S&L; Agency’s Sales Data Found Seriously Flawed : Thrifts: A $24-million computerized tracking system is almost useless because of errors in records, GAO says.
A $24-million computer system purchased by the federal government to track billions of dollars in properties seized from failed thrifts has been rendered virtually useless by missing and confusing data, according to General Accounting Office officials.
The Resolution Trust Corporation’s computerized real estate management system, originally planned to be fully operational in June, is unlikely to be fully functional before the end of the year and may be crippled for years by inaccurate records, the GAO says.
“Everything’s hooked up, but people aren’t using it,” said Howard G. Rhile, director of general government information systems for the GAO. “It’s like having a Ferrari Testarossa with an empty gas tank.”
And a separate review by The Times of more than 18,000 property sales found serious gaps in the agency’s records. The review found that 656 properties worth $188.8 million were listed as sold by the agency, but the sales prices were not recorded. Another 301 properties were sold for $92.5 million, but the asking prices were missing from the computerized records.
Accurate information is vital because the RTC currently holds real estate assets worth an estimated $20.4 billion, and the inventory is increasing as the agency takes control of additional failed thrifts. The RTC has sold properties worth $5.4 billion.
The revelations come as the RTC is asking Congress for $80 billion in new funds to pay for shutting down defunct S&Ls.; Lawmakers, already skeptical of the agency’s performance, are likely to become even more reluctant to approve full funding as new questions are raised about the RTC’s ability to oversee its vast real estate holdings.
“The RTC has “all this money and all these assets and it is careening out of control,” said an angry Rep. Bruce F. Vento (D-Minn.), chairman of a special RTC oversight task force of the House Banking Committee.
“It’s junk in and junk out,” he said, referring to the new computer system. “How do you separate the crap from the correct information?”
According to the GAO, an error rate of 20% to 30% on basic information--such as type of property, address and original value--was discovered during an examination by an outside accounting firm of a sampling of records on the computer.
However, RTC spokesman Stephen Katsanos said that the GAO and other critics are “full of bunk.” The computer network, called Real Estate Owned Management System (REOMS), already is being used as local offices transfer their computerized records to the new nationwide system, he said.
“These S&Ls; kept lousy records, and that’s a fact of life,” Katsanos said. “We have over a million cubic feet of records acquired from these S&Ls.; We are going through the process of correcting some of that information so the data quality issue is dealt with.”
The RTC, created in 1989 to manage failed thrifts and dispose of their assets, including securities, loans and foreclosed real estate, has been slow to establish a mechanism to track its vast holdings. The agency, for example, has never had a central system that would enable top managers in Washington to make a quick check of sales by local field managers.
The RTC hired IBM Corp. to design a state-of-the art system to track the thousands of pieces of its real estate--including shopping centers, office buildings, single family homes, condominiums and raw land.
GAO officials said they are convinced that the records being fed into the REOMS system are so riddled with errors as to be all but unusable. Even when the RTC has attempted to correct the mistakes, the error rate is still too high, the GAO believes.
“At this point, nobody is using REOMS,” Rhile said.
The RTC originally compiled sales information on computerized data bases operated through its four regional offices. Frequently, local personnel selling properties neglected to enter information into the computer, or provided hurried and often mistaken entries.
“When the RTC was originally put together, our mission was to go out and sell property, to save the taxpayers money. We were told, ‘Don’t sit on this stuff, go out and sell,’ ” a RTC official said.
“There was no emphasis on saving information,” the official said. “A lot of the stuff is missing from the computer because somebody forgot to put it down.”
As far back as July, 1990, the GAO criticized the RTC, saying: “We did not find strong, central leadership in information resources management activities, nor were there clear lines of accountability, authority and responsibility for managing information resources.”
The RTC headquarters in Washington sent a letter to local offices, advising them that a new tracking system was being developed, and asking for a cleanup of the sales records already carried on the computer.
But these efforts evidently failed. Arthur Andersen & Co., the large accounting firm, took a sample of 3% of the RTC’s records from the computer this summer and compared them with the sales papers on file at local offices of the RTC. Arthur Andersen personnel looked at 14 basic pieces of information, and they discovered an error rate of 20% to 30%.
“We’ve been working like dogs on improving the quality of data,” said Brooks Dickerson, the RTC director of corporate information. “We know we’ve come a long way in 90 days. We’re convinced that the system is much better than it was.” In its separate review, The Times requested from the RTC a listing of all properties sold, along with the asking price, and the final sales price. Three regions supplied information through March 31, while the eastern region supplied data through July 12.
All the regions submitted information with missing data in response to a request filed by The Times under the Freedom of Information Act, and they were unable to supply complete records in response to follow-up requests.
Altogether, sales prices or list prices were absent for $281.3-million worth of property. In addition, the accuracy of other listings seemed questionable; for example, 70 pieces of property were recorded as having been sold for more than 10 times their original asking prices.
RTC officials said that they were unable to fill in the missing information or explain the questionable listings without going back to the original paper files. And these files may be incomplete, erroneous or missing.
An effort to locate information missing from the computer would “mean going back to boxes sealed and stored,” said Barbara A. Labitska, freedom of information specialist for the RTC North Central region. “It would take an extensive and exhaustive search of the files. If it does not show up on the data base it was not reported to us.”
In the Southwest region, “we’re working at trying to clean up all the data and bring it up to date,” said Mary A. Johnson, freedom of information specialist in the Southwest West region.
Katsanos said that the original sloppy bookkeeping at S&Ls; should be blamed for the current problem. “It took us several months to find the mortgage files for one of the biggest mortgage lenders in California. We had to find the one person in the organization who knew the warehouse where the records were stored,” he said.
“Until somebody goes out and sees the property and checks it out, the data quality problem will not be eliminated,” Katsanos said.
Times researcher Murielle Gamache contributed to this story.
