oversight

FCA's Adherence to the Government in the Sunshine Act I-10-02

Published by the Farm Credit Administration, Office of Inspector General on 2010-07-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

OFFICE OF
INSPECTOR GENERAL   Report of Inspection
                      FCA’s ADHERENCE TO
                    THE GOVERNMENT IN THE
                         SUNSHINE ACT

                             I-10-02

                         JULY 26, 2010




                    FARM CREDIT ADMINISTRATION
Farm Credit Administration	                                         Office of Inspector General
                                                                    1501 Farm Credit Drive
                                                                    McLean, Virginia 22102-5090




July 26, 2010


The Honorable Leland A. Strom
Chairman of the Board
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090

Dear Chairman Strom:

The Office of Inspector General (OIG) completed an inspection of the Farm Credit Administration’s
Adherence to the Government in the Sunshine Act.

We performed this inspection in accordance with the Council of the Inspectors General on Integrity
and Efficiency “Quality Standards for Inspections.” We conducted fieldwork beginning March 3,
2010. The OIG provided a discussion draft of the report to senior management on July 1 and a final
draft report on July 14.

During this inspection, senior management agreed with the OIG’s findings and to our proposed
recommendation. As a result, the recommendation has been changed to an agreed-upon action as
follows:

   •	 The Office of General Counsel will develop scenarios to provide examples of practical

      application of the Government in the Sunshine Act. Through use of case law and 

      hypothetical examples, the scenarios will seek to provide the Board an enhanced 

      understanding of situations both within and beyond the intent and parameters of the

      Sunshine Act.


If you have any questions about this report, I would be pleased to meet with you at your
convenience.

Respectfully,


Carl A. Clinefelter

Carl A. Clinefelter
Inspector General
                           Table of Contents


BACKGROUND _________________________________________________________ 1


OBJECTIVE AND SCOPE _________________________________________________ 3


FINDINGS AND RECOMMENDATIONS ______________________________________ 4

 BACKGROUND



              The Farm Credit Administration (FCA or Agency) is an executive branch, independent
              Federal financial regulatory agency. FCA has regulatory, examination, and supervisory
              responsibilities for the Farm Credit System (FCS) banks, associations, and related
              institutions.


              THE FCA BOARD

              The FCA Board (Board), established by the Farm Credit Act of 1971, as amended (Act),
              is the governing entity of the FCA. The Board is composed of three full-time members,
              appointed by the President, by and with the advice and consent of the U.S. Senate. The
              Act defines a quorum shall consist of two members of the Board and business may be
              transacted provided a quorum exists. The Act also provides that the Board shall hold at
              least one meeting each month and such additional meetings at such times and places as
              the Board may fix and determine.


              THE GOVERNMENT IN THE SUNSHINE ACT

              During the 1970s, partially in response to the Watergate scandal, Congress enacted the
              Government in the Sunshine Act (Sunshine Act), Pub. L. No. 94-409, 90 Stat. 1241
              (1976), along with the Freedom of Information Act and other anti-secrecy legislation. The
              intent of the Sunshine Act was to open government deliberation to the public. The
              Sunshine Act applies to agencies “headed by a collegial body composed of two or more
              individual members… and covers approximately 50 Federal agencies, including the
              FCA.1” A board whose members are not appointed by the President is not an agency
              subject to the Sunshine Act. 2


              MEETINGS

              Defining “meetings” and “deliberation” are vital to understanding and complying with the
              Sunshine Act. During the legislative process and through case law, various reports and
              legal decisions addressed the statutory meaning.

              For example, the Senate Report explains that: “The definition of “meetings” includes the
              conduct, as well as the disposition, of official agency matters. It is not sufficient for the
              purposes of open government to merely have the public witness final agency votes. The
              meetings … are not intended to be merely reruns staged for the public after agency

              1
                  5 U.S.C. 552b(a)

              2
                  Hunt v. Nuclear Regulatory Commission, 611 F.2d 332, 335 (10th Cir. 1979).




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              members have discussed the issue in private and predetermined their views. The whole
              decision-making process, not merely its results must be exposed to public scrutiny.”
              S. Rep. 94-No.354 at 18 (1975). Similarly, the House Report states “meetings” include
              not only sessions at which formal action is taken, but also those at which a quorum of
              members deliberates regarding the conduct or disposition of agency business.
              H.R. Rep. 94-880(I), at 3 (1976). Unlike a board composed of many members, this can
              be more constraining when, as at FCA, the quorum of the Board consists of any two of
              three Members.

              Further, the Conference Report also made clear that the definition of “meetings” included
              conference calls if they involve the requisite number of members and otherwise come
              within the definition. Conf. Rep. No. 94-1178, at 11 (1976).

              The Supreme Court addressed the term “meetings.” “This statutory language
              contemplates discussions that effectively predetermine official actions. Such discussions
              must be sufficiently focused on discrete proposals or issues as to cause or to be likely to
              cause the individual participating members to form reasonably firm positions regarding
              matters pending or likely to arise before the agency.” FCC v. ITT World Communications,
              Inc. 466 U.S. 463, 471(1984).

              The definition of “meetings,” however, does not include a meeting to discuss the
              scheduling of future meetings. Washington Association for Television & Children v. FCC,
              665 F. 2d 1264, 1272 (D.C. Cir. 1981).

              The Sunshine Act requires “every portion of every meeting of an agency shall be open to
              public observation” with ten narrow exemptions related to:
                   (1) National Defense and foreign policy;
                   (2) Internal personnel rules and practices;
                   (3) Statutory exemptions;
                   (4) Proprietary information;
                   (5) Accusation of crime or formal censure;
                   (6) Personal privacy;
                   (7) Investigatory records;
                   (8) Financial institution reports;
                   (9) (a) Financial speculation and stability;
                       (b) Frustration of proposed agency action; and
                  (10) Issuance of subpoena, participation in civil action or proceeding, or formal

                       agency adjudications. 3


              These ten exemptions allow for closed meetings or closed portions of an otherwise open
              meeting.



              3
                  5 U.S.C. 552b (c)



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              There are procedural requirements if an agency meets for either an open or a closed
              session. First, at least one week prior to each meeting, the agency must make a public
              announcement regarding the time, place, and subject matter of the meeting, the name
              and phone number of the designated official (at FCA it is the Secretary to the Board), and
              whether the meeting is to be open or closed.

              To close all or a portion of a meeting, an agency must vote to do so and make publically
              available a written copy of the vote and “full written explanation of its action closing the
              portion.” Also, for a closed meeting, the agency’s General Counsel must publicly certify
              that the meeting may be closed under one of the Sunshine Act’s exemptions. FCA has
              invoked “expedited procedures” to close meetings primarily because of the Agency’s
              financial regulatory role. The expedited procedures are set forth in regulation 12 C.F.R. §
              604.430. The regulation permits closing a meeting or portion of a meeting by recorded
              vote of the majority of its members at the beginning of the meeting, or portion of the
              meeting.

              All agencies subject to the Sunshine Act must also report to Congress annually on: any
              changes in the agency’s policies and procedures under the Sunshine Act; a tabulation of
              the number of meetings held, exemptions applied, and the days of public notice provided
              to close a meeting; a brief description of litigation or formal complaints concerning the
              implementation of the Sunshine Act; and any changes in law that have affected the open-
              meeting responsibilities of the agency.



 OBJECTIVE AND SCOPE


              The objectives of this inspection were to determine whether FCA adheres to the
              Government in the Sunshine Act and whether improvement is warranted. The
              inspection was performed in accordance with “Quality Standards for Inspections.”

              To conduct this inspection, we reviewed the Government in the Sunshine Act; FCA
              regulations; interviewed staff; reviewed meeting records, documents and announcements
              and listened to DVD recordings of four (4) closed meetings to determine that the subject
              matter was consistent with the exemptions to the open meeting mandate of the Sunshine
              Act. We selected a number of open and closed meetings conducted during calendar
              years 2007 through 2009 and verified adherence to the requirements as set forth in the
              Sunshine Act and FCA regulations. We also reviewed the annual reports prepared
              during 2007-2009.




Inspection Report on FCA’s Adherence to The Government in the Sunshine Act - July 26, 2010           3
 FINDINGS AND RECOMMENDATIONS


              There is an evident intent and overriding effort at FCA to comply with the Sunshine Act.
              The Sunshine Act Officer, who is also the Secretary to the Board to both the FCA and the
              Farm Credit System Insurance Corporation, has undertaken significant measures to
              streamline and ensure compliance with the letter and intent of the law. The Sunshine Act
              Officer is diligent in documenting processes and procedures and has prepared detailed
              manuals and guidance. His efforts will afford his successor a firm basis for continuity.

              Board meetings are routinely held the second Thursday of each month. The Sunshine
              Act requires the Agency to make a public announcement of each meeting at least one
              week before a Board meeting. FCA Regulation 604.425(c), and the policy concerning the
              transaction of business by the FCA Board, further specifies that the public notification
              shall be made not later than 8 days before the beginning of a meeting. Publication is
              posted within the Agency, on the FCA website, and in the Federal Register.

              This inspection verified the accuracy of the Board Secretary Procedure Manual which
              states: “[T]he business of an FCA board meeting typically includes such matters as:
              promulgation of regulations; prior approval of requests from System institutions; items
              that pertain to the conduct of business of the Agency, and periodic reports on FCA
              operations by Agency staff.”

              It also correctly states: “FCA Board Meeting closed session matters falling within the
              exemptions identified in the Sunshine Act may include: presentations by staff on matters
              pertinent to the examination and supervision of the Farmer Mac by the Office of
              Secondary Market Oversight; examination and supervisory matters pertinent to FCS
              institutions; proprietary information of FCS institutions and/or the System; Agency
              personnel matters; and executive sessions with the Inspector General.”

              The specific exemption for the closed session must be certified in writing and made part
              of the official records and minutes. We found that the exemption for each closed session
              was certified in writing and made part of the official records and minutes.

              If the agenda for any meeting of the Board is amended to include a closed session, public
              notice must take place as soon as practicable after the meeting. During the time period
              reviewed for this inspection, we did not find any such instances when the agenda was
              amended to include a closed session following publication of the initial notice.

              The Sunshine Act requires agencies to maintain a complete transcript or electronic
              recording of the proceedings of each meeting, or portion of a meeting, closed to the
              public. Transcripts, recordings, and minutes must disclose the identity of each speaker.
              An agency is required to maintain a complete verbatim copy of each transcript, a copy of
              each set of minutes, and a complete copy of each electronic recording or a meeting or


Inspection Report on FCA’s Adherence to The Government in the Sunshine Act - July 26, 2010          4
              portion of a meeting, closed to the public, for at least 2 years, or until 1 year after the
              conclusion of an agency proceeding with respect to which the meeting or portion was
              held, whichever is later. 5 U.S.C. § 552b(k). At FCA, the records for the time period
              covered within the scope of this inspection were complete and have been kept beyond
              the required time. There have not been any requests from the public for transcripts or
              recordings under the Freedom of Information Act.

              Each agency must report annually to Congress with respect to its compliance with the
              Sunshine Act. §552b(j). The report is to include changes to agency policy and
              procedures, as well as a “tabulation of the number of meetings held, the exemptions
              applied to close meetings, and the days of public notice provided to close meetings,”
              descriptions of litigation and complaints concerning agency implementation of the
              Sunshine Act; and explanations of any changes in the law affecting agency Sunshine
              responsibilities.” Id. As in all Sunshine Act processes at FCA, the Sunshine Officer has a
              system to collect the information for the annual report. During the fieldwork of the
              inspection, we pointed out that the days of public notice provided to close meetings
              should be included in the report to Congress. The Sunshine Officer immediately made
              the change to the formatting of the report for 2010 to include a column identifying the
              number of days of public notice provided to close meetings. Other than that detail, the
              reports have been complete and timely.

              ORIENTATION, EDUCATION and TRANSPARENCY

              During interviews with the FCA Board members, the Sunshine Act Official, the General
              Counsel and the Deputy General Counsel, we discussed whether orientation and
              education regarding the requirements of the Sunshine Act was sufficient. It was agreed
              by all interviewed that the education is thorough and ongoing from the time a Board
              member is confirmed and continuing throughout each member’s term. Some Board
              members were previously acquainted and familiar with working within the parameters.
              Others felt the requirements were pervasive, forcing an unnatural focus on balancing
              collegiality with transparency. All interviewed agreed that those involved in adherence to
              the Sunshine Act’s requirements are diligent and conscientious.

              Precautions are routinely taken to avoid any possible transgression from a preliminary
              discussion becoming a deliberation. When two Board members meet, there is a staff
              member, knowledgeable and focused on preserving all aspects of the Sunshine Act,
              present to observe the discussion and witness its preliminary or factual nature. However,
              not all situations when two Board members gather are potentially problematic.

              In discussing where the boundaries exist to distinguish preliminary or factual discussion
              from pre-deliberation or deliberation, it was agreed that Board members may benefit from
              the development of sample scenarios that exemplify practical application. This exercise,
              agreed to by the General Counsel, will afford the Board an update in access law and




Inspection Report on FCA’s Adherence to The Government in the Sunshine Act - July 26, 2010             5
              provide examples of reasoned situational experiences and exemptions pertinent to the
              Sunshine Act.

              In another respect, the Board, as a collegial body, recognizes its role of balancing
              independent decision making and public interest in viewing decision making. Although it
              is entirely appropriate to use notational voting to transact Agency business, there is an
              initiative to make notational votes more open to the public view either through inclusion in
              open meetings or providing public notice. There is an ongoing effort to use opportunities
              to enhance transparency.

         Agreed-Upon Action

         1.	 The Office of General Counsel will develop scenarios to provide examples of practical
             application of the Government in the Sunshine Act. Through use of case law and
             hypothetical examples, the scenarios will seek to provide the Board an enhanced
             understanding of situations both within and beyond the intent and parameters of the
             Sunshine Act.




Inspection Report on FCA’s Adherence to The Government in the Sunshine Act - July 26, 2010           6
        R E P O R T 

Fraud   |   Waste     |   Abuse     |   Mismanagement





        FARM CREDIT ADMINISTRATION

        OFFICE OF INSPECTOR GENERAL


 • Phone: Toll Free (800) 437-7322; (703) 883-4316


 • Fax: 	 (703) 883-4059


 • E-mail: fca-ig-hotline@rcn.com

 •	 Mail:   Farm Credit Administration

            Office of Inspector General

            1501 Farm Credit Drive

            McLean, VA 22102-5090