The Treasury Department has failed to address a number of critical issues while implementing the $700 billion financial rescue plan, including how to ensure its efforts are successful, the Government Accountability Office said Tuesday.
The report, which was required by the legislation authorizing the rescue plan, said the agency has yet to figure out how to make sure financial firms receiving billions of dollars of federal funds comply with limits on executive compensation and dividend payments.
On a more basic level, the Treasury's efforts to establish "an effective management structure and an essential system of internal control" are incomplete, the report said. Agents and contractors hired under the program have provided few written details on avoiding any conflicts of interest, and the Treasury has yet to develop a process for monitoring any such conflicts, the GAO said.
Attempts to address these deficiencies have been hampered by the short time frame the Treasury has had to implement the program and its vacillations over the intent of the rescue plan, the report said.
As a result, the report said, "there is a heightened risk that the interests of the government and taxpayers may not be adequately protected and that the program objectives may not be achieved in an efficient and effective manner."
The report also noted that the Treasury has yet to fully staff its Office of Financial Stability, which is implementing the Troubled Asset Relief Program. The office will eventually need as many as 200 full-time employees, the GAO said, but as of Nov. 21 only 48 employees were assigned to Tarp. Increasing that number in the near term could prove difficult, the report said, because of the many permutations to the program since it was passed by Congress and the transition to the next administration in the White House.
These hiring issues, the report said, could hinder the Treasury as it tries to keep key leadership positions filled, "potentially creating uncertainty about the direction of the program and impeding efforts to effectively implement" Tarp.
The report said the agency has yet to announce whether it will require firms that receive capital injections to report on the use of the funds. Doing so, the report said, "would enable Treasury to monitor, to some extent, how the infusions were being used."
Lawmakers seized on the report's findings.
"This report proves the immediate need for oversight of the taxpayer dollars being expended right now as part of" Tarp, Senate Finance Chairman Max Baucus, D-Mont., said in a statement. Sen. Baucus complained that the Senate has not been able to vote on President Bush's nomination of Neil Barofsky to serve as special inspector general over Tarp. Mr. Barofsky's nomination has purportedly been held up by a Republican senator using Senate rules.