Treasury Automation

Automated Auction System May Not Achieve Benefits or Operate Properly Gao ID: IMTEC-93-28 April 27, 1993

In response to the 1991 Salomon Brothers scandal, which threatened public confidence in U.S. Treasury auctions, the government speeded up development of a computerized auction system for large dealers and made other changes to reduce the potential for fraud and misconduct. It is unclear, however, whether the Treasury Department's new automated auction processing system will actually ensure market integrity and encourage aggressive bidding on government securities. Specifically, the system cannot detect or identify collusion or fraud, although it can provide clues about behaviors that warrant further attention. In addition, Treasury plans to indefinitely allow bidders to submit paper tenders that will not be inspected by the system. Time savings are also in doubt. Finally, Treasury took shortcuts in system development, skipping steps such as documenting detailed functional requirements that would help control risks associated with building and running such a system. GAO recommends that Treasury put the system on hold until these concerns are addressed.

GAO found that: (1) Treasury has scheduled TAAPS implementation in phases beginning in April 1993, but it has not documented its plans and expected implementation dates; (2) TAAPS may not substantially enhance violations detection, because it cannot detect collusion or fraud in the manual bids that Treasury will continue to accept; (3) TAAPS may not attain the time savings that are anticipated because Treasury is handling both electronic and paper tenders and continues to manually process auctions; (4) Treasury does not plan to require all large dealers to use TAAPS, so it cannot ensure that they will use the system; and (5) Treasury and the system's developer did not adequately control TAAPS development risks, since they did not conduct cost-benefit analyses, perform an adequate risk analysis, document detailed functional requirements, test the system thoroughly, or resolve important technical operations problems.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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