The special inspector general for the Troubled Asset Relief Program, Neil Barofsky, is expected to release his first official report late Thursday. Barofsky, whose nomination for the inspector general position was confirmed Dec. 8., was sworn in on Dec. 15 and has since been conducting looking into ways greater transparency and oversight of the TARP program can be achieved. The first report over the program takes a severe look at the Treasury Department's decision to value the government's capital investments at cost and concludes that "the cost-based valuation methodology will not provide an accurate view of the value of the securities over time," especially since so many of the financial institutions that have participated in TARP have posted huge fourth-quarter losses and still struggle with write-downs and other byproducts of a volatile market. Barofsky's report will call for a reform of this cost-based valuation methodology and the development of a long-term investment strategy for the program, according to an article by American Banker, which has obtained an advance copy of the report. "How long these securities should be held and when, and under what circumstances, they should be sold into the market are vitally important questions that implicate not only the taxpayers' return on their investment, but also the stability of the markets," the report reads in part, according to American Banker. "[Special Inspector General for the TARP] recommends that Treasury quickly determine its going-forward valuation methodology." According to an article by Forbes, which also received an advance copy of the report, Barofsky's report will also ask the Treasury to postpone investing the $20 billion promised as the Treasury's share of the Federal Reserve's Term Asset-Backed Securities Loan Facility until the program is strengthened and an issue with compliance -- which is currently limited to signed certifications. In a letter addressed to Max Baucus, chairman of the Committee on Finance, and dated Jan. 7, Barofsky shared his initial thoughts on rules that should be implemented in TARP going forward. He suggested, among other regulations, that each recipient of TARP funds should establish internal controls to meet the conditions placed on them within their respective contracts, report to the program directors on the progress of implementing those controls and make an effort to account for their use of TARP funds. (Click here to read the letter to Baucus.) "If the American taxpayer is to be expected to fund this extraordinary effort to stabilize the financial system, it is not unreasonable that the public and its representatives in Congress have some understanding as to how those funds have been used by the recipients," Barofsky wrote in a separate letter written Jan. 22 to Charles Grassley, a ranking member of the Committee on Finance. "The current lack of transparency...has the potential to erode the trust of the public in the effectiveness and integrity of TARP, potentially putting at risk the legitimacy of the entire program." (Click here to read the letter to Grassley.) Write to Diana Golobay at