TARP Takes Another Misstep
The continuing pattern of internal control missteps gives us yet another reason to be concerned about TARP.
The Government Accountability Office (GAO) issued a report this week in which it found that the office at Treasury responsible for administering the Troubled Asset Relief Program (TARP) bailout is having trouble keeping its books. GAO “identified incorrect amounts and inconsistent disclosures” in TARP’s draft fiscal year 2011 financial statements and accompanying materials. One problem that GAO found was a failure to properly record a change that affected the warrants (which are options to buy stock) that Treasury had received from one of the TARP financial institutions. As GAO explained, “Upon analysis, we determined that, in this particular instance, the financial statements were misstated by $12 million, which OFS and we deemed immaterial. As a result, OFS did not revise the financial statements.” The fact that a $12 million error is immaterial to the office overseeing TARP is a stark reminder of the size of the bailout.
This is not the first time GAO has found problems with the office’s internal controls. Last year and the year before, GAO identified other flaws in the controls governing TARP’s financial statements. Treasury has since corrected some of the previously identified issues, but the new problems combined with the unresolved old ones constitute a significant deficiency in internal controls over accounting and financial reporting. The continuing pattern of internal control missteps gives us yet another reason to be concerned about TARP.