporarily filled. Staffing remains important as some programs are still being implemented, while others have closed or been terminated but have assets that must be managed, repaid, and divested. OFS has begun to take steps that will help to retain staff. But staff retention could be a challenge for OFS going forward, because more than half of OFS's employees, including key leaders, are term appointments (many with 4-year term limits). OFS has also begun to address succession planning for critical senior positions, but its workforce plan has not been updated since March 2009. Without a plan that considers various scenarios, OFS may find itself unprepared to adequately manage and oversee the remaining TARP investments and programs. OFS has strengthened its management and oversight of contractors and financial agents and its system of internal control for financial reporting and compliance with program requirements. Continued progress will depend on retaining qualified staff. As TARP enters its next phase and winds down, GAO recommends that OFS take action to further enhance its ongoing operations by finalizing a plan for addressing how it will manage its workforce, in particular term-appointed and key Senior Executive Service employees. While Treasury agreed with our recommendation, we have differing views on the status of prior recommendations. We will continue to update the status of recommendations as appropriate.