1. Farmers Home Administration's Farm Loan Programs. HR-93-1.
December 1992. Letter Report. 35 pp. Filename: HR1
GAO provided information on the Farmers Home Administration's
(FmHA) management of direct and guaranteed farm loan programs and
federal farm properties, focusing on FmHA failure to comply with
loan and property management standards and program policies which
contribute to financial risks.
GAO found that: (1) FmHA attempted to provide high-risk farmers
with temporary credit until they were able to secure commercial
credit and protect the taxpayers' investment; (2) 70 percent of
the $20 billion in outstanding FmHA loans were either delinquent
or restructured to prevent delinquency; (3) FmHA reduced $7.6
billion in delinquent debt due to loan defaults; (4) repeated loan
servicing worsened borrowers' financial conditions by increasing
their debt and reducing equity; (5) FmHA field offices often
failed to follow their own standards for making loans, servicing
loans, and managing property; (6) FmHA and congressional loan
making, loan-servicing, and inventory management policies
increased FmHA and taxpayers' vulnerability to losses; and (7)
FmHA and Congress need to establish a system to ensure that FmHA
field offices follow loan standards and enact policy and program
changes to reduce the loan programs' exposure to risk.
2. Guaranteed Student Loans. HR-93-2. December 1992. Letter
Report. 40 pp. Filename: HR2
GAO reviewed the Department of Education's management of the
Guaranteed Student Loan Program, focusing on the: (1) program's
structural flaws; and (2) lack of adequate incentives to prevent
loan defaults.
GAO found that: (1) the federal government's risk of loan losses
has increased greatly as the program has evolved; (2) the
government has increased its financial exposure, since it provided
interest subsidies to lenders as well as full reimbursement to
lenders and guaranty agencies for any loan defaults; (3)
incentives do not adequately encourage participants to do more to
prevent defaults; (4) Education has a history of mismanagement and
poor oversight of the program's activities; and (5) Education has
inadequate financial and management information systems that
contain inaccurate and incomplete data, conducted little oversight
of the lenders and guaranty agencies, experienced high turnover in
key management positions and has not hired staff with adequate
skills, and a management structure that inhibited effective
program improvement.
3. Bank Insurance Fund. HR-93-3. December 1992. Letter Report. 46
pp. Filename: HR3
GAO reviewed the Bank Insurance Fund, focusing on the factors that
contributed to the depletion of the Fund's reserves and the need
for improved accounting rules and bank examinations.
GAO noted that: (1) during the 1980s, U.S. banks made riskier
loans to increase their customer base and fight competition from
other domestic and foreign financial service vendors; (2) weak
internal controls, flawed corporate governance systems, and lax
regulatory supervision put banks and the Bank Insurance Fund at
risk; (3) federal regulators have not acted to effectively tighten
flexible accounting rules; (4) successful implementation of the
Federal Deposit Insurance Corporation (FDIC) act reforms depends
on FDIC use of its authority to rebuild the fund and the quality
of regulators' oversight efforts; and (5) Congress should consider
legislating certain regulatory accounting principles for
nonperforming loans and more rigorous reporting to regulators.
4. Resolution Trust Corporation. HR-93-4. December 1992. Letter
Report. 45 pp. Filename: HR4
GAO reviewed the Resolution Trust Corporation's (RTC) cleanup of
the thrift industry, focusing on: (1) RTC management of its asset
disposition and contracting activities; (2) RTC information
systems; and (3) reduction of thrift cleanup costs.
GAO found that RTC: (1) has recovered about 95 percent of the book
value of the financial assets it has sold, but faces losses from
contingent liability on already-sold assets and potential asset
mismanagement by contractors; (2) has not adequately planned or
executed its real estate disposition, and did not perform
evaluations of its disposition results until its third year of
operation; (3) is incapable of properly monitoring contractors'
performance and minimizing costs because of poor contract planning
and administration; and (4) information systems are inadequate and
contain inaccurate information, although RTC is developing
improvements to some systems. GAO also found that: (1) the total
cleanup cost will be around $335 billion, if RTC minimizes its
losses by improving its control over asset management and
disposition; and (2) inadequate funding has prevented RTC from
resolving a number of failed thrifts, which has increased its
operating losses and taxpayers' costs.
5. Pension Benefit Guaranty Corporation. HR-93-5. December 1992.
Letter Report. 36 pp. Filename: HR5
GAO reviewed the financial condition of the Pension Benefit
Guaranty Corporation (PBGC), focusing on: (1) the growing PBGC
deficit; (2) weaknesses in the Department of Labor's, Internal
Revenue Service's (IRS), and independent public accountants'
efforts to detect pension plan abuses that place plan assets at
risk; and (3) pressures Congress faces to expand PBGC guarantees
to cover insurance annuitants and other groups.
GAO found that: (1) the growing PBGC deficit threatens the
insurance program's long-term financial viability; (2) effective
enforcement of the Employee Retirement Income Security Act (ERISA)
requirements is essential to reducing the risk to the insurance
program; (3) ERISA violations and the collection of deliquent and
underpaid premiums have added to PBGC financial losses and
increased its administrative burden; (4) Labor and the IRS have
made progress in improving their enforcement efforts, but problems
remain; (5) Labor and IRS efforts have been hindered by scarce
resources relative to the size of the plan and disappointing
enforcement targeting results; (6) recent failures of several
large insurance companies have raised concerns that federal
oversight of plans' selections of insurance annuity providers is
inadequate; and (7) inadequate federal oversight may add to
increasing pressures Congress faces to expand PBGC guarantees to
cover insurance annuities if the existing guarantees fail to
adequately protect pension benefits.
6. Medicare Claims. HR-93-6. December 1992. Letter Report. 32 pp.
Filename: HR6
GAO provided information on the Health Care Financing
Administration's (HCFA) management of the Medicare Program and
whether insufficient funding exposes the program to unnecessary
loss through waste, fraud, and abuse.
GAO found that: (1) Medicare losses resulting from fraud, waste,
and abuse could total 10 percent of the nation's total health care
costs; (2) HCFA relies on contractors to process Medicare claims
and protect program funds with payment safeguards; (3) HCFA
failure to properly manage contractors' safeguards and
insufficient funding exposed the program to waste, fraud, and
abuse; (4) HCFA contractors often failed to investigate fraud
complaints raised by Medicare beneficiaries and failed to recover
$170 million in overpayments from hospitals; (5) HCFA contractors
paid nearly $2 billion in claims for which other insurers were
responsible; and (6) HCFA needs to strengthen contractor
oversight, reduce excessive payments, and tighten billing
controls.
7. Defense Weapons Systems Acquisition. HR-93-7. December 1992.
Letter Report. 50 pp. Filename: HR7
GAO reviewed the Department of Defense's (DOD) annual expenditure
of billions of dollars to acquire new weapons systems, focusing on
DOD determination, planning, budgeting, and acquisition of major
weapons requirements.
GAO found that: (1) while the services conduct considerable
analyses to justify major acquisitions, these analyses were
narrowly focused, and did not fully consider alternative
solutions, including the joint acquisition of systems with other
services; (2) cost growth and schedule delays were among the
oldest and most visible problems associated with DOD weapon system
acquisition; (3) DOD tendency to overestimate the amount of future
funding available for defense, and underestimate program costs,
has resulted in program acquisition strategies that are
unreasonable or risky at best; (4) the most troublesome
characteristic of DOD acquisition strategies was the high degree
of concurrency between the development and production of weapons;
(5) DOD has compromised or not adequately considered design
considerations such as reliability, maintainability, and logistics
support during the acquisition process.
8. Defense Contract Pricing. HR-93-8. December 1992. Letter
Report. 37 pp. Filename: HR8
GAO reviewed the Department of Defense's (DOD) contracting
practices, focusing on the significant risks it faces as a result
of overpriced contracts.
GAO found that: (1) DOD found $3.67 billion in overcharges in
defense contracts in fiscal years 1987 through 1991, of which 37
percent was due to subcontractors' overcharges; (2) DOD required
major contractors to establish adequate cost-estimating systems
and include subcontract price evaluations in their contract
proposals; (3) despite strengthened regulations and emphasis on
subcontract pricing, overcharges due to inflated subcontractor
estimates continued; (4) DOD oversight of contract pricing was
inadequate, and corrective actions were insufficient; (5) the
Defense Contract Audit Agency was unaware of 88 percent of the
subcontracts because prime contractors were not required to
provide lists of their subcontractors; (6) contracting officers
did not adequately review contractors' actions and enforce
compliance; (7) the DOD audit follow-up system did not provide
accurate and complete information on many high-risk contractors'
cost-estimating systems; and (8) DOD could ensure fair and
reasonable profits for defense firms if it established a financial
reporting system that provides information comparing defense and
nondefense contract costs.
9. Department of Energy Contract Management. HR-93-9. December
1992. Letter Report. 41 pp. Filename: HR9
GAO reviewed the Department of Energy's (DOE) contract management
weaknesses, focusing on DOE failure to adequately oversee
contractors that manage and operate the nuclear weapons complex
and national laboratory network.
GAO noted that: (1) DOE contract management weaknesses have led to
mismanagement of federal property and funds; (2) DOE is required
to reimburse contractors for money and materials stolen by
contractor employees and for fines the contractors incurred for
environmental law violations; (3) vulnerability to waste, fraud,
abuse, and mismanagement stemmed from long-standing inadequacies
in DOE oversight of contactors' operations and activities; (4) 70
percent of DOE management and operating contracts did not employ
standard contract clauses used by other federal agencies; and (5)
DOE contracts gave contractors excessive latitude, increased the
government's financial risk, and restricted its ability to control
costs, since DOE failed to provide objective criteria for award or
management fees paid to contractors.
10. Superfund Program Management. HR-93-10. December 1992. Letter
Report. 41 pp. Filename: HR10
GAO provided information on the Environmental Protection Agency's
(EPA) management of the Superfund Program, focusing on EPA: (1)
recovery of Superfund clean-up costs from private parties; and (2)
inadequate attention to contract management.
GAO found that: (1) EPA failed to base its Superfund expenditures
on adequate cost-benefit assessments and lacked sufficient program
administration to control escalating costs; (2) EPA lacked an
adequate system for assigning clean-up priorities and determining
Superfund sites' health and environmental risks in comparison to
other environmental problems; (3) EPA collected only 10 percent of
the potential $5.7 billion in recoverable funds from responsible
parties; (4) the lack of complete data on past recovery efforts,
failure to control collection efforts, and Superfund's legal
restrictions which exclude recovery of indirect costs and interest
limited EPA ability to recover more funds from responsible
parties; and (5) EPA needed to develop additional risk-based
planning approaches to assigning clean-up priorities, place
greater emphasis on recovering program costs, and strengthen
contract management.
11. NASA Contract Management. HR-93-11. December 1992. Letter
Report. 42 pp. Filename: HR11
GAO reviewed the National Aeronautics and Space Administration's
(NASA) lack of adequate controls over contract management and
related activities.
GAO found that: (1) NASA failure to realistically plan for the
budgetary resources to fund its programs can affect its ability to
manage its contracts; (2) NASA technical oversight procedures and
its cost reporting, property management, accounting, and
information systems did not adequately ensure that contractor
payments and the government-owned property were managed
effectively; and (3) NASA field centers did not always fully
comply with governmentwide, agency, or center requirements when
awarding and modifying contracts.
12. Defense Inventory Management. HR-93-12. December 1992. Letter
Report. 39 pp. Filename: HR12
GAO reviewed the Department of Defense's (DOD) management of
military supplies, focusing on DOD maintenance of: (1) high excess
inventory levels; and (2) systems for determining supply needs.
GAO found that: (1) each military service and the Defense
Logistics Agency (DLA) individually maintained inventories of
spare and repair parts in accordance with their own projected
needs; (2) DOD estimated that its excess inventory costs over $30
billion; (3) the services' excess inventories increased during the
1980s by 150 to 240 percent; (4) DOD oversight and inventory
information and control systems were inadequate and ineffective
and led to the overstatement of supply requirements; (5) DOD must
undergo an organizational culture change, such as adopting
commercial practices, to reduce the costs of inventory procurement
and maintenance; and (6) DOD is increasing cost awareness in its
business practices by such means as charging the full cost of
items and services to the military units that use them.
13. Internal Revenue Service Receivables. HR-93-13. December 1992.
Letter Report. 42 pp. Filename: HR13
GAO reviewed the Internal Revenue Service's (IRS) ability to
collect the tax debts owed to the federal government, focusing on
what IRS needs to do to increase collections.
GAO found that: (1) IRS estimates that it will never collect 75
percent of the tax debt, since tax records are inaccurate, it
cannot locate delinquent taxpayers, and deliquent taxpayers are
unable to pay; (2) for fiscal year 1991, IRS collections of
accounts receivable actually declined by 5 percent while the IRS
receivable inventory increased by 15 percent; and (3) conditions
that interfered with IRS ability to collect unpaid taxes included
lack of complete account information, an inefficient collection
process, the need to balance collection efforts with taxpayer
protection, a highly decentralized organizational structure, and
uneven staffing among offices.
14. Managing the Customs Service. HR-93-14. December 1992. Letter
Report. 37 pp. Filename: HR14
GAO reviewed the U.S. Customs Service's ability to effectively
enforce trade law and maintain effective financial controls.
GAO found that: (1) Customs needs to define trade enforcement in
terms of increased detection of violations, increased voluntary
compliance by importers, and increased collections of duties; (2)
Customs needs to develop an institutional standard for measuring
the significance of trade violations; (3) Customs has not managed
its information resources effectively; (4) Customs employees often
lack basic information needed to assess the effectiveness of trade
enforcement efforts; (5) Customs continues to face the challenge
of establishing adequate accountability and control over its
resources; and (6) Customs needs to improve both its accounting
for and controls over property.
15. Management of Overseas Real Property. HR-93-15. December 1992.
Letter Report. 33 pp. Filename: HR15
GAO provided information on the Department of State's Office of
Foreign Building Operations' (FBO) management of government
overseas real estate programs, focusing on the need for increased
government facility oversight to prevent mismanagement and waste.
GAO found that: (1) unapproved overseas facility construction,
over-standard housing for foreign-based U.S. employees,
insufficient maintenance requirements, and questionable real
estate acquisition and disposal decisions contributed to program
waste and mismanagement; (2) the FBO $2.1-billion security
construction program lacked clear program objectives, planning,
and coordination which resulted in significant delays and cost
overruns; (3) internal control weaknesses in FBO property
management included inadequate overseas post oversight, inadequate
financial information systems, insufficient funding for facility
rehabilitation and maintenance, and poor integration and planning
of foreign policy and security objectives; (4) FBO completed only
8 of the 57 projects under the security construction program,
failed to adequately assess contractor performance, and lacked
sufficient staff to manage overseas facility construction; and (5)
FBO needs to establish focused priorities for overseas
construction projects, enhance and increase contractor
evaluations, hire additional qualified staff to survey maintenance
conditions at foreign posts, require yearly maintenance
inspections, streamline and update housing standards, and improve
information systems.
16. Federal Transit Administration Grant Management. HR-93-16.
December 1992. Letter Report. 39 pp. Filename: HR16
GAO reviewed the Department of Transportation's Federal Transit
Administration's (FTA) management and oversight of federal transit
grants.
GAO found that: (1) FTA did not give high priority to oversight of
federal grants but instead relied on assurances by grantees that
they would manage federal funds properly; (2) problems often went
undetected and uncorrected because FTA failed to oversee grantees'
activities effectively; and (3) FTA has made a commitment to
improving grant oversight by performing annual risk assessments of
each grant recipient, establishing detailed procedures for
monitoring recipients, and adopting a comprehensive enforcement
system.
17. Asset Forfeiture Programs. HR-93-17. December 1992. Letter
Report. 33 pp. Filename: HR17
GAO reviewed the Department of Justice's and the U.S. Customs
Service's management and disposition of seized and forfeited
assets, focusing on: (1) program changes; and (2) areas needing
sustained management attention.
GAO found that: (1) legislative changes allowing more seizures and
forfeitures increased Justice's and Customs' seized property
inventories by almost 600 percent by 1992; (2) Congress
established special funds with proceeds from asset sales to pay
asset forfeiture-related expenses; (3) in 1987, Justice and
Customs established policies to minimize the unnecessary holding
of cash by speeding up the deposit of cash not needed in Treasury
accounts; (4) Justice and Customs have developed systems to
improve information handling needed for decision making; (5) a
1990 legislative change allowed the agencies to process all
uncontested forfeitures administratively rather than judicially,
which sped up the process considerably; (6) Justice and Customs
have agreed to a pilot test of consolidating their postseizure
management and disposition of noncash seized property inventories;
(7) Justice and Customs are developing joint asset-sharing
guidelines and oversight policies and procedures in response to
asset-sharing concerns expressed by state and other officials; and
(8) Justice has increased its use of title searches in seizing
real property to protect owners' property rights.
