Financial Audit: Resolution Trust Corporation's 1994 and 1993 Financial
Statements (Letter Report, 06/22/95, GAO/AIMD-95-157).

Pursuant to a legislative requirement, GAO audited the Resolution Trust
Corporation's (RTC) financial statements for the years ended December
31, 1994 and 1993. GAO also reviewed: (1) RTC internal control
weaknesses; (2) RTC estimated recoveries from failed thrifts; (3) the
estimated unused loss funds after RTC completion of all resolution
activities; and (4) RTC progress in reducing risk.

GAO found that: (1) RTC financial statements were reliable in all
material aspects; (2) RTC internal controls were effective in
safeguarding assets, ensured that transactions were in accordance with
management authority and material laws and regulations, and ensured that
there were no material misstatements; and (3) there was no material
noncompliance with applicable laws and regulations. GAO also found that:
(1) RTC needs to improve its internal controls over computer systems;
(2) uncertainties regarding general economic conditions, interest rates,
and real estate markets could impact the cost of resolving failed
institutions; (3) RTC has resolved two of the three previously
identified operating control weaknesses; (4) based on current estimates,
RTC may have $14.8 billion of unused loss funds after completing all its
thrift resolutions; and (5) RTC, Congress, and the Federal Deposit
Insurance Corporation have reduced RTC management risks sufficiently to
remove RTC as a high-risk entity.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-95-157
     TITLE:  Financial Audit: Resolution Trust Corporation's 1994 and 
             1993 Financial Statements
      DATE:  06/22/95
   SUBJECT:  Financial statement audits
             Financial management
             Internal controls
             Corporate audits
             Auditing standards
             Accounting procedures
             Savings and loan associations
             Bank failures
             Compliance
             Financial records
IDENTIFIER:  SAIF
             Savings Association Insurance Fund
             
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Cover
================================================================ COVER


Report to the Congress

June 1995

FINANCIAL AUDIT - RESOLUTION TRUST
CORPORATION'S 1994 AND 1993
FINANCIAL STATEMENTS

GAO/AIMD-95-157

RTC's Financial Statements


Abbreviations
=============================================================== ABBREV

  FDIC - Federal Deposit Insurance Corporation
  FFB - Federal Financing Bank
  FSLIC - Federal Savings and Loan Insurance Corporation
  SAIF - Savings Association Insurance Fund

Letter
=============================================================== LETTER


B-259541

June 22, 1995

To the President of the Senate and the
Speaker of the House of Representatives

This report presents the results of our audits of the financial
statements of the Resolution Trust Corporation for the years ended
December 31, 1994 and 1993.  This report also presents our opinion on
management's assertions regarding the effectiveness of its system of
internal controls on December 31, 1994, and our evaluation of
compliance with laws and regulations.  We conducted our audits
pursuant to the provisions of section 21A(k)(1) of the Federal Home
Loan Bank Act (12 U.S.C.  1441a(k)(1)) and in accordance with
generally accepted government auditing standards. 

The report also discusses (1) an internal control weakness we
identified and our recommendation to correct this weakness, (2)
issues affecting estimated recoveries from failed thrifts, including
uncertainties and operating controls, (3) the estimated unused loss
funds after the Corporation's completion of all resolution
activities, and (4) the progress made in reducing risk. 

We are sending copies of this report to the Chairman and members of
the Thrift Depositor Protection Oversight Board; the Deputy and
Acting Chief Executive Officer of the Resolution Trust Corporation;
the Director of the Office of Management and Budget; the Chairmen and
Ranking Minority Members of the Senate Committee on Governmental
Affairs, the House Committee on Government Reform and Oversight, the
Senate Committee on Banking, Housing and Urban Affairs, and the House
Committee on Banking and Financial Services; and other interested
parties. 

This report was prepared under the direction of Robert W.  Gramling,
Director, Corporate Financial Audits, who may be reached at (202)
512-9406 if you or your staff have any questions.  Major contributors
to this report are listed in appendix V. 

Charles A.  Bowsher
Comptroller General
of the United States


Letter
=============================================================== LETTER


B-259541

June 22, 1995

To the Thrift Depositor Protection
 Oversight Board
Resolution Trust Corporation

We have audited the Resolution Trust Corporation's accompanying
statements of financial position as of December 31, 1994 and 1993,
and the related statements of revenues, expenses, accumulated
deficit, and cash flows for the years then ended.  We found: 

  The Corporation's financial statements referred to above were
     reliable in all material respects. 

  The Corporation fairly stated that internal controls in place on
     December 31, 1994, were effective in safeguarding material
     assets against loss from unauthorized acquisition, use, or
     disposition; assuring the execution of transactions in
     accordance with management's authority and material laws and
     regulations; and assuring that there were no material
     misstatements in the financial statements.  While we identified
     one internal control weakness, we did not consider it to be
     material. 

  There were no reportable instances of noncompliance with laws and
     regulations we tested. 

The following section presents significant matters considered in
performing our audit and forming our opinions.  This report also
discusses each of the above audit conclusions in more detail and our
recommendation for improving the Corporation's internal control
structure. 

Appendix I discusses the scope of our audit.  Appendix II presents
the Corporation's financial statements.  Appendix III presents
management's report on internal controls.  The Corporation's written
comments on a draft of this report are included in appendix IV. 
Major contributors to this report are included in appendix V.  A list
of related GAO products is presented at the end of this report. 


   SIGNIFICANT MATTERS
------------------------------------------------------------ Letter :1

The following information is presented to highlight (1) uncertainties
that could affect the Corporation's loss estimates, (2) the current
status of the Corporation and its funding, (3) the potential
continuing impact of past weaknesses in contract issuance and
contractor oversight, and (4) the progress made in reducing the risk
associated with weak internal controls and uncertain funding. 


      UNCERTAINTIES COULD AFFECT
      ESTIMATED RECOVERIES FROM
      RECEIVERSHIP ASSETS
---------------------------------------------------------- Letter :1.1

Although the Corporation continued to use an appropriate methodology
for estimating the future recovery value of receivership assets\1 and
has used the best information available, uncertainties regarding
general economic conditions, interest rates, and real estate markets
could increase or decrease the final cost of resolving failed
institutions.  The uncertainties impact the final cost of resolving
failed institutions by affecting the amount the Corporation
ultimately recovers from disposing of receivership assets. 

As described in notes 4 and 5 to the financial statements, the
Corporation records as assets the full amount advanced to
conservatorships and receiverships for liquidity and working capital
(Advances) or paid to close failed thrifts (Subrogated Claims).  The
Corporation then establishes loss allowances against these assets by
estimating the difference between the amounts paid or advanced and
the expected recovery.  As of December 31, 1994, the Corporation
estimated a total net recovery of $20.3 billion from its outstanding
Subrogated Claims and Advances.  The amounts ultimately recovered and
repaid to the Corporation may increase or decrease as a result of
changes in general economic conditions, interest rates, and real
estate markets. 

Recoveries from conservatorship and receivership assets are used to
repay the Corporation.  As of March 31, 1995, approximately 26
percent of the book value of assets held for sale by the
Corporation's receiverships\2 were performing 1-4 family mortgages,
cash, and investment securities.  The remaining 74 percent were
delinquent loans, real estate owned, other assets, other mortgages
and loans, and investments in subsidiaries of failed thrifts and are
considered hard-to-sell by the Corporation.  It is particularly
difficult for the Corporation to predict the recovery value and
timing of sales for these hard-to-sell assets.  Typically, if a
receivership's assets sell later or for less than predicted, the
final loss on resolving the failed institution will be higher than
estimated.  Conversely, higher or earlier recoveries would typically
lower the final loss. 

As discussed in note 15 to the financial statements, the
Corporation's loss allowances also include estimated losses arising
from securitization transactions,\3 and representations and
warranties\4 made in the process of disposing of the assets of failed
institutions.  As of December 31, 1994, the allowances included $1.7
billion representing the expected credit losses on securitization
transactions and $1.2 billion representing losses arising from
representations and warranties.  However, the Corporation's loss
experience has been limited to date.  Although the Corporation used
the best information available to estimate these losses, the amount
of future losses may significantly increase or decrease over the
remaining life of the loans that were sold, which could be as long as
20 years.  These future losses will be affected by the behavior of
the economy, interest rates, and real estate markets, as well as the
performance of the collateral underlying the transactions.  Changes
in these factors, which are beyond the Corporation's control, could
result in higher or lower credit and claims losses than currently
estimated. 

The final cost of resolving failed institutions will also be affected
by uncertainties related to the Federal Deposit Insurance
Corporation's (FDIC) treatment of the Resolution Trust Corporation's
remaining receivership assets after it ceases operations on December
31, 1995.\5 The Corporation's estimated loss on resolving failed
institutions at December 31, 1994, includes estimates of future asset
recoveries and related expenses.  These estimates are largely based
on the Corporation's experience in disposing of receivership assets. 
The actual amounts for some asset recoveries and related expenses
will be determined after the Corporation ceases operations.  After
December 31, 1995, FDIC may apply different asset disposition
strategies and valuing methodologies which could result in changes to
the estimated recovery values of the remaining receivership assets. 


--------------------
\1 The Corporation's estimated recovery values are based in part on a
statistical sampling of receivership assets subject to a sampling
error of plus or minus $700 million with a 95 percent confidence
interval. 

\2 The Corporation's one institution in conservatorship at December
31, 1994, was resolved prior to March 31, 1995. 

\3 Securitization refers to the Corporation's practice of selling
securities backed by the underlying future cash flows of groups of
loans.  To protect purchasers of the securities against credit losses
arising from defaults and delinquencies of the underlying loans, the
Corporation has set aside a portion of the securitization proceeds
for possible future credit losses. 

\4 The Corporation and its receiverships and conservatorships provide
representations and warranties on the unpaid principal balance of
certain loans sold for cash, sold as part of securitization
transactions, exchanged for mortgage-backed securities, or sold under
contracts that convey the right to service mortgages. 

\5 Under the Resolution Trust Corporation Completion Act, the
Corporation will terminate on or before December 31, 1995.  All
remaining assets and liabilities will be transferred to the FSLIC
Resolution Fund, which is managed by FDIC. 


      FUNDING AND CURRENT STATUS
      OF THE CORPORATION
---------------------------------------------------------- Letter :1.2

For each institution it resolves, the Corporation calculates the
amount it will have to pay to cover depositor claims and then
estimates how much it will recover from the sale of the failed
institution's assets.  The portion not recovered from the sale of
receivership assets is a loss to the Corporation and must be covered
with loss funds.  The amount expected to be recovered is borrowed
from the Federal Financing Bank (FFB) and is considered working
capital. 

As shown in table 1, the Congress has made $105 billion available to
the Corporation to cover losses associated with resolutions. 



                           Table 1
           
           Total Loss Funding Made Available as of
                      December 31, 1994

                    (Dollars in billions)

--------------------------------------------------  --------
Financial Institutions Reform, Recovery,              $ 50.0
 and Enforcement Act of 1989
Resolution Trust Corporation Funding Act of 1991        30.0
Resolution Trust Corporation Refinancing,              6.7\a
 Restructuring, and Improvement Act of 1991
Resolution Trust Corporation Completion Act           18.3\a
============================================================
Total                                                 $105.0
------------------------------------------------------------
\a The Resolution Trust Corporation Refinancing, Restructuring, and
Improvement Act of 1991 (Public Law 102-233) provided $25 billion in
December 1991, which was only available for obligation until April 1,
1992.  After the deadline passed, the Corporation returned $18.3
billion of unobligated funds to the Treasury in April 1992.  In
December 1993, the RTC Completion Act removed the April 1, 1992,
deadline, thus making the $18.3 billion available to the Corporation
for resolution activities. 

Table 2, which is based on estimates in the Corporation's December
31, 1994, financial statements and the related notes, shows
cumulative estimated loss funding needs of $90.2 billion.  This
amount includes funding used to cover the Corporation's losses to
date as well as amounts needed to complete the resolution of all
receiverships, conservatorships, and institutions for which it is
probable that government assistance may be required on or before June
30, 1995.\6



                           Table 2
           
           Cumulative Estimated Loss Funding Needs
                   as of December 31, 1994

                    (Dollars in billions)

--------------------------------------------------  --------
Receiverships                                          $89.8
Conservatorships and probable failures                    .4
Possible failures\a                                        0
============================================================
Total                                                  $90.2
------------------------------------------------------------
\a As of the date of our report, it is highly unlikely that the
Corporation will have to resolve any institutions considered possible
failures before June 30, 1995.  Institutions classified as possible
failures will more likely become the responsibility of the Savings
Association Insurance Fund (SAIF) if failures are to occur.  SAIF
will assume the Corporation's resolution responsibilities beginning
July 1, 1995. 

The Corporation's estimates show that $89.8 billion will be used to
resolve the 744 institutions closed as of December 31, 1994, and an
estimated $.4 billion will be used to resolve the 1 institution in
conservatorship and
3 institutions considered probable failures before the Corporation's
authority to resolve institutions expires on June 30, 1995. 

As shown in table 3, the Corporation estimates it will have $14.8
billion of unused loss funds after resolving all institutions for
which it is responsible.  This is based on the estimates presented in
the Corporation's 1994 financial statements, which are subject to the
uncertainties discussed previously and in notes 5 and 10 to the
financial statements.  The need to use any of the $14.8 billion of
estimated unused loss funds is dependent on the Corporation's actual
recoveries from receiverships and its actual cost of future
resolutions. 



                           Table 3
           
              Estimated Unused Loss Funds After
               Completion of the Corporation's
                    Resolution Activities

                    (Dollars in billions)

--------------------------------------------------  --------
Total loss funding made available                     $105.0
Less: cumulative estimated loss                       (90.2)
 funding needed
============================================================
Estimated unused loss funds                           $ 14.8
------------------------------------------------------------
At December 31, 1994, the Corporation had sufficient net assets to
repay its $23 billion in working capital borrowings from FFB.  The
Corporation would only be unable to repay its FFB borrowings if its
combined additional losses on receivership assets and future
resolutions exceeded the $14.8 billion in estimated unused loss
funds. 

Currently, the Corporation, FDIC, and the Thrift Depositor Protection
Oversight Board are reviewing the funding needed to dispose of the
Corporation's assets and settle liabilities remaining after December
31, 1995.  This review will consider the need for any additional
funding in excess of the Corporation's currently estimated loss
funding needs of $90.2 billion. 

Loss funds not used by the Corporation are available for losses
incurred by the Savings Association Insurance Fund (SAIF) subject to
the conditions set forth in the Resolution Trust Corporation
Completion Act.\7 Also, according to the act, funds in excess of the
amounts needed by both the Corporation and SAIF will be returned to
the general fund of the Treasury. 


--------------------
\6 The Corporation's estimated loss funding needs does not include up
to $1 billion in losses that the Corporation could possibly incur
from pending lawsuits and as yet unasserted claims as discussed in
note 11 to the financial statements. 

\7 The Resolution Trust Corporation Completion Act makes available to
SAIF, during the 2-year period beginning on the date of the
Corporation's termination, any of the $18.3 billion in appropriated
funds not needed by the Corporation.  However, prior to receiving
such funds, FDIC must first certify, among other things, that SAIF
cannot fund insurance losses through industry premium assessments or
Treasury borrowings without adversely affecting the health of its
member institutions and causing the government to incur greater
losses. 


      CONTROLS OVER CONTRACTING
      COULD AFFECT RECOVERIES FROM
      RECEIVERSHIPS
---------------------------------------------------------- Letter :1.3

The Corporation has used thousands of private contractors to manage
and dispose of assets from failed thrifts, including activities such
as collecting income and paying expenses.  The estimated recoveries
from receiverships included in the Corporation's financial statements
include the results of the receipts and disbursements made by
contractors that perform services for receiverships during the year. 
Weak operating controls over contract issuance and contractor
oversight could impact these estimated recoveries from receiverships. 
While we assess, as part of our financial statement audit, internal
accounting controls over receivership receipts and disbursements, the
Corporation's operating controls over contract issuance and
contractor oversight are not part of the scope of our audit.  These
operating controls are considered as part of GAO's other reviews of
the Corporation's operations\8 as well as by the Corporation's
Inspector General and Office of Contract Oversight and Surveillance. 

In response to previously reported operating control weaknesses, the
Corporation has taken actions to improve the process of contract
issuance and contractor oversight.  In addition, the Corporation has
recently placed increased emphasis on the process of closing out\9
contracts to ensure that contractors have fulfilled all contractual
responsibilities. 

However, during 1994, reports issued by the Corporation's Inspector
General and the Office of Contract Oversight and Surveillance
demonstrate that despite the Corporation's actions to correct
contracting problems, the effects of early neglect of contracting
operations remain.  These reports also identified significant
performance problems with contracts that were issued before many
contracting reforms and improvements were implemented by the
Corporation.  As a result, the Corporation remains vulnerable to the
risks associated with contracting operations and contractors'
performance and cannot be sure that it is recovering all it should
from receiverships. 


--------------------
\8 High-Risk Series:  An Overview (GAO/HR-95-1, February 1995);
High-Risk Series:  Quick Reference Guide (GAO/HR-95-2, February
1995); and Resolution Trust Corporation:  Efforts Under Way to
Address Management Weaknesses (GAO/GGD-95-109, May 12, 1995). 

\9 The Corporation's contracting manual states that a contract
closeout includes, among other things, a determination by the
contracting officer that (1) all deliverables, including reports,
have been received by the Corporation and accepted, (2) final payment
has been made, (3) all collections of funds due to the Corporation
have been completed, (4) all financial documents are in the file, (5)
all Corporation property has been returned and accounted for, and (6)
all Corporation files have been returned. 


      PROGRESS IN REDUCING RISK
---------------------------------------------------------- Letter :1.4

In 1992, we reported that the Corporation was designated as a
high-risk entity because of weaknesses in its asset disposition,
contracting, information systems, and financial management and
accountability.\10 We also noted our concerns about uncertainties
affecting its resolution activities and funding levels.  Finally, we
warned that the thrift clean-up would not be completed before the
Corporation closed down and that the total cost would depend, in
part, on how effectively FDIC settled any remaining assets and
liabilities. 

Since 1992, the Congress, the Corporation, and FDIC have reduced
these risks to the point that we no longer consider the Corporation a
high-risk.\11 The Congress provided the additional funding needed to
complete the thrift clean-up, mandated management reforms, and
required that a task force be formed to facilitate transition.  In
addition, the Corporation made substantial progress in addressing
internal control and operating weaknesses by implementing mandated
reforms and taking additional actions to strengthen operating
procedures, information systems, and internal controls.  Also, as
required, the Corporation and FDIC established a task force to
facilitate the transfer of remaining assets, personnel, and
operations to FDIC in a coordinated manner.  However, one continuing
source of concern is the difficulty in terminating a large and
complex organization with thousands of personnel and billions in
assets, while attempting to minimize disruption.  Although transition
planning has gone well, the Corporation faces the challenge of
disposing of its remaining assets and working successfully to carry
out the transition while maintaining internal controls and
accountability. 


--------------------
\10 High-Risk Series:  Resolution Trust Corporation (GAO/HR-93-4,
December 1992). 

\11 See footnote 9. 


   OPINION ON FINANCIAL STATEMENTS
------------------------------------------------------------ Letter :2

In our opinion, the financial statements present fairly, in all
material respects, in accordance with generally accepted accounting
principles, the Corporation's

  assets, liabilities, and equity as of December 31, 1994 and 1993;

  revenues, expenses, and accumulated deficit for the years then
     ended; and

  cash flows for the years then ended. 

However, misstatements may nevertheless occur in other financial
information reported by the Corporation as a result of the internal
control weakness described below.  Additionally, significant
uncertainties discussed earlier in this report and in notes 5 and 10
to the financial statements, may ultimately result in higher or lower
resolution costs than those estimated in these statements. 


   OPINION ON MANAGEMENT'S
   ASSERTION ABOUT THE
   EFFECTIVENESS OF INTERNAL
   CONTROLS
------------------------------------------------------------ Letter :3

We evaluated management's assertion about the effectiveness of its
internal controls designed to

  safeguard assets against loss from unauthorized acquisition, use,
     or disposition;

  ensure the execution of transactions in accordance with
     management's authority and with laws and regulations that have a
     direct and material effect on the financial statements; and

  properly record, process, and summarize transactions to permit the
     preparation of reliable financial statements in accordance with
     generally accepted accounting principles and to maintain
     accountability for assets. 

The Corporation's management fairly stated that those controls in
effect on December 31, 1994, provided reasonable assurance that
losses, noncompliance, or misstatements material in relation to the
financial statements would be prevented or detected on a timely
basis, based on the control criteria used.  Management's assertion,
which is included in appendix III, was made using the internal
control and reporting criteria set forth in the implementing guidance
for the Federal Managers' Financial Integrity Act of 1982. 

However, our work identified the need to improve internal controls,
as described in the following section.  This weakness, although not
considered material,\12 represents a significant deficiency in the
design or operation of internal controls which could adversely affect
the Corporation's ability to fully meet the internal control
objectives listed above.  In making its assertion, the Corporation's
management considered the internal control weakness we identified. 

While management's assertion about the effectiveness of internal
controls was reasonable, misstatements may nevertheless occur in
other financial information reported by the Corporation.  Because of
inherent limitations in any system of internal controls, losses,
noncompliance, or misstatements may nevertheless occur and not be
detected. 


--------------------
\12 A material weakness is a reportable condition in which the design
or operation of the internal controls does not reduce to a relatively
low level the risk that losses, noncompliance, or misstatements in
amounts that would be material in relation to the financial
statements may occur and not be detected within a timely period by
employees in the normal course of their assigned duties.  Reportable
conditions involve matters coming to our attention relating to
significant deficiencies in the design or operation of internal
controls that, in the auditor's judgment, could adversely affect an
entity's ability to (1) safeguard assets against loss from
unauthorized acquisition, use, or disposition, (2) ensure the
execution of transactions in accordance with management's authority
and in accordance with laws and regulations, or (3) properly record,
process, and summarize transactions to permit the preparation of
financial statements and to maintain accountability for assets. 
Reportable conditions that are not considered to be material
nevertheless represent significant deficiencies in the design or
operation of internal controls and need to be corrected by
management. 


   REPORTABLE CONDITION
------------------------------------------------------------ Letter :4

The Corporation's corrective actions during 1993 and 1994 resolved
two of the three reportable conditions identified in our audit of its
1993 financial statements.  The Corporation strengthened controls
over posting wire receipts to the general ledger and in reconciling
receivership assets.  For the remaining reportable condition,
weaknesses in general controls over some computerized information
systems,\13 the Corporation addressed the weaknesses we identified. 
However, our audit of the 1994 financial statements identified
additional weaknesses such that this reportable condition continued
to exist. 

Because the Corporation relies on its computer systems extensively,
both in its daily operations and in processing and reporting
financial information, the effectiveness of general controls is a
significant factor in ensuring the integrity and reliability of
financial data.  Our audit of the Corporation's 1994 financial
statements found that the general controls still did not provide
adequate assurance that data files and computer programs were fully
protected from unauthorized access and modification.  However, prior
to completion of our fieldwork in June 1995, we found that the
Corporation had already corrected several of the weaknesses we
identified.  In addition, for the remaining weaknesses, the
Corporation had prepared corrective action plans. 

During 1994, the Corporation performed accounting and control
procedures, such as reconciliations and manual comparisons, which
would have detected material data integrity problems resulting from
inadequate general controls.  Without these procedures, the
weaknesses in general controls would raise significant concerns over
the integrity of information obtained from the affected systems. 

We also noted other less significant matters involving the internal
control structure and its operation which we will communicate
separately to the Corporation's management. 


--------------------
\13 General controls are policies and procedures that apply to an
entity's overall effectiveness and security of operations, and that
create an environment in which application controls and certain user
controls operate.  General controls include the organizational
structure, operating procedures, software security features, system
development and change control, and physical safeguards designed to
ensure that only authorized changes are made to computer programs,
that access to data is appropriately restricted, that back-up and
recovery plans are adequate to ensure the continuity of essential
operations, and that physical protection of facilities is provided. 


   COMPLIANCE WITH LAWS AND
   REGULATIONS
------------------------------------------------------------ Letter :5

Our tests for compliance with significant provisions of selected laws
and regulations disclosed no instances of noncompliance that would be
reportable under generally accepted government auditing standards.\14


--------------------
\14 The Federal Deposit Insurance Corporation Improvement Act of 1991
requires that the Resolution Trust Corporation resolve institutions
in the least costly manner and that we report to the Congress
annually on the Corporation's compliance with the least-cost
provisions.  Our most recent least-cost compliance review identified
no significant compliance issues.  A detailed discussion of our
findings and the Corporation's comments is presented in 1993 Thrift
Resolutions:  RTC's Resolution Process Generally Adequate to
Determine Least Costly Resolutions (GAO/GGD-95-119, May 15, 1995). 


   RECOMMENDATION
------------------------------------------------------------ Letter :6

We recommend that the Deputy and Acting Chief Executive Officer
direct the Corporation's staff to monitor the implementation and
progress of the corrective actions related to the weakness we
identified in general controls over some of the Corporation's
computerized information systems. 


   CORPORATION COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

In comments on a draft of this report, the Corporation's Chief
Financial Officer agreed with our findings and recommendation.  The
Chief Financial Officer's written comments, provided in appendix IV,
discuss efforts, many of which are ongoing, intended to address the
reportable condition.  We plan to evaluate the adequacy and
effectiveness of these efforts as part of our audit of the
Corporation's December 31, 1995, financial statements. 

Charles A.  Bowsher
Comptroller General
of the United States

June 2, 1995


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

The Corporation's management is responsible for

  preparing annual financial statements in conformity with generally
     accepted accounting principles;

  establishing, maintaining, and evaluating the internal control
     structure to ensure that it provides reasonable assurance that
     the internal control objectives previously mentioned are met;
     and

  complying with applicable laws and regulations. 

We are responsible for obtaining reasonable assurance about whether
(1) the financial statements are free of material misstatement and
presented fairly in conformity with generally accepted accounting
principles and (2) management's assertion about the effectiveness of
internal controls is fairly stated in all material respects based
upon the criteria in GAO's Standards for Internal Controls in the
Federal Government required by the Federal Managers' Financial
Integrity Act.  We are also responsible for testing compliance with
significant provisions of selected laws and regulations. 

In order to fulfill these responsibilities, we

  examined, on a test basis, evidence supporting the amounts and
     disclosures in the financial statements;

  assessed the accounting principles used and significant estimates
     made by the Corporation's management;

  evaluated the overall presentation of the financial statements;

  evaluated and tested relevant internal controls over the following
     significant cycles, classes of transactions, and account
     balances: 

resolved institutions, consisting of policies and procedures related
to (1) resolution activities, (2) receipts and disbursements in
receiverships, and (3) valuation of the Corporation's net receivables
from resolution transactions and assistance;

unresolved institutions, consisting of policies and procedures
related to identifying and estimating the cost of future resolutions
and of providing advances to institutions in conservatorship;

Federal Financing Bank borrowings, consisting of policies and
procedures related to the borrowing, use, and repayment of working
capital;

treasury, consisting of policies and procedures related to Corporate
cash receipts and disbursements; and

financial reporting, consisting of policies and procedures related to
the processing of journal entries into the general ledger and the
preparation of financial statements; and

  tested compliance with significant provisions of the following laws
     and regulations: 

section 21A of the Federal Home Loan Bank Act (12 U.S.C.  1441a) and

Chief Financial Officers Act of 1990 (Public Law 101-576). 

We limited our work to accounting and other controls necessary to
achieve the objectives outlined in our opinion on management's
assertion about the effectiveness of internal controls. 

We conducted our audit between July 1994 and June 1995 in accordance
with generally accepted government auditing standards.  We believe
that our audits provide a reasonable basis for our opinions. 

The Corporation's Chief Financial Officer provided written comments
on a draft of this report.  These comments are discussed in the
"Corporation Comments and Our Evaluation" section of the opinion
letter and are reprinted in appendix IV.  We have incorporated the
Corporation's views where appropriate. 


FINANCIAL STATEMENTS
========================================================== Appendix II

   Statements of Financial
   Position

   (See figure in printed
   edition.)

   Statements of Revenues,
   Expenses and Accumulated
   Deficit

   (See figure in printed
   edition.)

   Statements of Cash Flows

   (See figure in printed
   edition.)

   Notes to Financial Statements

   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)




(See figure in printed edition.)Appendix III
MANAGEMENT'S REPORT ON INTERNAL
CONTROLS
========================================================== Appendix II



(See figure in printed edition.)



(See figure in printed edition.)




(See figure in printed edition.)Appendix IV
COMMENTS FROM THE RESOLUTION TRUST
CORPORATION
========================================================== Appendix II



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

John J.  Reilly, Assistant Director
Lynda E.  Downing, Audit Manager
Christine A.  Robertson, Audit Manager
Vera M.  Seekins, Audit Manager
Phyllis L.  Anderson, Auditor
Diane P.  Boch, Auditor
Oscar J.  Castro, Auditor
Phillip W.  McIntyre, Auditor

ATLANTA REGIONAL OFFICE

Shawkat Ahmed, Audit Manager
Johnny Barnes, Auditor
Rhonda P.  Rose, Auditor
Cynthia C.  Teddleton, Auditor
Lisa M.  Warde, Auditor

DENVER REGIONAL OFFICE

Paul S.  Begnaud, Auditor
Mary B.  Gaston, Auditor
Miguel A.  Lujan, Auditor
Anna L.  Fruik, Member

KANSAS CITY REGIONAL OFFICE

Patricia S.  Dickerson, Audit Manager
Rose M.  Dorlac, Auditor
Richard S.  Schupbach, Auditor

RELATED GAO PRODUCTS

Resolution Trust Corporation:  Better Data Could Improve
Effectiveness of Nonperforming Loan Auctions (GAO/GGD-95-1, November
14, 1994). 

Failed Financial Institutions:  RTC/FDIC Risk Fraud and Mismanagement
by Employing Those Deemed Culpable (GAO/OSI-95-1, October 3, 1994). 

RTC Affordable Housing Open House (GAO/GGD-95-23R, October 31, 1994). 

Resolution Trust Corporation:  Affordable Housing Disposition Program
Achieving Mixed Results (GAO/GGD-94-202, September 28,1994). 

Resolution Trust Corporation:  Recommendations Addresssed to Oversee
and Account for Cash Flow Mortgages (GAO/GGD-94-179, July 26, 1994). 

Resolution Trust Corporation:  Better Analyses Needed Before
Terminating Asset Management Contracts (GAO/GGD-94-147, July 8,
1994). 

Special Resource Properties (GAO/GGD-94-161R, July 1, 1994). 

Resolution Trust Corporation:  Interim Report on the Management
Reforms in the RTC Completion Act (GAO/GGD-94-114, June 30, 1994). 

1992 Thrift Resolutions:  RTC Policies and Practices Did Not Fully
Comply With Least-Cost Provisions (GAO/GGD-94-110, June 17, 1994). 

Bank and Thrift Regulation:  Better Guidance is Needed for Real
Estate Evaluations (GAO/GGD-94-144, May 24, 1994). 

Resolution Trust Corporation:  Real Estate Recoveries 1993
(GAO/GGD-94-84FS, March 25, 1994). 

Resolution Trust Corporation:  Analysis of Selected Asset Sales and
Financial Data (GAO/GGD-94-37, February 1, 1994). 
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