oversight

FCA's Process in Developing and Updating Policies and Procedures

Published by the Farm Credit Administration, Office of Inspector General on 2016-03-31.

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

OFFICE OF
INSPECTOR GENERAL      InspecƟon Report
                      Farm Credit AdministraƟon’s
                       Process in Developing and
                    UpdaƟng Policies and Procedures
                                 I‐16‐01

                               Inspector
                                Ava Bell

                        Issued March 31, 2016




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




March 31, 2016


The Honorable Kenneth A. Spearman, Board Chairman
The Honorable Dallas P. Tonsager, Board Member
The Honorable Jeffery S. Hall, Board Member
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090

Dear Board Chairman Spearman and FCA Board Members Tonsager and Hall:

The Office of Inspector General (OIG) completed an inspection of the Farm Credit Administration’s (FCA
or Agency) Process in Developing and Updating Agency Policies and Procedures (PPMs). The objective of
this inspection was to determine the effectiveness and efficiency of FCA’s process in developing and
updating PPMs.

We found the Agency is generally consistent in preparing and formatting new PPMs and routing for
approvals. The Agency also consistently posts and communicates new and modified PPMs.

We identified opportunities to improve the PPM processes. The Agency agreed to the following actions:

    1.		 Publish procedures for developing, updating, formatting, approving and communicating PPMs.
    2.		 Periodically review PPMs to certify whether policies and procedures are current, need updating,
         or should be rescinded.
    3.		 Consider automating the review and approvals process.

We appreciate the courtesies and professionalism extended by FCA personnel to the OIG staff. If you
have any questions about this inspection, I would be pleased to meet with you at your convenience.

Respectfully,




Elizabeth M. Dean
	
Inspector General
	

Enclosure
RESULTS:

The Agency uses a consistent            Inspection of Farm Credit Administration’s
	
process for developing new                 Process in Developing and Updating
	
or updating existing policies
and procedures (PPMs). The                   Agency Policies and Procedures
	
Agency also generally
communicates new and             The Farm Credit Administration (FCA or Agency) maintains an online library
updated information about        of Agency policies and procedures (PPMs). The PPM library serves as a
PPMs to its employees.           central repository for PPMs and is a valued resource to FCA employees for
                                 information on Agency programs.
We identified opportunities
for improvement in the           The inspection objective was to determine the effectiveness and efficiency of
following areas:                 FCA’s process in developing and updating Agency policies and procedures.
•	 The processes for
     developing and updating     We found the Agency is generally consistent in the following processes:
     policies and procedures
     are not formalized in a         •	 Preparing and formatting new PPMs;
     written document. Such          •	 Routing PPMs for approvals;
     a document might
     include: responsibilities       •	 Posting new PPMs or modifications; and
     associated with                 •	 Communicating PPM information to employees.
     developing and updating
     PPMs; oversight of the      We identified opportunities to improve the PPM processes and the Agency
     PPM library; methods for    agreed to take the following actions.
     approvals; and guidance
     on content.                     1.		 Publish procedures for developing, updating, formatting, approving
•	 Many PPMs have older                   and communicating PPMs.
     publication dates and
     contain outdated                2.		 Periodically review PPMs to certify whether policies and procedures
     information about                    are current, need updating, or should be rescinded.
     Agency policies and
     programs.                       3.		 Consider automating the review and approvals process.
•	 The process to
     determine when a new,
                                 The Agency agreed to complete specific tasks to improve the PPM process.
     updated or rescinded
     PPM should be               These tasks include creating a PPM to document the PPM process, and
     communicated to             documenting how and when PPMs are reviewed. The Agency stated it will
     employees is not            also consider automating the review and approvals process.
     documented.
                                   TABLE OF CONTENTS



BACKGROUND _______________________________________________________ 1


 Prior Review ______________________________________________________________________ 1
	

INSPECTION RESULTS ________________________________________________ 2


 Developing or Updating a PPM ________________________________________________________ 2
	

   Basic PPM Process________________________________________________________________ 2
	
   Routing and Approvals ____________________________________________________________ 2
	
   Routing Process__________________________________________________________________ 3
	
   SharePoint Access ________________________________________________________________ 3
	
   PPM Template Elements ___________________________________________________________ 3
	
 Outdated Policies and Procedures _____________________________________________________ 4
	

 Communication ____________________________________________________________________ 6
	

 Agreed-Upon Actions _______________________________________________________________ 6
	

OBJECTIVE, SCOPE, AND METHODOLOGY _______________________________ 7


ACRONYMS _________________________________________________________ 8

BACKGROUND


    The Farm Credit Administration (FCA or Agency) is an independent federal agency responsible for
    regulating, examining, and supervising the Farm Credit System and the Federal Agricultural Mortgage
    Corporation. The core mission of the Agency is to ensure a safe, sound, and dependable source of credit
    and related services for agriculture and rural America.

    FCA maintains a library of Agency policies and procedures (PPMs) to ensure processes are documented
    and communicated to employees. The online library of PPMs is housed in the Policies and Procedures
    site in SharePoint. All FCA employees have read-only access to the library.

    Since 2012, when the PPMs were moved to SharePoint, a former document providing guidance to all
    staff on the responsibilities for use and oversight of the PPMs, was not transferred to the SharePoint
    library.

    The Standards for Internal Control in the Federal Government, also known as the “Green Book,” state
    that management should implement control activities through policies and the following attributes 1
    contribute to the effective design, implementation, and operation of internal controls:

        •    Documentation of responsibilities through policies,
        •    Periodic review of control activities, and
        •    Communication throughout the entity with appropriate methods of communication.


    Prior Review
    Although not exactly on point, the Office of Inspector General conducted an inspection of the FCA Board
    Policy Statements (I-03-05) to determine if they were consistent with sound business practices in terms
    of relevancy, timeliness, coverage, and key elements. The inspection found the Agency did not have an
    established methodology for developing Policy Statements and there was inconsistency in subjects
    covered and level of detail provided. Additionally, several statements were outdated and documented
    practices and operations no longer in existence, or missing key elements for sound policy. The
    inspection resulted in three recommendations, with all action items closed in 2005. The
    recommendations related to: 1) establishing a methodology for the policies, including distinguishing
    between FCA operations policy and philosophy statements as guidance for the Farm Credit System; 2)
    regular review of the policies and updating when appropriate; and 3) a content review of the policies to
    ensure oversight of critical FCA operations.




    1
      Based on Principle 12, Implement Control Activities, and Principle 14, Communicate Internally, Standards for Internal Control
    in the Federal Government (Green Book).

                                                                   1
INSPECTION RESULTS

     The objective of this inspection was to determine the effectiveness and efficiency of FCA’s process in
     developing and updating Agency policies and procedures. The Agency is generally consistent in its
     process for initiating a new PPM or updating an existing PPM. However, this process is not formally
     documented in a format that is readily accessible and communicated to FCA staff. We identified
     opportunities to improve the PPM processes as described in the following sections.

     Developing or Updating a PPM
     The Agency has a process for developing and updating FCA’s policies and procedures in practice, but the
     process is not available to personnel and stakeholders in a written document. A new PPM may be
     developed for a variety of reasons: Executive Order or Presidential Memorandum, Office of
     Management and Budget or Office of Personnel Management requirement, Congressional request or
     mandate, Office of General Counsel requirement or suggestion, staff suggestion, or result of an audit
     finding.

     When the PPMs were housed in Lotus Notes, an “About Document” provided guidance on definitions,
     responsibilities and various procedures relating to preparation, formatting, approvals, classification,
     publication and distribution of PPMs. The About Document was not transferred to SharePoint with the
     PPMs; therefore, this written guidance is not readily available to employees. Documenting the Agency’s
     PPM process in a format that is accessible to all employees will ensure the procedures are consistently
     and efficiently followed, and the required approvals are obtained.

     Basic PPM Process
     The Agency’s general process for initiating a new PPM or updating an existing PPM consists of: drafting
     and finalizing a new or updated PPM; routing the PPM for approvals; loading the approved PPM into
     SharePoint; and notifying employees of the change through FCA Today or other means of
     communication. Documenting this process will provide a resource for staff to follow when initiating a
     new PPM or updating an existing PPM.

     Routing and Approvals
     The Agency’s routing of PPMs for approval
     generally includes approval by the: Office of
     General Counsel (OGC), Chief Operating
     Officer (COO), Executive Assistant to the
     Chairman, and Chairman. If the PPM is specific
     to an office, it is also approved by that Office
     Director. By practice, if the PPM contains
     procedures, it is approved by the COO; if the
     PPM contains a policy, it is approved by the
     Chairman. OGC approval is sometimes
     requested and sometimes required.
     Documenting the routing process and defining
     when approvals are required, and by which
     offices, will ensure appropriate approvals are
     obtained.

                                                         2
Routing Process
To obtain the various approvals, the Agency uses a paper routing sheet to submit a new or updated
PPM. This sheet lists the names of those to approve and dates when the PPM package is received and
action taken by each staff member. Based on our review of the PPM files, a new or updated PPM
generally takes one to two weeks for final review and approvals. File documentation showed that
occasionally a routing sheet was not used. We also found inconsistency in the documentation of the
PPM routing packages. Only a few packages included background documentation explaining what gave
rise to developing or updating the PPM, such as an Executive Order or change in regulations.

Automating the review and approvals process will ensure a consistent routing mechanism is used. It
would also provide a central storage location for background documentation, as well as a cumulative
review of edits and comments.

SharePoint Access
All employees have read-only access to the SharePoint PPM library. The Agency limits contributor access
to the SharePoint PPM library to two employees (in addition to the Office of Information Technology’s
SharePoint administrators). This provides reasonable controls for access to the Agency Policies and
Procedures site.

PPM Template Elements
The Agency was consistent with the formatting of the two new PPMs we reviewed that were developed
in Fiscal Years (FY) 2014 and 2015. These two PPMs both include the following elements in their
respective policy and procedures sections.

       Policy section includes:
           • Policy
           • References
           • Delegations
           • Reporting

       Procedures section includes (in addition to sections specific to each PPM):
           • Implementing Procedures
           • General Agency Guidance
           • Definitions
           • Accountability

Defining required section elements through use of formal templates will continue to ensure consistency
in the formatting of new or updated PPMs.




                                                   3
	
Outdated Policies and Procedures
Our inspection included a review of the SharePoint library of PPMs to determine how current they are. It
appears many PPMs have not been updated for a number of years. Of the 92 PPMs the Agency has
published in SharePoint as of January 20, 2016, we found:


                 No. of PPMs                   with a publication date…
                      31                  January 1, 2011 to January 20, 2016
                      14                 January 1, 2006 to December 31, 2010
                      47                        prior to January 1, 2006


We found no documentation in the records we inspected that indicated whether the PPMs had been
reviewed since their publication date in SharePoint.



                            Latest PPM Publication Date
	



                                                               34%
                                    51%                    within last
                                   more                     5 years
                                  than 10
                                 years ago                 15%
                                                         5-10 years
                                                            ago




                                                   4
	
We also reviewed PPM titles, publication dates and limited content. We noted several PPMs with
outdated information or potentially obsolete information. The chart below identifies information in
these PPMs that needs further review.

                              PPMs with Information in Need of Review
                                              Publication   Issuing
 PPM No.               PPM Title                 Date         Unit      Information in Need of Review
   861       Domestic Partner Health           3/5/2015      OMS      Update for Supreme Court ruling
             Insurance Subsidy Program
   804       FCA Compensation Program         1/17/2014      OMS      Compensation 2016
   821       Hours of Duty and Alternative    9/13/2006      OMS      PPM states: OMS reviews and
             Work Schedule Program                                    revises or modifies these
                                                                      implementing procedures at least
                                                                      every 2 years
   700       Telephone System                 9/10/2003      OMS      Update for iPhones, iPads—PPM
                                                                      refers to Blackberries
   707       Telephone Credit Cards            8/5/2003      OMS      Obsolete
   853       Supervisory Development          6/19/2003      OMS      Date missing
             Program
   900       IRM Planning                     3/14/2003      OMS      Signature and date missing
   833       Health Benefits                   3/7/2003      OMS      Update Agency contribution;
                                                                      Update for Supreme Court ruling;
                                                                      Update for dependent children
                                                                      coverage to age 26
   832       Group Life Insurance              3/7/2003      OMS      Update for Supreme Court ruling
   829       AIDS                              3/7/2003      OMS      Consider rescinding or broaden to
                                                                      cover other diseases
   851       Property Management              11/8/2002      OMS      Update for electronic certification
             Program                                                  forms; Refers to obsolete Board
                                                                      Policy Statement 69
   840       Role and Responsibility of the   9/30/2002      OMS      Signature and date missing
             Contracting Officer’s
             Technical Representative
   852       Student Loan Program              9/4/2002      OMS      Update for new student loan
                                                                      program
   1006      Audit Follow-up Policies and     6/28/2002     OCEO      PPM states: This directive will
             Procedures                                               expire on June 30, 2005 unless
                                                                      reissued by the CEO.
   823       Voluntary Leave Bank             1/28/2002      OMS      Update publication date—signed
             Program                                                  10/28/2010
   901       Publications Group               11/15/1999     OMS      Obsolete
   805       Mail Procedures                   8/19/1998     OMS      Outdated procedures
   800       Farm Credit Administration        6/30/1998     OMS      Organization chart dated Sept 2011
             Organization
   806       Procedures for Acquiring FCA     6/30/1998      OMS      Outdated procedures
             Stock Items
   811       Upward Mobility Program          10/9/1990      OMS      PPM states: This PPM is being
                                                                      reviewed for possible revisions.
                                                                      (10/15/98)




                                                     5
	
Additionally, there are 37 PPMs that reference one (or more) other PPMs. At least 17 of these PPMs
reference obsolete or outdated PPMs. If PPMs are not kept current, employees may have inaccurate
information on Agency programs and follow outdated procedures.

The Agency does not have a schedule to periodically review current PPMs and certify the status of each
PPM as: current, needs revising, or should be rescinded. Periodic review of the PPMs will ensure
management and employees have access to current operational policies and procedures.


Communication
The Agency generally communicates new PPMs or modifications to PPMs to employees through FCA
Today (a collection of articles emailed to all employees on a daily basis) in a timely manner. During FY
2013 through 2015, we found most new PPM information was communicated through FCA Today to all
employees or alternatively, through other means directed to the specific stakeholders (e.g., to office
directors). However, we found no written guidance describing the Agency’s communication process for
new PPM content.

Because the Agency does not have a documented process for determining when a new, updated or
rescinded PPM should be communicated to employees, responsibility for deciding when and how to
communicate updates to PPMs lies with the PPM author. Formalizing guidance on publishing new or
updated PPM information will ensure employees are notified of new or modified PPMs.


Agreed-Upon Actions
1.		 Publish procedures for developing, updating, formatting, approving and communicating PPMs.

2.		 Periodically review PPMs to certify whether policies and procedures are current, need updating, or
     should be rescinded.

3.		 Consider automating the review and approvals process.

The Office of Management Services agreed to complete the following specific tasks to improve the PPM
process:

1.		 Create an Agency PPM that documents the PPM process, including developing, updating,
     formatting, approving and communicating PPMs.

2.		 Provide written documentation demonstrating when and how PPMs are reviewed.

3.		 Provide written documentation demonstrating that automating the PPM process was considered.




                                                    6
	
OBJECTIVE, SCOPE, AND METHODOLOGY


     The objective of the inspection was to determine the effectiveness and efficiency of FCA’s process in
     developing and updating Agency policies and procedures. We conducted fieldwork at FCA’s
     headquarters in McLean, Virginia from December 2015 to March 2016. We limited our scope to FY 2013
     through 2015.

     We completed the following steps to accomplish the inspection objective:

            •   Reviewed applicable laws and regulations relating to the inspection objective, including
                Standards for Internal Control in the Federal Government (Green Book);

            •   Considered prior reviews related to the inspection objective;

            •   Reviewed current Agency policies and procedures (PPMs);

            •   Conducted interviews with key personnel involved in the PPM process;

            •   Obtained background information on policymaking procedures;

            •   Identified internal controls over the PPM process;

            •   Reviewed the processes for developing, updating and communicating PPMs, including
                required approvals and controls; and

            •   Analyzed relevancy, timeliness and coverage of subject matter.

     This inspection was performed in accordance with the Council of the Inspectors General on Integrity
     and Efficiency’s Quality Standards for Inspection and Evaluation. Those standards require that we plan
     and perform the inspection to obtain sufficient, competent and relevant evidence that supports a
     reasonable basis for our findings, conclusions and recommendations. We assessed internal controls and
     compliance with laws and regulations to the extent necessary to satisfy the objective. Because our
     review was limited, it would not necessarily have disclosed all internal control deficiencies that may
     have existed at the time of our inspection. We assessed the information and data collected during the
     inspection and determined it was sufficiently reliable and valid for use in meeting the inspection
     objectives. We assessed the risk of fraud related to our inspection objective in the course of evaluating
     evidence. Overall, we believe the evidence obtained is sufficient to provide a reasonable basis for our
     findings and conclusions based on the inspection objective.




                                                        7
ACRONYMS


           COO   Chief Operating Officer

           FCA   Farm Credit Administration

           FY    Fiscal Year

           OGC   Office of General Counsel

           OMS   Office of Management Services

           PPM   Policies and Procedures




                                                 8
	
    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