OFFICE OF INSPECTOR GENERAL RESOLUTION TRUST CORPORATION FISCAL YEAR 1996 CONGRESSIONAL SUBMISSION General Statement The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 Organization and Objectives The RTC Office of Inspector General (OIG) is aligned based on the functional responsibilities legislated by the Inspector General Act of 1978 and with consideration to RTC's mission and operations. The OIG responsibilities have been organized into five separate offices: (1) Office of Audit (2) Office of Investigation (3) Office of Inspections (4) Office of Policy, Planning, and Resources (5) Office of Oversight and Quality Assurance The Office of Audit is responsible for carrying out a comprehensive, nationwide plan of audits of RTC's programs and operations. Its purpose is to promote economy, efficiency, and effectiveness and to prevent and detect fraud, waste, and abuse in such programs and operations. Areas subject to audit include: (1) Corporate program, financial, contracting, personnel, and (3) Conservatorship and resolution operations; and (4) Asset and real estate management, marketing, and disposition. Audits are conducted in the headquarters or field offices, at various sites nationwide, and/or at the offices of participants in RTC activities and RTC contractors. The Assistant Inspector General for Audit ensures compliance of all RTC/OIG audit work with applicable professional audit standards, including those established by the Comptroller General of the United States. The Office of Investigation is responsible for conducting and supervising a comprehensive, nationwide program of investigations of alleged criminal or otherwise prohibited activities in RTC's programs and operations. The subjects of our investigations may be RTC employees, individuals who provide goods and services to the RTC such as contractors or vendors, and/or other individuals and groups who otherwise participate in RTC programs and operations. Investigations may include such matters as alleged bribery, collusion, and bid rigging. This office maintains close and continuous working relationships with U.S. Attorneys, the FBI and other law enforcement agencies in investigating and prosecuting fraud and abuse in RTC programs. The Assistant Inspector General for Investigation ensures compliance of all RTC/OIG investigations with applicable professional standards established by the President's Council on Integrity and Efficiency. The Office of Inspections supplements and complements our audit and investigative activities. This office is responsible for quickly evaluating and recommending improvements to RTC programs and operations and for detecting potential areas of fraud, waste and abuse. The inspections initiated is determined largely by requests received from RTC management and members of Congress; information received through the OIG Hotline; and areas of potential fraud, waste, and abuse identified through OIG audits and investigations. The Office of Policy, Planning, and Resources is the management operations arm of the OIG with responsibility for directing the development of OIG policies and operating procedures; developing and controlling the execution of OIG budgets and strategic plans; formulating the OIG human resources management program, including comprehensive training to meet legislatively required minimum levels; performing administrative oversight of OIG contracts for audits and other services; and providing ADP support and technical assistance relative to audits and investigations nationwide. This office is also responsible for reviewing and analyzing existing and proposed legislation and regulations relating to RTC programs, and for managing the OIG's nationwide toll-free hotline. The Office of Oversight and Quality Assurance is responsible for establishing guidelines for the audits by independent public accountants of RTC programs and for reviewing the quality of these audits as required by the Inspector General Act. This office also performs quality assurance reviews and assessments of audits conducted by the OIG. Fiscal Year 1994 Program Accomplishments The OIG's audit office issued 144 audit reports during fiscal year 1994. These reports contain 1,124 recommendations to RTC management for improving corporate operations, including potential monetary benefits totalling $156 million. Of these reports, 82 were prepared by OIG staff and 62 by independent public accountants under contract with the OIG. Since OIG operations began in 1990, we have issued 300 audit reports containing a total of 1,986 recommendations to RTC management and potential monetary benefits totalling $6.5 billion. Currently, we have management decisions on 92 percent of our recommendations. The investigations caseload remains heavy. During fiscal year 1994, we opened 177 investigations and closed 173. At year end, 317 cases were pending completion. As a result of OIG investigations during fiscal year 1994, there were 70 referrals to the Department of Justice, 46 criminal indictments, and 48 convictions. Since OIG operations began in 1990 through January 1995, investigations have resulted in 155 indictments, 130 convictions, fines of $495,452, restitution of $7.1 million, monetary recoveries of $15.6 million, assets seized valued at $735,245, a total of 134 RTC employee disciplinary actions, and 139 contractor actions. We also continued our program of inspections that are designed to supplement the audits and investigations by evaluating selected RTC activities. During fiscal year 1994, we completed 19 inspections. Our inspections aim to quickly evaluate and recommend improvements to management and detect potential areas of fraud, waste, and abuse. These inspections generally are in response to special requests received from the Congress, the Oversight Board, and the OIG Hotline. Inspections conducted in fiscal year 1994 have resulted in seven reports to RTC management, several letters to Members of Congress, and referrals of potential criminal matters to our Office of Investigations. The reports to management have potential monetary benefits of over $500,000. Four inspections were on-going at the end of fiscal year 1994. Since it was established in July 1992 through January 1995, the Office of Inspections has closed 41 inspections and issued 15 formal reports to RTC management. Our Office of Oversight and Quality Assurance continued its program of overseeing audits and reviews by independent public accountants (IPAs) under contract with RTC. The office completed desk reviews of the quality of 159 audit reports and issued 17 reports resulting from comprehensive reviews of IPA's work. The office also continued its program of internal OIG quality reviews by issuing two reports on the OIG Office of Audit's operations. In addition, the office performed an external peer review of the audit function in the Small Business Administration's Office of Inspector General. Since OIG operations began in 1990 through January 1995, the Oversight and Quality Assurance staff has completed desk reviews of 328 IPA reports, conducted comprehensive quality reviews of 44 IPA reports, and issued 11 reports to RTC on its management of IPA activities. In addition, the staff has issued 10 reports covering internal quality reviews of OIG Office of Audit operations and conducted two PCIE external peer reviews of other OIGs under the auspices of the President's Council on Integrity and Efficiency. The OIG's nationwide toll-free hotline continued to have very high levels of activity. In fiscal year 1994, a total of 205 inquiries were opened. Since November 1990, when we began hotline operations, through January 1995, we have received 723 substantive calls and letters. Reviews have been completed on about 75 percent of the cases and about 23 percent of these were substantiated. The OIG also continued its practice of reviewing and commenting on proposed RTC policies and operating directives. Through this activity, we work in cooperation with RTC management to help ensure that programs are designed with sufficient controls to preclude future problems. In fiscal year 1994, our office reviewed 115 directives and policies that were provided to us in draft by RTC management. Fiscal Year 1996 Request Background Since its inception in August 1989, the RTC has managed more assets than any financial institution in history. The most recent RTC statistics report that the Corporation has resolved 744 troubled thrifts. As of December 31, 1994, RTC had one institution to resolve and it was being marketed. Asset sales and collections totalled $380 billion. The book value of assets to be sold totals $28 billion as of November 30, 1994. RTC is responsible for accepting failed institutions from the Office of Thrift Supervision (OTS) through June 30, 1995. Disposing of assets from the failed institutions continues to be one of RTC's most important tasks. These assets are largely made up of non-performing loans and hard-to-sell real estate. The ultimate cost of the thrifts cleanup to the taxpayer will depend on how well and how quickly the RTC disposes of these assets. The high risk areas of contracts, asset management sales, and information management are aspects of the disposition process that remain particularly vulnerable to mismanagement, fraud, waste, and abuse. We have added a fourth high-risk area, personnel and administration, in light of the Corporation's |