FI Helps U.S. Department of the Treasury Troubled Asset Relief Program

FI Consulting’s work was integral to the UST obtaining ongoing clean audit opinions, with no material weaknesses.

Client: U.S. Department of the Treasury (UST)

Challenge: The UST established several programs under the Troubled Asset Relief Program (TARP) to help stabilize the U.S. financial system, restart economic growth, and prevent avoidable foreclosures. Through the TARP, the UST purchased preferred and common equity, warrants, and debt of institutions within the financial, automotive, and mortgage industries. The Office of Financial Stability (OFS), who administered this program, hired FI Consulting to develop models to estimate cost cuts and valuations of the TARP investments, in accordance with Federal Government accounting and budgeting regulations. The project’s critical challenge was to develop and execute, within a highly compressed timeframe, asset valuation models generating highly visible and scrutinized results.

FI Solution: Though politically controversial, the TARP investments positively contributed to the economic recovery that began in 2009. FI provided complete lifecycle modeling services to support OFS. Our team consulted senior staff within Treasury and the Office of Management and Budget (OMB), and outside subject matter experts, to obtain their support of valuation methodologies early in the engagement. We then designed, developed, tested, and documented complex modeling processes used to value a variety of illiquid investments. The models produced cost estimates and market valuations for more than $400 billion in TARP investments and were designed to embed critical internal controls and facilitate transparency. To validate our models’ results, we benchmarked our valuations against observable market prices of comparable securities and performed sensitivity analysis on a variety of model assumptions. After executing the model process and performing diagnostic tests for validation, we provided cost estimates and market valuations for inclusion in Treasury’s consolidated financial statements. We supported the models through the financial statement and internal controls audits by defending methodologies and providing ad hoc analysis requested by auditors.

FI Impact: FI Consulting’s work was integral to the UST obtaining ongoing clean audit opinions, with no material weaknesses, on both their financial statement and internal controls audits.

FI Consulting has provided consulting services to the UST since 2009.

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