Financial Audit

This report presents the results of GAO's audit of the financial statements of the Resolution Trust Corporation (RTC) for 1991 and 1990. GAO finds that RTC's statement of financial position and cash flows for 1991 are presented fairly. GAO gives RTC an unqualified opinion on its 1991 statement of financial position because RTC addressed internal control and asset valuation problems in its receiverships. In addition, RTC now projects that fewer thrifts than previously thought will need resolving in the future, lessening its exposure to potential real estate losses. As a result of these changes, GAO has been able to assess the reasonableness of RTC's estimated recoveries from resolved institutions and its estimated liability for unresolved institutions. Yet significant uncertainties remain concerning the economy, interest rates, and real estate markets, any of which could produce lower recoveries from resolved institutions or higher-than-estimated costs for unresolved institutions. GAO notes a material internal control weakness involving controls over cash receipt and disbursement processing at RTC's receiverships.

GAO found that: (1) the financial statements presented fairly, in all material respects, the RTC financial position for the year ending December 31, 1991, in conformity with generally accepted accounting principles; (2) it could not give an unqualified position about the 1991 RTC statement of revenues, expenses, and accumulated deficit, due to internal control weaknesses in RTC receivership operations, flaws in the RTC methodology for estimating recoveries, and significant RTC exposure to losses from resolved and unresolved thrifts; (3) RTC has addressed previously identified internal control problems in its receiverships and also implemented a statistical methodology for sampling receivership assets and projecting estimated values of all receivership assets; (4) RTC based its projections of recoveries on the best available information, but economic uncertainties which are beyond RTC control could result in fewer than projected recoveries and higher than estimated costs; (5) RTC does not have the estimated $109 billion to $114 billion in loss funds that it needs to resolve all receiverships and currently identified probable and possible thrift failures; and (6) RTC has issued a circular that should address GAO concerns about receivership documentation of cash receipts and disbursement processing.