Full text of Annual Report (Resolution Trust Corporation) : 1993
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1 9 9 3 A N N U A L R E P O R T RC F R E S O L U T I O N TRUST C O R P O R A T I O N Resolving The Crisis Restoring The Confidence R E S O L U T I O N TRUST C O R P O R A T I O N September 30, 1994 Resolving The Crisis Restoring The Confidence Resolution Trust Corporation Washington, D.C. Sirs: In accordance with the provisions of section 501 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the Resolution Trust Corporation is pleased to submit its Annual Report for 1993. Financial operating plans and forecasts have been provided separately. Very truly yours, Deputy and Acting Chief Executive Officer The President of the U.S. Senate The Speaker of the U.S. House of Representatives CHIEF EXECUTIVE O F F I C E R ’S STATEMENT he Resolution Trust C o rp oratio n ity a n d w om en's pro g ra m s, th e D e p a r tm e n t o f (R T C ) has now entered the last M in o rity and W o m e n s Programs was elevated to a phase of its operations. 1am pleased division, and the Assistant Vice President became a to report that, given the RTC's progress Vice President. in 1993, the C o rp oratio n is now poised A far-reaching new program, the Small Investor to com plete its jo b by the statutory sun Program, was also created to give investors in the set date, no later than December 31,1995. moderate capital range more opportunities to c o m T h e days w h e n the R T C resolved pete for and purchase assets. All of these changes scores of thrifts in a single m o nth and disposed of were designed to make the RT C more efficient and tens of billions of dollars in assets in one quarter are its programs more equitable as it works to complete thankfully behind us. T he most serious damage of its mandate. the savings and loan crisis has been addressed, and By far the most pivotal event o f the year was today depositors continue to retain faith in the promise C o n g re s s ' a p p ro v a l in N o v e m b e r 1993 o f th e of deposit insurance and to benefit from the improved Resolution Trust Corporation C o m p le tio n Act, leg stability of savings institutions. islation w hich provided the final installment of RT C At the end of 1993, there remained only 63 thrifts funding and set an agenda for creating more o p p o r to be resolved and $63 billion in assets of w hich to tunities for minorities and wom en. W ith funding in dispose. At that point, 680 thrifts had been resolved, hand, the R T C has resumed resolving thrifts, and protecting 22.9 m illion depositors, $353 b illion (net plans to com plete the sale of all rem aining conser of putbacks) in assets sold, and $680 m illion in recov vatorships by the end of the third quarter of 1994. eries c o lle c te d from professional lia b ility claim s The RT C has also im plem ented the legislation's pro against individuals and profession visions relating to m inority and women's programs, als w ho had participated in b rin g including bidder preferences for m inority investors ing about the crisis. seeking to purchase thrifts or branches located in The pace o f resolutions during m inority neighborhoods. 1993 was slow as a result of Congres T he C o m p le tio n A ct also changed the RTC's sional deliberations on pro v id in g sunset to no later than D ecem ber 31, 1995, at least th e last in s ta llm e n t o f fu n d in g . one year earlier than was originally established in Twenty-seven thrifts were resolved the 1989 legislation creating the C o rp o ra tio n . In during the year and $49 billion (net light of this earlier sunset date, we are w orking close of putbacks) was recovered for tax ly w ith the Federal D eposit Insurance C orporation payers through asset sales and co l on the transfer of RT C assets, personnel, and oper lections. T he R T C also recovered ations to the F D IC . $351 m illio n in funds from profes sional liability claims. In a d d itio n to c o n d u c tin g its Jo h n E. Ryan In m y six months w ith the RTC, I have seen first hand the dedication of the RTC's employees, w ho have helped bring the resolution of the savings and essential business in 1993, the RT C D e p u ty a n d A ctin g C h ie f Executive O ffic er loan crisis to its final chapter. Never before has such also paused to take stock of opera an organization been created and charged w ith c o n t io n s a n d m a k e s o m e e s s e n tia l fronting such a massive task. W ith o u t the dedica improvements. A wide range of management reforms tion demonstrated daily by the R T C employees, the was enacted to ensure the integrity and cost-effec- anticipated prom pt and successful conclusion of this tiveness of operations. A new C h ie f Financial Officer mission w o uld not be possible. was appointed to manage financial and accounting activities, and all such activities were consolidated under one division. As part of the expansion of m inor 2 CEO S tatement June 22, 1994 R e s oluti on Trust Co r p o r a t i o n TABLE OF CONTENTS Transmittal Letter ............................................................................................................................ 1 Chief Executive Officer's Statement ............................................................................................. 2 Introduction ......................................................................................................................................4 Division of Legal Services ..............................................................................................................7 Department of Asset Disposition ........................................................................................................................... 8 Department of Conservatorships and Receiverships .............................................................................................8 Department of Corporate Affairs ........................................................................................................................... 9 Department of Litigation ......................................................................................................................................10 Division of Administration and Corporate R e la tio n s .............................................................. 13 Department of Administration ..............................................................................................................................14 Department of Contracts, Oversight, and Evaluation .........................................................................................15 Office of the Secretary .......................................................................................................................................... 17 Office of Governmental Relations ....................................................................................................................... 17 Office of E t h ic s .......................................................................................................................................................17 O ffice of Corporate Communications ................................................................................................................. 18 Division of Institution Operations and S a le s .............................................................................19 Department of O p e ra tio n s .................................................................................................................................... 20 Department of R eso lu tio n s.................................................................................................................................... 26 Department of Planning and Analysis ................................................................................................................. 29 Department of Information Resources Management ...........................................................................................30 Division of M inority and Women's Program s.............................................................................3 3 Department of Minority- and W om en-O wned Business .....................................................................................34 Department of Legal P ro g ra m s.............................................................................................................................. 34 Department of Equal Em ployment Opportunity and Affirmative Action Department of Policy, Evaluation, and Field Management Division of Asset Management and Sales ..........................................................35 ................................................................................ 36 ................................................................................. 37 Department of Field Activities .............................................................................................................................. 38 Department of Capital Markets ............................................................................................................................ 39 Department of Asset M a r k e tin g ............................................................................................................................ 40 Department of Affordable Housing ......................................................................................................................41 Department of the Small Investor Program ......................................................................................................... 42 Division of the Chief Financial O f f ic e r ...................................................................................... 45 Office of Accounting Services .............................................................................................................................. 46 Office of Budget and Planning .............................................................................................................................. 46 O ffice of Field Accounting and Asset Operations O ffice of Management Control ............................................................................................... 47 ............................................................................................................................ 47 R e g u la tio n s.......................................................................................................................................49 Financial Statements and Internal C o n tr o ls ............................................................................... 53 S ta tistic s............................................................................................................................................95 Index .............................................................................................................................................. 100 T l: I F o f ( a ,v / i \ I s 3 INTRODUCTION E stablished on August 9, 1989, with thrifts, and maximizes the availability and afford th e pa s s a g e o f th e F in a n c ia l ability of residential real property for low- and mod- In stitu tio n s Reform , Recovery, erate-income individuals. a n d E n fo rc e m e n t A c t o f 1989 To ensure that as m any S&L violators as possi (FIRREA ), the R esolution Trust ble are punished, and to recover money from w rong C orporation (RTC) is tasked with doers, the R T C is authorized to investigate, initiate resolving the savings and loan cri civil litigation, and make criminal referrals in cases sis created during the 1980s. Risky involving former officers, directors, and other pro fessionals w ho investments, fraud, and mismanagement at hundreds contributed to the thrifts' downfall. o f thrifts across the co un try c o n trib u te dThe their to Resolution Trust C orporation Refinancing, demise— a financial crisis this nation had not seen Restructuring, and Im provem ent Act of 1991 ( H R . since the Great Depression. T he RTC's jo b is to ful 3435), enacted on Decem ber 12,1991, provided the fill the governm ent's prom ise to pro te ct insured R T C w ith $25 b illio n in fund ing through April 1, deposits at these failed institutions. 1992; extended the RTC's ability to accept ap p o in t T he R T C manages and sells failed savings insti ment as conservator or receiver from August 9, 1992, tutions, and recovers funds by m anaging and selling set forth in FIRREA, to September 30, 1993,- redes the institutions' assets. These thrifts are ones that had ig n ate d the R T C O v e rs ig h t Board as the T h rift bee n in sure d b y the Federal S av in g s an d L o an D epositor Protection Oversight Board and restruc Insurance C o rporatio n (FSLIC) for w hich a conser tured its membership,- abolished the RT C Board of vator or receiver was app ointe d d uring the period Directors and removed the F D IC as exclusive m a n January 1, 1989, through a date between January 1, ager of the RTC,- and created the office o f C h ie f 1995, and Ju ly 1, 1995, to be d eterm ined by the Executive Officer of the RTC, requiring appointm ent C h a irp e rs o n o f the T h r ift D e p o s ito r P ro te c tio n to that office by the President w ith the advice and O versight Board. consent of the Senate. U p o n its creation in 1989, the R T C inherited From A p ril 1, 1992, th ro u g h D e c e m b e r 17, 262 failed thrifts from the Federal D eposit Insurance 1993— w hen President C lin to n signed into law the C orporation (F D IC ), w hich had led an interagency RT C C o m p le tio n A ct— the RT C was w itho ut fu n d effort to evaluate and oversee the operations of the ing to resolve failed savings and loan institutions. nation's insolvent thrifts. By yearend 1993, the RT C W ith enactment of this legislation, the April 1, 1992, had resolved 680 insolvent thrifts, and achieved asset lim itation on funds previously established under the sales and collections totaling $353 billion (net of put R T C Refinancing, Restructuring, and Im provem ent backs) for the nation's taxpayers. In 1993, the RT C Act of 1991 was removed. The RTC was given author resolved 27 failed thrifts,- asset sales and collections ity to use up to $18.3 billio n— w hich remained from totaled $49 billion (net of putbacks). A t yearend, the the $25 billio n authorized under the 1991 act— to R T C was supervising 63 thrifts in its conservatorship resolve failed savings institutions. program that the O ffice of T hrift Supervision had determined to be insolvent. As part of its mandate under FIRREA, the RT C A m o n g other provisions of the RT C C om pletion Act were the extension of the deadline for a p p o in t m ent of the RT C as conservator or receiver for sav must conduct its operations in a m anner w hich m ax ings associations from September 30, 1993, to a date imizes the net present value return from the sale or between January 1, 1995, and July 1, 1995, to be o ther d isposition o f failed thrifts and their assets, determined by the Chairperson of the Thrift Depositor m inim izes the im pact of such transactions on local Protection O versight Board,- establishment of a new real estate and financial markets, minimizes the amount t e r m in a tio n d a te fo r th e R T C — n o la te r th a n of any loss realized in the resolution of the insolvent D ecem ber 31, 1995, at least one year earlier than Resolution Trust Corporation Organizational Structure D ecem ber 31, 1993 ^^p H H H U ^H vxjuinTR TISiEIkl ^HESZEZSZEE^H ^ Q T T Q rn T J^ H A M H M M |H H ■ ^ U i| i| | i^ H -■ ■ ■ ■ ■ ■ ■ ■ ^ m n | f t^ ^ | - M fS B B ilK iiffi^ W ^ ■ ^_^____^_ P fB lfflR T fH t> ffi ■ ■ ■ ■ ■ ■ ■ ■ B IM M M M M U ^ K H 9 R S ^ H ■ ■ ■ ■ ■ ■ ■ ■ ^H|NI||Im n H ^|u ^ |||| m H m K ^ ■ tH ^ fH S H ff^ B ^ ^ ^ H H p H H lH ^ H ^ ■ jp f lV B M ^Hj V H^H | ^ H 9 3H| i n ^ H ^ ■ iH ^ t f H S H ji^ B ^ ^H H I^M H H B ||^H ~^^^^KijfeBpjpMUKH^^^H g ~ H H H m i^ _ ^^■ C TH TH W ^^B ^ ^ ^ H H IM H H ^ ^ b ^ H jjU jp p M H g Q K H ■ ■ ■ | p H j| R ll Kjy|ll|iiig|iua ^■ H ||M M |M ■ U B | | j| | | | B H ■ I fliiililH H N M llllllll^ H ^ ■ •S Q S Q S H ^ H ■ I I ■ :- 1 ( I I ■ 1 / 5 ■ H I lR iB l 6 INTRODUCTION previously established,- expansion of the RTC's m inor Roelle, Senior Vice President, D ivision of Institution ity and women's programs and affordable housing Operations and Sales (who served as committee chair responsibilities,- im plem entation of numerous m a n man), Lamar C. Kelly, Senior Vice President, Division agement reforms, outlined in March 1993 by Secretary o f A s s e t M a n a g e m e n t a n d S a le s , D o n n a FT o f the Treasury Lloyd Bentsen, reduction of the m ax C un n in g h a m e , C h ie f Financial Officer, Jo h n n ie B. im u m a u th o r iz a tio n o f fun d s for S A IF (S avin gs Booker, Vice President, D iv isio n of M in o r ity and Association Insurance Fund), controlled by the FD IC , Women's Programs,- Barry S. Kolatch, Vice President, to $8 b illio n th ro ug h fiscal year 1998, or until its D e p a rtm e n t o f P la n n ing and Analysis,- T hom as P. reserve ratio equals 1.25 percent, whichever occurs Horton, Vice President, Department of Field Activities, first, and creation o f an F D IC -R T C transition task and E. G lio n Curtis, Acting General Counsel, Division force to facilitate the transfer of R T C operations and of Legal Services. personnel to the F D IC in a coordinated manner. T h e T h r ift D e p o s ito r P ro te c tio n O v e rs ig h t T h e R T C operates from its h e a d q u a rte rs in Board reviews the RTC's overall strategies, p o li W ashin gton , D C ., field offices and sales centers in cies, and goals, in c lu d in g those deem ed likely to six c itie s — A tla n ta , Georgia,- N e w p o r t B each, im pact significantly on the RTC's financial c o n d i California,- Dallas, Texas, Denver, C olorado, Kansas tio n , its o perations or its cash flows,- or those it C ity, Missouri, and Valley Forge, Pennsylvania,- and deems to involve substantial public p o lic y issues. the N ational Sales C enter in W ashin gton D .C . T he Board's m embers include the Secretary o f the O n M arch 15, 1993, D ep uty Treasury Secretary Treasury, w h o chairs the Board; the C hairperson Roger C . A ltm a n becam e interim C h ie f Executive o f the F D IC Board o f Directors,- the R T C C E O ; Officer of the RTC, taking over the helm from resign the D ire c to r o f the O ffic e of T h rift Supervision,- ing President and C E O Albert V. Casey. A t yearend the C hairperson o f the Board o f G overnors o f the 1993, the Executive C o m m itte e — w h ic h served as Federal Reserve System, and two independent m e m the policy-setting entity of the R T C and addressed bers a p p o in te d by the President, w ith the advice m ajor operational matters— consisted of W illia m FI. an d consent o f the Senate. I N T k O I) II i T I O N R e s o l u t i o n T r u s t r o r p o h a t i o n L S E E R G V A I C L E S LEGAL SERVICES he D ivision of Legal Services pro- (JD C ) initiative, a partnership arrangement designed vides comprehensive legal services to sell approximately $7 billion (book value) of ju d g to the RTC. The division advises ments, deficiencies, and chargeoffs. the W ashin gton and field staffs on such issues as resolutions, conservatorship and receivership operations, asset disposition, contracting, litigation, claims against directors and officers of failed institutions, and special issues, including the RTC's statutory author ity and responsibilities, legislation, and tax and envi ronmental matters. The General Counsel heads the division, w hich consists o f four departm ents: Asset D is p o s itio n , C o n se rva to rships an d Receiverships, C o rp o ra te Affairs, and Litigation. Department of Asset Disposition T he D ep artm e nt of Asset D isposition reviews the Office of Securities and Finance In 1993, the Office of Securities and Finance assist ed w ith the securitization o f loans, resulting in the sale of $3.8 billion (book value) of single-family, m ul tifam ily, com m ercial, m anufactured housing, and hom e equity loans. In addition, the office assisted in disposing of a variety o f high-yield and other securities. In 1993, the R T C sold over $182 m illion (face value) in junk bonds and equity securities, and $193 m illion (face value) in additional shares of com m on preferred stock and warrants. T he office also assisted in disposing of $139 m illio n (face value) in high ly leveraged trans action loans during the year. legal aspects of R T C asset sales, in clud ing the dis position of real estate, high-yield and other securi ties, a n d p e r fo r m in g a n d n o n - p e rfo rm in g loans through securitized transactions. T he departm ent is comprised of the Office of Real Estate, and the Office o f Securities and Finance. Department of Conservatorships and Receiverships T h e D e p a r t m e n t o f C o n s e r v a t o r s h ip s a n d Receiverships provides legal advice and support to conservatorship and receivership operations, legal Office of Real Estate In 1993, th e O ffic e o f Real Estate assisted th e C o rporatio n in closing more than $34 b illio n (book value) in sales of real estate and loans secured by real estate through sealed-bid offerings, portfolio sales, and open-cry auctions. The office also provided legal support on major real estate transactions, in c lu d in g Land Fund I, in w h ich nearly $0.8 b illio n (book value) in land and loans secured by land were sold through a lim ited partnership arrangem ent, and Landm ark I, w h ic h counsel and docum entation for sales of subsidiaries, and legal support in resolving failed savings assocations in clud ing providing docum entation required when the R T C takes over and resolves failed thrifts. T he departm ent also provides legal advice for c o n tracting activities. The departm ent consists o f the O ffic e o f C o n se rv a to rsh ip s, R eceiverships, an d Resolutions, and the O ffice of Contracting. Office of Conservatorships, Receiverships, and Resolutions offered g o lf course and other developm ent proper In 1993, the Office of Conservatorships, Receiverships, ties from the L andm ark subsidiaries o f O a k Tree and Resolutions provided legal support for six major Federal Savings Bank, N e w Orleans, Louisiana, in thrift resolutions (resolutions o f thrifts w ith lia b ili accordance w ith an approved b ank rup tcy plan of ties exceeding $500 m illio n at conservatorship) and reorganization. 21 field thrift resolutions (resolutions o f thrifts w ith T h e o f f ic e a s s is te d in th e p r e p a r a t io n o f liabilities totaling less than $500 m illio n at conser E nvironm ental II, sealed-bid sales of e n v iro n m e n vatorship), w hich represented an aggregate of $8.2 tally impaired assets and loans secured by such assets, b illio n in deposits and resulted in savings of $300 and in the Judgm ents, Deficiencies, and Chargeoffs m illio n over the cost of a payoff. 8 L i (, a i S £ k r if E s R E ■ o i. u T l o > N T k ti s r C o k p o k a t I < N ) In addition, the office assisted in the term ina the revised Statement of Policies Concerning Outside tion o f 16 receiverships, and in the processing of 52 Counsel Conflicts o f Interest was approved, setting receiverships a pp ro ve d for te rm in a tio n in 1993. fo r th th e p r in c ip le s a p p lie d b y th e C o n f lic ts Terminations are accom plished through the RTCs C o m m itte e in resolving outside counsel conflicts purchase of the rem aining receivership assets and its o f interest. paym ent of final dividends to creditors o f the for The office also assisted the RTC's Office of Ethics w ith its program to inform contractors of the c o n mer institutions. D u rin g the year, the office also provided legal sequences of violating R T C regulations. support for the sale of two healthy thrifts that were subsidiaries of failed institutions. Department of Corporate Affairs Office of Contracting T he D ep artm e nt of Corporate Affairs oversees all legal matters pertaining to the R T C ’s internal cor T he O ffice of C o n tractin g provides legal advice on contracting issues. In Decem ber 1993, after the RTC C o m p le tio n A ct became law, the office began assist ing in the im plem entation of provisions in the act w h ich require strengthened controls over contract ing and increased participation of women and m inori ties in contracting activities. T he office coordinated w ith the O ffic e o f C o n tra c t O p e ra tio n s a n d the Division of M inority and Women's Programs to revise co ntractin g procedures, regulations, and standard porate structure, governance, and procedure, as well as legislative and policy matters, and provides legal support in such areas as tax and environm ental law. T he departm ent also is reponsible for all legal m at ters involving the R T C as a federal employer, includin g p e r s o n n e l, la b o r - r e la tio n s , a n d g e n e r a l em plo ym ent matters. The departm ent is comprised of the Offices of Corporate Issues, Special Projects, and Labor and Em ploym ent. contracts in accordance w ith the act's provisions. T he office's O utside Counsel M anagem ent U n it ( O C M U ) continued in 1993 to oversee policies and Office of Corporate Issues procedures for retaining outside counsel. T he R T C In 1993, the O ffic e o f C o rp orate Issues provided C o m p le tio n Act provides that only a warranted c o n legal support an d analysis on RTC-related legisla tracting officer appointed by the R T C or a m anag tion, including the R T C C o m p le tion Act. The office in g a g e n t o f a s a v in g s a s s o c ia t io n in R T C prepared several analyses of the R T C C o m p le tio n conservatorship m ay execute a contract on behalf of Act, including a mem orandum setting forth the h ig h the R T C for the provision of goods or services. The lights o f the conference report, a preliminary list of RTC's General Counsel designated O C M U 's acting action items arising from the act, and an analysis of Senior Counsel as a warranted contracting officer, the acts provisions. w h o in turn redelegated levels o f authority at head The office also assisted in matters involving RTC quarters and in the field to execute legal services internal corporate governance, law, and procedure, includ ing drafting C E O resolutions, delegations of contracts. O C M U also acte d as th e D iv is io n o f Legal authority, and other documents. D u rin g 1993, pur Service's liaison w ith the Office of Inspector General suant to requirem ents u n d e r the C h ie f Financial in audits of outside counsel. O C M U prepared the Officers Act of 1990, the office performed internal division's responses to audit reports and negotiated control reviews o f the D ivision of Legal Service's del fee bill adjustments w ith the audited firms. egations of authority in each of the six field offices. D u r in g the year, the O ffic e o f C o n tractin g's In a d ditio n , the office was responsible for the O u ts id e C ounsel C onflicts U n it assisted the jo in t a d m in is tra tio n a n d o v e rs ig h t o f th e S e ttle m e n t R T C /F D IC O utsid e Counsel C onflicts C o m m ittee W o rk o u t Asset Teams (SW A T ) program at h e a d in overseeing the handling of conflict-of-interest m at quarters and the field offices, in clud ing the devel ters relating to outside counsel. In D ecem ber 1993, o pm e n t of SW A T policies and procedures. A :Y \ II ,\ 1 R F I 1 i) V T L F(, ,1I S £ k I' /< £ < 9 LEGAL SERVICES Office of Special Projects Office of Labor and Employment In 1993, the O ffice of Special Projects provided legal T he O ffice of Labor and Em ploym ent is responsible support to the R T C in several areas, including tax for all legal matters involving the R T C as a federal matters, pension and employee benefits, information employer, including personnel, labor-relations, ethics, disclosure, and environm ental law. T he office also equal em ploym ent opportunity, and other em plo y administered the com puterized tracking system for ment matters. In 1993, the office provided advice on legal matters— the R T C Legal Inform ation System these matters, including issues relating to the return (RLIS). A t yearend, RLIS was m onitoring more than of RTC-assigned employees to the F D IC and the 20,000 active legal matters, and contained records ramifications of the RTC's dow nsizing and sunset. o f n e a rly 1 0 0 ,0 0 0 n o n - a c tiv e e n trie s (m o s tly closed cases). From the RTC's inception through yearend 1993, the office represented the R T C in 73 em ploym ent The office is responsible for the RTC's Alternative actions— 19 M erit System Protection Board cases, Dispute Resolution Program, w hich helped to resolve 44 Equal E m p loy m e n t O p p o r tu n ity C o m m issio n 80 legal disputes in 1993, saving approximately $ 12.5 cases, and 10 Title V II and w histleblow er actions million in legal fees budgeted for litigation. Resolution brought in federal district court. of these cases resulted in a $3 m illion reduction in T he office also conducted legal reviews o f 139 claim s against the RT C , and produced recoveries garnishm ent actions, including tax levies, bankrupt totaling $11 m illion. The unit oversees the resolu cy, child/spousal support, and commercial debts. tion of disputes through negotiation, mediation, and Department of Litigation arbitration. T he office, along w ith the division's O ffice of R e al Estate, assisted in th e p r e p a ra tio n o f th e Environm ental II sealed-bid sales of environm ental ly im paired properties and loans secured by such properties. The office's Tax G roup, together w ith attorneys from the D e p a rtm e n t o f L itig a tio n and R T C tax accountants, was part of an R T C team that met in 1993 with many state tax officials to discuss tax aspects o f financial institutions in receivership. T he m eet ings resulted in the abatem ent o f m an y potential problems w ith state taxation o f R T C thrifts. A t the federal level, in December 1992, the RT C The D epartm ent of Litigation oversees and co ordi nates all litigation involving the RTC, including trial and appellate litigation in all federal and state courts,claims against directors, officers, accountants, and attorneys of failed financial institutions,- and claims and proceedings in bankruptcy. H ie department c o n sists of the Offices of Litigation, Professional Liability, and C om p le x Litigation. Office of Litigation T he O ffice of Litigation is responsible for all civil entered in to an inter-agency agreem ent w ith the litigation except bankruptcy, professional liability, Internal Revenue Service (IRS). The agreement pro and certain matters arising out o f ju n k bon d invest vides that w ith any insolvent thrift under R T C super ments by thrifts. T he office also coordinates w ith vision, the IRS will determine the proper am ount of other federal agencies, such as the F D IC an d the tax liabilities o f the thrift, but will forego the c o l D epartm ent of Justice, on issues of mutual interest. lection of assessed income tax liabilities when Treasury A t yearend 1993, the office was handling approx funds are used to pay them . In im p le m e n tin g this imately 20,000 trial court litigation matters. A t any agreement, the IRS and the RT C in 1993 attem pt given time, the RT C is m anaging approximately 700 ed to settle or otherwise resolve all tax litigation cases "significant issue cases," w h ic h involve issues that between the tw o agencies that were pe nd ing in Tax im pact R T C policy or on w hich it is im portant that C o urt or in various other courts. the R T C take a consistent position nationwide. 1O L EI. A I S Ek 1 I ' I £s k £ J <> L II T I <) ,V T k U S T ( I) K P (> k A T I () ,V At yearend, the office was also handling nearly 400 RT C appellate matters, including cases pe n d ing in the U nited States Supreme Court, in all 12 of the U nited States C ircuit Courts of Appeals, and in the appellate courts of m any states. In 1993, Litigation Review Teams were estab lished in each of the field offices to review, evaluate, and recommend strategies and proposed resolutions for matters in litigation. Office of Professional Liability Office of Complex Litigation The O ffice of C om plex Litigation oversees all bank ruptcy cases in w hich the R T C as a receiver or c o n servator has a vested interest. At yearend 1993, the office was handling approximately 3,500 active bank ruptcy matters with almost $ 10 billion of RTC claims. The office obtained sizeable bankruptcy recover ies during the year, including approximately $400 m il lio n resulting from the plan o f reorganization of Landmark Land Company,- $104 million in cash recov ered through the plan of reorganization of Craig Hall, T he O ffice of Professional Liability investigates and a real estate syndicator,- and $80 million in cash recov prosecutes RT C claims arising from im proper c o n ered on junk bonds through the plan of reorganiza d u c t o f directors, officers, attorneys, appraisers, tion of Gillett Holdings Inc., a conglomerate that issued accountants, and other professionals w ho provided junk bonds underwritten by Drexel Burnham Lambert. services to failed thrifts. A t yearend, the office was The office is also responsible for the prosecution in the process of prosecuting 320 civil actions aris of claims arising from junk bond investments by finan ing out of 213 failed institutions. cial institutions now under R T C or F D IC supervi From ince ptio n of the R T C th ro ug h yearend sion. A t y e a re n d , the o ffic e h a d o b ta in e d cash 1993, the office executed settlement agreements of recoveries totaling $800 m illion on behalf of RT C professional liability cases that will result in the pay and F D IC conservatorships and receiverships that m e n t o f a p p ro x im a te ly $7 43 m illio n , o f w h ic h incurred losses resulting from investments in high- a p p ro x im a te ly $ 6 7 5 m illio n in settlem ents and risk, high-yield securities. The RTC's share o f these approxim ately $5.1 m illio n in judgm ents had been recoveries totaled $754 million, w hich includes $260 collected by yearend. m illion from a securities litigation claims settlement T h e office also p ro v id e d legal s u p p o rt on reached in c o n n e c tio n w ith the Drexel Burnham legislative issues relating to professional lia b ili Lambert bankruptcy, $389 m illion from a settlement ty. O n N ovem ber 17, 1993, the Assistant General w ith M ichael M ilken, the head of Drexel's high-yield C o u n s e l o f the O ffic e of Professional Liability b o n d departm ent, and his associates and affiliates,- testified before the H ouse B anking C o m m itte e and $105 m illion from other Drexel-related claims, at a hearing on directors' and officers' insurance including actions brought against issuers of securi an d liab ility issues. ties underwritten by Drexel. \ .v a I. I I, A I S h K V I ^ 11 ADMINISTRATION A N D CORPORATE R E L A T I O N S ADMINISTRATION AND D ivision of Administration and CORPORATE RELATIONS System, providing a consolidated database of all insti C o r p o r a te R e la tio n s p ro v id e s tutional records to track the R T C asset inventory, administrative services to the RTC and com pleted investigations and litigation. In ad di in a wide range of areas, in c lud ing per- tion, storage and retrieval services were provided for sonnel, contracting, governm ental rela- 1.4 m illion cubic feet of RT C records. t io n s , c o r p o r a t e c o m m u n i c a t io n s , In 1993, the Personnel Security Program and the org anization and m anagem ent analysis, Suitability Program were transferred to the Office of and facilities. T he division is comprised Administrative Services from the O ffice of H um an of two departments and four offices that report direct Resources M anagem ent. T he programs ensure that ly to the division vice president. every R T C em ployee, appointee, and applicant is adequately investigated to determine suitability to work at the RTC. Department of Administration T h e D e p a rtm e n t o f A d m in is tr a tio n is the m a in provider of corporate services for the R T C , and is the central point for analyzing and proposing changes Office of Human Resources Management The Office of Hum an Resources Management adm in to the Corporations organizational structure. Through isters personnel and m anagem ent advisory services N ove m b e r 1993, the departm ent consisted of the in the areas of staffing, position classification, em ploy Offices of Administrative Services, H um an Resources ee relations, training, personnel managem ent evalu M a n a g e m e n t, O r g a n iz a tio n an d Resource M a n a tio n , a n d p e rso n n e l in fo r m a tio n system s an d agement, and Corporate Inform ation. In D ecem ber processing. 1993, the O ffice of Corporate Inform ation merged D u rin g the year, the office assisted in the RTC's w ith the Office of Systems D evelopm ent to form the field reorganization and dow nsizing effort, in c lud new D e p a rtm e n t o f In fo rm a tio n Resources M a n in g the closing of field offices in Houston,- Baton agement w ithin the Division of Institution Operations Rouge,- Somerset, N ew Jersey,- Phoenix,- Tampa,- San and Sales. Antonio,- and C hicago . T he office also conducted employee and manager briefings on personnel issues and programs in the six rem aining field offices, and Office of Administrative Services coordinated the return of more than 600 permanent T he O ffice of Adm inistrative Services develops and manages the RTC's corporate services, maintains the RTC's facilities, and develops policies, procedures, and guidelines for a wide variety of functions, includ ing real property m anagem ent and adm inistrative services. T he office provides direct operational sup port to all R T C headquarters activities and te chn i cal assistance to field offices in these areas. employees to the F D IC . In June 1993, the office reorganized operations, grouping personnel specialists into teams to increase efficiency, productivity, and accountability. The office also launched an outreach program for employees and managers, pro vid in g brochures, on-site visits, m anagem ent inform ation, and training on person nel-related issues. In 1993, the office developed and put into effect a housing plan for headquarters to accommodate staff increases re s u ltin g from the im p le m e n ta tio n o f Treasury Secretary Lloyd Bentsen's RT C M anagem ent Reform Agenda. The plan was executed w ithout dis rupting operations. Office of Organization and Resource Management T he O ffice of O rg a n iza tio n and Resource M an age ment provides organization- and management-analy- D u rin g the year, the office expanded in-house sis services to the C orporation. T he office is the focal graphic design capabilities to ensure improved-qual- point for all budget form ulation, analysis, reporting, ity graphic support. The office also completed im ple and execution for the division. m e n ta tio n o f the Records M a n a g e m e n t Tracking 1 4 A h a l ; ,\ I S I K ,\ I i n \ 1 \ 11 1 t > /' I' <i f,' > I t K I In 1993, the office drafted the charter for the I A T I II x s U I ''ill II I I II X T H II \ I ( II K I’ II K A I i n X FD IC /R T C Consolidation Coordination Comm ittee, w h ic h was established to begin m anaging the tran sition of perm anent employees back to the F D IC . In addition, the office drafted the RTC's Contracting A c tio n Plan, designed to strengthen c o n tra ctin g operations. T he office also conducted a study in the O ffic e of C ontracts to establish appropriate tim e frames for key steps in the contracting process and to establish a reporting network that keeps e m p lo y ees and contractors apprised o f the status o f c o n tracts. Office of Contract Policy and Major Dispute Resolution T he O ffice of C o ntract Policy and M a jo r D ispute Resolution develops R T C contracting policies and procedures, and addresses major disputes arising from contract awards. T he office responds to questions raised by audit organizations, including the General Accounting O ffice and the RTC's Office of Inspector G eneral, regarding contract awards and invoices, a n d n e g o tia te s fo r th e reco very o f fu n d s from contractors. D u rin g the year, the office established an RTCw ide delegations com m ittee responsible for ensur ing uniform and appropriate delegations of authority th ro ug ho ut the C orporation. T he office also acts as th e c o n ta c t for R T C field em ployees requesting clarifications and interpretations of delegations of auth o rity In 1993, the office enacted m ajor revisions to standard contracting procedures, and developed a new contractor oversight training course. T he office also revised the C o n trac t Policies and Procedures M an ual (C P P M ) to reflect new contracting policy changes and to prom ote prom pt and com plete R T C responses to contractor findings by auditors. T he office formulated the division's 1993 Expense O p e r a tin g Budget, a n d assisted d iv isio n b u d g e t representatives in a d ju stin g th eir annual o p e ra t ing budgets. T he office is responsible for adm inistering two programs: the Warranted Contracting Officer Program and the Byrd A m e n d m e n t Program. T he W arranted C o n tr a c tin g O ffic e r Program requires th a t o n ly W arranted R T C C ontracting Officers execute c o n tracts. T he program established uniform procedures Department of Contracts, Oversight, and Evaluation and m in im um standards for the certification, m ain T h e D e p a r tm e n t o f C o n tra c ts , O v e r s ig h t, a n d contracting officers. T he Byrd A m endm ent Program Evaluation oversees all RT C contracts. In 1993, the requires the R T C to obtain signed certifications from tenance, and term ination o f warrants issued to the d epartm ent significantly restructured and enhanced R T C co ntra c to rs w h o have contracts exceeding contracting operations. This included im plem enting $100,000 or from buyers w h o have obtained RT C an R T C contracting reform initiative during the first seller fin a n c in g in excess o f $1 50 ,000 disclosing quarter of 1993, and carrying out Treasury Secretary w hether they have engaged in any lo bb y ing activi Bentsen's recommendations to improve controls over ties w ith members of Congress. This inform ation is contracting activities, revise contracting procedures, reported to Congress bi-annually. and expand contractor training and m onitoring. As part o f this effort, in D ece m b e r 1993, the departm ent's O ffice o f C ontracts was reorganized Office of Contract Operations The Office of Contract Operations awards and adm in in to tw o new offices: C o n tra c t P olicy and M a jo r isters contracts at headquarters, and coordinates and D ispute Resolution, and C ontract O perations. The oversees contracting activities at R T C field offices, purpose o f the reorganization was to separate c o n conservatorships, and receiverships. T he office also tracting functions and to place a stronger focus on oversees the RTC's contracting inform ation system. c o ntract awards an d activities, and on the p o licy In 1993, the office restructured operations and increased staff b y 48 positions to strengthen c o n issues affecting contracting. T he departm ent is also com prised of the O ffice tracting oversight and improve the administration of of C o n tracto r O versight and Surveillance, and the contracting activities. Improvements were made in A dm inistrative Evaluation Staff. pre-award planning and post-award m onitoring, and A ,V ,V (I A I K f I’ I> k r A l> AI / ,V I S / k A I I (l X A ,V I) ( O K I’ l> k A l t k £ I- A I I I I N s 1 5 ADMINISTRATION AND CORPORATE RELATIONS in contracting performance standards, w hich were 1993, 95 percent o f all suspension and exclusion revised during the year. actions executed by the R T C were based on the The office established a field liaison unit at head office's investigative work. quarters to oversee field c o n tra c tin g o perations. In addition, the office administers the Competition Invoice Processing Centers were established in each Advocacy Program to provide an independent advo field office to standardize procedures for tracking, cate for the fair and equitable treatment of firms seek approval, and verification of invoices, and to strength ing to do business w ith the RTC. en internal controls. A n automated process for track In 1993, the office completed background inves in g an d pro ce ssin g in v o ice s was d e v e lo p e d for tigations of more than 4,600 contractors and 14,000 this purpose. contractor personnel, it also closed more than 400 contractor fitness and integrity investigations, result in g in 123 suspension and exclusion actions. T he The following chart shows RTC contracting activity nationwide from inception in August 1989 through 1993: office issued 165 performance and financial review reports of R T C contractors during the year, recom m ending improvements in contractor operations and 1 RTC C O N TR A C TIN G A C T IV IT Y id e n tify in g m ore th a n $12 m illio n in q u e s tio n able costs. 1989 through 1993 The office developed procedures to assess major Number of Awards Year Fees Paid to Contractors 1989 220* 1990 10,419* 47,449* tracting officials w ith guidance in m aking contract award determinations. Procedures for conducting fit 470,508,905* 1991 contractor performance and to provide R T C c o n 1,618,069,026* $ 2,940,514* ness and integrity background investigations o f law firms were also developed during the year. The office achieved its m inority outreach goals for h irin g independent public accou ntin g firms to 1992 45,948* 1,235,491,313* 1993 24,311 510,089,879 conduct contractor reviews,- in 1993, more than 43 percent of the office's review contracts were award ed to minority- or women-owned ( M W O B ) firms or TOTAL 128,347 $3,837,099,637 M W O B jo in t ventures. *Certain figures published in the 1992 RTC Annual Report have been restated to reflect contract amendments, extensions, and renegotiations made overtime. Administrative Evaluation Staff The O ffice of Administrative Evaluation was restruc tured in 1993 into the Office of Management Control, Office of Contractor Oversight and Surveillance w hich reports to the C h ie f Financial Officer, and the Administrative Evaluation Staff, w hich reports to the T he O ffice of Contractor Oversight and Surveillance Division of Adm inistration and Corporate Relations. assists RT C program offices and the Office of Contract T he A dm inistrative Evaluation Staff analyzes and O perations in engaging, m onitoring, and evaluating reviews the im plem entation of R T C contracting and m ajor contractors. The office conducts background adm inistration programs and their com pliance w ith investigations o f contractors and contractor person corporate delegations o f authority. nel, and financial and performance reviews o f c o n In 1993, the staff completed Program Compliance tr a c to r o p e r a tio n s , in v e s tig a te s a lle g a tio n s o f Reviews o f contracting and administrative activities co ntra ctin g irregularities, coordinates m ajor R T C at headquarters, the six field offices, and six conser contract terminations,- and initiates suspension and vatorships. In addition, reviews of two Receivership exclusion actions o f contractors for fraud, non-per Assistance Agreement Contractors were completed. formance, and violations o f fitness and integrity. In Reports were prepared for each field office and insti- 1 6 A d m i n i s t r a t i o n a n d C o r p o r a t e R e l a t i o n s R e s o l u t i o n T r u s t C o r p o r a t i o n tution incorporating more than 1,000 findings. The tains com m unications w ith the House and Senate, reports included recom m endations on im prov in g ensuring that members and their staffs are kept aware problem areas, follow-up reviews to ensure correc o f RT C policy concerns, and that the RTC is apprised tions are made were scheduled in 1993 and will be of issues of importance to the legislative branch. The com pleted in 1994. office also responds to m em ber inquiries on behalf Four offices in the Division of Administration and Corporate Relations report directly to the division vice president: the Offices of the Secretary, Governmental Relations, Ethics, and Corporate Communications. o f constituents. In 1993, the office engaged in a persistent effort to obtain the approval o f R T C funding legislation by the 103rd Congress. Tracking numerous pieces o f legislation that m igh t ultim ately prove to be the final funding measure, the office worked in cooper Office of the Secretary a tio n w ith the Treasury D e p a rtm e n t, the T h rift T he O ffice of the Secretary manages the decision D e p o s ito r P ro te c tio n O v e rs ig h t Board, a n d the m aking process for the RTC's senior executives, includ C o n g r e s s io n a l le a d e r s h ip to secure a p p r o v a l ing record-keeping and information-dissemination, of funding. and administers nationw ide programs to provide the After deliberating on more than 50 amendments public w ith complaint-resolution services and access w ithin various committees and subcommittees c o n to R T C inform ation. In preparation for the RTC's sidering R T C fund ing legislation, Congress in late sunset in 1995, the office is also co m p ilin g a c o m N o v e m b e r a p p ro v e d th e C o m p le tio n A c t, a n d President C lin to n signed the legislation into law on prehensive written history of R T C activities. In 1993, the office processed more than 1,000 D ecem ber 17, 1993. Since passage o f FIRREA, the decisions approved by the R T C President and C E O , o ffic e w o rk e d s u c c e s s fu lly w ith C o n g r e s s for the Executive C om m ittee, the senior vice presidents the appropriation o f a total of $55 b illio n in RT C and headquarters vice presidents, and the Information loss funds. Resources M anagem ent Steering C om m ittee. D u r in g the year, the office participated in 22 T he office responded to more than 1,321 requests hearings and four legislative mark-ups relating to for inform ation about actions taken by the former R T C operations. From inception to yearend 1993, R T C Board o f D irectors, the R T C President and the office took part in nearly 1,000 meetings w ith C E O , a n d o th e r senior officials. T h e office also members o f Congress or their staffs, and responded processed 2,773 litigation filings. to over 30,000 telephone and written inquiries from T he office handled more than 41,000 requests Congressional offices. th ro ug h the R T C C lie n t Responsiveness Program, and responded to 204,647 requests for docum ents Office of Ethics a n d in fo r m a tio n . T h e office also received 1,055 Freedom o f In form ation and Privacy A ct requests d urin g the year and com pleted responses to 1,151 s u c h req ue sts b y y e a re n d ( in c lu d in g req ue sts T he O ffice o f Ethics administers regulations g o v e rn in g the fitness a n d in te g rity o f in d e p e n d e n t contractors that do business w ith the RT C , and sus p e n d s a n d e x c lu d e s c o n t r a c to r s t h a t v io la te from 1992). In 1993, th e o ffic e in itia t e d th e E m p lo y e e O m b u d s m a n Program, p ro v id in g em ployees w ith the o p po rtun ity to voice concerns and ideas to the these regulations. T he office adm inisters the RTC's co m pliance w ith em ployee ethics and standards o f co nduct reg ulations, laws, and related directives and executive RTC's C h ie f Executive Officer. orders, and grants or denies waivers for conflicts of interest under R T C contracts. A system o f internal Office of Governmental Relations controls is administered by the office to ensure that T he O ffice o f G overnm ental Relations serves as the em ployee and contractor ethics policies and proce RTC's liaison w ith Congressional officials. It m a in dures are follow ed in the RTC's field offices. A X \ U A L R £ I' 11 k 7 A I > A! / jV / s f K ,1 7 I I ) .V * - .V l> 1 < t> H l ‘ l > k A T E R E L A T I () N s 1 7 ADMINISTRATION AND CORPORATE RELATIONS In 1993, the office im plem ented the U.S. Office reporters and others throughout the U nited States of G overnm ent Ethics standards of conduct, h o ld and overseas, providing detailed inform ation about ing 193 training sessions attended by 6,790 em ploy the RTC's latest actions. ees. The office also established a program compliance T he office headquarters staff issues b o th the review and m onitoring program to reduce risks of RTC's national and field press releases, and prepares conflicts of interest. The office issued directives on copy for various publications. The RTC's C E O and the disclosure of employee indebtedness to the RTC, other senior officials receive a full range of media the renegotiation of indebtedness with the RTC, and and public affairs support from the office, including procedures for enforcem ent o f in d e pe n de n t c o n briefings prior to interviews, and speeches and talk ing points prior to speaking engagements. The office tractor regulations. In 1993, 50 contractors were excluded from doing business w ith the RT C for failure to meet RTC also writes and edits o pin ion editorials and letters to the editor for key personnel. T he office produces publicatio ns such as the ethics standards. RTC's A n n u a l R e po rt an d Resolution Trust News, a m o n th ly newsletter for employees. It also distributes Office of Corporate Communications a series of news updates, including a daily clipsheet T he O ffice of Corporate C o m m unications provides of print coverage, a weekly wrap-up of print cover the press and the public w ith information about RTC age, and a daily sum m ary o f em e rg in g p rin t and activities. T h e office responds to inquiries from broadcast stories. 1 8 A |> a i I x I I k / I < ,v > ,\ x II I ( I K I- n k - I t \ K F t t I <> x \ R : s a t n 7 I n x T k u ■ I > ( i> k r n » ,t r I I INSTITUTION OPERATIONS A N D S A L E S INSTITUTION OPERATIONS AND SALES I n s t it u t io n The headquarters office develops policies and Operations and Sales oversees the procedures to ensure that all field operation activi m a n a g e m e n t an d o p e ra tio n o f ties c o m ply w ith applicable laws and support the he D iv i s io n of insolvent thrifts while they are in the RTC's RTC's goal of m in im izin g the costs and risks to the conservatorship program, and the nego- general public. The office provides day-to-day gu id tiation and execution of the m ost cost- ance in im plem enting these policies and procedures. effective resolutions of these thrifts as well as those in the Accelerated Resolutions Program (ARP). Resolution activity was slowed in 1993 because fun d in g legislation was n ot enacted until D ecem ber 17, 1993. The division investigates fraud and other abus es at failed thrifts. It also provides research and ana lytical support of R T C activities to ensure the RTC's effective o peration, and creates and manages the RTC's national inform ation systems. In D ecem ber 1993, the division consisted o f the D epartm ents of O perations, Resolutions, Planning and Analysis, and Information Resources Management. Department of Operations In s t it u t io n s an d A s s e ts in C o n s e r v a t o r s h ip From inception in August 1989 to yearend 1993, the R T C m anaged a total of 706 institutions in the c o n servatorship program . W h e n the R T C was estab lished, the office immediately assumed responsibility for 262 conservatorships from the F D IC . From incep tion th ro ug h yearend 1993, 643 conservatorships were resolved, leaving 63 in the program at yearend. A t the beginning of 1993, the R T C was m anag ing 81 conservatorships. D urin g the year, eight ad di tio n a l th rifts entered the pro gra m , a n d 26 c o n servatorships were resolved. O n e in stitutio n was resolved through the Accelerated Resolutions Program, bypassing a conservatorship action. T he D epartm ent of O perations manages and over sees conservatorship and receivership operations, the paym ent o f insured deposits, the adm inistration of resolution agreements and the representations (reps) and warranties provisions of asset sales agreements, the processing of creditor and insurance claims, and the te rm in a tio n o f receiverships. In a d d itio n , the departm ent investigates fraud and o ther abuses at conservatorships and receiverships. A t yearend, the d e p a r t m e n t w as c o m p o s e d o f th e O f f ic e s o f O perations and Investigations. Office of Operations T he O ffice of Operations, w hich has offices at head C o n s e r v a t o r s h ip O p e r a t io n s A c t iv it ie s Asset and Liability Management T he R T C prepares a conservatorship for resolution by dow nsizing it prim arily through asset sales. This accelerates the paym ent o f liabilities of the failed institution and reduces dependency on the Treasury D epartm ent to fund future operations. Gross c o n servatorship assets at D ecem ber 31, 1992, totaled $40.2 b illio n , they were reduced to an estim ated $23.2 billion by yearend 1993. D uring the year, eight institutions w ith assets of approximately $6.1 billion were added to the conservatorship program, 26 c o n servatorships were resolved, rem oving $7.7 b illion quarters and in the six field offices, m onitors and in assets from the program. Book value sales and c o l operates conservatorships an d receiverships, c o n lections during 1993 totaled $31.2 billion. ducts closings of insolvent institutions and subse D u rin g 1993, the sale of perform ing assets from qu e n t p ay m e n t o f d e p o sito r an d cre d itor claim s, conservatorships was postponed, pending receipt of administers post-resolution settlement activity w ith resolution funding, in order to reduce operating loss acquirers, analyzes and pays claims resulting from es in those institutions. After enactm ent of funding the representations and warranties provisions of asset legislation on D ecem ber 17, 1993, and subsequent sales agreements, manages the termination of em ploy approval of a schedule of resolutions, the sale of per ee benefit programs, coordinates and directs opera form ing assets in conservatorships was authorized to tions for term inations o f receiverships, and issues begin in early 1994. reports on program activities. 20 T he overall liability expenses of the institutions being prepared for resolution are reduced by elim i vatorship depends on their skills and know ledge, nating wholesale (high-cost) deposits, Federal H om e and the needs o f the m anaging agent's team. Loan Bank advances, and short-term collateralized Salary schedules for senior management of c o n borrowings. Funding is raised for this purpose pri servatorship institutions were established by RTC marily through asset sales supplem ented w ith bor directive in 1990. W h e n the RT C intervenes in a rowings from the RTC, as necessary. thrift and establishes a conservatorship, salaries of those asked to remain in managerial or executive Executive Compensation positions are adjusted to the levels established by Section 3(A) of the RT C C o m p le tio n Act requires the directive. For the 89 institutions operating in the the R T C to report, as part of its annual report, the R T C conservatorship program during 1993, a total total compensation paid to directors and senior exec salary savings of $63.2 m illion was achieved, w ith a utives of thrifts for w hich it was appointed conser corresponding reduction o f 924 officers from pre vator or receiver during the calendar year. W h e n an conservatorship totals. Compensation paid to all offi institution is placed into conservatorship, its direc c ers ( i n c l u d i n g s e n io r e x e c u tiv e s ) in R T C tors are removed on the day of intervention. As a conservatorships in operation during 1993 is listed result, no compensation is paid to any of these direc in the table Total Executive Com pensation for RTC tors w h ile th e in s titu tio n is in co nse rvatorsh ip . Conservatorships in 1993," page 22. Receiverships W h e th e r senior executives are asked to remain in do not have officers or directors,- therefore, there is managerial or executive positions w ith the conser no schedule for their compensation. 1993 RTC C ON SERVATO R SH IP A N D RESO LUTIO N A C T IV IT Y *This figure includes 1 association never placed into conservatorship. 1 9 9 i A n n u a l R e p o r t I n s t i t u t i o n O p e r a t i o n s a n d S a l e s 21 TOTAL EXECUTIVE C O M P E N S A T IO N FOR RTC CONSERVATO RSHIPS IN 1993 INSTITUTION N M AE CITY FIRST F&SLA Of RUSSELL CO, FA BIRMINGHAM FSB ALTUS FSB GREAT AMERICAN FSA GUARDIAN FSA DELTA FSB SAN CLEMENTE FSB HOMEFEDBANK.FA ADVANCED FSB FIRST NEWPORT FSB HOMESTEAD FSA VISTA FSA GOLDEN STATE FSB WESTERN FSB ENTERPRISE S&LA* PAN AMERICAN FSB WESTSIDE BANK FSB COASTAL FSB HOLLYWOOD FSB GOLDOME FSB CORAL COAST FSB HANSEN FSB CITIZENS FSA SECURITY FSA BAY FSB JACKSONVILLE FSA PALM BEACH FSA LIFE FSB THE GUARDIAN BANK, A FSB COBB FSA FIRST FSB OF GEORGIA, FA SOUTHERN FSA OF GEORGIA UNITED FSA OF IOWA LEMONTFSA IRVING FB FOR SAVINGS. FSB THE OVERLAND PARK FS&LA THE PIONEER FS&U FRANKLIN FSA DRYADES S&LA, FA OAK TREE FSB CARROLLTON HOMESTEAD ASSN. LIFE FSB PLYMOUTH FSA NEW ENGLAND FSA JOHN HANSON FSB IRVINGTON FSB POTOMAC FSB STANDARD FSA SECOND NATIONAL FSA FIRST FSA FIRST FS&LA SECURITY FS&W SURETY FS&LA, FA FIRST AMERICAN FSB HOMEBANK FSA PROSPECT PARK FSB HANSEN FSA WHITE HORSE FS&LA MARINE VIEW FSB POUFLY FS&LA SECURITY FSB VOLUNTEER FSA CARTERET FSB COLUMBIA BANKING FSA TRANSOHIO FSB CRESTLINE FS&LA CIMARRON FSA FAR WEST FSB HOME UNITY FS&LA ABRAHAM LINCOLN FSA CHASE FS&LA HOMESTEAD FSA FIRST HOME FSA ALPHA INDIAN ROCK FS&LA UKRAINIAN FS&LA OLD STONE FSB FIRST SOUTH FSB CITADEL FS&LA COOPER RIVER FSA STANDARD FS&LA CHEROKEE VALliY FSA VISTA FSA PIEDMONT FSA COMMONWEALTH FSB LIBERTY FSB FEDERAL SA OF VIRGINIA HOME FSB EVERGREEN FS&LA SHENANDOAH FSA PHENIX CITY BIRMINGHAM MOBILE SAN DIEGO HUNTINGTON BEACH WESTMINSTER SAN CLEMENTE SAN DIEGO NORTHRIDGE NEWPORT BEACH SAN FRANCISCO CANOGAPARK IRVINE MARINA DEL REY COMPTON SAN MATEO LOS ANGELES NEW LONDON HOLLYWOOD ST PETERSBURG BOYNTON BEACH PALM BEACH GARDENS JACKSONVILLE PANAMA CITY WEST PALM BEACH JACKSONVILLE PALM BEACH GARDENS CLEARWATER BOCA RATON MARIETTA WINDER ATLANTA DES MOINES LEMONT CHICAGO OVERLAND PARK PRAIRIE VILLAGE OTTAWA NEW ORLEANS NEW ORLEANS NEW ORLEANS BATON ROUGE PLYMOUTH WELLESLEY BELTSVILLE BALTIMORE SILVER SPRING GAITHERSBURG SALISBURY LEWISTON PONTIAC JACKSON MORGANTON GREENSBORO GILFORD WEST PATERSON HAMMONTON TRENTON MIDDLETOWN NEW MILFORD VINELAND LITTLE FERRY NEWARK ROCHESTER CLEVELAND CRESTLINE MUSKOGEE PORTLAND LAFAYETTE HILL DRESHER PHILADELPHIA MIDDLETOWN PITTSBURGH PHILADELPHIA PHILADELPHIA PROVIDENCE COLUMBIA CHARLESTON NORTH CHARLESTON COLUMBIA CLEVELAND RESTON MANASSAS MANASSAS WARRENTON FALLS CHURCH NORFOLK CHARLESTON MARTINSBURG ST TOTAL CURREN T LIABILITIESTHO USAN S$ D AL AL AL CA CA CA CA CA CA CA CA CA CA CA CA CA CA CT FL FL FL FL FL FL FL FL FL FL FL GA GA GA IA IL IL KS KS KS LA LA IA LA MA MA MD MD MD MD MD ME Ml MS NC NC NH NJ NJ NJ NJ NJ NJ NJ NJ NY OH OH OK OR PA PA PA PA PA PA PA Rl SC SC SC SC TN VA VA VA VA VA VA WV WV $ 65,785 56,083 500,076 2,518,405 268,214 18,475 118,863 4,990,285 25,130 10,153 807,125 89,295 45,249 3,098,201 8,375 140,733 74,389 143,875 587,685 441,140 26,005 17,956 29,439 39,504 18,135 79,822 50,764 34,731 51,065 42,015 82,347 68,604 301,727 115,575 183,045 100,417 128,043 1,519,193 82,034 2,846,111 21,459 12,386 85,587 51,893 243,371 28,489 48,281 1,882,901 1,035,073 47,611 326,479 213,073 68,935 394,360 82,734 218,321 256,101 42,004 88,143 282,913 754,111 27,889 3,031,453 749,204 1,515,695 23,945 486,885 767,739 442,880 62,826 19,280 86,769 97,104 6,135 43,593 1,521,018 25,901 18,830 75,388 167,961 79,041 71,550 309,925 34,500 59,742 15,376 120,825 16,927 44,440 TOTAL $35,931,114 PRECO SER N VATO SH R IP TOTAL N B UM ER TOTALAN UAL N O O F FFICER S CO PEN M SATIO W N HOLE $ $ 10 3 59 145 17 22 8 66 3 4 12 6 6 18 1 8 6 18 3 36 4 3 6 3 5 7 7 14 11 17 13 11 11 2 19 5 8 31 13 37 4 3 14 5 51 6 4 12 55 7 35 28 16 10 20 49 15 4 9 23 105 6 106 77 30 1 58 9 17 11 5 2 4 2 5 283 4 6 7 33 17 8 5 7 3 3 17 6 14 TOTAL N B UM ER OO F FFICER 1 S / 415,515 169,837 3,080,000 11,306,932 996,105 961,000 754,474 9,138,738 191,732 314,135 1,550,349 389,637 458,966 3,219,003 30,000 500,000 458,693 789,000 392,000 1,449,000 218,258 139,599 201,824 271,150 194,000 369,238 277,089 586,000 612,706 934,000 531,477 814,000 513,322 291,880 810,371 203,427 369,025 3,515,000 756,000 2,103,649 195,010 112,638 527,842 240,000 2,909,000 227,700 290,000 1,797,000 3,865,436 264,670 1,283,775 1,072,487 853,807 915,000 784,000 2,693,000 1,211,000 271,000 493,000 1,176,982 4,590,935 181,000 7,266,329 4,992,000 2,611,000 24,752 2,383,595 688,478 1,159,000 888,000 193,000 695,154 236,000 230,000 215,795 11,827,515 324,000 254,800 461,000 1,512,000 521,125 451,000 382,712 397,000 185,000 160,000 624,000 206,000 1,386,153 $ 975 A ER G V AE CO PEN M SATIO W O $ N H LE 287,534 123,000 1,048,686 4,791,804 250,078 90,000 133,899 4,485,981 104,632 85,860 663,015 254,885 244,659 1,731,578 0 175,000 213,099 425,801 209,800 842,828 249,831 139,599 143,200 186,300 112,093 214,026 90,259 144,000 190,089 73,072 265,848 78,000 336,876 141,022 800,286 203,427 161,375 941,163 448,000 1,280,533 135,422 106,521 348,395 164,792 189,061 148,500 39,400 1,002,000 2,081,840 167,093 1,283,775 590,174 370,260 322,000 379,719 1,020,974 327,000 145,686 304,799 1,064,219 2,678,520 136,176 4,767,726 2,598,158 2,324,343 24,752 1,379,712 262,872 538,766 267,807 110,651 479,627 142,369 76,115 189,135 1,653,545 98,367 167,500 153,915 620,749 478,166 235,756 231,350 252,419 179,536 75,457 158,700 50,194 350,539 $41,076 41,000 37,453 68,454 41,680 45,000 66,950 104,325 52,316 42,930 73,668 50,977 48,932 115,439 0 58,333 53,275 38,709 69,933 40,135 41,639 46,533 35,800 62,100 37,364 71,342 45,129 42,000 63,363 36,536 37,978 39,000 48,125 47,007 42,120 40,685 32,275 72,397 44,800 49,251 33,856 35,507 29,033 82,396 63,020 37,125 39,400 125,250 59,481 41,773 36,679 36,886 41,140 64,400 37,972 44,390 46,714 48,562 43,543 39,416 40,584 45,392 70,114 56,482 92,974 24,752 35,377 87,624 53,877 53,561 36,884 39,969 47,456 38,058 37,827 75,161 32,789 41,875 51,305 41,383 28,127 58,939 77,117 42,070 59,845 75,457 52,900 16,731 38,949 $53,235,691 $54,601 7 3 28 70 6 2 2 43 2 2 9 5 5 15 0 3 4 11 3 21 6 3 4 3 3 3 2 3 3 2 7 2 7 3 19 5 5 13 10 26 4 3 12 2 3 4 1 8 35 4 35 16 9 5 10 23 7 3 7 27 66 3 68 46 25 1 39 3 10 5 3 12 3 2 5 22 3 4 3 15 17 4 3 6 3 1 3 3 9 $116,507,820 1,889 19 93 TOTAL A N A NUL CO PEN M SATIO W O $ N H LE NOTE: ‘ Enterprise S&LA was resolved during the first quarter of 1993. As all reporting is as of quarter-erd, there is no data for this institution. 1/ During 1993, the “Total Officers" definition was revised. The 1993 total officers population includes both the three highest paid employees, and any officer who is not one of the three highest paid employees. The preconservatorship'Total Officers" definition includes any personnel designated as executive staff by their particular institution. Such definitions may be inconsistent among institutions. 2 2 I n s t i t u t i o n O p e r a t i o n s a n d S a l e s R e s o l li t i o n T r u s t C o r p o r a t i o n Employee Benefit Plans D urin g 1993, the R T C worked to terminate em plo y The following chart summarizes RTC advance activity in conservator ships and receiverships during 1993: ee benefit plans in conservatorships and receiverships in order to make funds available to participants, and created the Pension Tracking System to m o n itor the 1993 RTC CONSERVATORSHIP A N D RECEIVERSHIP A D V A N C E A C T IV IT Y progress o f the terminations. From inception o f the Principal Amount Only (dollars in billions) R T C through D ecem ber 31, 1993, 371 plans were terminated, 145 plans remained to be terminated at yearend. R ecog nizing the potential liability of the R T C in retaining defined benefit plans, the R T C pro Advances Outstanding at 12/31/92 $13.2 Total Advances Made in 1993 3.2 proper methods of terminating these plans. Employee Total Advances Paid in 1993 -4 .5 * benefit specialists in each field office are responsible Advances Outstanding at 12/31/93 vided detailed guidance to field staff concerning the $11.9* for term inating the plans and dealing w ith plan par *The Advances Paid balance includes $3.6 billion in non-cash payments, but does not include $322 million in interest collections during 1993. ticipant issues. C S l a im s a n d *The Advances Outstanding balance at 12/31/93 includes $5.1 billion in advances to conservatorships that have been resolved and will be repaid by the receiverships. e t t l e m e n t a c t iv it ie s Terminations of Receiverships In 1992, the R T C began term inating receiverships The following chart summarizes the termination of employee benefit plans during 1993: that were at least one year o ld and for w h ich there were no legal or other com pelling reasons to be kept EMPLOYEE BENEFIT P L A N S open. In 1993, the R T C created the Receivership Term inations U n it at headquarters and established task forces in each field office to manage the term i nation process. Open Plans at 12/31/92 287 Plans Added as a Result of Interventions in 1993 6 D u rin g the year, the R T C focused on selling the rem ain in g assets in receiverships that were c a n d i dates for te r m in a tio n . To fa c ilita te receivership term in ation s an d final paym ents to creditors, the Plans Terminated During 1993 (148) Open Plans at 12/31/93 145 RT C , in its corporate capacity, generally purchases assets o f receiverships w ith $1 0 m illio n or less in tration of the purchase and assumption agreements residual assets. In 1993, the R T C completed the approval process for 52 receivership terminations, including case prepa rations show ing there were no environm ental pro b lems or defensive litigation to prevent term ination, leaving o nly the final certification of term ination to be concluded for each institution. From inception of the program in June 1992 through yearend 1993, the approval of termination was completed for 92 receiver ships (77 receiverships have been term inated as of D ecem ber 31, 1993). between the R T C and the acquirers. T he process, w h ich continues for approxim ately six m onths after resolution, allows for the orderly transfer of business associated w ith the failed thrifts from the R T C to the acquirers. D ue to the lack o f fund ing in 1993, resolution activity fell short o f previous years, w ith o n ly 27 receiverships and one wholly owned subsidiary requir in g settlement activity added to the RTC's invento ry during the year. In 1993, settlement was concluded for 43 institutions, leaving 31 settlements to be c o m Settlements pleted at yearend. Receivership settlement w ith failed thrift acquirers Because of the slower resolution pace, the office under resolution agreements involves the adminis- focused more resources on establishing national poli- i “ < > > A n ,v u a l R e p o r t I n s t i t u t i o n O p e r a t i o n s a n i> S a l e s 23 INSTITUTION OPERATIONS AND SALES The following chart details asset sales, collections, and other conservatorship activities during 1993: 1993 CON SERVATO R SH IP AS SE T SALES A N D OTHER A C T IV IT IE S (dollars in millions) 1/1/93 Balance New Institutions 81 Institutions 8 Institutions Sales Collections 12/31/93 Balance Resolutions Activities* Adjustments^ 26 Institutions 63 Institutions $14,081 $1,263 $ 5,262 $10,175 $12,113 $4,179 $ 7,841 9,220 Cash and Securities 1,852 4,860 1,746 1,498 925 5,039 1,704 2,915 1,053 (52) 1-4 Family Mortgages 1,029 4,344 1,883 1,361 149 1,324 1,918 0 54 460 1,101 311 237 633 919 998 3,519 $6,060 $15,744 $15,490 $15,893 $7,740 $23,168 Other Mortgages 7,689 Other Loans 2,062 485 552 Owned Assets 2,980 445 Other Assets 4,157 $40,189 Total includes activities from all institutions in conservatorship at any time during December 1993. includes new asset purchases, valuation revisions, and other transactions affecting value. Note.- “Securities" include investment-grade securities and mortgage-pool securities. “Other loans” include commercial, consumer, and student loans. “Owned assets" consist of repossessed resi dential and non-residential real estate, land, and other repossessed assets. “Other assets" include a wide array of assets, some types of mortgage servicing rights, office equipment, and subsidiary companies of controlled institutions. The following chart shows the number of thrifts placed in the RTC con servatorship program and the number of resolutions: cies and procedures to protect the RTC's interests in such matters as dispute resolution, standards on set tle m e n t c o m p le tio n , an d c la rific a tio n o f sales of 1 C O N SE R V ATO R SH IP IN S T IT U T IO N S 1989-1993 Conservatorships Established branch premises. Conservatorships Resolved Total Resolutions 56 37 37 207 309 315* 262 Pre-FIRREA Post-FIRREA 1989 (8 /9 -1 2 /3 1 ) Liquidating Dividends D urin g the year, the R T C expanded the Accelerated D iv id e n d Program (A D P ), w h ic h began as a pilot program in O c to b e r 1992. The program expedites the return of funds to the C orporation and to cred 1990 1991 123 211 232t 1992 50 60 69* 1993 8 26 27§ Total 1989-93 706 itors by a u th o rizin g field office vice presidents to approve d ividend cases. In 1993, cash dividends to the C orporation totaled $14.5 b illio n and non-cash 643 680 Includes six non-conservatorship institutions, four of which were resolved through the Accelerated Resolutions Program (ARP). dividends totaled $7.6 billion. From the inception of the dividend process in September 1990 through ye are n d 1993, the recovery to the C o rp o r a tio n th ro ug h the program totaled $63.7 b illio n in cash and $51.8 billion in non-cash dividends. Insurance Payments ^Includes 21 non-conservatorship institutions resolved through ARP. D uring 1993, approximately 866,000 insured deposit ^Includes nine non-conservatorship institutions resolved through ARP. accounts, as of date o f resolution, at 27 failed thrifts ^Includes one non-conservatorship institution resolved through ARP. were protected. A p p ro x im ate ly 304,000 o f these 24 I n s t i t u t i o n O p e h a t i nn s a x i> S a i e H E SI) I U T I II X T R II S T ( I) a P I) R A T I I) N deposit accounts were protected through the pur ty b o n d com panies, directors, officers, appraisers, chase and assumption o f the failed thrift by one or accountants, attorneys, securities and com m odities more acquirers. T he rem aining 562,000 were paid brokers, and borrowers. off by R T C check in a payoff (P O ) transaction. O f T he O ffic e o f Investigations assists the P ro the $5.84 billio n in deposits that were involved in a fessional L ia b ility S ection an d o ther units of the P O transaction, only $ 10.5 m illion, or less than one D ivision of Legal Services in bringing claims against percent o f the total, were uninsured. directors, officers, and professionals for causing loss es to R T C thrifts. T he office assists the D epartm ent Creditor Claims o f Justice in prosecuting criminal conduct and recov Essential goods and services provided to R T C c o n servatorships are paid as adm inistrative expenses. General trade creditor claims of former associations, however, are considered to be unsecured claims. Pass th ro u g h rece iv e rsh ip d ata from R T C in c e p tio n th ro ug h yearend 1993 show that $688 m illio n in 10,851 creditor claims were allowed, $22 billion in claims from 6,994 creditors were disallowed, and $6 m illion in 2,105 claims were still pending at yearend. In liq u id a tin g receiverships, $89 m illio n in 8,060 cre d itor claim s were allow ed, w h ile $5 b illio n in claims from 8,194 creditors were disallowed,- $2 b il lion from 942 claims were still pe nd ing at yearend. Asset Claims From in c e p tio n th ro u g h yearend 1993, the R T C processed approximately 27,000 claims seeking $ 1.6 b illio n under the terms of asset sales agreements. A t ering misappropriated funds through crim inal and civil forfeiture and restitution proceedings. Crim inal referrals are filed w ith the D epartm ent of Justice on any apparent criminal activity discovered during the investigative process. From the RTC's inception through yearend 1993, the office assisted in the recovery of approximately $695.6 m illion in cash from professional liability and c o m m e rc ia l litig a tio n , a n d $ 7 5 4 .7 m illio n from litig a tio n in v o lv in g the Drexel Burnham Lam bert G ro up, Inc. The following chart shows detection by the RTC, OTS, and others of criminal activity by savings and loan directors, officers, and other pro fessionals, and legal action undertaken by the Department of Justice, as of December 31, 1993. RESTITUTION AND CRIMINAL ACTIVITY yearend, the R T C had approved and paid $547 m il lion on these claims (includes repurchases and actu (from inception in August 1989 through 1993) al losses). Number of defendants charged relating to RTC institutions 1,573 Number of convictions 1,383 the reserve a c c o u n t b alan ce was a p p ro x im a te ly Number sentenced 1,289 $1.3 b illion. Number awaiting sentencing R T C conservatorships, receiverships, and sub sidiaries place funds in reserve to cover the cost of future asset sales claims. As o f D ecem ber 31, 1993, S ubstan tial e n h a n c e m e n ts were m ade to the W arranties and Representations A ccount Processing 94 Total prison time sentenced System (W R A P S ) d uring 1993, including im proved Total number of restitution orders* capabilities to m o n itor reserve account balances and 1,184 years, 4 months 963 Total restitution ordered* $426,437,305 to manage, update, and report asset claims activities. Total restitution paid§ Office of Investigations The O ffice of Investigations examines all thrifts under the Corporation's supervision to determine the nature $15,035,609 *Based on information provided by the Department of Justice. Does not include state and local cases. *This figure includes 569 federal orders and 394 state orders. Federally ordered.- $419,293,663; Collected: $10,524,873. State ordered: $7,143,642; Collected: $4,510,710. determine potential recovery sources. W h e n judged *This figure includes orders both initiated and inherited by the RTC. Some orders may include multiple payees. These statistics reflect only the RTC portion of such orders. Total amount also includes a $219.7 million resti tution order imposed on Charles Keating, Jr. and Charles Keating III by the Department of Justice. to be cost-effective, claims are pursued against fideli §This figure is a cumulative statistic, reflecting all known RTC collections. and am o un t of losses, identify possible claims, and 4 ,V ,V I I A t R C r I) K T I ,V S r I r II T I (I N ( ) I ’ F k A T I ( ) ,V \ ,t ,V I ) S /t I £ 25 INSTITUTION OPERATIONS AND SALES Interagency Coordination program at yearend (including 8 institutions added The D epartm ent of Justice is responsible for prose during 1993). cuting criminal conduct com m itted by insiders and parties associated w ith RTC-supervised thrifts. RT C investigators work closely w ith the Federal T he departm ent assisted the field offices in c o n ducting in-house asset valuation reviews for 11 of the conservatorships resolved in 1993. Bureau of Investigation, U .S. Attorneys' offices, the T he total cost o f the 27 resolutions was esti Internal Revenue Service, the Securities and Exchange mated to be $1.6 billion. (The cost is estimated until C om m ission, the O ffice of Thrift Supervision, and all assets associated w ith the institutions are sold.) the Secret Service to provide the necessary d o c u The resolutions provided a $300 m illion savings over ments, work papers, and in some cases expert testi the cost o f paying off insured deposits. The gross m ony needed to prosecute individuals suspected of R T C funding for these 27 institutions totaled $5.6 crim inal co n d u c t in failed savings and loans. T he billion, including conservatorship advances of $138 O ffice of Investigations allocates substantial inves m illion, for a net R T C funding cost of $5.5 billion. tigative resources to assist the D epartm ent of Justice In 16 resolutions, all deposits were transferred to in pursuing criminal cases. acquirers, in 10 resolutions, insured deposits were Department of Resolutions payoff of the institution's insured deposits. T he D ep artm e nt of Resolutions markets and exe Office of Major Resolutions transferred to acquirers. O n e resolution involved the cutes the m ost cost-effective resolutions for insol vent thrifts placed in the RTC's conservatorship p r o g r a m b y th e O T S as w e ll as th o s e in th e Accelerated Resolutions Program. T he departm ent is com posed of the O ffice of M ajo r Resolutions, the O ffic e o f Field Resolutions, an d the Accelerated The O ffice of M ajo r Resolutions managed the dis position of larger conservatorships, generally insti tutions w ith more than $500 m illion in liabilities at time of conservatorship. D uring 1993, the office co m pleted six resolutions (com pared to 16 in 1992, 45 in 1991, and 39 in 1990). The six resolutions involved Resolutions Program. D urin g 1993, the R T C resolved 27 thrifts (com pared to 69 in 1992, 232 in 1991, and 315 in 1990). Despite a lack of Congressional funding during most o f the year, significant recoveries on asset sales and favorable econom ic conditions resulted in a release of unallocated reserves, m aking $3 billio n available for resolutions. Twenty-four thrifts were resolved using these funds. The rem aining three were c o m pleted w ith o u t cost to the RT C . T he acquirers of these three institutions assumed all o f the liabilities and purchased virtually all o f the assets for total pre mium s of $15.2 m illion, covering all expected loss $7 b illio n in deposits (com pared to $17 b illio n in 1992, $56 b illion in 1991, and $60 billio n in 1990). T he $264 m illion in premiums paid to the R T C in the six resolutions represented about 5 percent of the $5 .4 b illio n in core deposits (n on- brokered deposits w ith balances o f $80,000 or less) that were sold. T he premiums ranged from 3 percent to almost 9 percent of core deposits— higher percentages than in previous years. A ll b u t one o f the resolutions involved multiple purchasers, w ith 23 financial insti tutions acquiring one or more branches or the deposits thereof. N o n e of the six thrifts was resolved as a total payoff, however, one resolution involved paying off es in the institutions. Congressional fu n d in g became available w ith th e e n a c tm e n t o f th e R T C C o m p le t io n A c t on D ecem ber 17, 1993. T he act released $18.3 billio n deposits in tw o branches an d a n o th e r resolution involved paying off the wholesale deposits, for a total of $298.5 m illion. of funds formerly allocated by the R T C Refinancing, Restructuring, and Im provem ent A ct o f 1991, pro S v id in g the R T C w ith the means to resolve the 63 T he largest conservatorship resolution in 1993 was insolvent thrifts that remained in its conservatorship H o m e F e d B a n k , FA (F J o m e F e d ), S an D ie g o , 2 6 I X S I I T tl I I n X () /' E k A T I < X s > ,v 0 s A I E s iz e o f Re so lv ed T h r if t s R £ v O | I I T I () X T « 1 s 7 1 C l) » M l « A T I 1993 RTC CONSERVATO RSHIP A N D RESOLUTION A C T IV IT Y (dollars in millions) State Conservatorships Beginning Deposits* Added Balance 3 $ 1,283 0 California 10 18,490 4 223 0 60 Deposits* 1 $ 1,122 10,371 8 11,009 0 1 223 1 0 Ending 6 2,890 1 Connecticut $ 161 0 Deposits* Alabama 54 10 3,305 Deposits* Resolved 2 0 $ Florida 10 3,299 1 Georgia 3 330 0 0 1 97 2 233 Illinois 2 432 0 0 0 0 2 432 Iowa 1 712 0 0 0 0 1 712 Kansas 2 4,751 1 127 1 95 2 4,784 Louisiana 3 2,546 1 16 0 0 4 2,563 Maine 1 76 0 0 0 0 1 76 Maryland 5 2,780 0 0 1 43 4 2,738 Massachusetts 2 255 0 0 0 0 2 255 Michigan 1 547 0 0 1 547 0 0 Mississippi 1 247 0 0 0 0 1 247 New Hampshire 1 192 0 0 0 0 1 192 New Jersey 8 4,955 0 0 1 107 7 4,848 New York 1 1,073 0 0 0 0 1 1,073 North Carolina 2 802 0 0 2 802 0 0 Ohio 2 2,419 0 0 1 27 1 2,392 Oklahoma 1 710 0 0 1 710 0 0 Oregon 1 1,273 0 0 0 0 1 1,273 Pennsylvania 7 1,226 0 0 4 811 3 415 Rhode Island 0 0 1 1,699 0 0 1 1,699 South Carolina 4 564 0 0 2 326 2 238 Tennessee 1 124 0 0 0 0 1 124 Virginia 6 852 0 0 0 0 6 852 West Virginia 2 103 0 0 2 103 0 0 81 $50,266 8 $4,793 $14,253 63 $40,806 Total (27) 261 *Deposits at quarter prior to date of conservatorship. *Does not include 1 thrift resolved in 1993 through the Accelerated Resolutions Program. Note: Detail may not add to totals due to rounding. /\ \' ,V U A L M t I' ( l k I ‘ I N S T I T (I T I ( I N () I ’ E k A T I O -V \ A N I) S A L E S 27 INSTITUTION OPERATIONS SALES branches, completed in Decem ber 1993, the insured 1 1993 RESOLUTION COST A N D SA V IN G S BY STATE deposits in all branches, except the certificates o f (dollars in millions) State AND deposit in tw o branches, were transferred to four Resolution Cost* Resolved Institutions $ Estimated Savings* 10 $ 5 183 acquirers. T he R T C sold 119 of the 136 branches to G reat W estern Bank, FSB, Chatsw orth, California, Alabama 2 California* 7 1,401 Florida 1 15 1 purchased the remaining 17 branches. T he combined Georgia 7 6 premiums for the entire transaction totaled $164 m il Kansas 1 1 9 3 lion, or 4.7 percent of the $3.5 billion in core deposits. Maryland 1 3 2 Michigan 1 1 36 17 6 5 64 39 New Jersey North Carolina for a prem ium of $151 m illion, or 5 percent o f the $3 b illio n in core deposits. Three o ther acquirers A n o th e r significant m ajor transaction in 1993 was the reso lu tion o f C im a rro n Federal Savings A s s o c ia t io n ( C im a r r o n F e d e r a l), M u s k o g e e , O klah o m a , in M a y 1993. Cim arron Federal was sold to four financial institutions in an estimated no-cost Ohio Oklahoma 1 1 5 1 0 0 $15.2 m illion, or 3.7 percent o f the $406 m illion in Pennsylvania 4 51 22 core deposits. Acquirers purchased $421 m illio n in South Carolina 2 2 16 12 assets, representing 74 percent o f the assets in the 8 4 27 $1,630 $300 West Virginia Total (14) transaction. T he R T C o btained total premiums of institution at the tim e o f resolution. Office of Field Resolutions in c lu d e s 1 thrift resolved under the Accelerated Resolutions Program, D uring 1993, the Office of Field Resolutions resolved t Resolution cost estimated at time of resolution. 20 co nservatorships w ith a to tal o f $1 b illio n in ■t-This amount represents the difference between the estimated cost of the actual resolution method used by the RTC, and the estimated cost that would have been incurred had the RTC paid off the insured deposits. A s s o c ia t io n , C o m p t o n , C a lifo rn ia ,- a n d F irst Note: Detail may not add to totals due to rounding. F“ Iom e Federal S avings A s s o c ia tio n , P ittsb u rg h , C alifornia, w ith $10.2 b illio n in deposits, $13.9 b il lion in assets, and 201 offices w hen it was placed in conservatorship in July 1992. W h ile H om eFed was in conservatorship, the R T C aggressively marketed the assets to dow nsize the institution and reduce its operating losses. T he asset sales generated sufficient cash inflows to enable the O ffice o f M a jo r Resolutions to sell 56 northern C alifo rnia H o m e F e d branches w ith $1.6 billion in deposits and $1.1 billion in mortgage loans. T he branch sale, com pleted in January 1993, effec tively reduced the ultim ate cost o f the resolution because operating expenses were reduced and the franchise value o f the rem aining 136 branches was enhanced. T he R T C obtained total premiums o f $35 deposits. Two thrifts— Enterprise Savings and Loan Pennsylvania— were resolved at an estimated no cost to the R T C . Both were acquired b y thrifts in their respective states. D uring 1993, the Office of Field Resolutions co n ducted one insured deposit payoff of an institution in C alifornia w ith $50.2 m illio n in insured deposits. T he office also m anaged tw o resolutions involving tw o or more acquirers. T he 20 resolutions generated $44 m illion in pre miums, or approximately 6 percent of the total core deposits at tim e of resolution, representing a per centage increase over 1992 field resolution prem i ums, w h ic h averaged 2 percent of core deposits. Accelerated Resolutions Program m illio n , o r 3 pe rce n t o f th e $1.2 b illio n in core The Accelerated Resolutions Program is a jo in t effort deposits. (N in e of the 201 offices were consolidat between the RT C and the Office of Thrift Supervision (O T S ). It was created on the premise that early inter ed, leaving 136 offices fo llow in g the branch sale.) In the resolution of HomeFed's rem aining 136 28 I n s t i t u r i o n O p e r a t i o n s a n d S a l e s vention in a failing thrift could create significant tax- R e s o l u t i o n T r u s t C o r i> o r a t i o n payer savings. Thrifts selected for A RP are those that As provided for in the legislation, the acquirer was the O T S D irector has determ ined are in danger of given m inority preferences to purchase the thrift and failing, and whose financial c o nd itio n w ould cause was able to purchase loans from the R T C portfolio them to be placed in conservatorship w ithin one year. at market value up to the am ount of deposits assumed. U n lik e o th e r th rifts resolved b y the R T C , those U nite d Bank o f Philadelphia purchased $11 m illion resolved th ro ug h A R P are not placed in conserva in loans. torship prior to resolution. Three branches (w ith a total of $101 m illion in A n institution agreeing to participate in the pro deposits) of H o m e U n ity Federal Savings and Loan gram is marketed by the R T C and the O T S , w ith Association, FA, a m ajority thrift in Lafayette H ill, assistance from the thrifts ow n m anagem ent. O n c e Pennsylvania, were also sold to the same m inority a buyer for an A R P thrift is identified, the O T S clos acquirer, U nited Bank of Philadelphia, when no accept es the thrift, places it in RT C receivership, and im m e able bids were received for those branches. The acquir diately transfers it to the w aiting buyer. This process er received m inority preferences in this transaction is designed to avoid the deterioration in franchise as well and, as pro vid ed in the R T C R e financing, value associated w ith the conservatorship process. Restructuring, and Im provem ent A ct o f 1991, was T he im proved health o f the thrift industry result able to purchase loans at market value up to the amount ed in o nly one A R P resolution in 1993 (com pared to o f deposits assumed. As part o f the transaction, U nited 9 in 1992,21 in 1991, and 4 in 1990). A m ador Valley Bank o f Philadelphia purchased $96 m illio n in loans Savings and Loan Association, Pleasanton, California, from the R T C at market value. w ith deposits to taling approxim ately $41.2 m illion, was acquired b y C o m m u n ity First N atio n a l Bank, Pleasanton, California, w hich paid a $ 1.8 m illion fran chise premium, representing 5 percent of core deposits. Department of Planning and Analysis T he D epartm ent o f P lanning and Analysis provides M in o r it y Pa r t ic ip a t io n T he N ational M arketing List includes more than 350 financial institutions, investor groups, and in d iv id u als that have indicated they are minority- or womenowned, or are a minority member or a woman. Included research, planning, and analytical services to support operations th ro ug ho ut the Corporation. Office of Research and Statistics T he O ffice o f Research and Statistics provides eco in the list are 86 Asian American, 121 Black American, nom ic, financial, and statistical data and analysis to 79 F-|ispanic American, 46 N ative American groups other offices and divisions w ithin the R T C as well as or individuals, and 32 wom en. to Congress and the public. Three sections comprise In 1993, Enterprise Savings and Loan Association, th e O ffic e o f Research a n d S tatistics: F in an c ial C o m p to n , C alifornia, a m inority-owned thrift, w ith M o d e lin g a n d S tatistics, F in a n c ial M a rk e ts an d $8.8 m illion in deposits, was acquired by a like m inor Institutions, and C ost Analysis. ity-owned thrift, black-owned Family Savings Bank, T he Financial M o d e lin g and Statistics Section FSB, Los Angeles, California, at no cost to the RTC. regularly produces reports covering virtually all facets U nd e r the R T C Refinancing, Restructuring, and o f R T C o p e ra tio n s for senior R T C m an a g em en t, Im provem ent A ct o f 1991, the R T C is m andated to Congress, other agencies, and the public. M u c h of give certain m in ority preferences w hen no accept this in fo rm a tio n is p ro v id e d in the R T C Review, a able bids are received for an institution or its branch m o n th ly publication produced by the office. Internal es. Chase Federal Savings and Loan Association, a a n d external ad hoc reports, analyses, charts, and m ajo rity thrift in P hiladelphia, Pennsylvania, w ith tables are also prepared by the section. D u rin g 1993, $1 1.9 m illio n in deposits, was sold to a m in o rity the office participated in developing asset inventory acquirer, U n ite d Bank of Philadelphia, Philadelphia, and sales data, and projections for the R T C Business Pennsylvania, after no acceptable bids were received. Plan and the 1994 Sales Goals. In its role as a d m in A iV S U A L K £ I’ O k T I N S T I T II T I I ) ,V () > E K A T I O N s > N II S L £ 29 INSTITUTION OPERATIONS AND SALES istrator of the Corporate Inform ation System, the projects and the IR M strategic plan and IR M b ud section continued to facilitate communication between get. T he IR M Steering C om m ittee also reviews rec users and system developers, and to oversee the sys om m endations on actions requiring the attention of the RTC Executive Committee, which examines more tem's standard operations. The Financial Markets and Institutions Section provides policy- and economics-oriented support to substantial IR M expenditures and establishes strate gic IR M policy. the R T C . T h e section publishes the b i- m o n th ly Regional Economic Review, w hich includes valuable indi cators of real estate market conditions, and partici pates in the estimated cash recovery process (ECR) for the valuation of receivership assets. D u rin g the year, the section wrote numerous congressional tes timonies, prepared the RT C Business Plan, and devel oped briefing materials for senior m anagem ent. T he C o st Analysis Section supplies analytical support and inform ation m anagem ent in the RTC's resolutions and E C R processes. T he section conducts the RTC's "cost test" for all m ajor resolutions, and it provides technical assistance to field office person nel on field resolutions. T he section m aintains a res olutions database, and provides resolutions reports to R T C senior m anagem ent, the T hrift D epositor Protection Oversight Board, Congress, and the G A O . W it h the assistance of the Financial M arkets and Institutions Section, the section also conducts the quarterly E C R process for the valuation of receiver ship assets. Office of Systems Development T he O ffic e o f Systems D e v e lo p m e n t creates and manages the RTC's national info rm ation systems. The office has two branches: Software M anagem ent and Business Applications Analysis. The Software M anagem ent Branch plans, devel ops, implements, and maintains national information systems, and provides user training, docum entation, and other support for these systems. In 1993, the branch supported the following areas using the infor m ation systems below: finance, assets, resolutions, legal services, m inority and women's programs, and administration. The Business Applications Analysis Branch focus es primarily on systems-related activities of the RTC's most visible and mission-critical systems, and par ticularly on the interaction of the customers that cross organizational lines and have differing or often conflicting needs and perspectives. In 1993, the office actively developed or enhanced the RTC's corporate in fo rm a tio n systems, w h ic h Department of Information Resources Management include the following: T h e D e p a r tm e n t o f In fo r m a tio n R e so urces F in a n c ia l S y stem s M anagem ent (D IR M ) develops and manages n ation Financial Management System-Accounts Payable (FMS- al inform ation systems to support RT C operations. AP)— FMS-AP processes approved R T C invoices and D IR M also provides the RT C w ith technical support is fully integrated w ith the RTC's G eneral Ledger ( F M S - G L ) . T h e s y s te m was im p le m e n t e d in for its inform ation systems. T he departm ent, w h ich consists of the Offices M arch 1993. of Systems D evelopm ent and Corporate Information, Control Totals Module (CTM)— C T M is used to cap was formed in D ecem ber 1993 by consolidating the ture summ ary asset-related financial activity, post it tw o offices to integrate inform ation systems devel to the General Ledger, and assist in reconciling the o p m e n t and operations activities, and better assist G L and subsidiary records. In 1993, three system management in the RTC's dow nsizing operations and development projects increased CTM 's accuracy, and the transition of inform ation systems to the F D IC . im proved its data-sharing capabilities. M ajo r activities of the departm ent are guided by Invoice Processing System (IPS)— IPS is used to track th e In fo r m a tio n Resources M a n a g e m e n t ( IR M ) the location and paym ent of invoices as they move Steering C o m m ittee , w hich reviews selected system th ro ug h the approval process. Initially developed 3 0 I x \ i t t u r i < x > <) i ’ i: u i i n x s a x i> S a i e s K e s o i ti r i u n’ T r u s t C < > k p < u a > t i < x > by the Dallas O ffice, IPS was im plem ented n a tio n and verification of M W O B contractors. The system wide in 1993. was im plem ented in 1993. Asset Manager System (AM S)— A M S is a cash-management system that tracks incom e and expenses for Asset M a n a g e m e n t an d D is p o s itio n A g re e m e n t ( A M D A ) contractors and provides autom atic trans fer o f funds to and from contractor accounts. System enhancem ents to A M S in 1993 include im proved r e p o r tin g a n d e d it in g , a n d a c o n t r a c t o r d a ta upload facility. A d m in is t r a t iv e Sy stem s Personnel Action Request System (PARS)— In 1993, the Office of Systems D evelopm ent assisted the Office of H u m a n Resources M anage m ent ( O H R M ) in c o n ducting a major review of O H R M functions and data processing needs. The study recommended RTC imple mentation of the F D IC PARS, w hich processes and tracks requests for personnel actions. Implementation A s s e t Sy is expected to be completed by mid-1994. stem s Real Estate Oumed Management System (R E O M S )— R E O M S is the corporate-wide repository for infor m ation on the RTC's real estate assets. D u rin g the y e a r, R E O M S w as m o v e d fr o m th e R T C 's Gaithersburg, M aryland, data center to its Virginia Square data center in Arlington, Virginia, to increase processing capacity and to reduce costs. In 1993, the R E O M S Electronic Journal Interface (REJI) was imple m ented, providing an autom ated interface between R E O M S and C T M . Warranties and Representations Accounts Processing System (W R A P S )— W R A P S is used to m o n itor R T C activities on warranties and representations provid National Employee Ethics Tracking (NEET)— N EET is used to capture, review, and report R T C e m p lo y ee financial and ethical disclosure inform ation. The system was im plem ented nationw ide in 1993. Management Reporting System (M R S )— M R S tracks material weaknesses and nonconform ities in R T C internal controls, and recom m ended solutions. The system was im plem ented nationw ide in 1993, and w as e n h a n c e d to p r o v id e k e y - w o r d s e a rc h capabilities. Office of Corporate Information T he O ffice of Corporate Information (O C I) provides ed in asset sales. T he application of new data-man- the technical infrastructure and other support for the agem ent and data-sharing technology (S Q L Server) use of corporate information resources by RT C head im proved the system's data q u a lity timeliness, and quarters and field offices. T he office has two branch operational efficiencies. A new accounting function es: I n f o r m a t i o n R e s o u rc e s M a n a g e m e n t a n d was also incorporated into W R A P S , im proving per Inform ation Systems. formance, customer interface, and data security. The Information Resources M anagem ent Branch adm inisters an d m anages In fo rm a tio n Resources L eg al S M anagem ent (IR M ) programs, including oversight y stem RTC Legal Information System (RLIS)— RLIS is used to track R T C legal matters. The most recent version of the system, RLIS III, was developed in 1993, pro viding enhanced reporting and a streamlined payment review and approval process. D u rin g the year, RLIS was moved from a contractor-managed data center in Dallas, Texas, to the RT C Virginia Square data center. o f systems quality, standards, security, and internal controls. T he branch also oversees IR M p la n n in g and policy form ulation. T he Inform ation Systems Branch manages the RTC's data centers, Local Area N etw ork (L A N ) and W ide Area Network (W A N ) operations, and telecom m unication services (voice and data). The office operates and maintains a corporatewide inform ation network consisting of 12,000 work M in o r it y a n d Wo m e n ’s Pr o gram s S y stem stations. In 1993, a new contract was com petitively Minority- and Women-Owned Business Database System awarded to m anage the W A N , w h ich supports all (M W O B -D B )— M W O B - D B tracks the certification netw ork and data center systems, and capabilities A v .v ii i U i i' n u r / ,v s r I t it r I ti ,\ <) r f it I i ii \ s .v i> S i F v 3 1 INSTITUTION OPERATIONS such as video-teleconferencing between R T C head quarters and field offices. Contracts were also award ed to provide L A N support for R T C field offices. AND SALES action plans for major inform ation systems. The R T C changed its long-distance telephone services from M C I to the FTS2000 network during In 1993, the office began im plem enting a plan to the year. M u ltip le 800 numbers previously used in consolidate data center operations at the RTC's Virginia each of the six field office cities were replaced w ith Square data center in Arlington, Virginia. To improve a single 800 num ber at each site, reducing the need operational efficiency, the m ainfram e com puter at for operator assistance and im proving call handling Virginia Square was upgraded during the year. In addi for better service. tion to R E O M S and RLIS, corporate contracting sys In 1993, teams of O C I managers and program managers reviewed R E O M S , A M S , and C T M , and tems were m oved to Virginia Square. In 1993, the D ata Q u a lity Program was im ple determined that the three systems provide adequate m ented to ensure that all R T C automated-systems safeguards and achieve their stated objectives. A risk data are com plete, accurate, and timely. T he branch analysis of the Virginia Square data center was also provided technical guidance and support to R T C com pleted by the O ffice of Corporate Inform ation managers in developing and executing data-quality during the year, w ith no material weaknesses found. 32 I n s t i t u t i o n () p [ im t i h n' s a m ti S a l e s k l s o : i ii r i o x T r u s t (' < u i> o u a t i o m > 1 ws I II MINORITY AND WOMEN'S PROGRAMS MINORITY AND WOMEN’S PROGRAMS D iv i s io n o f M i n o r i t y a n d ly w ith contract officers and oversight managers to W omen's Programs (M W P ) man- ensure M W O B participatio n in smaller contracts ages and develops policy for the (those w ith estimated fees below $50,000), as well participation of minorities and w om en in as with S A M D A contractors to increase M W O B par all RT C activities, including contracting, ticipation in subcontracting activities. purchasing assets and failed thrifts, and T h ro u g h o u t the year, the office was actively securitization,- a n d equal e m p lo y m e n t involved in efforts to improve, identify, and preserve opportunity activities. The division is co m asset-acquisition opportunities for minorities, women, prised of the Departments o f Minority- and Women- and investors with moderate sources of capital through O w n e d Business,- Legal Programs, Equal Employment participation in the Small Investor Program. The pro O p p o r tu n ity (E E O ) and A ffirm ative A c tio n , and gram is intended to develop greater opportunities Policy, Evaluation and Field M anagem ent. for smaller investors. D u rin g 1993, the division experienced signifi T h e o ffic e a lso p a r tic ip a t e d in th e R T C 's cant growth. In accordance w ith Treasury Secretary Judgm ents, Deficiencies, and Chargeoffs (JD C ) in i Bentsen's m anagem ent reform agenda for the RTC, tiative, a partnership arrangement designed to sell which included the expansion of minority and women's approximately $7 billio n (book value) of judgm ents, program s, the R T C elevated the d iv isio n from a deficiencies, and chargeoffs. Minority- andw om en- departm ent and increased its role in m anagem ent ow ned firms participated in the initiative as general and disposition activities, contracting opportunities, partners, joint-venture partners, and subcontractors. legal engagements, sales and investment initiatives, In September 1993, the office sponsored a one- e m p lo y m e n t a c tiv itie s , a n d th e th r if t r e s o lu day "teaming conference'' in Washington, D .C ., which tion process. allowed several R T C contractors and M W O B firms to meet and discuss opportunities for subcontract ing, joint-venture, and other partnership arrange Department of Minority- and Women-Owned Business conferences, w hich will be held throughout the coun T he D epartm ent of Minority- and W o m e n - O w n ed try, are scheduled in 1994. ments. D u e to the event's success, several team ing Business ( M W O B ) ensures that firms o w n ed and In 1993, approxim ately 10,000 contracts were operated by minorities and w om en have the m axi awarded to M W O B firms, representing more than m u m o p p o rtu n itie s available to participate in all 40 percent of all R T C contracts awarded during the contracting activities of the C orporation, as well as year. Estimated contracting fees to the M W O B firms at conservatorships and receiverships. D u rin g 1993, exceeded $155 m illion, or more than 30 percent of th e o ffic e p u rs u e d several avenues to increase the estim ated fees for all R T C contracts awarded th e p a r t ic ip a t io n o f m in o r it ie s a n d w o m e n in in 1993. these activities. In an effort to strengthen the RTC's M W O B cer tification process against fraud and misrepresenta tion, the division published a circular in July outlining Department of Legal Programs The D epartm ent of Legal Programs establishes and the certification procedures. T he M W O B depart im plem ents programs designed to ensure the inclu m ent notified contractors an d o ther affected per sio n o f m in o rity - a n d w o m e n - o w n e d law firm s sonnel o f these procedures. To support this activity, (M W O L F s ) and m inority and w om en attorneys in an M W O B database was created, w hich contains a n o n - M W O L F s in legal contracting w ith the RTC. In 1993, while participating in the annual m eet nationw ide inventory of certified M W O B firms. To im p r o v e c o n t r a c t in g o p p o r t u n it ie s for ings o f several legal and bar associations, the office M W O B s , office representatives served on Technical identified and recruited M W O L F s and m inority and Evaluation Panels, w h ic h evaluate proposals from w om en attorneys in n o n - M W O L F s to serve as o u t prospective contractors. The staff also worked direct side counsel. These associations included the American 34 A! I N I) R I T v A N I) W (> At £ N ' S P K <) I. R A AI \ R £ .V < L I I T I I ) X > T # U S T ( < K P < H A T I l) K > > Indian Bar A ssociation, N atio n a l Bar Association,- M W O L F consortia, facilitate communication between American Bar Association (w hich held a conference M W O L F s and R T C legal staff, and promote interac on O pportu nities for M inorities in the Profession), tion between M W O L F s and non-M W OLFs. N a t io n a l A s s o c ia tio n o f W o m e n Law yers, an d In 1993, th e R T C m ad e 1 1,417 referrals to H ispanic N ational Bar Association. D urin g the year, M W O L F s for legal work w ith the RTC, or 56.9 per the office published the National M W O L F Directory, cent of all referrals to outside counsel, and paid them featuring the specific skills and expertise o f RTC- fees totaling $53.8 m illion, or 15.9 percent of all fees approved M W O L F s . paid to outside counsel during the year. T he office sponsored several seminars d uring the year to facilitate the assignm ent o f legal work to M W O L F s , p r o v id e e d u c a tio n a l sessions to M W O L F s o n the RTC's o utreach pro gram , give guidance on the RTC's Professional Liability Section an d Jo in t Representation programs, and prom ote Department of Equal Employment Opportunity and Affirmative Action co m m u nicatio n and interaction between M W O L F s T he Departm ent of Equal Em ploym ent O pp ortu nity an d R T C legal staff. Seminars were held in Atlanta, and Affirmative Action provides leadership and guid D enve r, P h ila d e lp h ia , N ew O r le a n s , and ance to the C o rp o ra tio n in all areas o f the equal W a s h in g to n , D .C . T he office is also p la n n in g sim em ploym ent opportunity program. D uring 1993, the ilar forums in 1994. departm ent expanded recruitment efforts to target To ensure that the R T C engaged outside c o u n a n d increase the representation of m inorities and sel on a com petitive basis, an office representative w o m e n in the w o rk force at headquarters a n d in served as a v o tin g m e m b e r o f the Legal Services the field. C o m m ittee , w h ic h selects law firms to handle RT C These increased recruitm ent efforts supported work. T he co m m itte e operates in each field office items in the RTC's Affirmative A ction Program plan. an d at headquarters. As a part of the plan, headquarters and the field offices To assist M W O L F s in b e c o m in g in vo lve d in established numerical objectives to improve the rep m o re c o m p le x legal issues, th e o ffice — in c o n resentation o f m inorities, w om en, an d individuals ju n c tio n w ith the D ivisio n o f Legal Services— pre w ith disabilities at senior-grade levels. These offices sented tw o national M W O L F sym posium s as part reported quarterly on their accom plishm ents, and o f th e RT C 's M i n o r it y a n d W o m e n O u t r e a c h u p d a te d th e ir n u m e r ic a l o b je c tiv e s as s ta ffin g P r o g r a m . In J u n e 1 9 93 , th e R T C h o s te d th e needs changed. "N a tio n a l W o rk s h o p on the J o in t Representation T he office m onitored the success of the offices o f R T C 's P ro fe ss io n a l L ia b ilit y Cases" in N e w in attaining their numerical objectives b y reviewing O rleans. In S eptem ber 1993, the R T C sponsored E E O efforts in the referral and selection processes. "A n Inside L o o k at Legal M atters w ith the RTC's As opportunities for hiring and promotions occurred, D iv is io n o f Legal Services" in W a s h in g to n , D .C ., all selections at the grades 13 and above in "major w h ic h focused o n co m plex securities, real estate, mission" occupations were reviewed by the depart litig a tio n , a n d affordable h o u s in g issues. Several m ent before the selections were finalized. E E O Action th o u sa n d attorneys a n d o th e r legal professionals Officers also reviewed selections to assist offices in participated in each sym posium . m eeting their E E O objectives. T he symposium objectives were to facilitate the T he departm ent oversaw the E E O Com m ittees assignment of work to M W O L F s already on the RTC's in the six field offices, assisting them in b oth m eet List of O utside Counsel,- provide educational sessions in g E E O o b je c tiv e s a n d ra is in g th e aw areness to M W O L F s on procedural and legal issues applica and sensitivity o f R T C managers and employees on ble to representing the RT C in complex legal matters, E E O matters. T he committees sponsored several pro provide instruction on the formation of joint-venture, gram s d u r in g th e year th a t e n h a n c e d d iv e rs ity jo in t- c o un se l, a n d co-counsel arrangem ents an d and awareness. i 99i A n n u a l R e p o r t M i n o r i t y a n d W o m e n ' s P r o g r a m s 35 MINORITY AND WOMEN Department of Policy, Evaluation, and Field Management T h e D e p a rtm e n t of Policy, E valuation, and Field PROGRAMS S pation of minorities and w om en in all facets of the^ RTC's operations necessitated changes to the rule. These revisions will be circulated internally for review for com pliance w ith the provisions o f the act. M a n a g e m e n t develops n a tio n w ide program stan The departm ent closely tracked, evaluated, and dards, policies, and procedures for the RTC's m in or reported to the U.S. Congress on the im plem enta ity and women's programs, ensuring that they are in tion of the RTC's M W P activities during 1993. In com pliance w ith FIRREA; the RT C Funding A ct of a d d i t i o n , it c o o r d i n a t e d w it h th e O f f i c e o f 1991,- the R T C R e fin a n c in g , R e structuring, a n d A dm inistrative Evaluation to establish "assessable Im provem ent A ct of 1991,- and the R T C C om pletion units" (standards to measure program performance) A ct of 1993. T he departm ent ensures standardized as part of the Corporations Internal Controls Program. im plem entation o f m inority and w om ens programs throughout headquarters and in the field offices. In 1993, the departm ent expanded its role to The office increased the RTC's use of advertise ments targeting minorities and wom en. D u rin g the year, the division also expanded its advertising in the include oversight of business, legal, and equal employ m inority press and teamed w ith the N ational Asset m ent oppo rtun ity programs at headquarters and in M arketing G ro up in its efforts directed at m inority the field. T he office defined standards an d criteria investors. In 1993, advertisements were placed in for the oversight and review of minority and womens m o re th a n 40 p u b lic a tio n s a im e d at m in o ritie s program s in the field to determ ine the programs' and wom en. effectiveness, and com pleted Program C o m pliance D u rin g the year, the office participated in m eet Reviews of the six field offices to determ ine their ings, conferences, and seminars representing Hispanic, p r o g r a m s ' a d h e r e n c e to M W P p o lic ie s a n d Black, Indian, Asian, and w om ens groups, w hich sig requirements. nificantly increased the prom otion of the RTC's pro D uring the year, an interim final rule— "M inority and W om en-owned Business and Law Firm Program" (12 CFR, Part 617)— was revised, providing the foun gram s to in v o lv e m in o r itie s a n d w o m e n w h ile furthering the RTC's outreach efforts. T hro ugh ou t 1993, the office focused on devel dation for uniform im plem entation of the M W O B o p in g regulations to assure uniform im plem entation and M W O L F programs. It also triggered the devel o f M W O B an d M W O L F programs,- tracked c o n o p m e n t an d revision o f policies, procedures, an d tracting activity and program performance,- drafted other guidelines necessary for consistent program p rocedures to im p le m e n t c o n tra c to r oversight,- delivery. T he original version of the rule was p u b and prepared reports on program accom plishments lished for public com m ent in 1992. Provisions in the fo r R T C R T C C o m p le tio n A ct intended to increase partici general public. 36 Mi n o r i t y a n d W o m e n ' s P r o g r a m s m a n a g e m e n t , C o n g r e s s , a n d th e R esoluti on Tr u s t Corporati on A S S E T MANAGEMENT A N D S A L E S ASSET MANAGEMENT he D ivision of Asset M anagem ent Sales manages and disposes of AND SALES m aintenance, subcontracting oversight, and m a n agement and disposition fee calculations. assets acquired from failed thrifts. T he division accom plishes this through the Departments of Field Activities, Capital M arkets, Asset M a rk e tin g , A ffo rd a b le Housing, and the Small Investor Program. D u rin g 1993, R T C asset sales and collec tions totaled $49 b illio n (net o f putbacks). From inception through 1993, asset sales and collections am ounted to $353 b illio n (net of putbacks),- book value reductions totaled $393 b illio n for the same period. T he asset inventory rem aining at yearend 1993 totaled $63 billion. Office of Asset Management The O ffice of Asset M anagem ent develops the RTC's policies and procedures on asset valuation, seller financing, subsidiary m anagem ent and disposition, and general real estate and loan credit management. In 1993, the office developed the Loan Servicer O versight Program to m o n itor and oversee all types of RT C loan servicing. The office also developed the R T C Property Tax M anagem ent Program to m axi m ize real property tax savings through tim ely real estate appraisals and property tax appeals. D u rin g the year, the office im plem ented proce Department of Field Activities dures developed in 1992 to originate seller-financ The Department of Field Activities coordinates nation and equity interests acquired from multiple asset sales ing loans for commercial R E O and servicing notes, al sales efforts and oversees field office sales and oper and multiple investor funds. In 1993, the R T C closed ations. T he department also develops and implements a pp ro x im a tely $1.6 b illio n in c o m m e rcial seller- policies and procedures governing the m anagem ent financed transactions. From inception of the program and disposition o f assets, except for securitization in M arch 1991 through yearend 1993, the RTC closed transactions. T he departm ent consists o f the Offices a pp ro x im a tely $3.1 b illio n in co m m e rcial seller- of financed transactions. SAM DA P ro g ram M a n a g e m e n t, A sset M a n a g e m e n t, S ettlem en t W o rk o u t, Systems an d T he office also com pleted the sale of 17 e nvi ronm entally significant properties, w ith a total book Pipeline M anagem ent, and Field Activities. value of $130.6 million, to conservation agencies and Office of SA M D A Program Management organizations for the protection o f approxim ately The Office of S A M D A (Standard Asset M anagem ent and D isposition Agreement) Program M anagem ent issues and m onitors all S A M D A s, w hich totaled 187 from inception of the S A M D A program in August 6,062 acres. Office of Settlement W orkout The O ffice of Settlement W orkout restructures prob 1990 through yearend 1993. At yearend, 91 S A M D A lem loans and negotiates settlements w ith defaulted contractors were m anaging assets w ith a total book borrowers. Assets assigned to the office generally value of approxim ately $ 10.9 billion. have a h ig h book value,- may have the potential for From A ug ust 1990 th ro u g h D e c e m b e r 1993, substantial legal costs,- m ay be involved in, or have S A M D A contractors m anag ed assets w ith a total the threat of, com plex litigation, or m ay not have b o o k value of $37.6 billio n and disposed o f 71 per sold after a prolonged period according to their pro cent, or $26.7 billion, of those assets. posed disposition plans. In 1993, the office d eveloped procedures for In 1993, the office's 23 settlement workout assis S A M D A an d o ther R T C contractors to com plete tance teams restructured, sold, or worked out approx their contractual o bligatio ns before the contracts' imately $2 b illion in problem assets,- total settlement scheduled expiration dates. T he office also im p le value on these assets was $951 m illion. A nother $2.9 mented internal control review procedures to strength- billio n in assets were under review by the office at en c o n t r o ls o v e r c a s h m a n a g e m e n t , sy s te m s yearend 1993. 38 A s s e t M ,a n a < e m ; e n t a n / > S a l e s R e s a l u t i o iV T r u s t ( o r p o u a t i o n Office of Systems and Pipeline Management CON SERVATO R SH IP A N D RECEIVERSHIP ASSETS UNDER RTC M A N A G E M E N T AS OF DECEMBER 31, 1993 T he O ffice of Systems and Pipeline M an age m en t coordinates the development, im plem entation, and (percentage of gross assets) Other Performing Loans 4% maintenance of the division's inform ation systems, manages related contracts such as the D ata Integrity Support and the Policy and Procedure Support c o n tracts, and monitors the performance of m ajor opera tin g system s s u c h as th e Real E state O w n e d M anagem ent System (R E O M S ), the Asset M anager System (A M S ), an d the S u b s id ia ry In fo rm a tio n M anagem ent System (S IM A N ). D u r in g 1993, the data in te g rity o f R E O M S im proved from 47 percent to 98 percent (based on computerized assessments of the data). A n automated clearinghouse was im plem ented for 67 percent of the RTC's outstanding contracts, w ith improved fund ing controls and cash m anagem ent. In addition, the Cash & Securities 14% Other Assets 24% office established the Central Loan Database to track all R T C sales initiatives. Mortgage Backed Securities 3% REO 9% Office of Field Activities T he O ffice of Field Activities oversees the asset m a n agem ent and sales operations in the six field offices, Total Assets: $63 Billion w hich manage assets primarily through S A M D A co n tracts, manages and disposes of RTC thrift subsidiaries, This includes the creation and sale of securitized loan and oversees the field responsibilities o f the RTC's products, and the sale of debt and equity acquired self-insurance program. through R T C interventions. The departm ent c o n T he office oversees all field office staff support activities, such as facilities operations, b udgeting, sists of the O ffice of Securities Transactions, and the O ffice of Securitization. inform ation services, resolutions, claims and settle ments, asset operations, and financial reporting. D u rin g 1993, the office worked closely w ith the field offices in co m ple ting the closure of seven R T C offices, located in Baton Rouge, C hicago, FJouston, Phoenix, San Antonio,- Somerset, N ew Jersey,- and Tampa. At yearend, six field offices rem ained open in A tlanta, Dallas, Denver, Kansas City, California, and Valley Forge. Office of Securities Transactions T he O ffice of Securities Transactions sells securities acquired th ro ug h R T C interventions and manages the reinvestm ent o f the RTC's cash. T he types of securities offered include jun k bonds, equity securi ties, U .S. Treasury obligations, federal agency and mortgage-backed securities, limited partnership inter ests, and nationally syndicated bank loans. In July 1993, the office coordinated a fun ctio n al reorganization w ithin each field office. Department of Capital Markets From inception o f the securities sales program in M arch 1990 through yearend 1993, the R T C sold over $62.5 b illio n of securities, including $9 b illion of interest-rate swaps and nearly $9 b illio n in jun k T he D epartm ent of Capital Markets plans, co o rd i bonds, recovering approx im ately 65 cents on the nates, and directs R T C capital markets transactions. dollar for the taxpayers. A S \ U A L k E I’ ' I k T A S N E T AI A N A (, I: A1 E N T A ,V I ) S A I £ S 39 ASSET MANAGEMENT AND SALES The office used several programs to sell highly T hro ugh the securitization program, approxi illiquid securities, including limited partnership inter mately $3.8 billion (book value) in performing loans ests, highly leveraged transactions, and subordinate were sold in 1993. Five transactions were collateral ized by $ 1.6 billion in performing single-family m ort loan participations. gages, three transactions were collateralized by $2.2 Office of Securitization billio n in performing commercial and multi-family T he O ffice of Securitization develops, manages, and im plem ents programs to securitize financial assets taken over by the RTC, including perform ing m ort gage loans, non-perform ing com m ercial mortgage loans, and other loans. In 1993, the office used the M u ltip le Investor Fund, and the N-Series and S-Series transactions to dispose of non-performing and sub-performing loans. These transactions involve establishing partnerships between the R T C and private investors w h o p u r chase, manage, and then sell portfolios of non-per form ing and sub-performing loan assets, and share in the profits w ith the RTC. T he structure provides incentives for equity partners to work out portfolios w ith the highest returns to the partners and the RTC. T h e S-Series is part o f the RTC's S m all Investor Program (SIP), SIP's smaller offerings are specifical ly geared to investors w ith moderate capital levels. mortgages. A nother $4.1 billio n (book value) in non-per forming commercial and multi-family mortgage loans were so Id in 1993. T h ree N-Series transactions accounted for $1.7 b illio n o f these assets,- tw o SSeries transactions accounted for $.2 billion o f the assets. The remaining $2.2 billion in assets were sold through M ultiple Investor Fund transactions in 1993. From inception o f the securitization program in June 1991 to yearend 1993, over $36.6 b illio n in assets were securitized, including single-family, m u l tifamily, and commercial mortgages, and com m er cial and consumer loans. Department of Asset Marketing T he D epartm ent o f Asset M arketing coordinates all marketing programs supporting the sale of RTC assets. T he departm ent consists of the O ffice o f N ational M a rk e tin g and the N a tio n a l Sales Center, w h ic h 1993 A S S E T SALES A N D CO LLEC TIO NS— C O N SE R V ATO R SH IPS , R ESO LU TIO N S A N D R ECEIVERSHIPS c oordinate the asset m arketing functions between W ashin gton and the six field offices. Office of National Marketing T he O ffice of N ational M arketing coordinates m ar keting programs nationw ide and provides asset sales support through advertising, industry relations, mar keting systems, and customer services and telemar keting. In 1993, the office designed and placed adver tisem ents in m ore th an 275 p u b lic atio n s, saving approximately $1.5 m illion through direct placement of the ads. The office also supported the Small Investor Program, developing the initial advertising campaign and creating brochures for the program. D u rin g the year, the office increased direct mail efforts to support sales initiatives and R T C programs coordinated by the Small Investor Program and the Affordable FHousing Disposition Program. M ore than Total Sales and Collections: $49 Billion (net of putbacks*) 120,000 pieces o f direct mail were produced and *Putbacks totaled $105 million in 1993. Putbacks include some assets returned pre-1993 resolution sales. 40 s s £ I AI :V I, (7 \l I ,Y I ,V I) S I delivered throughout the year. I s U f \ (I L U I I ( l X T (! II > I < Itll I* < ) U A T I O N In 1993, the N a tio n a l I -800 T e le m ark e ting August 1993 auction, 11,200 loans w ith a total bal Program, developed by the office in 1991, c o n tin ance of $670 m illion were sold, for a total recovery ued to provide the general public w ith inform ation o f $335 m illion. about RT C offerings. From the program's inception The office also established the partnership struc through yearend 1993, over 1.6 m illio n calls were ture for the Judgments, Deficiencies, and Chargeoffs received on the Affordable H ousing H otline, Broker (JD C ) initiative, a partnership arrangement designed H o t lin e , S m a ll In v e s to r P ro gram H o t lin e , an d to sell approximately $7 billion (book value) of ju d g Information Center Line. The Small Investor Program ments, deficiencies, and chargeoffs. T he J D C initia H o tlin e was added in June 1993 to help respond to tive was envisioned to create up to 30 partnerships the needs of investors w ith moderate capital levels. to receive approximately 70,000 assets with an aggre T he large num ber of callers enabled the office gate principal am ount o f $7 billion. In 1993, 23 w in to build a substantial investor database in 1993 to n in g bidder teams were selected to participate in the assist in direct m arketing efforts. Inform ation about J D C Program. A dditional teams will be selected in investor preferences was used to match investors with 1994. In addition, during 1993 approximately $6.9 b il auctions and sealed bids. In addition, the office increased the num ber of investors listed on the N a tio n a l Asset M a rk e tin g lion in mortgage-servicing rights were sold through 32 portfolio sales and four subsidiary sales. A pp lication from 11,500 to 19,000 in 1993. T he list serves as the prim ary m arketing source for field and national sales cam paigns and event announcements. National Sales Center Department of Affordable Housing T he D ep artm e nt o f Affordable H o u s in g identifies real estate assets suitable for sale to low- to moder- T he N ational Sales Center plans, coordinates w ith ate-income families and individuals, as well as n o n the field offices, and executes m ajor asset sales. The profit housing organizations, through its Affordable office disposes of illiq u id assets such as real estate H o usin g D isposition Program. and non-perform ing loans, and conducts portfolio T he A ffordable H o u s in g D isposition Program and structured sales (sales of pools o f assets chosen offers income-eligible purchasers and non-profit hous by the RT C and a purchaser) o f more than $100 m il ing organizations an exclusive 97-day marketing peri lion in assets in a single transaction. T he latter offer od and option to purchase these properties. Non-profit ings are composed primarily of commercial real estate housing organizations include consumer and public and non-perform ing mortgages. T he Sales C e n te r develops marketing-related interest groups, as well as state and local ho using agencies. data, develops and im plem ents new sales strategies U nder the Affordable H ousing Disposition M u lti to dispose o f assets, and conducts nationw ide auc fam ily Program, m ultiple-unit dw ellings must in i tions o f real estate and loans. tially be marketed exclusively to low-income housing In 1993, the Sales C enter was involved in a n um providers w h o agree to reserve at least 35 percent ber of notable sales transactions. T he RT C completed (15 percent for low-income individuals and families, the sale o f the first N ational Land Fund, a $.8 b illion and 20 percent for very low-income individuals and innovative partnership structure in w hich the R T C families) o f the units at restricted rent levels for the retains a lim ited partnership interest and shares in rem aining useful life of the property (40 to 50 years). In 1993, 3,589 single-famijy properties were sold the appreciation of land assets. T he Sales C enter also participated w ith all the through the affordable housing program for a total field offices in c o n d u c tin g tw o national non-per of $96 m illion. From the program's inception in 1990 form ing loan auctions in Kansas City, Missouri. In to yearend 1993, 20,197 single-family properties the M arch 1993 auction, approximately 18,000 loans were sold for a total of $553 m illion. These proper w ith a total balance of approxim ately $503 m illion ties were offered prim arily th ro u g h auctions and were sold, yielding a $249 m illio n recovery. In the sealed bids. /I ,v ,v ti It f r i i u r a i A S sE T M A N A I, I: Al E N T A N D S A I II S 41 ASSET MANAGEMENT In 1993, the RTC sold the following properties to state and local hous ing authorities through its Affordable Housing Disposition Program: AND SALES incomes of $21,866, or less than 80 percent o f the national median income. The average sales price of a single-family hom e in the program was $27,383. PROPERTIES SOLD TO STATE A N D LOCAL H O U SIN G A U TH O R ITIE S The RT C provided seller financing for 1,225 sin gle-family homes sold under the affordable housing program in 1993. From the program's in c e p tio n Housing Authority Property Sales Price Region III Housing Authority Las Lunas, NM Casa De Chavez Apts. Las Lunas, NM $ 500 ,00 0 Reno Housing Authority Reno, NV 7th Street Apts. Reno, NV Round Rock Housing Authority Round Rock, TX Main St. Square Apts. Round Rock, TX Housing Authority of the City of Del Rio Del Rio, TX Oakwood Apts. Del Rio, TX City of Temple Housing Authority Temple, TX 2 Properties: Raintree Apts. Temple, TX th ro u g h yearend 1993, the R T C pro vid ed seller financing for 4,339 single-family homes, or 21 per cent of the total sold. Purchasers of single-family homes utilized $58 m illion o f RTC-sponsored m o rt 180,000 gage revenue bonds. 1,095,000 In 1993, 151 m ulti-fam ily affordable housing properties were sold for a total of $81 million,- the R T C provided seller financing for 70 of the proper 528 ,00 0 ties. From the program's inception through 1993, the R T C sold 575 multi-family affordable housing prop 1,604,000 e rtie s, c o n t a in in g 5 3 ,3 5 8 u n its , fo r a to ta l o f $604 m illion. Creekside Apts. Temple, TX City of Houston Housing & Community Development Houston, TX T he R T C m ay donate properties w ith no rea 3 Properties: Bellfort Southwest Phase Houston, TX sonable recovery value to non-profit organizations 1 ,583,000 and public agencies that agree to make these p ro p erties available for low-income housing and other Tara Hall Apts. Houston, TX public uses. From inception of the affordable hous Bellfort Southwest III Houston, TX City of Lubbock Housing Authority Lubbock, TX ing program through yearend 1993, 647 properties 2 Properties. Normandy Apts. Lubbock, TX w ith no reasonable recovery value were made avail 316 ,00 0 able for conveyance to non-profit organizations and p u b lic agencies. O f th ose , 21 1 were c o n v e y e d Lexington Royal Apts. Lubbock, TX City of San Antonio Housing Authority San Antonio, TX in 1993. 2 Properties: Castle Point Apts. San Antonio, TX 2 ,7 8 0,00 0 Department of the Small Investor Program Burning Tree Apts. San Antonio, TX City of San Marcos Housing Authority San Marcos, TX 1,026,000 2 Properties: Windmill Plaza San Marcos, TX The Department of the Small Investor Program (SIP), created in April 1993, is responsible for ensuring that the RTC's assets are offered for sale individually and Langtry Apts. San Marcos, TX in pools to investors w ith moderate capital levels. In 2 Properties: Heatherwood Club Apts. Colorado Springs, CO Colorado Springs Housing Authority Colorado Springs, CO 2 ,2 5 0 ,0 0 0 1993, SIP offices were established in the W ashington, D C ., headquarters office and in each of the six field Firtree Apts. Colorado Springs, CO offices, w ith staff dedicated to addressing the needs continues on page 43 of investors w ith moderate financial capabilities. U nder the program, all R T C loan and real estate D u r in g the year, 26 affordable h o u s in g sales assets not previously com m itted to scheduled events events were held. Since the programs inception, over are actively marketed individually for a m in im um of 235 affordable housing sales events have been held 120 days. Individual real estate assets are offered in 32 states. Sixty-one percent of the purchasers were through localized auctions and small loan pool offer from low er-incom e fam ilies, those w ith average ings, as well as th ro ug h the real estate brokerage 4 2 4 S S I I M A M A (, I: AI l: ,V T A N I> S A l l s com m unity. To increase the participation o f small PROPERTIES SOLD TO STATE A N D LOCAL H OU SIN G AU TH O R ITIE S in ve sto rs, b id d e r e n try d e p o s its for lo an sales were lowered. D uring 1993, the department held several buyer awareness seminars in advance of sales events to help local and regional investors learn about the Small Investor Program. M ore than 16,000 investors par ticipated in the seminars throughout the year. continued from page 42 Housing Authority Property Sales Price Colorado Housing and Finance Authority Denver, CO 7 Properties: Hyland Park Center Federal Heights, CO $ 18 ,180,000 T he departm ent also worked w ith the O ffice of Altamira Apts. Colorado Springs, CO N ational M arketing to expand the investor database Summit Apts. Colorado Springs, CO to include investors in the moderate-capital range. By yearend, 4,106 such investors had com pleted the Vista Verde Townhomes Hayden, CO RT C Investor Profile and were registered in the Small 1467 Detroit Street Denver, CO Investor Database. O f this total, 969 investors in d i cated m inority status and 799 investors identified Bronzetree Apts. Colorado Springs, CO themselves as minority- or w omen-owned firms. Westree Apts. Colorado Springs, CO T he dep artm en t established a toll-free Sm all Investor Program H o tlin e to provide inform ation, brochures, calendars, and property listings on assets offered through SIP. Christy Apartments Phoenix, AZ T h e August 24 and 25, 1993, N atio n a l NonPerform ing Loan A uction in Kansas City, Missouri, Sunset North Apts. Phoenix, AZ was the first auction in w hich the SIP program actu Whispering Willows Phoenix, AZ ally participated. One-third of the w in nin g bidders had not previously participated in an R T C national non-perform ing loan auction. In 1993, the program also in tro du c ed the SSeries, an initiative sim ilar to the RTC's N-Series, designed to dispose of sub-performing and non-per form ing commercial loans through a leveraged trust. T he S-Series targets investors w ith moderate capi 1,118,000 4 Properties: Casa Castillo Phoenix, AZ Pima County Housing Authority Phoenix, AZ Central City Housing Development Corporation New Orleans, LA Las Cruces Housing Authority Las Cruces, NM Jennings University Blvd. Las Cruces, NM Selma Housing Development Corporation Selma, AL 1,000 2 4 1 6 -1 8 Rex Place New Orleans, LA 2 15 Mabry Street Selma, AL 418 ,00 0 4,0 0 0 tal levels by reducing the investor's equity require m ent to $4 m illio n to $9 m illion. T he first 1993 S-Series initiatives, 1993-S1 and a n d O k l a h o m a w i t h a t o t a l b o o k v a lu e o f $1 12.2 m illion. 1993-S2, offered investors a portion of equity in a After closing the S i and S2 transactions, the total o f 132 non-performing commercial and m u lti program transferred responsibility for the S-Series family assets w ith an aggregate book value of $ 186.6 to the field offices, w ith oversight retained by the m illio n . N in e qualified investors subm itted bids for National Sales Center and the Office of Securitization. the 49 percent equity po rtio n o f 1993-Sl, w h ich The first field S-Series transaction, 1993-S3, was c o n pooled 44 non-perform ing loans secured by c o m ducted by the RTC's Kansas C ity O ffice in 1993. mercial and multi-family projects in Florida and Texas Seven qualified investors submitted bids for the 49 w ith a total book value of $74 m illion. Seven qual percent equity portion of 1993-S3 (re-named 1994- ified investors subm itted bids for 49 percent o f the S l ), w hich pooled 86 commercial loans secured by equity portion of 1993-S2, w hich pooled 88 n o n real estate in Kansas, Missouri, O k la h o m a , O h io , p e r fo r m in g c o m m e rc ia l a n d m u lti- fa m ily m o r t Illinois, and M ic h ig a n w ith a total b o o k value of gage loans secured by real estate in New Jersey, O h io , $99.8 m illion. ' ,1 ,Y \II AI U E I1n h I A S s /; f A1 ,A ,V ,1 (, i At F N . I A ,V I) S A I E 43 C F I O N F H I E F A N C I A F I E R C L CHIEF FINANCIAL OFFICER D ivision of the C h ie f Financial 1993, 17,000 vendors were authorized and more than O fficer was established in 1993 in 88,000 payments totaling approximately $ 1.5 billion response to Treasury Secretary were processed. B entsen's R T C M a n a g e m e n t R e fo rm T h e o ffice m an ag ed the a p p ro p ria te d funds Agenda, w hich included a recommenda- received from the U.S. Treasury, and the borrowings tio n c a llin g for an in d e p e n d e n t C h ie f from and repayments to the Federal Financing Bank, F inancial O ffic e r ( C F O ). T he division w hich provides loans to federal agencies for w ork J i ^ H L began operations on June I, 1993, w ith ing capital purposes. In 1993, the office oversaw the P re sid en t C lin to n 's a p p o in tm e n t o f D o n n a H . net pay do w n of Federal F inancing Bank principal borrow ings by $6.7 billio n . Interest costs in 1993 C un n ing ha m e as the C F O . The division oversees financial management activ were $1 billion, compared w ith 1992 interest costs ities relating to the RTC's programs and operations, o f $1.9 b illio n . T he office also m anaged the d is including field and corporate accounting, the RT C bursem ent of initial fu n d in g for the resolution of budget, cash-management activities, financial report failed savings associations. ing, internal controls, and audit follow-up. The d ivi T he office prepared RT C official financial infor sion is c o m p ris e d o f the O ffic e s o f A c c o u n tin g mation for both internal and external sources, respond Services, Budget and Planning, Field A ccounting and ing to inquiries from Congressional committees, the Asset O perations, and M anagem ent C ontrol. T hrift D epositor Protection Oversight Board, RT C O n e o f the most significant achievements d ur senior m anagem ent, and the general public. ing the year was the efforts of division personnel w hich resulted in the RTC's receipt of an unqualified o p in io n on its financial statements from G A O for the second consecutive year. Office of Budget and Planning T he O ffice of Budget and Planning coordinates and oversees the RTC's budget process, and facilitates the use of corporate resources in business planning, Office of Accounting Services resource estimation, performance measurement, and T he O ffice o f Accounting Services performs the cor progress m onitoring. porate accounting functions for the RTC. The office In 1993, the office com pleted enacting changes produces and maintains the R T C corporate account in itia te d in 1992 to a c c o m m o d a te the m a tu rin g ing records and related systems, the corporate fund- operations of the RTC. The budget model was refined ing/cash-m anagem ent operations, and the official to further aid budget forecasting and RT C Business corporate financial statements and reports that reflect Plan preparation, budget reports were expanded to the financial performance of the R T C in its co rpo in clu d e b o th revenues a n d expenses, an d new ly rate, conservatorship, and receivership capacities. designed perform ance measurem ent reports were In 1993, the office continued to record and rec oncile all corporate accounting transactions to ensure in itia te d to assess p ro g ra m p e rfo rm a n c e in re source consum ption. the highest level of data integrity and consistency in The Budget Inform ation System, w hich is used the RT C General Ledger, the Corporation's official for data collection, analysis, and reporting on the accounting system. R T C budget, was enhanced to include ad ditio nal The office co m ple te d im p le m e n tin g the R T C estimation capabilities and a full range of budget exe Accounts Payable System, establishing uniform c o n cution reports. The office also assisted in enhancing trols and procedures for the disbursement of RT C the design and im p le m e n tatio n of the C o rporate funds, and elim inating the previously separate field Inform ation System and the Financial M anagem ent and corporate accounts payable systems. A vendor S yste m , in c lu d in g th e G e n e ra l L e dger a n d the maintenance group was established as the sole author Accounts Payable System. ity to review and establish authorized vendors, from The office added staff in the field offices to expand the group's inception in M arch 1993 through yearend reporting and analysis capabilities and to provide 46 i a i i f- r i ,v ,\ i i i <) i i i i / k k I > I > I II ■ I i < I T A < ^ I 1 / I I> h r I > I.' ,i T : more direct assistance to field budget activities. In 1993, R T C non-interest operating expenses and collections in 1993 through securitization, m u l tiple investor funds, structured transactions, auctions, totaled $2.9 billion. O f this am ount, outside services N-Series transactions, N ational Land Fund sales, and accounted for 53 percent, receivership real estate other sales initiatives. accounted for 23 percent, and employee com pensa As part of the office's fiscal integrity maintenance tion accounted for 14 percent. In 1993, the RTC's program, an electronic journal entry interface, which staff decreased by 627 employees, a nine percent autom atically reconciles financial inform ation, was reduction from the b eginning of the year. im p le m e n te d b e tw e e n th e Real Estate O w n e d M a n a g e m e n t System and the G eneral Ledger. In Office of Field Accounting and Asset Operations T he O ffice of Field Accounting and Asset Operations directs and manages all asset and field accounting operations in support of R T C asset sales, m anage ment, and disposition activities. The office acts as a liaison between the headquarters and field offices for financial and related asset-management activities, and coordinates w ith the RTC's four financial service centers in Atlanta, Dallas, Denver, and Kansas C ity to ensure their com pliance w ith procedures relating to asset and accounting functions. In 1993, all asset operations were consolidated into the RTC's financial service centers to improve efficiency in financial service center operations. A standard service contract for three of the financial service centers was developed and finalized, pro vid ad ditio n , an autom ated reconciliation facility was established to reconcile differences between General Ledger balances and balances received from loan ser vicers. A Loan S ervicing O v e rs ig h t Program was designed to detect and prevent waste, fraud, and abuse by the RTC's loan servicers. Two key organizations were created in the RTC's financial service centers in 1993: D o c u m e n ta tio n Control Units, which enforce documentation require ments for each type of R T C business/financial trans a c tio n , an d Q u a lity Assurance U n its , w h ic h are responsible for internal-control im plem entation and proper audit m anagem ent and follow-up w ithin the financial service centers. Office of Management Control T he O ffice of M anagem ent C ontrol was created in ing a uniform scope of work, tasks, performance cri 1993 (its functions were originally part o f the Office teria, budget, and expense and performance reporting o f A d m in is tr a tiv e E v a lu a tio n in the D iv is io n o f requirements. T he N ational Sales Support O ffice was Adm inistration and Corporate Relations). The office also created at headquarters to provide a c c o u n t assists the C h ie f Financial Officer in developing po li in g a n d asset o p e r a t io n s s u p p o r t fo r s p e c ia l cies relating to internal control programs,- adm inis sales initiatives. ters the Corporation's established internal control T he office directs a national cash-management and audit follow-up programs, serves as liaison w ith program for receiverships that has an average m o n th internal and external auditors,- administers the process ly balance of $4 b illion, m onitors a national internal of resolving audit issues and recommendations, reports financial controls program, develops tax and account to m anagem ent on the status of corrective actions, ing policies, conducts nationwide training for account- prepares the annual report on the status of internal in g a n d asset o p e r a t io n s s ta ff, a n d p r o v id e s controls throughout the R T C on behalf of the C F O , m anagem ent reporting of the RTC's performance on and participates in monitoring the Corporation's co m asset sales, asset m a n a g e m e n t, an d p r o d u c tiv ity pliance w ith the C h ie f Financial Officers Act of 1990 and efficiency. and associated policies of the R T C T hrift D epositor D u rin g the year, the office directed the day-to- Protection O versight Board. day accounting operations for assets retained from In 1993, several m ajor internal control review resolved thrift institutions, w hich totaled $40 billion initiatives were im plem ented to improve the control (book value) from 680 institutions at yearend 1993. systems u tiliz e d b y the R T C . T h e M a n a g e m e n t T he office also processed $33 b illio n in asset sales Reporting System was put into effect, w hich records, A v ,v a i k I r 11 k r C h i e f F i h a n < i a i. () f f i < n k A T 7 CHIEF FINANCIAL OFFICER monitors, and reports to managem ent on the status taken, and trained regional Internal Review Specialists of audit findings and recommendations issued by the in the use of the newly im plem ented M anagem ent General Accounting O ffice and the RTC's O ffice of R eporting System to ensure that audit follow-ups Inspector General, and recommendations contained are completed. in internal reports. N ationw ide training on internal D uring the year, the office coordinated with and controls and audit follow-up was also provided dur assisted various RT C offices in preparing responses ing the year to more than 1,000 headquarters, field to 60 General A ccounting Office and 260 O ffice of management, and senior employees. Inspector G eneral o n g o in g and com pleted audits, The office redefined and improved the Interna! investigations, and hotline cases. The office also coor Review Program at all field offices to include proac dinated 65 internal control and program compliance tive reviews and to ensure that corrective actions are reviews, primarily of field offices. 48 REGULATIONS REGULATIONS Final Rules Interim Rules Privacy Act Regulations Employee Responsibilities and Conduct Pu E J blish ed ffective D a n ua r y ecem ber 6, 1993 21, 1992 February 12,1993 T he RT C adopted a regulation for the processing of T he RT C adopted an interim rule requiring c o m p li requests for access to or amendm ent of records, other a n c e w it h th e O f f i c e o f G o v e r n m e n t E th ic s than the records of the R T C Inspector General, pur Regulations on C o n fid e ntial and Public Financial suant to the Privacy Act of 1974. T he rule sets forth D is c lo s u r e , S ta n d a r d s o f C o n d u c t , a n d Post- procedures to be used in requesting records from the E m ploym ent Rules as applied to Federal Employees R T C or a p p e a ling denials o f access to corporate ( O G E Regulations). T he rule revokes those sections records, the procedures for contesting the content of the RTC's regulation on Employee Responsibilities of records, and the identification of records that are and C o n d u ct that conflict w ith or are superseded by exempt from the access, am endm ent, and disclosure the O G E Regulations and reaffirms those sections accounting provisions of the Privacy Act. The reg o f its regulation on Employee Responsibilities and ulation also establishes a fee schedule for the d u p li C o n d u ct not in conflict w ith or superseded by the cation of corporate records, and establishes a minimum O G E Regulations. am ount under w hich fees will not be charged. Program Fraud Civil Remedies and Procedures P ublish ed E ffective J J u n e uly 30, 1993 30, 1993 Service of Process U pon the Resolution Trust Corporation A pril 8, 1993 T he R T C adopted an interim rule designating the officers upon w hom service of process may be made T he RT C adopted rules to im plem ent the Program w hen the R T C is sued in its receivership, conserva Fraud C ivil Remedies Act of 1986. T he rules estab torship, or corporate capacities. lish administrative procedures for determining whether to impose the statutorily authorized civil penalties against any person w ho makes, submits, or presents a false, fictitious, or fraudulent claim or written state m ent to the C orporation. Procedures Applicable to RTC Investigations N o v em b er 5, 1993 T he R T C adopted a regulation establishing proce dures applicable to the conduct of R T C investiga tions that involve the exercise of powers established in section 8(n) of the Federal D eposit Insurance Act, as amended. T he RT C is authorized to exercise such investigatory powers in carrying out its statutory obligations to resolve failed savings associations. 50 R l <, II I I I <l ,\ s ! Policy Statement Amended Statement of Policy on Contracting W ith Firms That Are Parties to Lawsuits W ith the RTC/FD1C P u b l i s h e d N o v e m b e r 23, 1993 Effective November 10 . 1993 In July 1992, the RT C adopted a statement of p o li cy setting forth the facts to be considered in deter m ining whether the RT C w ould do business w ith a firm that was being sued by it, the Federal D eposit Insurance C orporation, or the Federal Savings and Loan Insurance Corporation. U nder this policy state ment, as a general matter, the R T C will not do busi ness with entities that are defendants in these actions. In m aking this determination, however, the R T C will consider a num ber of factors, including, but not lim ited to: the n um ber o f lawsuits, the total a m o un t claimed, the num ber of individuals or offices named, and the type of m isconduct alleged. O n N ove m b e r 10, 1993, the RTC's Executive C o m m ittee am ended the policy to permit the RTC to apply these same factors to determine whether an entity can do business w ith the RT C when the RTC has authorized its counsel to sue this same entity, but the proposed litigation has not yet been filed. R F I, II L ,\ I I <I iV v 51 FINANCIAL STATEMENTS AND INTERNAL CONTROLS GAO United States General Accounting Office Washington, D.C. 20548 Comptroller General of the United States B -2 4 0 1 0 8 June 27, 1994 To th e T h r i f t D e p o s ito r P ro te c tio n O v e r s ig h t B oard R e s o lu tio n T r u s t C o rp o ra tio n We h a v e a u d i t e d t h e R e s o l u t i o n T r u s t C o r p o r a t i o n ' s a c c o m p a n y in g s ta te m e n ts o f f i n a n c i a l p o s i t i o n as o f D e c e m b e r 3 1 , 1993 a n d 1 9 9 2 , and t h e r e l a t e d s t a t e m e n t s o f r e v e n u e s , e x p e n s e s , a c c u m u la te d d e f i c i t , and c a s h flo w s f o r th e y e a rs th en ended. We f o u n d : Th e C o r p o r a t io n 's f i n a n c i a l sta te m e n ts r e f e r r e d w e re r e l i a b l e i n a l l m a t e r i a l r e s p e c t s . -- to above I n t e r n a l c o n t r o l s as o f Decem ber 31 , 1993, w e re e f f e c t i v e in s a fe g u a rd in g a sse ts a g a in s t u n a u th o riz e d a c q u is it io n , u s e , o r d is p o s it io n ; a s s u rin g th e e x e c u tio n o f t r a n s a c t i o n s i n a c c o r d a n c e w i t h m a n a g e m e n t's a u t h o r i t y a n d m a t e r i a l la w s and r e g u l a t i o n s ; and a s s u r i n g t h a t t h e r e w e re no m a t e r i a l m i s s t a t e m e n t s i n t h e f i n a n c i a l s ta te m e n ts . W h i l e we i d e n t i f i e d s e v e r a l i n t e r n a l c o n t r o l w e a k n e s s e s , we d o n o t c o n s i d e r t h e m t o b e m a t e r i a l w e a k n e s s e s .1 O u r f i n d i n g s w e re c o n s is t e n t w i t h th e *A m a t e r i a l w e a k n e s s i s a r e p o r t a b l e c o n d i t i o n i n w h i c h t h e d e s ig n o r o p e ra tio n o f th e in t e r n a l c o n t r o ls does n o t re d u ce t o a r e l a t i v e l y lo w l e v e l t h e r i s k t h a t lo s s e s , n o n c o m p l i a n c e , o r m is s t a t e m e n t s i n am o u n ts t h a t w o u ld be m a t e r i a l i n r e l a t i o n t o t h e f i n a n c i a l s t a t e m e n t s m ay o c c u r a n d n o t b e d e t e c t e d w i t h i n a t i m e l y p e r i o d b y e m p lo y e e s i n th e n o rm a l c o u rs e o f t h e i r a s s ig n e d d u t i e s . R e p o rta b le c o n d i t i o n s i n v o l v e m a t t e r s c o m in g t o o u r a t t e n t i o n r e l a t i n g t o s i g n i f i c a n t d e f ic i e n c i e s in th e d e s ig n o r o p e ra tio n o f i n t e r n a l c o n t r o l s t h a t , i n t h e a u d i t o r 's ju d g m e n t, c o u ld a d v e r s e l y a f f e c t an e n t i t y ' s a b i l i t y t o ( 1 ) s a f e g u a r d a s s e t s a g a in s t lo s s from u n a u t h o r iz e d a c q u i s i t i o n , u s e , o r d i s p o s i t i o n , (2 ) e n su re th e e x e c u tio n o f t r a n s a c t io n s in a c c o r d a n c e w i t h m a n a g e m e n t's a u t h o r i t y a n d i n a c c o r d a n c e w i t h la w s an d r e g u l a t i o n s , o r ( 3 ) p r o p e r l y r e c o r d , p r o c e s s , and s u m m a riz e t r a n s a c t i o n s t o p e r m i t t h e p r e p a r a t i o n o f f i n a n c i a l 54 F /,\ ,\ I i AI S I A I I M I - f V k t n t II r I ') N T t II ' I ! ' < n k / • ' ) k \T I 11 N B-240108 r e s u l t s o f th e C o r p o r a t io n 's in c lu d e d i n a p p e n d ix I I I . re v ie w of in te rn a l la w s c o n tro ls -- T h e r e was n o m a t e r i a l n o n c o m p l i a n c e w i t h r e g u l a t i o n s we t e s t e d . and -- Th e C o r p o r a t io n a d e q u a te ly a d d re ss e d th e m a t e r ia l weakness a n d r e p o r t a b l e c o n d i t i o n s we i d e n t i f i e d i n o u r 19 92 a u d it.2 P re s e n te d in th e f o llo w in g s e c tio n a re s i g n i f i c a n t m a tte rs c o n s id e re d i n p e rf o rm in g o u r a u d it and fo rm in g o u r o p in io n s . T h i s r e p o r t a l s o d is c u s s e s i n m ore d e t a i l e a c h o f t h e a b o v e a u d i t c o n c l u s i o n s , o u r re c o m m e n d a tio n f o r i m p r o v i n g t h e C o r p o r a t io n 's i n t e r n a l c o n t r o l s t r u c t u r e , and th e C o r p o r a t i o n ' s c o m m e n ts o n o u r r e p o r t . A p p e n d ix I d is c u s s e s th e scope o f o u r a u d it . A p p e n d ix I I p r e s e n t s th e C o r p o r a t io n 's f i n a n c ia l s ta te m e n ts . A p p e n d ix I I I p r e s e n t s th e r e s u l t s o f th e C o r p o r a t io n 's e v a lu a t io n o f i t s in t e r n a l c o n tro ls . A p p e n d ix IV p r e s e n t s th e i n t e r n a l c o n t r o l w e a k n e s s e s we i d e n t i f i e d i n 1992 a n d t h e C o r p o r a t i o n ' s p ro g re s s in a d d re s s in g th e s e w eaknesses. The C o r p o r a t io n 's w r i t t e n co m m e n ts o n a d r a f t o f t h i s r e p o r t a r e i n c l u d e d i n a p p e n d ix V . S I G N I F I C A N T M ATTERS The fo llo w in g in fo rm a tio n is p re se n te d to h ig h lig h t (1 ) u n c e r t a in t ie s t h a t c o u ld a f f e c t th e C o r p o r a t io n 's lo s s e s t im a t e s , ( 2 ) th e p o t e n t i a l im p a c t o f c o n t r o l s o v e r c o n t r a c t o r p e rfo rm a n c e on r e c o v e r i e s fro m r e c e i v e r s h i p s , and (3 ) th e c u r r e n t s ta tu s o f th e C o r p o r a t io n and i t s f u n d in g . s ta te m e n ts and t o m a in t a in a c c o u n t a b i l i t y f o r a s s e t s . R e p o rta b le c o n d it io n s w h ic h a re n o t c o n s id e r e d to be m a t e r ia l n e v e rth e le s s re p re s e n t s i g n i f i c a n t d e f ic ie n c ie s in th e d e s ig n o r o p e r a t i o n o f i n t e r n a l c o n t r o l s and need t o be c o r r e c t e d b y m an age m e nt. f in a n c ia l A u d it: R e s o l u t i o n T r u s t C o r p o r a t i o n ' s 1 9 92 a n d 1991 F i n a n c i a l S t a t e m e n t s ( G A O / A I M D - 9 3 - 6 , J u n e 3 0 , 1 9 9 3 ) a n d F in a n c ia l A u d it: R e s o lu tio n T r u s t C o r p o r a t io n 's I n t e r n a l C o n t r o l s a t D e c e m b e r 3 1 , 1992 ( G A O / A I M D - 9 3 - 5 0 , S e p t e m b e r 2 8 , 1 9 9 3 ). A '■:: I \ k i r •j f I F I X A X I I A I S I A I I At I \ I s 55 B-240108 U n c e r t a i n t i e s A f f e c t E s tim a te d R e c o v e r ie s From R e c e i v e r s h i p s and C o s ts o f F u t u r e R e s o lu t io n s A l t h o u g h t h e C o r p o r a t i o n u s e d an a p p r o p r i a t e m e t h o d o lo g y f o r e s t im a t in g th e r e c o v e r y v a lu e o f r e c e i v e r s h i p a s s e t s and has used th e b e s t a v a ila b le in f o rm a tio n , s i g n i f i c a n t u n c e r t a i n t i e s s t i l l e x i s t r e g a r d i n g g e n e r a l e c o n o m ic c o n d i t i o n s , i n t e r e s t r a t e s , and r e a l e s t a t e m a rk e ts t h a t c o u ld a f f e c t th e v a lu e o f a s s e ts i n r e s o lv e d and u n re s o lv e d in s titu tio n s . As shown i n f i g u r e 1 , t h e C o r p o r a t i o n ' s r e c e i v e r s h i p s a n d c o n s e r v a t o r s h i p s h e l d $54 b i l l i o n i n a s s e t s a s o f M a r c h 3 1 , 1 9 9 4 , o f w h i c h 31 p e r c e n t w e r e p e r f o r m i n g 1 - 4 f a m i ly m o rtga ge s and ca sh and in v e s tm e n t s e c u r i t i e s . The r e m a i n i n g 69 p e r c e n t w e r e d e l i n q u e n t l o a n s , r e a l e s t a t e owned, o t h e r a s s e t s , o t h e r m o rtg a g e s and lo a n s , and in v e s tm e n ts i n s u b s i d i a r ie s o f f a i l e d t h r i f t s and a re c o n s id e re d h a r d - t o - s e l l b y th e C o r p o r a t io n . I t is p a r t i c u l a r l y d i f f i c u l t f o r th e C o rp o ra tio n to p r e d ic t the r e c o v e r y v a lu e and t im in g o f s a le s f o r th e s e h a r d - t o - s e l l a sse ts. T y p i c a l l y , i f a sse ts s e l l l a t e r o r f o r le s s th a n p r e d i c t e d , th e C o r p o r a t io n 's c o s ts w i l l be h ig h e r th a n e s tim a te d . C o n v e r s e ly , h i g h e r o r e a r l i e r r e c o v e r i e s w o u ld t y p i c a l l y lo w e r th e C o r p o r a t io n 's f i n a l c o s t s . F ig u re 1: C o n s e r v a t o r s h ip and R e c e i v e r s h ip A s s e t s as o f M a r c h 3 1 , 1994 ( T o t a l a s s e t s = $54 b i l l i o n ) aL i q u i d a s s e t s i n c l u d e p e r f o r m i n g ca sh and in v e s tm e n t s e c u r i t i e s . 1 -4 f a m ily m ortgages and bH a r d - t o - s e l l a s s e t s i n c l u d e d e l i n q u e n t l o a n s , r e a l e s t a t e owned, o t h e r a s s e t s , o t h e r m o rtg a g e s and lo a n s , and in v e s tm e n ts in s u b s id ia r ie s o f f a ile d t h r i f t s . B-240108 A s d i s c u s s e d i n n o t e 15 t o t h e f i n a n c i a l s t a t e m e n t s , t h e C o r p o r a t io n has s e t a s id e a p o r t i o n o f th e p ro c e e d s fro m s e c u r i t i z a t i o n t r a n s a c t io n s to c o v e r f u t u r e c r e d i t lo s s e s w i t h r e s p e c t t o th e u n d e r l y i n g l o a n s . 3 Th e C o r p o r a t io n and i t s r e c e iv e r s h ip s a ls o p r o v id e r e p r e s e n t a t io n s and w a r r a n t ie s on th e u n p a id p r i n c i p a l b a la n c e o f c e r t a i n lo a n s s o ld f o r c a s h , s o l d as p a r t o f s e c u r i t i z a t i o n t r a n s a c t i o n s , e x c h a n g e d f o r m o rtg a g e -b a c k e d s e c u r i t i e s , o r s o ld u n d e r s e r v i c i n g r i g h t c o n t r a c t s . 4 As o f D ecem ber 3 1 , 1 9 9 3 , t h e C o r p o r a t i o n ' s l o s s a llo w a n c e s f o r r e s o l v e d and u n r e s o lv e d i n s t i t u t i o n s i n c l u d e d $ 1 .5 b i l l i o n f o r th e e x p e c te d c o s t o f f u t u r e s e c u r i t i z a t i o n c r e d i t lo s s e s and $ 1 .2 b i l l i o n f o r c la im s a r i s i n g fro m th e r e p r e s e n t a t i o n s and w a r r a n t i e s . A lth o u g h th e C o r p o r a tio n used th e b e s t a v a ila b le in f o rm a tio n to e s tim a te s e c u r i t i z a t i o n c r e d i t lo s s e s and f u t u r e lo s s e s a r i s i n g fro m r e p r e s e n t a t i o n s and w a r r a n t i e s , s i g n i f i c a n t u n c e r t a i n t i e s e x is t. Th e C o r p o r a t i o n 's c la im s e x p e r ie n c e t o d a te has been l i m i t e d , r a i s i n g t h e r i s k t h a t as a d d i t i o n a l e x p e r i e n c e i s g a i n e d , t h e a m o u n t o f f u t u r e l o s s e s m ay s i g n i f i c a n t l y i n c r e a s e o r d ecrea se . Th e se f u t u r e lo s s e s w i l l be a f f e c t e d b y th e b e h a v io r o f th e econom y, i n t e r e s t r a t e s , and r e a l e s t a t e m a rk e ts as w e l l as th e p e rfo rm a n c e o f t h e c o l l a t e r a l u n d e rly in g th e tra n s a c tio n s . Changes i n th e s e f a c t o r s , w h ic h a re beyond th e C o r p o r a t io n 's c o n t r o l , c o u ld r e s u l t i n h ig h e r o r lo w e r c r e d i t and c la im s lo s s e s th a n c u r r e n t l y e s t im a t e d . C o n tro ls O ver C o n tra c to r P e rfo rm a n c e C o u ld A f f e c t R e c o v e r i e s Fro m R e c e i v e r s h i p s Weak o p e r a t i n g c o n t r o l s c o u l d i m p a c t t h e e s t i m a t e d r e c o v e r i e s from r e c e iv e r s h i p s in c lu d e d i n th e C o r p o r a t io n 's f i n a n c i a l s ta te m e n ts . These o p e ra tin g c o n t r o l s , th o u g h n o t in c lu d e d in th e scope o f i n t e r n a l c o n t r o ls o b je c t i v e s a s s e s se d as p a r t o f 3S e c u r i t i z a t i o n r e f e r s t o t h e p r a c t i c e o f g r o u p i n g a s s e t s ( u s u a l l y p e rf o rm in g m ortgage lo a n s ) and s e l l i n g s e c u r i t i e s backed b y th e u n d e r ly in g f u t u r e cash flo w s o f th o s e a s s e t s . P u r c h a s e r s o f t h e s e c u r i t i e s d em an d some p r o t e c t i o n a g a i n s t c r e d i t l o s s e s w h i c h m ay o c c u r d u e t o d e f a u l t s a n d d e l i n q u e n c i e s on th e u n d e r l y i n g l o a n s . 4T h e s e c o n t r a c t s c o n v e y t h e r i g h t t o s e r v i c e m o r t g a g e s , w h i c h i n c l u d e s c o l l e c t i n g lo a n pa ym e n ts and c o n t r o l l i n g m o rtg a g e e scrow fu n d s . F I \ A \ I I A I S r A I F ,\ t 1 X I s 57 B-240108 G A O 's f i n a n c i a l a u d i t , w e re c o n s i d e r e d as p a r t o f G A O 's o t h e r a u d it s and re v ie w s o f th e C o r p o r a t io n 's o p e r a t io n s . In re s p o n s e t o p r e v i o u s l y r e p o r t e d w e a k n e sse s, th e C h a irm a n o f th e T h r i f t D e p o s it o r P r o t e c t io n O v e r s ig h t B oard announced a m anagement r e f o r m agenda i n M arch 1 9 93 , w h ic h i n c l u d e d re q u ire m e n ts t h a t th e C o r p o r a t io n s tr e n g th e n i t s i n t e r n a l c o n t r o l s . 5 Th e s p e c i f i c re fo r m ite m s d e a l t w i t h im p r o v in g i n t e r n a l c o n t r o l s i n s e v e r a l o p e r a t i o n a l a r e a s as w e l l as f i n a n c i a l a c c o u n t in g and r e p o r t i n g c o n t r o l s . T h e C o r p o r a t i o n has t a k e n s t e p s t o en h a n ce i t s o p e r a t i n g c o n t r o ls d u r in g 1993, in c lu d in g o v e r s ig h t o f c o n t r a c t o r s t h a t p e rfo rm s e rv ic e s fo r r e c e iv e rs h ip s . H o w e v e r , a u d i t s o f some c o n t r a c t o r s a re c o n tin u in g to i d e n t i f y c o n t r a c t o r p e rfo rm a n ce p r o b l e m s , s u c h as p o o r a s s e t m anagem ent a n d d i s p o s i t i o n p r a c t i c e s and q u e s t io n a b le b i l l i n g s , w h ic h c o u ld r e s u l t i n in c r e a s e d e x pen ses o r re d u c e d r e c o v e r i e s on a s s e t s . 6 Th e e s t im a t e d r e c o v e r i e s from r e c e i v e r s h i p s in c lu d e d i n th e C o r p o r a t io n ’ s f i n a n c ia l sta te m e n ts in c lu d e th e r e s u l t s o f ca sh r e c e iv e d and d is b u r s e d b y r e c e i v e r s h i p s d u r i n g th e y e a r . H ow e ver, because o f c o n t r a c t o r p e rfo rm a n ce p ro b le m s , th e C o r p o r a t io n c a n n o t be s u re t h a t i t i s r e c o v e r i n g a l l i t s h o u ld fro m i t s r e c e i v e r s h i p s . D u r i n g 1 9 9 3 , GAO i s s u e d a t o t a l o f 22 r e p o r t s r e s u l t i n g f r o m i t s a u d i t s and re v ie w s o f th e C o r p o r a t i o n 's o p e r a t i o n s , a number o f w h ic h a d d re ss c o n t r a c t o r p e rfo rm a n c e p ro b le m s . F u n d in g and C u r r e n t o f th e C o rp o ra tio n S tatu s F o r each i n s t i t u t i o n i t r e s o lv e s , th e C o r p o r a t io n c a lc u la t e s t h e am ount i t w i l l have t o p a y t o c o v e r d e p o s i t o r c la im s and t h e n e s t i m a t e s how m uch o f t h a t c o s t i t w i l l r e c o v e r f r o m t h e s a le o f th e f a ile d i n s t i t u t i o n 's a s s e ts . Th e am ount e x p e c te d t o be r e c o v e r e d i s b o rro w e d fro m T r e a s u r y 's F e d e r a l F in a n c i n g Bank (F F B ) and i s c o n s id e r e d w o r k in g c a p i t a l . The p o r tio n n o t r e c o v e r a b l e i s a lo s s t o t h e C o r p o r a t i o n and m ust be co ve re d w ith lo s s fu n d s. 5I n D e c e m b e r 1 9 9 3 , s i m i l a r r e q u i r e m e n t s w e r e l e g i s l a t i v e l y m an da te d i n t h e R e s o l u t i o n T r u s t C o r p o r a t i o n C o m p le t io n A c t . R e s o lu t io n T r u s t C o rp o ra tio n : O v e r s i g h t o f SAMDA P r o p e r t y M anagem ent C o n t r a c t s Needs Im p ro ve m e n t (G A O / G G D -9 4 -5 , Novem ber 30 , 1 9 9 3 ). 58 F i v ,i iv < i / i S r . \ r i: i t ,v r > K f s III II T I I ) \ T k u s I ( o k I’ a k A T I B-240108 T a b le 1: E s t im a t e d L o s s F u n d in g Needs 1993 ( D o l l a r s i n b i l l i o n s ) as o f R e c e iv e rs h ip s C o n s e rv a to rs h ip s P o s s ib le D e c e m b e r 31/ $ 82 and p r o b a b le 9 fa ilu re s 1 fa ilu re s $ 92 To ta l Th e C o r p o r a t i o n 's Decem ber 31, 1993, f i n a n c i a l s ta te m e n t s , a n d t h e r e l a t e d n o t e s , show t o t a l l o s s f u n d i n g n e e d s o f $92 b i l l i o n t o c o m p l e t e t h e r e s o l u t i o n o f a l l r e c e i v e r s h i p s , c o n s e r v a t o r s h i p s , and i n s t i t u t i o n s f o r w h ic h i t i s p r o b a b le o r p o s s i b l e t h a t g o v e r n m e n t a s s i s t a n c e m ay b e r e q u i r e d o n o r b e f o r e M a rc h 3 1 , 1 9 9 5 .7 B ased on f i g u r e s p r e s e n t e d i n t h e f i n a n c i a l s t a t e m e n t s , $82 b i l l i o n h a s b e e n u s e d t o r e s o l v e t h e 680 i n s t i t u t i o n s c l o s e d as o f D e ce m b e r 3 1 , 1 9 9 3 , a n d an e s t i m a t e d $10 b i l l i o n w i l l b e u s e d t o r e s o l v e t h e 63 i n s t i t u t i o n s i n c o n s e r v a t o r s h i p , 4 i n s t i t u t i o n s c o n s i d e r e d p r o b a b l e f a i l u r e s , a n d t h e 18 i n s t i t u t i o n s c o n s i d e r e d p o s s ib le f a il u r e s b e fo re th e C o r p o r a t io n 's a u t h o r it y to ta k e in s t i t u t i o n s in t o c o n s e rv a to rs h ip e x p ire s . 7T h e R e s o l u t i o n T r u s t C o r p o r a t i o n C o m p l e t i o n A c t e x t e n d e d t h e p e r io d o f th e C o r p o r a t io n 's a u t h o r it y to ta k e i n s t i t u t i o n s i n t o c o n s e r v a t o r s h ip to a d a te n o t e a r l i e r th a n J a n u a ry 1, 1995, and n o t l a t e r th a n J u l y 1, 1995. The a c t re q u ire s th e C h a irp e rs o n o f th e T h r i f t D e p o s ito r P r o te c tio n O v e rs ig h t B o ard to s e le c t th e a c tu a l d a te . The C o rp o ra tio n based i t s e s t im a t e on t h e O f f i c e o f T h r i f t S u p e r v i s i o n ' s l i s t o f i n s t i t u t i o n s w h ic h a re p ro b a b le o r p o s s ib le f a i l u r e s b y M arch 3 1 , 1995, th e m id p o in t o f th e ra n g e o f d a te s s p e c i f i e d in th e le g is la t io n . F ! X AXl ! A I 5T Ar FA t \ 7\ I 59 B-240108 T a b le 2: T o t a l L o s s F u n d i n g Made A v a i l a b l e a s o f D e c e m b e r 3 1 , 1993 ( D o l l a r s i n b i l l i o n s ) F i n a n c i a l I n s t i t u t i o n s R e fo rm , E n f o r c e m e n t A c t o f 1989 R e s o lu tio n Tru st C o rp o ra tio n R e co very, and $ 5 0 .0 F u n d in g A c t of 3 0 .0 1991 R e s o lu tio n T r u s t C o rp o ra tio n R e fin a n c in g , R e s t r u c t u r i n g , a n d I m p r o v e m e n t A c t o f 19 91 R e s o lu tio n Tru st C o rp o ra tio n 6 . 7a 1 8 . 3a C o m p le tio n A c t $ 1 0 5 .0 To ta l aT h e R e s o l u t i o n T r u s t C o r p o r a t i o n R e f i n a n c i n g , R e s t r u c t u r i n g , a n d I m p r o v e m e n t A c t o f 1991 ( P u b l i c L a w 1 0 2 - 2 3 3 ) p r o v i d e d $25 b i l l i o n i n D e c e m b e r 1 9 9 1 , w h i c h w as o n l y a v a i l a b l e f o r o b l i g a t i o n u n t i l A p r i l 1, 1992. As a r e s u l t o f t h e d e a d l i n e , t h e C o r p o r a t io n r e t u r n e d $ 1 8 .3 b i l l i o n o f u n o b l i g a t e d fu n d s to th e T r e a s u ry in A p r i l 1992. I n D e c e m b e r 1 9 9 3 , t h e R TC C o m p le t io n A c t rem oved t h e A p r i l 1, 1 9 9 2 , d e a d l i n e , t h u s m a k in g t h e $ 1 8 .3 b i l l i o n a v a i l a b l e t o t h e C o r p o r a t i o n f o r re s o lu tio n a c t iv it ie s . T o d a t e $ 1 0 5 b i l l i o n h a s b e e n made a v a i l a b l e t o t h e C o r p o r a t io n to c o v e r lo s s e s a s s o c ia t e d w it h r e s o l u t i o n s . B a s e d o n t h e e s t i m a t e s p r e s e n t e d i n t h e C o r p o r a t i o n ' s 19 93 f i n a n c i a l s ta te m e n ts , w h ic h a re s u b je c t t o th e u n c e r t a i n t ie s d i s c u s s e d a b o v e a n d i n n o t e s 5 a n d 10 t o t h e f i n a n c i a l s t a t e m e n t s , t h e C o r p o r a t i o n c o u l d h a v e $13 b i l l i o n o f u n u s e d lo s s fu n d s a f t e r r e s o l v i n g a l l i n s t i t u t i o n s f o r w h ic h i t i s re s p o n s ib le . Ta b le 3: E s tim a te d Unused Loss Funds A f t e r C o m p le tio n o f th e C o r p o r a t io n 's R e s o lu tio n A c t i v i t i e s ( D o l l a r s in b i l l i o n s ) To ta l lo s s Less: e s tim a te d E s tim a te d f u n d i n g made a v a i l a b l e lo s s unused fu n d in g lo s s $ 105 (9 2 ) needs $ fu nd s 13 T h e e s t i m a t e d $13 b i l l i o n o f u n u s e d l o s s f u n d s i s d e p e n d e n t on t h e C o r p o r a t i o n 's e s t im a t e d r e c o v e r i e s fro m r e c e i v e r s h i p s 6 0 FI X \ X i [ . l l S T T E \l E N I s k E s II L U / I ( i X ' T K II s T (. n II I' n K A T i n X B-240108 and i t s e s tim a te d c o s t o f f u t u r e r e s o l u t i o n s . At D ecem be r 3 1 , 1 9 9 3 , t h e s e e s t i m a t e s show t h a t t h e C o r p o r a t i o n w i l l be a b le t o r e p a y i t s $ 3 0 .8 b i l l i o n i n w o r k in g c a p i t a l b o r r o w in g s fro m th e F F B . FFB b o rro w in g s a re r e p a id u s in g asset re c o v e rie s . I f a c tu a l a s s e t re c o v e rie s a re le s s th a n e s tim a te d o r f u tu r e r e s o lu t io n c o s ts a re g r e a t e r th a n a n t i c i p a t e d , th e C o r p o r a t io n w i l l need t o use a d d i t i o n a l lo s s fu n d s. C o n s i d e r i n g th e am ount o f e s t im a t e d lo s s f u n d in g n e e d s , t h e C o r p o r a t i o n w i l l o n l y be i n a p o s i t i o n w h e re i t i s u n a b le t o r e p a y i t s FFB b o r r o w in g s i f i t s c o m b in e d l o s s e s on r e c e i v e r s h i p a s s e t s a n d f u t u r e r e s o l u t i o n s a r e $13 b i l l i o n m ore t h a n c u r r e n t l y e s t i m a t e d . Lo s s fu n d s n o t used b y th e C o r p o r a t io n a re a v a i l a b l e f o r lo s s e s in c u r r e d by th e S a v in g s A s s o c ia t io n In s u ra n c e Fund ( S A I F ) , s u b je c t to th e c o n d itio n s s e t f o r t h in th e R e s o lu tio n T r u s t C o r p o r a t io n C o m p le tio n A c t . 8 Funds i n excess o f th e a m o u n ts n e e d e d b y b o t h t h e C o r p o r a t i o n and S A I F w i l l be r e t u r n e d t o th e g e n e ra l fu nd o f th e T r e a s u r y . U n d e r th e R e s o lu tio n T r u s t C o r p o r a t io n C o m p le tio n A c t , th e C o r p o r a t i o n w i l l t e r m i n a t e on o r b e f o r e D ecem be r 3 1 , 1 9 9 5 . A l l r e m a in in g a s s e ts and l i a b i l i t i e s w i l l be t r a n s f e r r e d t o t h e F S L IC R e s o l u t i o n F u n d , w h ic h i s m anaged b y t h e F D I C . O P I N I O N ON F I N A N C I A L STATEM ENTS In o u r o p in io n , th e f i n a n c ia l sta te m e n ts p re s e n t f a i r l y , in a l l m a t e ria l re s p e c ts , in accorda nce w ith g e n e r a lly acce pted a c c o u n tin g p r in c i p le s , th e C o r p o r a t io n ’ s -- a sse ts, 1992; lia b ilitie s and e q u i t y as of Decem ber 31 , 1 9 93 a n d 8T h e R e s o l u t i o n T r u s t C o r p o r a t i o n C o m p l e t i o n A c t m akes a v a i l a b l e t o S A I F , d u r i n g th e 2 y e a r p e r i o d b e g i n n in g on t h e d a te o f th e C o r p o r a t io n 's t e r m in a t io n , any o f th e $ 1 8 .3 b i l l i o n i n a p p r o p r ia t e d fu nd s n o t used b y th e C o rp o ra tio n . H ow e ver, p r i o r t o r e c e i v i n g such fu n d s , th e F e d e r a l D e p o s it In s u ra n c e C o r p o r a t io n (F D IC ) m ust f i r s t c e r t i f y , am ong o t h e r t h i n g s , t h a t S A I F c a n n o t f u n d i n s u r a n c e l o s s e s t h r o u g h i n d u s t r y p re m iu m a s s e s s m e n t s o r T r e a s u r y b o rro w in g s w ith o u t a d v e rs e ly a f f e c t in g th e h e a lth o f i t s m ember i n s t i t u t i o n s a n d c a u s i n g t h e g o v e r n m e n t t o i n c u r g r e a t e r lo s s e s . F i ,V • ,\ ! 1 I A I S T /, T F \! F ,v T s 61 B-240108 -- re ve n u e s , expenses th e n e n d e d ; and -- cash flo w s fo r and a c c u m u la te d d e f i c i t the ye a rs th en fo r the ye ars ended. H o w e v e r , m i s s t a t e m e n t s may n e v e r t h e l e s s o c c u r i n o t h e r f i n a n c i a l i n f o r m a t i o n r e p o r t e d b y t h e C o r p o r a t i o n as a r e s u l t o f th e i n t e r n a l c o n t r o l w eaknesses d e s c r ib e d b e lo w . A d d i t i o n a l l y , s i g n i f i c a n t u n c e r t a in t ie s d is c u s s e d e a r l i e r in t h i s r e p o r t a n d i n n o t e s 5 a n d 10 t o t h e f i n a n c i a l s t a t e m e n t s , m ay u l t i m a t e l y r e s u l t i n h i g h e r o r l o w e r r e s o l u t i o n c o s ts th a n e s tim a te d in th e s e s ta te m e n ts . O P I N I O N ON I N T E R N A L CO N TR O LS I n o u r o p i n i o n , th e i n t e r n a l c o n t r o l s i n e f f e c t on Decem ber 31, 1993, p r o v id e d re a s o n a b le a s s u ra n c e t h a t lo s s e s , n o n c o m p lia n c e , o r m is s ta te m e n ts m a t e r i a l i n r e l a t i o n t o th e f i n a n c i a l s ta te m e n t s w o u ld be p r e v e n t e d o r d e t e c t e d . S p e c i f i c a l l y , t h e c o n t r o l s we e v a l u a t e d w e r e d e s i g n e d t o -- sa fe g u a rd a sse ts d is p o s itio n ; a g a in s t u n a u th o riz e d a c q u is itio n , use or -- e x e c u te t r a n s a c t i o n s i n a c c o rd a n c e w i t h m anage m e nt’ s a u t h o r i t y and w i t h m a t e r i a l la w s and r e g u l a t i o n s ; and -- p r o p e r l y r e c o r d , p r o c e s s , and s u m m a riz e t r a n s a c t i o n s t o p e rm it th e p r e p a r a tio n o f f i n a n c ia l sta te m e n ts in acco rdance w ith g e n e r a lly a cce p te d a c c o u n tin g p r in c i p l e s and t o m a in t a in a c c o u n t a b i l i t y f o r a s s e t s . H o w e v e r , we i d e n t i f i e d s e v e r a l i n t e r n a l c o n t r o l w e a k n e s s e s w h i c h we d o n o t c o n s i d e r t o b e m a t e r i a l . Th e se weaknesses a r e d i s c u s s e d i n t h e f o l l o w i n g s e c t i o n on r e p o r t a b l e c o n d itio n s . Because o f in h e r e n t l i m i t a t i o n s i n an y syste m o f i n t e r n a l c o n t r o l s , lo s s e s , n o n c o m p lia n c e , o r m is s ta te m e n ts m ay n e v e r t h e l e s s o c c u r a n d n o t b e d e t e c t e d . We c a u t i o n t h a t p r o je c t in g o u r e v a lu a tio n o f c o n tro ls to fu tu re p e rio d s is s u b j e c t t o t h e r i s k t h a t c o n t r o l s m ay b e c o m e i n a d e q u a t e because o f changes in c o n d it io n s o r t h a t th e d e g re e o f c o m p l i a n c e w i t h s u c h c o n t r o l s m ay d e t e r i o r a t e . T h e C o r p o r a t i o n ' s m anagement a s s e r t e d t h a t i n t e r n a l c o n t r o l s i n e f f e c t on Decem ber 3 1 , 19 93 , p r o v id e d r e a s o n a b le a s s u ra n c e t h a t lo s s e s , n o n c o m p lia n c e , o r m is s ta te m e n ts m a t e r i a l i n r e l a t i o n t o th e f i n a n c i a l s ta te m e n ts w o u ld be p r e v e n te d o r d e t e c t e d on a t i m e l y b a s i s . T h is a s s e r t io n , w h ic h is k I. W ) L tl r I <’ X T k II v I I I I k /' I I k A I B-240108 i n c l u d e d i n a p p e n d i x I I I , was p a r t o f m a n a g e m e n t ' s e v a l u a t i o n o f in t e r n a l c o n tr o ls under th e C h ie f F in a n c ia l O f f ic e r s A c t o f 1990. M a n a g e m e n t made t h i s a s s e r t i o n u s i n g t h e i n t e r n a l c o n t r o l and r e p o r t i n g c r i t e r i a s e t f o r t h i n th e im p le m e n tin g g u id a n c e f o r th e F e d e ra l M a n a ge rs' F in a n c ia l I n t e g r i t y A c t o f 1982. I n m a k in g t h i s a s s e r t i o n , m anagem ent c o n s i d e r e d t h e r e p o r t a b l e c o n d i t i o n s we f o u n d . We f o u n d t h a t m a n a g e m e n t ' s a s s e rtio n is c o n s is te n t w ith th e r e s u lts o f o u r e v a lu a tio n of c o n tro ls . REPORTABLE C O N D ITIO N S Th e f o llo w in g re p o r t a b le c o n d it io n s , a lth o u g h n o t c o n s id e re d t o be m a t e r i a l , re p r e s e n t s i g n i f i c a n t d e f i c i e n c i e s i n th e d e s ig n o r o p e ra tio n o f th e C o r p o r a t io n 's in t e r n a l c o n t r o ls and s h o u ld be c o r r e c t e d . 1. G e n e r a l c o n t r o l s o v e r some o f t h e C o r p o r a t i o n ' s c o m p u t e r iz e d in f o r m a t i o n sys te m s d i d n o t p r o v i d e a d e q u a te a s s u ra n c e t h a t d a ta f i l e s and c o m p u te r p ro g ra m s w e re f u l l y p r o t e c t e d from u n a u t h o r iz e d a c c e s s and m o d i f i c a t i o n . A b a s ic i n t e r n a l c o n t r o l o b j e c t i v e f o r c o m p u te r iz e d syste m s i s t o p r o t e c t d a ta and p ro g ra m s from u n a u t h o r iz e d ch an g e s and t o p re v e n t u n a u th o riz e d access to s e n s it iv e d a ta . The e ffe c tiv e n e s s o f g e n e ra l c o n tro ls is a s ig n if ic a n t f a c t o r in e n s u r in g th e i n t e g r i t y and r e l i a b i l i t y o f f i n a n c i a l d a ta . D u r in g 1993 , th e C o r p o r a t io n had c o m p e n s a tin g c o n t r o l s i n p l a c e , s u c h as m an ual c o m p a ris o n s an d r e c o n c i l i a t i o n s , w h ic h w o u ld h a ve d e t e c t e d m a t e r i a l d a ta i n t e g r i t y p ro b le m s r e s u l t i n g from in a d e q u a te g e n e r a l c o n t r o l s . W ith o u t th e c o m p e n s a tin g c o n t r o l s , th e w eaknesses i n g e n e r a l c o n t r o l s w o u ld r a i s e s i g n i f i c a n t c o n c e rn s o v e r th e i n t e g r i t y o f in f o r m a t io n o b ta in e d from th e a f f e c t e d s y s te m s . T h e C o r p o r a t i o n has d e v e lo p e d an a c t i o n p l a n i n t e n d e d t o a d d re s s th e above c o n d i t io n and i s c u r r e n t l y im p le m e n tin g th e c o rre c tiv e a c tio n s . We b e l i e v e t h a t t h e c o r r e c t i v e a c t i o n s , i f p r o p e r l y i m p l e m e n t e d , w i l l c o r r e c t t h e p r o b l e m s we f o u n d . 2. Th e C o r p o r a t i o n 's f i e l d o f f i c e s d i d n o t a lw a y s p o s t w i r e r e c e ip t s to th e c o r r e c t g e n e ra l le d g e r a c c o u n ts . B a se d on t h e r e s u l t s o f o u r t e s t i n g , we e s t i m a t e d t h a t a p p r o x i m a t e l y 11 p e r c e n t o f a l l w i r e r e c e i p t s f r o m t h i r d p a r t i e s i n 1 9 93 F i .v.i .v' i a / si ,1 r i: m t vr s 63 B-240108 c o n t a i n e d one o r m ore p o s t i n g e r r o r s . 9 M ore t h a n h a l f o f t h e w ir e s c o n t a i n i n g p o s t in g e r r o r s w ere s e c u r i t i z a t i o n re la te d re c e ip ts . A b o u t h a l f o f t h e s e c u r i t i z a t i o n w i r e s had e r r o r s b e t w e e n in c o m e a c c o u n t s o n l y . Th e o t h e r h a l f a l s o had e r r o r s betw ee n p r i n c i p a l r e d u c t i o n a c c o u n ts o r i n th e a l l o c a t i o n b e tw e e n p r i n c i p a l and in co m e a c c o u n t s . In o rd e r f o r r e c e i v e r s h i p f i n a n c i a l i n f o r m a t i o n t o be r e l i a b l e and u s e f u l , t r a n s a c t i o n s s h o u ld be c o n s i s t e n t l y and a c c u r a t e l y r e c o r d e d and s u m m a riz e d . The p o s tin g e r r o r s c o u ld cause c e r t a i n f i n a n c i a l i n f o r m a t i o n u s e d b y m anagement t o be in a c c u ra te . I n 1993 a n d 1 9 9 4 , t h e C o r p o r a t i o n t o o k a c t i o n t o a d d r e s s t h e p ro b le m s a s s o c ia t e d w i t h s e c u r i t i z a t i o n - r e l a t e d w i r e r e c e i p t s . The C o r p o r a t io n i n i t i a t e d a p o l i c y w he re by th e h e a d q u a rte rs o f f ic e re s p o n s ib le f o r m a in ta in in g th e s u p p o rt f o r s e c u r i t i z a t i o n t r a n s a c t io n s a s s ig n s th e g e n e ra l le d g e r a c c o u n ts t o be used b y th e f i e l d o f f i c e s f o r p o s t in g each w ire r e c e ip t. T h e new p o l i c y s t a t e s t h a t t h e f i e l d o f f i c e p e rs o n n e l s h o u ld n o t use a c c o u n ts o t h e r th a n th o s e a s s ig n e d w ith o u t f i r s t c h e c k in g w ith th e h e a d q u a rte rs o f f i c e . We b e l i e v e t h a t t h e new p o l i c y , i f p r o p e r l y i m p l e m e n t e d , s h o u l d re d u c e t h e o v e r a l l r a t e o f p o s t i n g e r r o r s t o an a c c e p t a b le le v e l. 3 . Th e C o r p o r a t i o n 's f i e l d o f f i c e s d id n o t a lw a y s use c o r r e c t a m oun ts fro m t h e d e t a i l e d a s s e t r e c o r d s when r e c o n c i l i n g t h e r e c e i v e r s h i p s ' a s s e t b a la n c e s to th o s e r e c o r d s . In o rd e r fo r t h e a s s e t r e c o n c i l i a t i o n p r o c e s s t o be e f f e c t i v e , p r o p e r a m oun ts fro m t h e d e t a i l e d a s s e t r e c o r d s m u s t be u s e d . Use o f t h e i n c o r r e c t am o un ts c o n t r i b u t e d t o u n r e c o n c i l e d d i f f e r e n c e s and u n r e p o r t e d d i f f e r e n c e s b etw ee n th e r e c e i v e r s h i p s ' a s s e t b a la n c e s and t h e b a la n c e s i n th e d e t a i l e d a s s e t r e c o r d s . I n 1993 a n d 1 9 9 4 , t h e C o r p o r a t i o n h a s i m p l e m e n t e d a c t i o n s t o a d d re ss th e above c o n d it io n in c l u d i n g (1 ) p r o v id i n g a d d it io n a l t r a i n in g to f i e l d p e rs o n n e l re g a rd in g use o f s e r v i c e r r e p o r t s i n th e a s s e t r e c o n c i l i a t i o n p ro c e s s and (2 ) m o n ito r in g to en sure t h a t f i e l d o f f ic e s a re u s in g p ro p e r a m o u n ts i n t h e r e c o n c i l i a t i o n s . We b e l i e v e t h a t t h e s e 9B a s e d o n t h e r e s u l t s o f o u r s a m p l e , we c a n c o n c l u d e w i t h 90 p e r c e n t c o n f id e n c e t h a t betw ee n 7 .1 p e r c e n t and 1 5 .5 p e r c e n t o f a l l w i r e r e c e i p t s from t h i r d p a r t i e s c o n t a in e d a t l e a s t one p o s t i n g e r r o r , w i t h th e m ost l i k e l y e r r o r r a t e a t 1 1 .3 p e rce n t. 64 f i v .i \ •i l b i \i f .m \ i i f f M ] I II T [ II ,V T It II W ( o K /• ll k A T I B-240108 a c t i o n s , i f e f f e c t i v e l y im p le m e n te d , s h o u ld r e s u l t a m oun ts b e i n g u s e d i n f u t u r e r e c o n c i l i a t i o n s . in prope r We a l s o n o t e d o t h e r l e s s s i g n i f i c a n t m a t t e r s i n v o l v i n g t h e i n t e r n a l c o n t r o l s t r u c t u r e a n d i t s o p e r a t i o n w h i c h we w i l l c o m m u n ic a te s e p a r a t e l y t o t h e C o r p o r a t i o n ' s m anagem ent. C O M P L IA N C E W I T H LAWS AND R E G U L A T IO N S O u r t e s t s f o r c o m p lia n c e w i t h s i g n i f i c a n t p r o v i s i o n s o f s e l e c t e d la w s and r e g u l a t i o n s d i s c l o s e d no m a t e r i a l i n s t a n c e s o f n o n c o m p l i a n c e . 10 A l s o , n o t h i n g came t o o u r a t t e n t i o n i n t h e c o u rs e o f o u r o t h e r w o rk t o i n d i c a t e t h a t m a t e r i a l n o n c o m p lia n c e w i t h such p r o v i s i o n s o c c u r r e d . PROGRESS ON 1992 A U D I T RECOM M ENDATIONS I n c o n d u c t i n g o u r 19 93 a u d i t , we f o u n d t h a t t h e C o r p o r a t i o n m ade s i g n i f i c a n t p r o g r e s s i n a d d r e s s i n g t h e i n t e r n a l c o n t r o l w e a k n e s s e s we i d e n t i f i e d i n o u r r e p o r t s o n t h e r e s u l t s o f o u r 19 92 a u d i t . T h e C o r p o r a t i o n ' s a c t i o n s d u r i n g 1 9 93 f u l l y r e s o l v e d t h e o n e w e a k n e s s we c o n s i d e r e d m a t e r i a l a n d a l l o f t h e r e p o r t a b l e c o n d i t i o n s we r e p o r t e d i n 1 9 9 2 . A p p e n d ix IV s u m m a r i z e s t h e 1992 i n t e r n a l c o n t r o l w e a k n e s s e s a n d t h e a c tio n s ta ke n b y th e C o rp o ra tio n to a d d re ss th o se w e akn esse s. RECO M M ENDATIO N We r e c o m m e n d t h a t t h e C o r p o r a t i o n ' s C h i e f F i n a n c i a l O f f i c e r d i r e c t t h e C o r p o r a t io n s t a f f t o m o n it o r im p le m e n t a t io n and p ro g re s s o f th e c o r r e c t iv e a c tio n s r e la t e d to th e weaknesses we i d e n t i f i e d i n g e n e r a l c o n t r o l s o v e r some o f t h e C o r p o r a t io n 's c o m p u te riz e d in f o r m a t io n s y s te m s , p o s t in g s e c u r i t i z a t i o n - r e l a t e d w ir e r e c e i p t s , and r e c o n c i l i a t i o n s o f r e c e i v e r s h i p s ' a s s e t b a la n c e s t o d e t a i l e d a s s e t r e c o r d s . 10T h e F e d e r a l D e p o s i t I n s u r a n c e C o r p o r a t i o n I m p r o v e m e n t A c t o f 1 9 91 r e q u i r e s t h e C o r p o r a t i o n t o r e s o l v e i n s t i t u t i o n s i n t h e l e a s t c o s t l y m a n n e r a n d GAO t o r e p o r t t o t h e C o n g r e s s a n n u a l l y on th e C o r p o r a t i o n 's c o m p lia n c e w i t h t h e l e a s t - c o s t p ro v is io n s . GAO r e c e n t l y c o m p l e t e d i t s 1992 l e a s t - c o s t c o m p lia n c e re v ie w o f th e C o r p o r a t io n . The re v ie w id e n t if ie d s e v e r a l c o m p lia n c e is s u e s , none o f w h ic h w e re m a t e r i a l t o th e C o r p o r a t io n 's f i n a n c ia l s ta te m e n ts . A d e ta ile d d is c u s s io n o f G A O 's f i n d i n g s i s p r e s e n t e d i n P o l i c i e s and P r a c t i c e s D i d N o t F u l l y C o m p ly W it h L e a s t - C o s t P r o v i s i o n s ( G A O / G G D -9 4 -H O , Ju n e 17, 19 94 ). F I \ i .v - i \ ; s i a I i \i i v / , 6 5 B -2 4 0 1 0 8 C O R P O R A T IO N COMMENTS AND OUR E V A L U A T I O N C o m m e n tin g on a d r a f t o f t h i s r e p o r t , t h e C o r p o r a t i o n ' s C h i e f F i n a n c i a l O f f i c e r a g re e d w i t h o u r f i n d i n g s and re c o m m e n d a tio n . The C h ie f F in a n c ia l O f f i c e r 's w r it t e n com m ents, p r o v i d e d i n a p p e n d ix V , d is c u s s v a r i o u s e f f o r t s , m any o f w h ic h a r e o n g o i n g , i n t e n d e d t o a d d r e s s t h e r e p o r t a b l e c o n d itio n s . We p l a n t o e v a l u a t e t h e a d e q u a c y a n d e f f e c t i v e n e s s o f th e s e e f f o r t s as p a r t o f o u r a n n u a l a u d i t s o f th e C o r p o r a t io n 's f i n a n c ia l s ta te m e n ts . C h a rle s A . Bowsher C o m p tro lle r G en eral o f th e U n ite d S ta te s June 15, 1994 APPENDIX I O B JE C TIV E S , The C o r p o r a t io n 's p re p a rin g g e n e ra lly m anagement SCOPE, is AND M ETHODOLOGY re s p o n s ib le fo r a n n u a l f i n a n c i a l sta te m e n ts in c o n fo r m ity w it h a cce p te d a c c o u n tin g p r i n c i p l e s ; e s t a b l i s h i n g , m a in t a i n i n g and e v a l u a t i n g th e i n t e r n a l c o n t r o l s t r u c t u r e to e n s u re t h a t i t p ro v id e s re a s o n a b le a s s u ra n c e t h a t th e i n t e r n a l c o n t r o l o b j e c t i v e s p r e v i o u s l y m e n tio n e d a r e m e t; and c o m p ly in g w it h a p p lic a b le la w s and r e g u la t i o n s . We a r e r e s p o n s i b l e f o r o b t a i n i n g r e a s o n a b l e a s s u r a n c e a b o u t w h e t h e r ( 1 ) th e f i n a n c i a l s ta te m e n ts a r e f r e e o f m a t e r i a l m is s ta te m e n t and p re s e n te d f a i r l y in c o n fo rm ity w ith g e n e r a lly acce pted a c c o u n tin g p r i n c i p l e s and ( 2 ) r e l e v a n t i n t e r n a l c o n t r o l s a r e i n p l a c e and o p e ra tin g e f f e c t iv e ly . We a r e a l s o r e s p o n s i b l e f o r t e s t i n g c o m p li a n c e w i t h s i g n i f i c a n t p r o v i s i o n s o f s e l e c t e d la w s and re g u la tio n s . In o rd e r to fu lfill th e se re s p o n s ib ilitie s , we e x a m in e d , on a t e s t b a s i s , e v id e n c e s u p p o r t i n g d is c lo s u re s in th e f in a n c ia l s ta te m e n ts; the am o u n ts and a s s e s s e d th e a c c o u n tin g p r i n c i p l e s used and s i g n i f i c a n t e s t i m a t e s made b y t h e C o r p o r a t i o n ' s m a n a g e m e n t ; e v a lu a te d th e sta te m e n ts ; o v e ra ll p re s e n ta tio n e v a lu a te d and t e s t e d r e le v a n t fo llo w in g s ig n if ic a n t c y c le s , a cco u n t b a la n c e s : -- -- of th e fin a n c ia l in t e r n a l c o n tro ls o ve r th e c la s s e s o f t r a n s a c t i o n s , and r e s o lv e d i n s t i t u t i o n s , c o n s i s t i n g o f p o l i c i e s and pro ce dures re la te d to (1 ) r e s o lu tio n a c t i v i t i e s , (2 ) r e c e i p t s and d is b u rs e m e n ts i n r e c e i v e r s h i p s , and ( 3 ) v a l u a t i o n o f th e C o r p o r a t io n 's n e t r e c e iv a b le s from r e s o l u t i o n t r a n s a c t i o n s and a s s is t a n c e ; u n r e s o lv e d i n s t i t u t i o n s , c o n s i s t i n g o f p o l i c i e s and p ro c e d u re s r e la t e d to i d e n t i f y i n g and e s t im a t in g th e o f f u t u r e r e s o lu t i o n s and o f p r o v id i n g advances to in s t i t u t i o n s in c o n s e rv a to rs h ip ; f / ,Y4X'/.II S T A I [ MI ,Y/ 67 cost A PPEN DIX I -- --- F e d e r a l F in a n c i n g Bank b o r r o w in g s , c o n s i s t i n g o f p o l i c i e s and p ro c e d u re s r e l a t e d to th e b o r r o w in g , use and re p a ym e n t o f w o rk in g c a p i t a l ; t r e a s u r y , c o n s i s t i n g o f p o l i c i e s and p ro c e d u re s r e l a t e d t o C o r p o r a t e ca sh r e c e i p t s and d is b u rs e m e n ts ; and f i n a n c i a l r e p o r t i n g , c o n s i s t i n g o f p o l i c i e s and p ro c e d u re s r e la t e d to th e p ro c e s s in g o f jo u r n a l e n t r ie s in t o th e g e n e r a l le d g e r and t h e p r e p a r a t io n o f f i n a n c i a l s t a te m e n t s ; and t e s t e d c o m p lia n c e w it h la w s and r e g u l a t i o n s : --- s ig n ific a n t p ro v is io n s of the fo llo w in g s e c t i o n 2 1 A o f t h e F e d e r a l Home L o a n B a n k A c t ( 1 2 U . S . C . 1441a) and C h i e f F i n a n c i a l O f f i c e r s A c t o f 1 990 ( P u b l i c L a w 1 0 1 - 5 7 6 ) . We l i m i t e d o u r w o r k t o a c h ie v e th e o b je c t iv e s c o n tro ls . a c c o u n tin g and o t h e r c o n t r o ls n e c e s s a ry to o u t l i n e d i n o u r o p i n i o n on i n t e r n a l We c o n d u c t e d o u r a u d i t s i n a c c o r d a n c e w i t h go ve rn m e n t a u d i t i n g s ta n d a rd s . We b e l i e v e a re a s o n a b le b a s is f o r o u r o p in io n s . g e n e r a lly a cce p te d th a t o u r a u d its p ro v id e T h e C o r p o r a t i o n ' s C h i e f F i n a n c i a l O f f i c e r p r o v i d e d w r i t t e n co m m e n ts on a d r a f t o f t h i s r e p o r t . T h e s e c o m m e n ts a r e d i s c u s s e d i n t h e " C o r p o r a t i o n C o m m e nts a n d O u r E v a l u a t i o n " s e c t i o n o f t h e o p i n i o n l e t t e r and a r e r e p r i n t e d i n a p p e n d ix V . We h a v e i n c o r p o r a t e d t h e C o r p o r a t i o n 's v ie w s w he re a p p r o p r ia t e . 6 8 F i .v i .v < / l y r ,i i f ,\i ,v r i H £S<1 I. II T I < N > Tuil •T f OK l> (I R A T I () N > Financial Statements A P P E N D I X II RESOL UTI ON TR US T CORPORATION S TA T E ME NT S OF FI NA NCI A L POSI TI ON (dollars in thousands) December 31,1993 December 31,1992 $ 6,470,428 $ 3,048,320 7,337,863 9,331,348 21,158,047 32,490,003 Net assets purchased by the Corporation (Note 6 ,7 and 15) 76,387 82,305 Other assets 10,120 13,319 $35,052,845 $44,965,295 ASSETS Cash (Note 3) Net advances (Note 4 ,6 ,1 5 and 18) Net subrogated claims (Note 5 ,6 ,1 5 and 18) TOTAL ASSETS (Note 14) LIABILITIES Accounts payable, accrued liabilities, and other (Note 16 and 17) $ 169,822 $ 224,558 13,790 29,111 30,773,103 37,474,371 8,097,851 16,858,857 171,633 375,375 39,226,199 54,962,272 Contributed capital (Note 3) 55,523,993 55,522,019 Capital certificates 31,286,325 31,286,325 (90,983,672) (96,805,321) (4,173,354) (9,996,977) $35,052,845 $44,965,295 Due to receiverships/conservatorships (Note 8) Notes payable and accrued interest (Note 9) Estimated cost of unresolved cases (Note 6,10 and 15) Estimated losses from corporate litigation (Note 6 and 11) TOTAL LIABILITIES EQUITY Accumulated deficit TOTAL EQUITY (Note 12) TOTAL LIABILITIES AND EQUITY (Note 14) See accom panying notes A P P E N D IX II RESOLUTI ON TR US T CORPORATION S TA T E ME NT S OF REVENUES, EXPENSES A N D ACCUMULATED DEFICIT (dollars in thousands) Year Ended December 31,1992 Year Ended December 31,1993 REVENUES $ Interest on advances and subrogated claims $ 367,751 532,183 Other interest income 12,061 10,087 Other revenue (Note 3) 48,106 33,288 427,918 575,558 1,010,562 1,928,623 72,977 774,320 TOTAL REVENUES EXPENSES Interest expense on notes issued by the Corporation Interest expense on amounts due receiverships (8,116,762) (6,579,610) Reduction in loss allowances (Note 6) Administrative operating and other expenses (Note 2 ,1 4 and 17) 54,213 102,340 (5,393,731) NET REVENUE ACCUMULATED DEFICIT, BEGINNING (5,359,606) 5,821,649 TOTAL EXPENSES 5,935,164 (96,805,321) ($90,983,672) ACCUMULATED DEFICIT, ENDING (Note 12) (102,740,485) ($96,805,321) See accom panying notes 70 F I ,Y ,1 ,V < I A 1 S' I A r E Al I: .V T S R f s a i u t i o .v T r u s t < o u / <> k a t i • A P P E N D IX II RESOLUTI ON TR US T CORPORATION S TA T E ME NT S OF CASH FLOWS (dollars in thousands) Year Ended December 31,1993 Year Ended December 31,1992 CASH FLOWS FROM OPERATING ACTIVITIES Cash inflows from: Receipts from subrogated claims $14,577,355 $29,655,899 5,836,959 14,772,701 Receipts of interest on advances 322,666 754,480 Receipts from asset liquidations 35,663 53,089 Receipts from other operations 41,433 32,140 Disbursements for subrogated claims (4,931,341) (22,668,747) Disbursements for advances (3,241,601) (11,735,557) Disbursements for reimbursable expenditures (1,446,145) (1,554,588) (95,366) (41,555) (770,709) (1,605,807) 10,328,914 7,662,055 34,314 25,033,510 4,100,000 7,500,000 0 203 0 (18,314,767) (11,041,120) (27,867,007) (6,906,806) (13,648,061) Net increase (decrease) in Cash 3,422,108 (5,986,006) CASH-BEGINNING 3,048,320 9,034,326 $6,470,428 $3,048,320 Repayments of advances and reimbursable expenditures Cash outflows for: Administrative operating and other expenditures Interest paid on notes payable Net Cash Provided by Operating Activities (Note 13): CASH FLOWS FROM FINANCING ACTIVITIES Cash inflows from: Contributed capital Notes payable Capital certificates Cash outflows for: Contributed capital returned to the Treasury (Note 1) Repayment of notes payable, principal Net Cash Used by Financing Activities CASH-ENDING See accom panying notes A P P E N D IX II Resolution Trust Corporation Notes to Financial Statements December 31, 1993 and 1992 1. Impact of Legislation: T he RT C , a G ove rnm en t C o rp oratio n , was created by the Financial Institutions Reform, Recovery, and Enforcement Act o f 1989 (FIRREA) to manage and resolve all troubled savings institutions that were previ ously insured by the Federal Savings and Loan Insurance Corporation (FSLIC) and for w hich a conservator or receiver was appointed during the period January 1, 1989, through August 8, 1992. This period was extend ed to September 30, 1993, by the Resolution Trust C orporation Refinancing, Restructuring, and Improvement Act of 1991 and in D ecem ber 1993, the period was extended to a date not earlier than January 1, 1995, nor later than July 1, 1995, by the Resolution Trust C o rporatio n C o m p le tio n Act of 1993. The final date will be determined by the Chairperson of the T D P O versight Board. The activities of the R T C are subject to the general oversight of the Oversight Board, w hich was redesig nated the T hrift D epositor Protection (T D P ) O versight Board and increased in size by the D ecem ber 1991 legislation. T he T D P O versight Board m onitors the operations of the RTC, provides the R T C w ith general policy direction, and reviews the RTC's performance. T he seven members on the T D P O versight Board include: the Secretary of the Treasury,- the Chairperson of the Board of Governors of the Federal Reserve System,- the D irector of the O ffice of T hrift Supervision (OTS),- the Chairperson of the Board of Directors of the Federal D eposit Insurance C orporation (F D IC ), the C h ie f Executive Officer of the RTC,- and two inde pendent members appointed by the President, w ith the advice and consent of the Senate. U nd e r current law, the R T C will terminate on or before D ecem ber 31, 1995. All rem aining assets and lia bilities will be transferred to the FSLIC Resolution Fund w hich is m anaged by the F D IC . Proceeds from the sale of such assets will be transferred to the Resolution Funding Corporation (R E F C O R P ) for interest pay ments after satisfaction of any outstanding liabilities. Source of Funds: T he R T C is funded from the follow ing sources: 1) U .S. Treasury appropriations and borrowings,- 2) a c o n tribution from the Federal FJome Loan Banks through REFCORP,- 3) amounts borrowed by R E F C O R P w hich is authorized to issue long-term debt securities,- 4) the issuance o f debt obligations and guarantees as per m itted by the T D P O versight Board, and 5) incom e earned on the assets of the RTC, proceeds from the sale of assets, and collections m ade on claims received by the R T C from receiverships. T he Secretary of the Treasury has contributed capital of $55.5 b illio n to the R T C as of D ecem ber 31,1993, $18.8 billio n of w hich was authorized by FIRREA, $30 b illion o f w hich was authorized by the Resolution Taist C orporation Funding Act of 1991 and $6.7 b illion of w hich related to the Resolution Trust Corporation Refinancing, Restaicturing, and Improvement Act of 1991 (See N ote 12). This legislation, signed in December 1991, authorized the Secretary o f the Treasury to provide an additional $25 b illion in capital to the R T C for its operations th ro ug h M a rch 31, 1992. These funds were received in January 1992. In A pril 1992, the RT C returned $18.3 billion to the Treasury w hich represented funds not com m itted by the M arch 31, 1992, deadline. A P P E N D IX II In D ecem ber 1993, the Resolution Trust Corporation C o m p le tio n Act authorized funding of the $18.3 b il lion previously returned to Treasury. Expenditure of funds in excess of $10 billion requires certification by the Secretary of the Treasury that certain statutory requirements have been met. In January 1994, the T D P O versight Board received $10 billion in funds, of w hich $4 billion was forwarded to the RTC. T he RT C has also issued capital certificates of $3 1.3 b illion to R E F C O R P as of D ecem ber 31, 1993 (see N ote 12). FIRREA prohibits the paym ent o f dividends on any o f these capital certificates. The RT C is also autho rized to borrow directly from the Treasury an am ount not to exceed in the aggregate $5.0 billion. There have been no draws against these authorized borrowings through the end of 1993. 2. Summary of Significant Accounting Policies; General. These statements do not include accountability for assets and liabilities of closed thrifts for w hich the R T C acts as receiver/liquidating agent or of thrifts in conservatorship for w hich the RT C acts as m an aging agent. Allowance lor Losses on Advances. T he R T C recognizes an estim ated loss on advances. T he allow ance for losses represents the difference between amounts advanced to conservatorships or receiverships and expect ed repayments. Allowance for Losses on Subrogated Claims. The R T C records as assets the am ounts disbursed for assisting and clos ing thrifts, prim arily the am ounts for insured deposit liabilities. An allowance for losses is established against subrogated claims representing the difference between the amounts disbursed and the expected repayments. T he allowance is based on the estimated cash recoveries from the assets of the assisted or failed thrifts, net of estimated asset liquidation and overhead expenses, including interest costs. Estimated Cost of Unresolved Cases. The R T C records the estimated losses related to thrifts in conservatorship and those identified in the regulatory process as probable to fail on or before the statutory date of between January 1, 1995, and July 1, 1995. Litigation Losses. T he R T C recognizes an estimated loss for litigation against it in its Corporate, conservator ship and receivership capacities. T he R T C Legal D ivision recommends these estimated losses on a case-bycase basis. Due to Receiverships-Assets Sold. T he R T C establishes a contra asset account to record the am ount payable to receiverships for the purchase price of receivership assets sold to acquiring institutions in resolution trans actions. This is done in lieu o f the receivership receiving the cash proceeds from the sale of its assets. This contra account offsets the balance due from the receiverships for subrogated claims. T he amounts that exceed the expected recovery of subrogated claims due from the receiverships are recorded as a liability entitled "D ue to receiverships." T he R T C accrues interest on the total of the contra asset and liability accounts. National Judgments, Deficiencies and Chargeoffs Joint Venture Program. T he R T C purchases assets from receiverships, conservatorships, and their subsidiaries to facilitate the sale and/or transfer of selected assets to several Joint Ventures in w hich the R T C retains a financial interest. Allocation of Common Expenses. T he R T C shares certain administrative operating expenses w ith several funds of the F D IC in c lu d in g the Bank Insurance Fund, the F S LIC Resolution Fund, and the Savings Association Insurance Fund. T he administrative operating expenses include allocated personnel, administrative, and other overhead expenses. ,1 \.v II 'i ; K E I' I ‘ k I' F i s ,i ,v < i a i s r ,i r f. a i f s r s 73 A P P E N D IX II Allocation of Corporate Expenses. T he R T C recovers costs incurred by the C orporation in support of liq uida tion/receivership activities, including a portion of administrative expenses. These costs are billed to in d iv id ual receiverships w ith the offsetting credits reducing the Corporation's "Administrative operating and other expenses." Depreciation. T he cost of furniture, fixtures, equipm ent and other fixed assets is expensed at the time of acqui sition and is reported as "Administrative operating and other expenses." This policy is a departure from gen erally accepted accounting principles, however, the financial im pact is not material to the RTC's financial statements. Cash Equivalents. The R T C considers cash equivalents to be short-term, high ly liquid investments w ith origi nal maturities of three m onths or less. As of D ecem ber 31, 1993, and 1992, the R T C did not have any cash equivalents. Fair Value of Financial Instruments. The balances of financial instruments included in the RTC's Statement of Financial Position approximate their estimated fair values. T he values of "N et advances" and "N et subrogat ed claims'' are based on the discounted net cash flows expected to be received from those instruments. The frequent repricing of the balances of "D ue to receiverships" and the short-term nature of "Notes payable'' result in face amounts of such instruments w hich approximate their fair values. 3. Office of Inspector General: FIRREA established an Inspector General of the C o rporatio n and authorized to be appropriated such sums as m ay be necessary for the operation o f the O ffice o f Inspector General ( O IG ) . All financial transactions related to the O I G are included in the Corporation's financial statements. T he O I G has received $108.9 m illion o f appropriated funds from the U.S. Treasury since it was established of w hich $34.3 m illion relate to the Government's Fiscal Year (FY) 1994 and $33.5 m illion relate to FY 1993. These funds are used to finance the activities of the O I G . Restricted amounts of $5,805,385 for FY 1993, $9,571,221 for FY 1992 and $773,671 for FY 1991 are included in "Cash." These funds were unobligated at year end. R eductions to the O I G appropriated funds resulting from o bligatio ns are recorded as "O th e r revenue." Accordingly, the O I G appropriated funds were reduced by $32,339,972 and $24,274,873 during 1993 and 1992, respectively, and recorded as "O th e r revenue." Disbursements of the O I G appropriated funds for expenditures are recorded as "Administrative operating and other expenses." These disbursements totalled $34,538,230 during 1993 and $20,955,917 during 1992. As of D ecem ber 3 1, 1993, and 1992, the unobligated O I G appropriation balances included in "C ontributed capital" were $38.8 m illion and $36.8 m illion, respectively. 4. N et Advances (in thousands): T he R T C makes advances to receiverships and conservatorships. Advances are made to conservatorships to provide funds for liquidity needs and to reduce the cost of funds, and to receiverships to provide w orking capital. T he advances generally are either secured by the assets of the conservatorship or receivership at the tim e the advances were made or have the highest priority of unsecured claims. T he C o rporatio n accrues interest on these advances w hich is included in the Statements of Revenues, Expenses and A ccum ulated 74 F I S A \ cI A I ' S 7,1 7f A E,VT s ! k E S () 7 U r I S T K LI S T C tl R I’ a It A T I A P P E N D IX II Deficit. T he C orporation expects repayment of these advances, includ ing interest, before any subrogated claim s are paid by receiverships. T he advances carry a floating rate o f interest based upon the 13-week Treasury Bill rate. Interest rates charged during 1993 ranged between 3.1 3% and 3.54% , and between 2.98% and 4.44% in 1992. A t D ecem ber 3 1, 1993, and 1992, the interest rates on advances were 3.37% and 3.54%, respectively. December 31, 1993 December 31, 1992 $6,522,853 $6,777,066 5,406,256 6,379,436 307,268 419,611 Accrued interest 73,165 38,921 Write-offs at termination - advances (Note 6 and 7) (3,815) (3,575) Allowance for losses on receivership advances (Note 6) (3,981,719) (3,907,079) (986,145) (373,032) Advances to conservatorships Advances to receiverships Reimbursements due from receiverships and conservatorships Allowance for losses on conservatorship advances (Note 6) $7,337,863 $9,331,348 Reimbursements due from receiverships and conservatorships represent operating expenses paid by the RT C on behalf of the receiverships and conservatorships for w hich repayment is expected in full. Interest is not accrued on these reimbursements. 5. N et Subrogated Claims (in thousands): Subrogated claims represent disbursements made by the R T C primarily for deposit liabilities. The Corporation recognizes an estimated loss on these subrogated claims. These estimates are based in part on a statistical sam pling of receivership assets subject to a sam pling error o f plus or minus $0.8 billio n w ith a 95 percent confidence interval. T he value of assets under R T C m anagem ent could be lower (or higher) than projected because general eco n om ic conditions, interest rates and real estate markets could change. Because of these uncertainties, it is reasonably possible that the actual losses m ay be higher (or lower) than the current “Allow ance for losses on subrogated claims." Receiverships frequently sell a portion of their assets to institutions acquiring their deposit liabilities. In lieu of the receiverships receiving cash for the sale, the purchase price of the assets sold is recorded by the receiver ship as a receivable and by the R T C in a contra asset account entitled "D ue to receiverships - assets sold.'' T his account is offset against subrogated claims expected to be collected from the receivership. T he portion of the contra asset account, if any, in excess of expected subrogated claim recoveries is recorded as a liabil- 4 ,V ,V II A ! R. E !• < k T > F i n a s < t a i S t a t e a ,v i e t 75 A P P E N D IX II ity entitled "D ue to receiverships" (see N ote 8). T he R T C accrues interest payable to the receiverships on the total of the contra asset and liability accounts. The rates used by the R T C to accrue interest are based upon the C h icago FHLB D a ily Investment D eposit Rates. Interest rates paid during 1993 ranged between 2.50% and 3.64% , and between 2.59% and 4.74% in 1992. At Decem ber 31, 1993, and 1992, the interest rates paid on these accounts were 2.79% and 2.63% , respectively. December 31, 1993 December 31, 1992 Subrogated claims $208,331,406 $200,461,308 Recovery of subrogated claims (115,566,781) (92,855,555) 17,540 19,974 (2,316,651) (7,520,378) (639,585) (352,712) (68,667,882) (67,262,634) Claims of depositors pending and unpaid Due to receiverships - assets sold Write-offs at termination - subrogated claims (Note 6 and 7) Allowance for losses on subrogated claims (Note 6) $21,158,047 $32,490,003 6. Changes in Allowance for Losses (in thousands): Allowance for losses on subrogated claims Allowance for losses on advances $ 6 8 ,0 8 8 ,1 1 1 $ 3 ,4 8 2 ,8 8 9 Balance, Dec 3 1 ,1 9 9 1 Provision (reductions) (7 ,6 6 3 ,2 6 4 ) 8 0 0 ,7 9 7 W rite-offs a t term ination (Note 7) Cost of Resolutions Balance, Dec 3 1 ,1 9 9 2 Provision (reductions) (3 5 2 ,7 1 2 ) (3 ,5 7 5 ) Cost of resolutions Balance, Dec 3 1 ,19 9 3 7 6 $ 0 1 1,2 2 5 - - 6 7 ,2 6 2 ,6 3 4 4 ,2 8 0 ,1 1 1 1 1,2 25 6 2 ,3 7 7 6 8 7 ,9 9 2 5 ,0 2 5 (2 8 6 ,8 7 3 ) (2 3 9 ) - - $68,667,882 $4,967,864 $16,250 .v , , , , S T A T E Al F ,V f v Estimated losses from corporate litigation TOTAL $ 2 5 ,4 9 2 ,6 5 2 $ 1 9 7 ,5 9 9 $ 9 7 ,2 6 1 ,2 5 1 (1 ,4 4 3 ,2 9 6 ) (8 ,1 1 6 ,7 6 2 ) 1 7 7 ,7 7 6 . _ (7 ,1 9 0 ,4 9 9 ) (3 5 6 ,2 8 7 ) - 0 1 6 ,8 5 8 ,8 5 7 3 7 5 ,3 7 5 8 8 ,7 8 8 ,2 0 2 (7 ,1 3 1 ,2 6 2 ) (2 0 3 ,7 4 2 ) (6 ,5 7 9 ,6 1 0 ) _ _ (2 8 7 ,1 1 2 ) _ 1 ,6 2 9 ,7 4 4 F , ,V , Estimated cost of unresolved cases _ 7 ,1 9 0 ,4 9 9 W rite-offs a t term ination (Note 7) Allowance for losses on corp assets (1 ,6 2 9 ,7 4 4 ) - $171,633 $ 8,097,851 R E s II L U T I O N 0 $81,921,480 T k II s T (' o K / n * K ,\ r 1 n > A P P E N D IX II T he "Allowance for losses on subrogated claims" includes future interest costs and overhead expenses. Total "reductions" in loss allowances contain the offset of net interest costs incurred in the current period that were previously included in provisions. "Cost of resolutions" represent amounts transferred from "Estimated cost of unresolved cases" to "Allowance for losses on subrogated claims" as a result of case resolutions in each year. 7. Net Assets Purchased by the Corporation (in thousands): T he R T C has purchased the rem aining assets o f selected receiverships in order to expedite the termination of the receivership entity. As of D ecem ber 31, 1993, the RT C had purchased assets from 77 receiverships for $173 m illion, in order to pay a final dividend to the receiverships' creditors and to begin the process of legally term inating the receivership entities (assets from 36 receiverships for $142 m illion at D ecem ber 31, 1992). U p o n term ination, the R T C may realize a loss on advances and subrogated claims that was previously included in the respective allowances and recognized in the provision for losses in a prior year. A dditionally, during 1993, the R T C purchased assets from receiverships, conservatorships, and their subsidiaries for $1.5 m illio n to facilitate the sale and/or transfer of selected assets to several Jo in t Ventures in w hich the RT C retained a financial interest. December 31, 1993 December 31, 1992 $173,075 $141,795 Sales, collections and adjustments (80,438) (48,265) Allowance for losses on corporate assets (Note 6) (16,250) (11,225) $ 76,387 $ 82,305 Assets in liquidation purchased Assets purchased include m ortgage loans backed by 1-4 family homes, multi-family dwellings or com m er cial real estate,- consumer loans,- real estate,- and other assets including receivership interests in credit enhance m ent reserve funds created w hen receiverships participated in R T C loan securitizations. 8. D ue to Receiverships/Conservatorships: Receiverships frequently sell some of their assets to institutions acquiring their deposit liabilities. In lieu of the receiverships receiving cash for the sale, the R T C establishes a contra asset account equal to the pur chase price of the assets sold and the receiverships record a receivable. This account is offset against the sub rogated claims due from the receivership to the extent that the R T C expects full repayment o f such claims. If a receivership's contra account exceeds the expected repayment of its subrogated claims to the RTC, the excess is recorded as "Due to receiverships." T he balance of "D ue to receiverships" was $13.4 m illion and $29.1 m illio n at D ecem ber 31, 1993, and 1992, respectively. A .V .V U \ L k i r 'I K r F I V \ I I A L S T ,t r t AI F .V T 77 A P P E N D IX II Conservatorships participating in RTC'S N ational Judgm ents, Deficiencies and Chargeoffs Jo in t Venture Program (J D C JV ) have sold judgm ents and deficiencies to the RTC. The liability, "D ue to conservatorshipsassets purchased," w ith a $0.4 m illion balance at D ecem ber 31,1993, represents the am ount due to these c o n servatorships for the purchase of their JDC's. 9. Notes Payable and Accrued Interest: W o rk in g capital has been made available to the RT C under an agreement between the RT C and the Federal Financing Bank. The w orking capital is available to fund the resolution of thrifts and for use in the RTC's high-cost funds replacement and emergency liquidity programs. T he outstanding notes mature at the end of each calendar quarter, at w hich time they are generally refinanced at similar terms. Payments on the note bal ance may also be made during each calendar quarter. T he notes payable carry a floating rate of interest estab lished by the Federal Financing Bank and ranged between 2.88 and 3.27% during 1993 and between 2.82% and 5.09% in 1992. As of D ecem ber 31, 1993, and 1992, the R T C had $30.8 b illion and $37.5 billion, respec tively, in borrowings and accrued interest outstanding from the Federal Financing Bank. These borrowings, approved by the Oversight Board, are w ithin the lim itations im posed under FIRREA. 10. Estimated Cost of Unresolved Cases: T he RT C has established a liability of $8.1 billio n at D ecem ber 31, 1993, for the anticipated costs of resolv ing an additional 67 troubled institutions. O f the 67 institutions, 63 were in conservatorship as o f that date. T he other 4 associations were identified by the O T S as institutions for w hich it is probable that governm ent assistance m ay be required on or before the last date by w hich the R T C may be appointed conservator. T he 1993 "Estimated cost of unresolved cases" has declined from the D ecem ber 31, 1992, and 1991, esti mates o f $ 16.9 billion and $25.5 billion, respectively. The primary reasons for this decline were O T S changes in estimated caseload, R T C revisions to cost estimates for existing conservatorships, and resolution of cases during 1993 leaving fewer unresolved cases at the end of the year. T he O T S has also identified 18 savings associations for w hich it is reasonably possible that governm ent assis tance may be required. The estimated cost to resolve these 18 institutions could be up to $1 billion. Furthermore, the value of assets anticipated to com e to the R T C could be lower (or higher) than projected because general econom ic conditions, interest rates, and real estate markets could change. Because of these uncertainties, it is reasonably possible that the cost of unresolved cases will be higher (or lower) than w hat has been estimated. 1 1. Estimated Losses from Corporate Litigation: As of Decem ber 31,1993, the RT C has been named in several thousand lawsuits while serving in its Corporate, conservatorship or receivership capacities. Currently, it is not possible to predict the outcom e for all of the various actions. An allowance for loss totalling $171.6 m illio n has been established as of D ecem ber 31, 1993, for the 40 actions that managem ent feels are probable to result in a significant loss ($375.4 m illion at December 31 ,199 2, for 71 actions). A dditionally, the C o rporatio n could possibly incur further losses of approximately $400 m illio n from other pe nd ing lawsuits and other yet unasserted claims. 78 F I .V ,1 V < I A L y T A T E M E ,V I R f S i ) I. ( I T I O ,V T k U S T C <) k /' I ) k A T I ( l iV A P P E N D IX II 1 2 . Changes in Equity (in thousands): Contributed Capital Accumulated Deficit Total Equity $48,827,551 Balance, Dec 31,1991 Capital Certificates $31,286,122 $(102,740,485) $(22,626,812) - - 1992 Net revenue Resolution Trust Corporation Refinancing, Restructuring and Improvement Act of 1991 5,935,164 5,935,164 6,685,233 6,685,233 FY 93 OIG appropriation 33,510 - - 33,510 1992 Obligated OIG funds (24,275) - - (24,275) Issuance of capital certificates: 01/30/92 Balance, Dec 31,1992 55,522,019 - 1993 Net revenue FY 94 OIG appropriation 34,314 1993 Obligated OIG funds (32,340) Balance, Dec 31,1993 A X X II ! k I I' i ) l $55,523,993 K I 203 203 31,286,325 (96,805,321) - 5,821,649 - - - - $31,286,325 $ (90,983,672) F i x a xi i i. S t a t e (9,996,977) 5,821,649 34,314 (32,340) $ (4,173,354) ae x t s i 73 A P P E N D IX II 13. Supplementary Information Relating to the Statement of Cash Flows (in thousands): Reconciliation of net revenue to net cash provided by operating activities. For the Years Ended December 31, December 31, 1992 1993 Net Revenue Reduction in loss allowances $ 5,821,649 (6,579,610) $ 5,935,164 (8,116,762) Interest expense financed as additional notes payable 278,975 545,215 Decrease in accrued interest on notes payable (39,122) (222,398) 72,977 774,320 (35,033) 238,115 14,577,355 29,655,899 5,836,959 14,772,701 35,663 53,089 (56,628) (7,400) 55,290 39,045 Increase in accrued interest on amounts due to receiverships (Increase) decrease in accrued interest due from advances Receipts from subrogated claims Repayments of advances and reimbursable expenditures Receipts from asset liquidations Decrease in accounts payable, accrued liabilities and other Decrease in reimbursable portion of liabilities above Disbursements for advances (3,241,601) (11,735,557) Disbursements for subrogated claims (4,931,341) (22,668,747) Disbursements for reimbursable expenditures (1,446,145) (1,554,588) (32,340) (24,275) Other non-cash (income) and expenses (net) 8,594 (22,564) Decrease in other assets 3,272 798 $10,328,914 $ 7,662,055 OIG income recognized Net cash provided by operating activities N oncash transactions incurred from thrift assistance and failures (in thousands): ■ $ 1,629,744 and $7,190,499 were reclassified from "Estimated cost of unresolved cases” to "Allowance for losses on subrogated claims" during 1993 and 1992, respectively, due to the resolution of 27 cases during 1993 and 69 cases in 1992. H "D ue to receiverships - assets sold" decreased by $62,157 and $3,661,299 in 1993 and 1992, respective ly, w ith offsetting decreases o f $61,364 and $3,61 1,547 to "Advances to receiverships" and of $793 and $49,752 to "Accrued interest" to repay receivership advances and related interest. B $278,975 and $545,215 of interest expense was financed through increases in notes payable in 1993 and 1992, respectively. 80 A P P E N D IX II I "Recovery of subrogated claims" increased by $7,602,027 and $21,630,902 during 1993 and 1992, respec tively, w ith an offsetting decrease in "D ue to receiverships - assets sold", to record liquidating dividends declared by receiverships. I "Subrogated claims" increased by $2,983,857 and $5,190,331 in 1993 and 1992, respectively, resulting from resolution activity w ith an offsetting increase in "D ue to receiverships - assets sold." ■ "D ue to receiverships" decreased by $ 15,715 and $ 1,605,088 in 1993 and 1992, respectively, w ith the off set to "Due to receiverships - assets sold" (a co m po nent of "Net subrogated claims") for amounts exceeding the expected recovery of subrogated claims due from the receiverships. ■ "Reimbursements due from receiverships and conservatorships" decreased by $89,272 and $389,551 dur ing 1993 and 1992, respectively, w ith an offsetting decrease to "D ue to receiverships - assets sold." B "Due to receiverships - assets sold" increased by $31,280 and $141,795 in 1993 and 1992, respectively, w ith an offsetting increase to "N et assets purchased by the C orporation" relating to the purchase of receiver ship assets by the C orporation. 14. Related Party Transactions: T he Financial Institutions Reform, Recovery, and Enforcement Act of 1989 established the R T C to manage and resolve failed savings institutions that were formerly insured by the FSLIC and for w hich a receiver or conservator was appointed after January 1, 1989. At D ecem ber 31, 1993, there were 743 institutions w ith $75.5 b illion of assets for w hich the RT C was appointed conservator or receiver. This compares to 734 insti tutions w ith $ 124.0 billion of assets at D ecem ber 31,1992. In its fiduciary capacity as receiver or conservator, the R T C has substantial control over the operations of the institutions placed in receivership or conservatorship by the O T S . T he RT C, as receiver or conservator, has ultim ate authority in the day-to-day operations, including the tim ing and m ethods of the disposal of the institutions' assets in an effort to m aximize returns on such assets. T he R T C does not include the assets and liabilities of the receiverships and conservatorships in its financial statements. FHowever, certain transactions w ith these institutions, including advances to and receivables from the institutions, as well as interest paid or received on such items, are included in the RTC's financial records. A t D ecem ber 31,1993, the net balances of advances and subrogated claims were $7.3 b illion and $21.2 b il lion (net of "D ue to receiverships - assets sold" of $2.3 billion), respectively. T he R T C owed $2.3 billion to receiverships, including the liability account of $13 m illion, at D ecem ber 31, 1993, resulting from resolu tion transactions (see notes 5 and 8). Interest incom e earned on advances and subrogated claims was $368 m illio n during the year ended D ecem ber 3 1, 1993, and interest expense on amounts due receiverships was $73 m illion. At D ecem ber 3 1, 1992, the net balances o f advances and subrogated claims were $9.3 billion and $32.5 b il lion (net of "Due to receiverships - assets sold" of $7.5 billion), respectively. Total am ounts due receiverships were $7.5 billion, including the liability account of $29 m illion. Interest incom e on advances and subrogat ed claims was $0.5 b illion during the year ended D ecem ber 31,199 2, and interest expense on amounts due receiverships was $0.8 billion. R T C receiverships and conservatorships are holders of lim ited partnership equity interests as a result of var ious R T C sales programs w hich include the N ational Land Fund, M u ltip le Investor Funds, N-Series and SSeries programs. T hro ugh 1993, the RT C sold $5.2 billio n of loans through these programs. F ! v .i .v i j ; : s r , r t u r .v i ■ 1 , 81 A P P E N D IX II The RTC funds the activities of the T D P Oversight Board based on its fiscal year budgets. The amounts funded in 1993 and 1992 were $5.1 m illion and $5.0 m illion, respectively. These amounts are subject to the Corporation's policy of allocating corporate expenses to the receiverships. "Administrative operating and other expenses" for the C orporation were $102.3 m illion and $54.2 m illion for the years ended D ecem ber 31, 1993, and 1992, respectively (total costs of $933.0 m illion and $970.9 m illion less $830.7 m illion and $916.7 m illion billed back to receiverships during 1993 and 1992, respec tively). T he C orporation bears the costs o f administrative expenses for terminated receiverships since they are managed by the C orporation. 15. Commitments and Guarantees: S e c u r it iz a t io n C R r e d it e s e r v e s : T hrough 1993, the R T C sold through its mortgage-backed securities securitization program $36.6 billion of receivership, conservatorship and Corporate loans ($32.8 billion through 1992). The loans sold were secured by various types of real estate including 1-4 family homes, multi-family dwellings and commercial real estate. Each securitization transaction is accom plished through the creation of a trust, w hich purchases the loans to be securitized from one or more institutions for w hich the Corporation acts as a receiver or conservator or purchases loans ow ned by the Corporation. The loans in each trust are pooled and stratified and the result ing cash flow is directed into a num ber of different classes of pass-through certificates. T he regular pass through certificates are sold to the public through licensed brokerage houses. R T C and its receiverships and conservatorships retain residual pass-through certificates w hich are entitled to any rem aining cash flows from the trust after obligations to regular pass-through holders have been met. To increase the likelihood of full and tim ely distributions of interest and principal to the holders of the reg ular pass-through certificates, and thus the marketability of such certificates, a portion of the proceeds from the sale of the certificates is placed in credit enhancem ent reserve funds (reserve funds) to cover future cred it losses w ith respect to the loans underlying the certificates. The reserve funds' structure limits the receiver ships', conservatorships' or C o rp oratio n 's exposure from credit losses on loans sold th ro u g h the R T C securitization program to the balance of the reserve funds. T he initial balances of the reserve funds are deter m ined by independent rating agencies and are subsequently reduced for claims paid. T hrough Decem ber 1993, the am o unt of claims paid is 1% of the initial reserve balances. A t D ecem ber 31, 1993, and 1992, reserve funds related to the R T C securitization program totalled $6.6 b illion and $6.2 b illion, respectively. R T C m anagem ent expects to recover a substantial portion of the reserve funds over time. The RT C estimates C o rp o ra te losses related to the receiverships' reserve funds as part of the RTC's allow ances for losses. A dditionally, the R T C estimates C orporate losses related to conservatorships' reserve funds as part of the RTC's "Estimated cost of unresolved cases." As of D ecem ber 31, 1993, the R T C included $1.5 billion, net of realized losses, in these provisions to cover estimated losses on the reserve funds ($1.3 m illion as of December 31, 1992). As of D ecem ber 31, 1993, the provisions were offset by $844 m illion of securitization residual values ($755 m illion as o f D ecem ber 3 1, 1992). R e p r e s e n t a t i o n s a n d W a r r a n t i e s : T he R T C provides certain representations and warranties on loans sold through the securitization program. Funds have been placed in escrow by the receiverships and conservatorships participating in the securitiza tion transactions to honor obligations that may arise from the representations and warranties. The Corporation has also established a liability for the estimate of representation and warranty claims associated w ith the secu ritization transactions that involved corporate purchased assets. A P P E N D IX II T he RT C has provided guarantees, representations and warranties on approximately $52 billion in unpaid principal of loans sold for cash or exchanged for mortgage-backed securities. T he RT C also has provided guarantees, representations and warranties on approximately $143 b illion of loans under servicing rights c o n tracts w hich have been sold. T he representations and warranties made in connection w ith the sale of ser vicing rights are lim ited to the responsibilities of acting as a servicer of loans. W h ere there are corporate guarantees, institutions have established escrow fund accounts containing a portion of the sales proceeds to h o n or any obligations that m igh t arise from the guarantees, representations and warranties. T he R T C estimates Corporate losses related to the receiverships' representation and warranty claims as part of the RTC's allowances for losses. Additionally, the R T C estimates Corporate losses related to the conser vatorships' representation and warranty claims as part of the RTC's "Estimated cost of unresolved cases." As of D ecem ber 3 1, 1993, the RT C included $ 1.2 billion in these provisions to cover the estimated costs of rep resentation and warranty claims ($1.5 billion as of D ecem ber 31 ,199 2). L e t t e r s o f C r e d i t : T he R T C has adopted special policies for outstanding R T C conservatorship and receivership collateralized letters of credit. These policies enable the R T C to m in im ize the im pact of its actions on capital markets. In most cases, these letters of credit are used to guarantee tax exempt bonds issued by state and local housing authorities or other public agencies to finance housing projects for low and moderate incom e individuals or families. As of D ecem ber 31, 1993, the R T C has issued a co m m itm e nt to ho n o r approximately $2.4 b illion o f these letters o f credit. T he total am o unt that will ultim ately be paid, the fair value of such letters of cred it, and the losses resulting from these letters of credit are not reasonably estimable at D ecem ber 31, 1993. A f f o r d a b l e H o u s in g P r o g r a m : As part of its Affordable H o usin g Program, R T C m anagem ent has com m itted to expend up to $6 m illion to pay reasonable and customary co m m itm e n t fees to various state and local housing authorities w h o will, in turn, assist in providing financing to low and moderate incom e families. U nd e r this program, the RT C works w ith state and local housing finance agencies to secure com m itm ents of Mortgage Revenue Bond and Mortgage C red it Certificate funds w hich will be lent to qualifying families to enable them to purchase properties from the RT C . A t D ecem ber 31,199 3, $2.1 m illio n remains unexpended. N o substantial recoveries are anticipat ed from the program. R e n t a l E x p e n s e : T he R T C is currently leasing office space at several locations to accom m odate its staff. As of D ecem ber 31, 1993, these offices include: (1) the W ashin gton , D C . Headquarters offices, (2) the six megasite offices, and (3) four satellite offices located thro ug ho ut the country. A ddition al satellite offices have been closed, but the R T C remains obligated for the remainder of their lease terms pe nd ing negotiations for lease buyouts or sub leases. These obligations total $0.9 m illion. T he RTC's rental expense for 1993 and 1992 totalled $59.5 m il lion and $44.8 m illion, respectively. The RTC's total contractual obligations under lease agreements for office space are approxim ately $128.9 m illion. These agreements often contain escalation clauses w hich can result in adjustments to rental fees for future years. The m in im u m yearly rental expense for all locations is as fol lows (in thousands): 1994 $38,690 1995 $32,258 VV A i . II AI H Fr n H 1996 $18,329 1997 $6,616 1998 $7,069 F I .V,1 ,V( I A L 1999/Thereafter $25,920 S I' ,1 FEA F,v r s l 83 A P P E N D IX II Lease obligations for 1997 and beyond are exclusively for the RT C headquarters building in W ashington, D C . This lease was entered into by the now defunct FSLIC in 1987. At the date of RTC's termination, w hich undercurrent law shall not be later than D ecem ber 31, 1995, all of the RTC's debts, obligations and assets, including the above lease obligations, shall be transferred to the FSLIC Resolution Fund w hich is managed by the FD IC . 16. Pension Plan and Accrued Annual Leave: T he F D IC eligible employees assigned to the RT C are covered by the Civil Service Retirement System and the Federal Employees Retirem ent System. Em ployer contributions provided by the R T C for all eligible employees for the years ended Decem ber 31, 1993, and 1992, were approximately $16.9 m illion and $16.9 m illion, respectively. A lth ou gh the RT C contributes a portion of pension benefits for eligible employees and makes the necessary payroll w ithholdings from them, the R T C does not account for the assets of either of these retirement funds and does not have actuarial data w ith respect to accumulated plan benefits or the unfunded liability relative to its eligible employees. These am ounts are reported by the U .S. O ffice of Personnel M anagem ent (O P M ) and are not allocated to the individual employers. O P M also accounts for Federal health and life insurance programs for those R T C retired eligible employees w h o had selected Federal governm ent sponsored plans. T he RTC's liability to employees for accrued annual leave was approximately $20.2 m illion at D ecem ber 31, 1993, and $20.0 m illion at D ecem ber 31 ,1992. 17. Health, Dental and Life Insurance Plans for Retirees: T he RTC, through its association w ith the F D IC , provides certain health, dental and life insurance coverage for its eligible retirees, the retirees' beneficiaries and covered dependents. Eligible retirees are those w ho have elected the FDIC's health and/or life insurance programs and are entitled to an im mediate annuity (dental coverage is autom atic at retirement). The health insurance coverage is a comprehensive fee-for-service pro gram, w ith hospital coverage and a m ajor medical wraparound. Corporate contributions for retirees are the same as those for active employees. Premiums are paid to the F D IC , where they are held until plan fixed costs and expenses are paid. The life insurance program provides for basic coverage at no cost and allows converting optional coverages to direct-pay plans. The cost of pro viding this benefit is not separable from the cost of providing benefits for active employees, as the charge for retirees is built into rates for active employees. The RT C adopted Financial Accounting Standard N o. 106 (FAS 106), Employer's Accounting for Postretirement Benefits O th e r than Pensions, as of January 1, 1992. FAS 106 requires the accrual m ethod of accounting for postretirement health and life insurance costs. These costs are generally recognized over the period from the date of hire to the full eligibility date of employees w h o are expected to qualify for such benefits. T he R T C elected to recognize im m ediately the accumulated postretirement benefit liability of $18.1 m illion as of January 1, 1992. T he accum ulated liability, know n as the transition obligation, represents that portion of future retiree benefit costs related to service rendered by both active and retired employees prior to the date of adoption. The R T C recorded charges of $ 13.8 m illion and $1 1.0 m illion for the current periodic cost, for 1993 and 1992, respectively. All am ounts have been reflected in the "Administrative operating and other expenses'' line of the Statements of Revenues, Expenses and A ccum ulated Deficit. 84 f i .v t n ' i \ i s I \ i r M I N I '• k I- ' ‘ > I II I I n x T K U s I ( () It r () it a I I a I V A P P E N D IX II T he net p e rio dic postretirem ent benefit cost for 1993 and 1992 in c lud e d the fo llo w in g c o m po n en ts (in millions): 1993 $ 8.5 4.4 ____.9 Net periodic postretirement benefit cost $ 6.8 4.2 ____ - $13.8 Service cost, benefits attributed to employee service during the year Interest cost on accumulated postretirement benefit obligations Net amortization and deferral 1992 $11.0 T he RT C, as a governm ent corporation scheduled under current law to terminate on or before Decem ber 3 I, 1995, decided, in conjunction w ith the FD1C, that the liability for postretirement benefits for eligible employees assigned to the R T C will be recorded on the books of the F D IC . T he RT C pays the F D IC an am ount equal to the RTC's obligation. In return, the F D IC agrees to pay the costs associated w ith postre tirement benefits due to eligible employees assigned to the R T C upon their retirement. D urin g 1993, the RT C paid the F D IC an am ount equal to the RTC's transition o bligation plus the RTC's 1992 net periodic postretirement cost and the estimated 1993 net periodic postretirement cost. As of Decem ber 31, 1993, the R T C has included as a current liability on its Statement of Financial Position an am ount equal to $5.2 m il lion for a revised 1993 net periodic postretirement cost w hich the R T C expects to pay to the F D IC in 1994. T he discount rate used in the calculation of the postretirement benefit obligation was 6.0% in 1993. The assumed m edical inflation trend in 1993 was 14.0%, decreasing to an ultim ate rate o f 8.0% in 1998 and rem aining at that level thereafter. T he dental cost trend rate in 1993 and thereafter was 8.0% . Both the assumed discount rate and health care cost trend rates have a significant effect on the am ount of the o b lig ation and periodic cost reported. If the health care cost trend rate was increased one percent, the accumulated postretirement benefit obliga tion for he alth care benefits as of D ece m b e r 31, 1993, w o uld have increased $17.8 m illio n , or 27.3% . A dditionally, a one percent increase w ould have increased the aggregate service and interest costs of the 1993 net periodic postretirement health care benefit cost by $3.7 m illion, or 31.7%. 18. Concentration of Credit Risk: T he R T C has receivables from conservatorships and receiverships located th ro ug ho ut the U n ite d States w h ich are experiencing problems w ith both loans and real estate. T heir ability to make repayments to the R T C is largely influenced by the econom y of the area in w hich they are located. T he gross balance of these receivables at D ecem ber 31,1993, is $ 105.1 billion (against w hich $76.6 b illion of reserves and contra assets have been recorded). O f this total, $27.4 billion is attributable to institutions located in Texas, $17.5 billion is attributable to institutions located in California, $7.6 billion is attributable to institutions located in Florida and $6.5 billio n is attributable to institutions located in Arizona. F I ,V A X I I .A L S T < T i: VI E iV I > \ 85 A P P E N D IX 1 1 1 RESOLUTION M A N A G E M E N T S A S S E S S M E N T O F IN T E R N A L C O N T R O L S TRUST C O R P O R A T I O N Resolving The Crisis Restoring The Confidence Chief Financial Officer 1993 M anagem ent Report on Internal Controls Corporate Internal C ontrol O bjective The Resolution Trust C orporation (RT C ) maintains an internal control system w hich is designed to pro vide reasonable assurance that assets are safeguarded against loss from unauthorized acquisition, use or dis position,- transactions are executed in accordance w ith m anagem ents authority and w ith laws and regulations,- and transactions are properly recorded, processed, and summ arized in accordance w ith gener ally accepted accounting principles and to m aintain accountability for assets. The internal control system includes a docum ented organizational structure, division of responsibility, and established policies and pro cedures. T he corporate policy sets a positive tone for the organization and is intended to influence the control consciousness of R T C personnel. T he Thrift D epositor Protection O versight Board (T D P O B ) has issued a policy statement on internal c o n trols dated July 25, 1991. T he objectives o f the policy statements are to encourage the R T C to establish and adhere to internal control standards, including evaluation and reporting standards, that are no less stringent than those required of certain agencies pursuant to the Federal Managers' Financial Integrity Act of 1982 (FMFIA) and to encourage the R T C to vest in its C h ie f Financial Officer powers substantially sim i lar to those provided in the C h ie f Financial Officers A ct of 1990. Internal C o n tro l Program Activity In 1993, the R T C significantly enhanced its internal control system. In M arch, Treasury Secretary Bentsen, as C hairm an of the T D P O B , announced the R T C m anagem ent reform agenda, w hich included require ments that R T C strengthen its internal controls and im plem ent a new audit follow-up system. In response, the R T C reinforced its co m m itm e n t to prom ote and encourage internal control program activity and took several m ajor steps to measurably im prove internal controls throughout the Corporation. D u rin g the year a new audit follow-up program was established, w hich required the Corporation to respond prom ptly and thoroughly to all recom m endations contained in reports issued by both internal and external auditors. The follow-up program includes procedures for tracking audit findings and recom m enda tions by the General A ccounting O ffice ( G A O ), the RTC's O ffice of Inspector General ( O IG ) , and other audit and review organizations. The C o rporatio n im proved the internal control program by enhancing the coordination am o n g the internal review activities at the six asset m anagem ent and sales field offices, the quality assurance activities at the four field financial service centers, and the headquarters m anagem ent control activities. A dditional resources were allocated to the field Internal Review Units, and their respon sibilities were expanded to include a proactive program of evaluating internal controls. Also, the field Q u a lity Assurance U nits began reporting directly to the Vice Presidents of the Financial Service Centers during 1993. T he R T C trained more than 1,000 managers and senior personnel in the concepts of RTC's internal control program, a comprehensive internal control review initiative and the new audit follow-up procedures. N ational conferences were held for b oth the field Internal Review and Q u a lity Assurance personnel. 801 17th Street, NW, Washington, DC 20434-0001 86 F I S A ,V I I A L S i A I' E Al F V T < Tel. (202) 416-7221 R f S (l L U T I < iV > T Fax (202) 416-7226 :i s r ( A P P E N D IX III D urin g the year, the Corporation continued to aggressively pursue its internal control and review program. T he inventory o f corporate units for w hich individual control and com pliance assessments can be made was revised to reflect organizational changes,- vulnerability assessments were conducted, and scheduled internal control and program com pliance reviews were completed. N ew autom ated systems designed to track o ng o in g audits and follow-up on audit recommendations were made available to headquarters and field managem ent. T he M anagem ent Reporting System (M R S ), w hich m onitors audit findings and recom m endations along w ith corrective actions taken by the RTC, became fully operational in m id-1993. The A udit M anagem ent Tracking System (A M T S ), w hich tracks the progress of o ng o in g audits, was installed at headquarters, the financial service centers and the asset m a n agem ent and sales field offices during the year. Field personnel were trained in the use of both M R S and AM TS. Internal C o n tro l and O perations Reviews In 1993, R T C program managers com pleted 65 internal control and program com pliance reviews covering all m ajor programs and financial m anagem ent systems. T he reviews m onitored com pliance w ith corporate policies and the adequacy o f internal control objectives and techniques. Also during 1993, the G A O issued a total of 24 reports resulting from its audits and reviews of R T C operations and financial statements, and the RTC's O I G issued a total of 71 reports on its audits and reviews. In its Sem iannual Report to the Congress, dated September 30, 1993, the O I G com m ented favorably on the RTC's initiatives to improve audit follow-up and internal control training, and to im plem ent the M RS. T he O I G also com pleted a review of the RTC's internal control program and concluded that the RT C has adhered to the internal control policy statement issued by the T D P O B and that its internal control system meets the requirements of the FMFIA. T he R T C has im proved its internal control program by incorporating the results o f audits and reviews, thereby allow ing the RT C to take advantage o f the benefits derived from the audit process. M anagem ent's Assertion D u rin g the year, m anagem ent evaluated the Corporation's internal control system of safeguarding assets against loss from unauthorized acquisition, use or disposition,- assuring the execution of transactions in accordance w ith management's authority and w ith laws and regulations, and properly recording, process ing, and sum m arizing transactions in accordance w ith generally accepted accounting principles and m a in tain in g accountability for assets using the control criteria described in FM FIA and other selective laws, federal directives and applicable policy statements of the T D P O B . Based on that evaluation, m anagem ent believes that the Corporation's internal control system m et those criteria as of D ecem ber 31, 1993. There are, however, inherent lim itations in the effectiveness of any internal control system, including the possibility of hum an error and the circum vention or overriding of controls. Accordingly, even the most effective internal control system can provide o nly reasonable assurance w ith respect to safeguarding of assets against unauthorized acquisition, use or disposition, com pliance w ith laws and regulations, and financial statement preparation. Furthermore, the effectiveness o f an internal control system can change w ith circumstances. N o tw ith s ta n d in g the Corporation's evaluation of its internal control system, it should be noted that through the reviews undertaken during 1993, certain h ig h risk areas were identified and operating control 4 .v \ ti a I A! / II P r F i ,v .1 ,v < i a i. S r ,i r f a i f ,v r .> • 87 A P P E N D IX III weaknesses disclosed. However, managem ent does not consider the weaknesses disclosed to be material in relation to the financial statements or the purpose for w hich the Corporation's overall system was designed. T hrough D ecem ber 3 1, 1993, the weaknesses, along w ith the status of corrective actions taken or pro posed, were disclosed in the Corporation's 1993 Internal C o n tro l Report to the T D P O B dated M arch 31, 1994. Subsequent to D ecem ber 3 1, 1993, the follow ing additional weaknesses, w hich were also considered not to be material, were discovered: • the general controls over some of the Corporation's com puterized inform ation systems did not provide adequate assurance that data files and com puter programs were fully protected from unau thorized access and m odification, • the Corporation's field offices did not always post wire receipts to the correct general ledger accounts, and • the C orporations field offices did not always use correct amounts from the detailed asset records when reconciling the receiverships' asset balances to those records. T he C orporation is currently im plem enting corrective actions necessary to address these weaknesses. APPENDIX I V C O R P O R A T I O N 'S PROGRESS ON IM P L E M E N T IN G GAP RECOM M ENDATIONS C O N C E R N IN G 1992 I N T E R N A L C O N TR O L WEAKNESSES D u r i n g 1993 , t h e C o r p o r a t i o n im p le m e n te d p r o c e d u r e s t o a d d re s s t h e 1 9 92 m a t e r i a l i n t e r n a l c o n t r o l w e a k n e s s r e l a t e d t o l a c k o f c o n t r o l p r o c e d u r e s w h ic h r e s u l t e d i n an u n d e t e c t e d e r r o r i n a co m p o n e n t o f th e C o r p o r a t io n 's lo s s a llo w a n c e c a l c u l a t i o n f o r s u b ro g a te d c la im s . S p e c i f i c a l l y , th e s e p ro ce d u re s r e q u ir e t h a t th e d a ta used to c a l c u l a t e th e s y s te m -g e n e ra te d p e rfo rm in g / rio n p e rfo rm in g a s s e t s p l i t s be v a l i d a t e d b y c o m p a ris o n w i t h s i m i l a r d a t a fro m an in d e p e n d e n t s o u rc e . A dherence to th e s e p ro c e d u re s s h o u ld e n s u re t h a t e r r o r s i n t h e p e rf o rm in g / n o n p e r fo rm in g a s s e t s p l i t s w i l l be d e t e c t e d i n a t i m e l y m anner. T h e C o r p o r a t i o n a l s o t o o k a c t i o n s d u r i n g 1 9 93 t o a d d r e s s e a c h o f t h e f o l l o w i n g r e p o r t a b l e c o n d i t i o n s i d e n t i f i e d i n o u r 1992 r e p o r t s . -- A t Decem ber 3 1 , 1992, th e C o r p o r a t io n used in f o r m a t io n fro m th e w ro n g d a ta base syste m t o c a l c u l a t e i t s lo s s a c c r u a l f o r c la im s a r i s i n g fro m r e p r e s e n t a t i o n s and w a r r a n t i e s t h a t a r e o f f e r e d w i t h th e s a le o f lo a n s and s e r v i c i n g r i g h t s . D u rin g 1993, th e C o r p o r a t io n d e v e lo p e d fo rm a l p ro c e d u re s f o r e s t im a t in g i t s lo s s a c c r u a l i n w h ic h th e W a r ra n tie s and R e p re s e n ta tio n s A c c o u n ts P r o c e s s in g System i s th e s t a r t i n g p o i n t . A d d it io n a lly , the C o r p o r a t i o n d e v e lo p e d and im p le m e n te d s e v e r a l m a jo r en h a n c e m e n ts t o t h e s y s te m w h i c h , co m b in e d w i t h t h e f o r m a l p r o c e d u r e s , h e l p e n s u re th e i n t e g r i t y o f th e d a ta used to e s tim a te th e lo s s a c c ru a l. As a r e s u l t o f t h e a c t i o n s im p le m e n te d d u r i n g 1 9 93 , o u r t e s t s fo u nd t h a t th e Decem ber 31 , 1993, e s tim a te d lo s s a c c r u a l was r e a s o n a b l e . -- Th e C o r p o r a t io n 's c o n t r a c t o r e s tim a te d r e c o v e r y v a lu e s f o r r e c e i v e r s h i p a s s e t s i n 1992 w i t h o u t a d e q u a t e s u p p o r t i n g f i l e d o c u m e n ta tio n . D u r in g 1993, th e C o r p o r a t io n enhanced th e t r a i n i n g and o v e r s ig h t o f th e c o n t r a c t o r h i r e d t o e s t im a t e a s s e t re c o v e rie s . A s a r e s u l t o f t h e s e e f f o r t s , we f o u n d a n i m p r o v e d a u d i t t r a i l and m ore c o n s i s t e n t p r o c e d u r e s i n p l a c e t o e s t i m a t e re c o v e rie s fo r assets. S p e c i f i c a l l y , we f o u n d t h a t t h e c o n t r a c t o r b ased t h e e s t im a t e s on t h e C o r p o r a t i o n 's h i s t o r i c a l s a l e s e x p e r i e n c e a n d o t h e r i n f o r m a t i o n , a n d we f o u n d t h e e s t im a t e s t o be d o cu m en te d a d e q u a t e l y . -- D u r in g 1992, th e C o r p o r a t io n 's c o n t r a c t o r d id n o t c o n s id e r a l l r e le v a n t f i l e d o c u m e n ta tio n o r in f o r m a t io n i n e s t im a t in g r e c e i v e r s h i p a s s e t r e c o v e r i e s o r made e r r o r s i n r e c o r d i n g v a lu a tio n in fo rm a tio n . D u r i n g 1 9 9 3 , we f o u n d t h e e r r o r s w e r e \\m ; RI r■ i i F I s .) x i I a / Si rf i I X I > . 89 APPENDIX I V r e d u c e d t o an a c c e p t a b l e l e v e l s u c h t h i s t o be a r e p o r t a b l e c o n d i t i o n . t h a t we n o l o n g e r c o n s i d e r -- N i n e o f t h e C o r p o r a t i o n ' s 13 f i e l d o f f i c e s d i d n o t p e r f o r m t h e r e q u ir e d r e c o n c i l i a t i o n o f ch ecks r e c e iv e d and p ro c e s s e d d u r i n g 1992. Th e C o r p o r a t io n u p d a te d th e F i e l d A c c o u n tin g M anual d u r i n g 19 93 a n d p r o v i d e d a s t a n d a r d f o r m a t t o e n s u r e t h e u n i f o r m p re p a ra tio n o f d a ily r e c o n c ilia t io n s of cash re c e iv e d . A t th e e n d o f 1 9 9 3 , we f o u n d t h a t a l l f i e l d o f f i c e s p e r f o r m e d t h e r e q u ir e d r e c o n c i l i a t i o n o f checks r e c e iv e d and p ro c e s s e d . -- I n 1992, th e C o r p o r a t io n 's f i e l d o f f i c e s d id n o t p o s t w ir e d is b u rs e m e n ts t o th e c o r r e c t g e n e ra l le d g e r a c c o u n t s . D u rin g 1993 , t h e C o r p o r a t i o n c o m p le te d t r a i n i n g i n i t i a t i v e s t o im p ro v e th e a c c u r a c y o f p o s t in g w ir e d is b u rs e m e n ts i n th e f i e l d o f f i c e s . T h e r e s u l t s o f o u r 1993 t e s t i n g s h o w e d a n i m p r o v e m e n t i n t h e e r r o r r a t e o f p o s t i n g w i r e d i s b u r s e m e n t s s u c h t h a t we n o l o n g e r c o n s i d e r t h i s t o be a r e p o r t a b l e c o n d i t i o n . H o w e v e r , i n 1 9 9 3 we fo u n d a h ig h p o s t in g e r r o r r a t e r e l a t e d t o w ir e r e c e i p t s , w h ic h we r e p o r t e d . — Th e C o r p o r a t io n d id n o t i d e n t i f y th e m a t e r ia l weakness o r th e f i v e r e p o r t a b l e c o n d i t i o n s d e s c r i b e d a b o v e i n i t s 1992 s t a t e m e n t on th e e f f e c t iv e n e s s o f i t s i n t e r n a l a c c o u n tin g and a d m in is tra tiv e c o n tro ls . D u r i n g 1 9 9 3 , we f o u n d n o m a t e r i a l w e a k n e s s e s and t h e C o r p o r a t i o n t o o k im m e d ia te a c t i o n s t o a d d re s s t h e r e p o r t a b l e c o n d i t i o n s we i d e n t i f i e d . In a d d it io n , th e C o r p o r a t i o n m o d i f i e d i t s own i n t e r n a l r e v i e w p r o c e d u r e s t o in c lu d e th ese a re a s . -- D u r i n g t h e f i r s t 8 m onths o f 19 92, t h e C o r p o r a t i o n p r o c e s s e d i t s f i n a n c i a l i n f o r m a t i o n on t h e F e d e r a l D e p o s i t I n s u r a n c e C o r p o r a t io n 's ( F D I C ) g e n e ra l le d g e r s ys te m . F D IC had in a d e q u a te c o n t r o ls o v e r access to i t s e le c t r o n ic d a ta p ro c e s s in g c e n te r and syste m s s o f t w a r e . I n S e p tem be r 1992, th e C o r p o r a t io n i m p l e m e n t e d i t s own g e n e r a l l e d g e r s y s t e m a t a s e p a r a t e d a t a c e n t e r and no l o n g e r p r o c e s s e s i t s f i n a n c i a l i n f o r m a t i o n a t t h e F D IC d a ta c e n t e r . 90 F I X A X I I A I S I A I f Al I X T s k i s o i ii t i n x T r u s t ( <> r i> m r a r i C O M M E N T S F R O M T H E R E S O L U T IO N T R U S T C O R P O R A T IO N RESOLUTION A P P E N D IX V TRUST C O R P O R A T I O N Resolving The Crisis Restoring The Confidence Chief Financial Officer June 20, 1994 T he FHonorable Charles A. Bowsher C o m ptroller General of the U nited States U nite d States General A ccounting Office W ashington, D G . 20548 Re: Financial A udit— Resolution Trust Corporation 1993 and 1992 Financial Statements D ear Mr. Bowsher: T hank you for the o ppo rtunity to respond to the General A ccounting O ffice ( G A O ) draft audit report of the Resolution Trust Corporation's (RT C ) 1993 and 1992 financial statements. W e appreciate the o ppo rtu nity to review and com m ent on the report in draft form prior to its issuance. It has been a co ntin uin g objective of the R T C to receive from the G A O an unqualified o pin ion on its financial statements. W e are pleased, therefore, that since 1992 the G A O has concluded that RTC's finan cial statements are reliable in all material respects. W e are also pleased to note the G A O 's conclusion that the RT C made significant progress in addressing the internal control weaknesses identified in the 1992 audit. W e concur w ith these findings, and we are appreciative of G A O 's co ntinuing assistance in achieving these results. T he follow ing addresses the significant matters and the reportable conditions identified in the G A O draft audit report for 1993. SIGNIFICANT MATTERS 1. Uncertainties Affect Estimated Recoveries From Receiverships and Costs of Future Resolutions W e concur w ith the G A O 's assessment that changes in various factors such as general econom ic c o n d i tions, interest rates and real estate markets that are b ey ond RTC's control may have some im pact on the ultim ate financial results of the RTC. G iven the econom ic factors that existed at year-end 1993, we believe that the estimated recoveries on assets, and the reserve requirements for future credit losses on securitiza tions and for claims arising from representations and warranties are appropriate. 2. Controls over Contractor Performance Could Affect Recoveries from Receiverships W e concur that a significant issue is the need for co n tin u in g im provem ent in contractor oversight to ensure accurate recoveries from receiverships. As a result, we have established a num ber of major m anage m ent initiatives w hich we anticipate will im prove RTC's contractor oversight program: A. W e have initiated a formal Loan Servicing O versight Program to continually review the ong o ing coordination and supervision o f all loan servicer activities,- B. W e have co m m itte d significant additional staff resources to the O ffice of C ontractor Oversight and Surveillance,- and 801 17th Street, NW, Washington, DC 20434-0001 Tel. (202) 416-7221 Fax (202) 416-7226 A P P E N D IX V C. 3. W e have added internally the necessary resources to support the expanded efforts of RTC's Office of the Inspector General in formally auditing the activities of various RT C contractors. F u nd ing and Current Status of the Corporation As correctly noted in your report, there is, and will continue to be, a significant level o f uncertainty per taining to the actual financial outcom e of the RTC. T he D ecem ber 31, 1993 financial statements reflect loss funding needs of up to $92 b illion w hich is $1 3 b illion less than the loss funds of $105 billion made available to the Corporation. However, it must be remembered that the loss funding of $92 billio n is only an estimate. Changes in eco nom ic conditions, unanticipated additional savings and loan failures, and unforeseen problems im pacting the value of rem aining assets or RT C liabilities are just a few o f the factors that could cause substantial vari ation from current estimates. Therefore, the total am o unt of loss funds used by the RT C will not be know n w ith certainty until the last institution is resolved and the last asset is sold. REPORTABLE CONDITIONS 1. Computerized Information Systems In response to the findings o f the 1993 G A O Financial Statement Audit, the D epartm ent of Inform ation Resources M anagem ent (D IR M ) has made significant progress in effecting the corrective actions required. T he changes have included establishing and im proving access control, inform ation security practices and procedures, change control procedures, and business recovery procedures. By September 30, 1994, D IR M expects to com plete corrective actions necessary to address the deficiencies w hich had been identified. In addition, tw o other efforts involving a lim ited business recovery test w ith no w arning and a standardized system software platform are planned for com pletion in accordance w ith the action plan already submitted to the G A O . These corrective actions are designed to: • • Strengthen and form alize security programs, • Strengthen independent review and testing of system software change controls, • Improve the application change control process, and • 2. Improve controls over access to data and programs, Strengthen the business recovery plan. Posting Wire Receipts W e have taken a num ber of significant steps to reduce the errors referenced to in your report. A com plete ly separate function called the N ational Sales S upport O ffice was formed to support financial integrity in connection w ith national sales initiatives. W e revised the C hart of Accounts and enhanced formal proce dures associated w ith our posting and reconciliation requirements. D u rin g 1994, internal control testing w ill be conducted to ensure that these revised procedures and processes are achieving the intended result of decreasing the referenced posting errors. 3. Reconciliation of Receivership Assets T he organization in recent m onths has also taken significant steps to improve its reconciliation processes w ith its loan servicers to ensure that servicer balances are reported correctly: the RTC's loan servicer over sight program now reviews the m ajor servicer's rem ittance reporting processes for com pliance w ith existing 92 F i A .v i i At S i a r t \i E ,v r s R e s o l u t i o n T r u s t < n r ;■ < u i T I A P P E N D IX V reporting requirements, a formal training program has been developed and im plem ented w hich allows ser vicers to better understand the full range of RTC's reporting requirements,- an autom ation project is under way to improve servicer reporting for those servicers using specialized software, and the RTC has a m o n th ly reconciliation procedure in place to identify and correct servicer balance variances. In the months ahead, we will continue the servicer balance reporting and reconciliation efforts so that in the future exist ing shortcomings will be corrected in a timely manner. W e believe that these efforts will be successful in correcting the internal control weaknesses identified in your report. T he corporate staff will be directed to m onitor the com pletion and progress of the corrective actions. W e look forward to w orking w ith G A O representatives in assessing their success. Sincerely, Av ii \ H : F / ,\‘ N I I A I S I Ar F At F T > 93 STATISTICS STATISTICS RTC Conservatorships J a nu ary 1, State 1993 t h rou g h D ec em b er CALIFORNIA CONNECTICUT 1993 Associations Placed into Conservatorship January 1,1993 - December 31,1993 Associations in Conservatorship December 31,1992 ALABAMA 31, Conservatorship Resolutions January 1,1993 - December 31,1993 P&A 2 3 1 1 1 1 0 1 0 IOWA 1 KANSAS 2 1 LOUISIANA 3 1 2 1 0 1 1 5 1 2 0 0 2 MICHIGAN 10 2 1 MAINE MASSACHUSETTS 8 1 2 MARYLAND 1 6 1 3 ILLINOIS 2 5 1 10 GEORGIA Total 4 10 FLORIDA Payoff Associations in Conservatorship December 31,1993 4 1 1 1 4 1 0 2 0 1 MISSISSIPPI 1 0 NEW HAMPSHIRE 1 0 NEW JERSEY 8 NEW YORK 1 1 1 1 1 0 7 1 NORTH CAROLINA 2 2 2 OHIO 2 1 1 1 OKLAHOMA 1 1 1 0 0 1 4 4 3 0 1 2 2 2 OREGON 1 PENNSYLVANIA 7 RHODE ISLAND 0 SOUTH CAROLINA 4 1 0 TENNESSEE 1 0 1 VIRGINIA 6 0 6 WEST VIRGINIA Total 2 2 81 8 *D oes not include 1 institution resolved under the Accelerated Resolutions Program in 1993. 96 S T A T I V r I 25 2 1 0 26* 63 New RTC Conservatorships JANUARY 1, 1993 T H R O U G H D E C E M B E R 31, 1993 (dollars in thousands) Date of Conservatorship Name of Institution and Location 29-Jan Life FSB, Baton Rouge, LA* 29-Jan Old Stone FSB, Providence, Rl 29-Jan Vista FSA, Canoga Park, CA 16-M ar The Guardian Bank, a FSB, Boca Raton, FL^ 02-Apr The Pioneer FS&LA, Prairie Village, KS 04-Jun Western FSB, Marina Del Rey, CA Gross Assets $ 16,811 Total Liabilities $ 16,535 Total Deposits $ Number of Deposit Accounts 16,470 4,357 1,699,352 232,543 1,924,902 1,821,049 108,573 103,096 94,482 980 65,735 66,255 60,394 4,597 139,385 129,833 127,478 9,030 3 ,894,870 3,6 5 9,63 0 2,6 7 1,80 8 134,097 13-Aug Golden State FSB, Irvine, CA 51,341 4 8,818 46,517 786 24-Sep Westside Bank, a FSB, Los Angeles, CA 82,433 79,004 76,949 2,671 Total 8 Institutions $6,284,050 $5,924,220 $4,793,450 389,061 Note: Data based on TFR data for the quarter prior to date of conservatorship, except as noted. *S eptem ber 1992 TFR data f March 1993 TFR data ■ A i ' \ ■ ' 1* ■ ■ S I I ! s T / i s 97 STATISTICS RTC Resolutions Ja n u a ry 1 1993, t h r o u g h , D ecem ber 31, 1993 (dollars in thousands) Date of Resolution Name of Institution and Location Gross Assets Type Total Liabilities Total Deposits Number of Deposit Accounts Estimated Cost of Resolution Acquiring Institution and Location 845 $ Fam ily SB, FSB , Los Angeles, CA 0 8 ,7 8 0 $ 8 $ 7 5 8,3 5 7 ,3 4 8 0 ,7 7 7 51 ,8 9 0 B ranch Sale 48 6 ,8 8 5 0 51 7 ,3 9 7 751 7,029 None 9 4 ,0 9 5 8 9 ,2 9 5 7 2 ,7 7 2 9 5 ,2 3 6 16 ,586 0 First Hom e FSB , FSB, Pittsburgh, PA 9 7 ,1 0 4 102,291 Roxb orough-M an ayunk FSB , Philadelphia, PA 6,1 3 5 2 ,5 3 4 372 2,203 4 ,1 5 7 Bran ch Sale 12 ,766 105 7 0 ,1 1 2 65 ,7 8 5 5 9 ,7 0 6 8,8 4 9 341 2,2 4 9 Sterling B & T , FSB , Southfield, Ml 10 ,153 10 ,807 3 ,4 2 0 5,081 Prem ier B & T , Elyria, OH 2 4 ,8 0 0 2 3 ,9 4 5 16 ,817 United B an k of Philadelphia, Philadelphia, PA 1,769 8,4 4 6 17 ,306 19 ,280 12 ,565 First C o m m,190 Bank, B irm ingham , AL 5 6 ,0 8 3 4 9 ,7 1 3 5,9 4 9 10 e rcial 5 4 ,6 5 7 7,6 08 28 ,2 1 2 Household Bank, FSB , a FSB , New port Beach, CA 1 1 1,832 1 1 8,863 1 1 8 ,1 5 0 S u m m it Bank, C ha tham , NJ PA 8 8 ,1 4 3 8 7 ,4 8 81 0 ,582 6,2 67 9 2 ,3 1 7 10 0,417 6 2 ,1 5 6 3,8,89 8 Conservative SB, FSB, O m aha, NE 97 ,591 837 2 7 ,0 5 2 Arundel F S B , Baltimore, M D 28 ,5 6 3 5,9 59 2,7 33 2 6 ,9 7 2 27 98 35 ,5 6 5 Bran ch Sale PA/PO 3 2 3 ,6 6 ,9 5 6 3 2 4 7 ,9 6 0 1 ,8 6 3 6 8 ,9 3 4 6 8 ,5 9 0 15 ,288 3,3 6 9 First Citizens B & TC , Raleigh, N C 6 3 ,8 2 6 8 1 ,9 6 7 39 ,9 9 6 Bran ch Sale 4 2 7 ,1 1 0 4 4 2 ,8 8 0 4 3 5 ,7 9 1 4 1 ,1 5 0 6,961 2,1 1 8 C o m m u n ity First N B, Pleasanton, CA 4 3 ,7 8 0 4 2 ,8 5 0 2 4 3,951 72 ,8 6 4 Bran ch Sale 8 7 1 ,7 7 7 8 2 9 ,6 4 3 8 0 7 ,1 2 4 16 ,562 1 6 ,927 2,2 6 9 2,5 7 0 Th e M erchants N B of Montgom ery, M ontgom ery, W V 15,081 1,314 6,2 3 0 2 3 ,9 4 3 25 ,901 16 ,5 6 4 So uth Tru st B ank of Charleston, NA, Charleston, SC PA 167,961 16 4 ,9 9 0 2 8 ,2 7 5 9,4 82 Th e N B of South Carolina, C olu m b ia, SC 16 3,194 2 8 ,8 0 4 1,294 14 ,730 S outhBank, a FSB , Palm Beach G a rdens, FL 51 ,1 0 2 53 ,4 7 7 52 ,1 3 6 6 0 ,1 8 4 C entura Bank, Rocky M ount, N C 34 4 ,0 8 9 3 9 4 ,3 6 0 3 9 1 ,7 9 3 PA 4 4 ,4 4 0 4 3 ,5 3 3 9,7 6 5 5,287 Blue Ridge Bank, M artinsburg, W V 4 1 ,8 4 5 6 4 ,1 9 5 10 ,586 7,083 B ranch Sale 8 2 ,3 4 7 8 0 ,0 5 9 PA/PO 4 ,9 9 0 ,2 8 5 4 ,7 2 4 ,4 9 0 4 4 0 ,8 7 6 1 ,2 88,87 3 B ranch Sale 4 ,3 1 3 ,8 7 7 0 5 -M a r 2 1 -M a y 0 4 -Ju n 3 0 -Ju n 0 9 -Ju l 2 3 -Ju l 2 3 -Ju l 3 0 -Ju l 3 0 -Ju l 0 6 -A u g 0 6 -A u g 0 6 -A u g 1 3 -A u g 2 0 -A u g 2 7 -A u g 2 7 -A u g 2 7 -A u g 1 0 -S e p 1 7 -S e p 1 7 -S e p 2 4 -S e p 2 4 -S e p 0 8 -0 c t 0 8 -0 c t 1 5 -0 c t 0 5 -N o v 0 3 -D e c PA Enterprise S& LA , Com pton, CA PA C im arron FSA, M uskogee, OK PO Vista FSA, Canoga Park, CA PA First Hom e FSA, Pittsburgh, PA PA A lp ha Indian Rock FS& LA, Philadelphia, PA PA First FS& LA of Russell Co, FA, Phenix City, A L First N ew p ort FSB, N ew p ort Beach, C A PA PA Crestline FS& LA , Crestline, OH PA Ch a se FS& LA, Philadelphia, PA PA B irm ingh am FSB , B irm in gh a m , A L San Clem ente FSB , San C lem ente, CA PA M arine V iew FSB , M iddletow n, NJ Th e Overland Park FS& LA , O verland Park, PA KS PA Irvington FSB, Glen Burnie, M D First FS& LA, Pontiac, Ml PA Surety FS& LA , M organton, N C PA H om e U nity FS& LA , Lafayette Hill, PA PA A m a d o r Valley S& LA , Pleasanton, C A * PA/PO Hom estead FSA, San Francisco, CA PA Evergreen FS& LA , Charle ston , WV PA First South FS B , C o lu m b ia , S C Stan dard FS& LA , C olu m b ia, SC PA P alm Beach FSA, Palm Beach G ardens, FL PA First A m e rican F S B , Greensboro, NC Shena ndoah FSA, M artinsburg, WV PA First FSB of GA, FA, W inder, GA H om eFed Bank, FA, San Diego, CA $ Total 27 Institutions $7,997,940 $8,679,449 $8,182,714 1,065,319 $1,629,744 Notes: 1) Data based on T F R data for the quarter prior to the date of resolution. 2 ) PO — Deposit Payoff; PA— Purchase & Assum ption 3 ) “ Estim ated C o st of Resolution" as of date of resolution. 4 ) For all 1993 activity, the R TC resolved institutions using fund s from funding bills prior to the Com pletion Act. Th e $ 4 billion that the R TC received in Jan uary 1994 p u rs uan t to the Com pletion Act will be used for 19 94 resolutions. *lnstitution w a s resolved un der the Accelerated Resolutions Program (A R P ). There w a s 1 AR P resolution in 1993. 98 s / / ( w I ( s R f \ n i a t I < \ > T k il s r ( n k I' ( ) k A r ; n .* RTC Resolved Conservatorships A u g u s t 9, 1989 t o D ecem ber 31, 1993 (dollars in thousands) Number of Accounts Number Assets Liabilities 262 $114 ,3 2 2,6 27 $120 ,7 8 8,2 39 $ 9 1,721,957 8 ,787,092 Added in 1989 56 25,8 72 ,9 2 8 25,7 74 ,1 1 5 1 9,774,644 2 ,230,425 Resolved in 1989 37 13,730,737 1 4,459,356 11,308,281 1,159,387 281 $ 12 6 ,4 6 4,8 18 $ 1 3 2 ,1 0 2,9 98 $ 100 ,1 8 8,3 20 9 ,858,130 Added in 1990 207 1 29,778,490 1 28,889,934 9 4,8 26 ,4 2 4 9,218,763 Resolved in 1990 309 134,521,901 1 38,580,070 105,329,383 11,168,506 In Conservatorship as of 8 /9 /8 9 In Conservatorship as of 1 2/3 1 /8 9 Deposits In Conservatorship as of 1 2 /3 1 /9 0 179 $12 1 ,7 2 1,4 07 $122 ,4 1 2,8 62 $ 8 9,685,361 7,908,387 Added in 1991 123 71,0 89 ,3 5 8 70,2 56 ,4 7 4 55,9 92 ,8 3 5 4,9 7 9,96 3 Resolved in 1991 211 122,399,634 1 23,758,665 9 3,8 98 ,2 4 7 8,3 3 7,01 5 In Conservatorship as of 1 2/3 1/91 91 $ 70,411,131 $ 68,910,671 $ 5 1,779,949 4,5 5 1,33 5 Added in 1992 50 3 5,9 12 ,4 5 6 34,7 37 ,8 5 7 2 5,2 57 ,1 1 0 2,9 9 6,54 5 Resolved in 1992 60 3 4,452,261 3 3,8 63 ,2 7 5 26,7 71 ,4 3 8 2 ,559,752 In Conservatorship as of 1 2 /3 1 /9 2 81 $ 71,8 71 ,3 2 6 $ 69,7 85 ,2 5 3 $ 50,265,621 4 ,9 8 8,12 8 8 6,2 8 4,05 0 5,9 2 4,22 0 4 ,7 9 3,45 0 389,061 Resolved in 1993 26 19,485,058 18,828,229 14,253,104 1,599,988 In Conservatorship as of 1 2 /3 1 /9 3 63 $ 58,670,318 $ 56,881,244 $ 40,805,967 3,777,201 6 $ 4,0 00 ,2 0 7 $4,4 21 ,6 6 9 $ 3,7 24 ,2 9 6 560,411 21 $ 8 ,8 28 ,5 5 9 $ 8 ,5 71 ,5 6 4 $ 7,3 94 ,1 9 8 1,053,701 9 $ 9 ,7 27 ,7 9 8 $ 9,7 07 ,8 5 2 $ 8,5 11 ,0 2 9 993,251 1 $ $ $ Added in 1993 Institutions never placed in conservatorship prior to resolution in 1990 Institutions resolved under the Accelerated Resolutions Program in 1991 Institutions resolved under the Accelerated Resolutions Program in 1992 Institutions resolved under the Accelerated Resolutions Program in 1993 4 2,8 50 4 3,7 80 4 1,150 6,961 Note: Data a t quarter prior to date of conservatorship (date of resolution for non-conservatorship resolutions). V V , !• f I,: 7 s r i i s i i i s 99 I N DEX A Accelerated Resolutions Program 20, 26, 27, 28-29, 98, 99 Contracts, Oversight, and Evaluation, Department of 15-17 Accounting Scrviccs, Office of 46 Corporate Affairs, Department of 8, 9-10 Administration and Corporate Relations, Division of 13-18, 47 Corporate Communications, Office of 18 Corporate Information, Office of 14, 30, 31-32 Administration, Department of 14-15 Corporate Issues, Office of 9 Administrative Evaluation Staff 16-17 E Equal Employment O pportunity and Affirmative Action, Department of 34, 35 Administrative Services, Office of 14 Affordable Housing, Department of 38, 41-42 Ethics, Office of 9, 17-18 Executive Committee 6, 17, 51 Affordable Housing Disposition Program 40, 41, 42, 43, 83 F Federal Deposit Insurance Corporation 2, 4, 6, 10, 11, 14, 15, 30, 50, 61, 72, 73, 84, 85, 90 Altman, Roger C. 6 Asset Disposition, Department of 8 Asset Management and Sales, Division of 37-44 Legal Services, Division of 7-11, 25, 35, 73 Litigation, Department of 8, 10-11 Litigation, Office of 10-11 M M ajor Resolutions, Office of 26-28 Management Control, Office of 16, 46, 47-48 M ino rity Participation 2, 29, 34 Minority- and Women-Owned Business, Department of 34 Savings Association Insurance Fund (SA IF ) 6, 61, 73 M inority and Women's Programs, Division of 2, 9, 33-36 Securities and Finance, Office of 8 N Securitization, Office of 40, 43 Seller Financing 38, 42 O Office of Thrift Supervision 4, 6, 26, 28, 29, 59, 72, 78, 81 Settlement Workout, Office of 38 Field Activities, Office of 39 Operations, Office of 20-25 Budget and Planning, Office of 46-47 Field Resolutions, Office of 28-29 C Financial Institutions Reform, Recovery, and Enforcement Act of 1989 1, 4, 17, 36, 60, 72, 78, 81 Organization and Resource Management, Office of 14-15 Chief Financial Officer, Division of the 45-48 G Complex Litigation, O ffice of 1 1 Governmental Relations, Office of 17 Conservatorships, Receiverships, and Resolutions, O ffice of 8-9 Contract Operations, O ffice of 9, 15-16 Contract Po licy and M ajor Dispute Resolution, Office of I 5 Contracting, O ffice of 9 Contractor Oversight and Surveillance, O ffice of 16, 91 1o o Securities Transactions, Office of 39-40 National Sales Center 4 1 ,4 3 Field Activities, Department of 38-39 Conservatorships and Receiverships, Department of 8-9 Secretary, Office of the 17 National Marketing, Office of 40-41, 43 Bentsen, Lloyd C. 6, 14, 15, 34, 46, 86 8, I 5, 25, 26, 59, 73, 83, 85, Ryan, John E. 1, 2 S S A M D A Program Management, Office of 38 Management Report on Internal Controls 86-88 Operations, Department of 20-26 Conservatorships 2, 4, 20, 21, 22, 23, 24, 27, 28, 34, 40, 56, 74, 75, 77, 81, 82, 96, 97, 99 Resolutions, Department of 20, 26-29 Field Accounting and Asset Operations, O ffice of 46, 47 Asset Marketing, Department of 38, 40-41 Capital Markets, Department of 38, 39-40 Resolutions 2, 4, 8, 20, 21, 23, 26, 27, 28, 40, 76, 98, 99 Federal Savings and Loan Insurance Corporation 4, 50, 72, 81, 84 Asset Management, Office of 38 B Organization Chart 5 Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 4, 26, 29, 36, 60, 72, 79 H Human Resources Management, Office of 14, 3 1 I Information Resources Management, Department of 20, 30-32, 92 P Planning and Analysis, Department of 20, 29-30 Statistics R T C Conservatorships, January 1, 1993-December 31, 1993 96 N ew R T C Conservatorships, January 1, 1993-December 31, 1993 97 Real Estate, Office of 8, 10 R T C Resolutions, January I, 1993-December 3 1, 1993 98 Receiverships 8, 9, 15, 20, 21, 23, 25, 34, 39, 40, 56, 57, 58, 59, 73, 74, 75, 76, 77, 80, 81, 82, 83, 85, 92 R T C Resolved Conservatorships, August 9, 1989-December 31, 1993 99 Investigations, O ffice of 25-26 J Resolution Trust Corporation Completion Act 2, 4, 9, 17, 21, 26, 36, 59, 60, 6 1, 72, 73 Legal Programs, Department of 34-35 Standard Asset Management and Disposition Agreements 38, 39 R Regulations 49-51 Labor and Employment, O ffice of 10 Special Projects, Office of 10 Professional Liability, Office of 1 1 Research and Statistics, Office of 29-30 L Small Investor Program, Department of the 38, 42-43 Policy, Evaluation, and Field Management, Department of 34, 36 Institution Operations and Sales, Division of 19-32 Justice, Department of 25, 26 Small Investor Program 2, 34, 40, 42-43 Resolution Trust Corporation Financial Statements and Internal Controls 53-93 Systems and Pipeline Management, Office of 39 Systems Development, Office of 14, 30-31 T Thrift Depositor Protection Oversight Board 4, 6, 17, 30, 46, 47, 54, 58, 59, 72, 73, 78, 82, 86, 87, 88 The 1993 RTC Annual Report Published by: The Resolution Trust Corporation Office of Corporate Communications 801 17th Street, N W Washington, D C 20434-0001 Director Stephen J. Katsanos Deputy Director Elizabeth R. Ford i S ' ? \ R e soluti A n n u a l report * unnuai r p " 1 9 ? 3 204O1 Cor 199 “ P°'“a t i o n ^ 332.32 Resoluti 1993 20401 Resolution Trust Corporation Annual report, 1993 DEM C0