oversight

FY 2004

Published by the Farm Credit Administration, Office of Inspector General on 2005-01-04.

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

Office of
Inspector General

                    FISCAL YEAR 2004
                PERFORMANCE REPORT




                        December 2004
Farm Credit Administration                                    Office of Inspector General
                                                              1501 Farm Credit Drive
                                                              McLean, Virginia 22102-5090




January 4, 2005


The Honorable Nancy C. Pellett
Chairman of the Board and
 Chief Executive Officer
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102

Dear Ms. Pellett:

The Government Performance and Results Act of 1993 encourages organizations to
manage for results and hold managers accountable for executing programs to achieve
desired outcomes. The enclosed report documents the outcomes or impact of the
Office of Inspector General (OIG) products and services. The report demonstrates
the success the OIG had working with the Agency to accomplish its mission of
ensuring a dependable source of credit for agriculture and rural America.

The OIG has been successful in its role as an agent for positive change within the
Farm Credit Administration. The results reflect the commitment that OIG staff has to
helping you, the FCA Board, and FCA employees achieve the agency’s mission. We
are committed to continuing to work with you to ensure FCA remains vigilant in its
efforts to accomplish its mission. I welcome your comments on ways the OIG can
continue to improve our services that help you achieve your goals for FCA operations.
If you have any questions, or concerns, please call me.

Respectfully,



Stephen G. Smith

Enclosure
                                                 TABLE OF CONTENTS

                                                                                                                                         Page
Executive Summary ..................................................................................................................... 1

Audits and Inspections................................................................................................................. 2

Investigations ............................................................................................................................... 5

Legislative and Regulatory Review.............................................................................................. 7

Outreach ...................................................................................................................................... 8

Appendix 1
                     Farm Credit Administration
                     Office of Inspector General
                   FY 2004 Performance Measures

                                 EXECUTIVE SUMMARY
The Office of Inspector General (OIG) of the Farm Credit Administration (FCA or Agency) met
or exceeded most targets or goals for performance in Fiscal Year (FY) 2004. Goals pertained to:
   ƒ   audits and inspections,
   ƒ   technical assistance to agency officials and management,
   ƒ   continuous improvement of the OIG staff,
   ƒ   investigation of administrative and criminal violations,
   ƒ   reviewing and commenting on legislation and regulations affecting the Agency and the
       IG community, and
   ƒ   outreach.
During this reporting period the OIG issued two program audits: 1) the Farm Credit System
Building Association Business Practices and 2) Human Capital: Job Classification. The FY 2003
Audit of the FCA’s Financial Statement was also issued without material findings.

An inspection of Project Management was issued, as well as a review of the Federal Information
Security Management Act (FISMA). OIG began a new practice of issuing IG Observations.
The purpose of issuing the Observation is to alert agency officials and managers to new issues,
problems or analysis to aid in decision making. The first one issued at the end of this year,
compared compensation at FCA with that of other financial regulators. A previous practice was
to issue an IG Advisory to management. Several such advisories were issued on subjects
including: Sunshine in Government Act practices, confidential treatment of Closed Board
Meeting sessions, the financial management system, consolidation of financial regulators, the
accuracy of Board meeting records, enhancing public awareness of FCA’s mission, governance,
timeliness of information distribution, and Board practices.

OIG products were timely and constructive. Most products addressed risk to the Agency. Over
80% of the products contained recommendations to improve agency operations. Feedback from
an audit survey instrument showed management’s satisfaction with OIG products.

Since 1995, the OIG has developed, administered, and collected survey data from the Farm
Credit System, following a financial institution examination, for use by the Agency as a
feedback mechanism in the areas of safety and soundness and value-added results.

A measure of our success is contributing to the Agency’s continuous adaptation of sound
business practices and basic integrity. We are hopeful that the Agency will continue to show
firm commitment to decision making and follow-up to improve operations and programs.

The OIG welcomes comments and suggestions related to performance measurement.


FCA OIG FY 2004 Performance Report                                                      1
                                             Farm Credit Administration
                                             Office of Inspector General
                                           FY 2004 Performance Measures
                                                           AUDITS AND INSPECTIONS
    Objective—Audit and evaluate the Agency’s programs and operations to promote economy, efficiency and effectiveness.

Performance Goal 1—Deliver quality audit and inspection products and services that are useful to the Board.

                         OUTPUT/CRITERIA                                                                OUTCOME/IMPACT

Audits and inspections are relevant. Audit coverage includes all             FCA programs and operations are more effective. Waste in agency
mandated audits and at least 75% of those suggested by the Board and         programs and operations is reduced. Better business practices are
management. Risk is addressed. 100% of the OIG audits are                    initiated.
performed in high risk/high dollar programs and activities and/or are tied
                                                                                 ƒ   FCA continues to improve and develop mechanisms to streamline
to the Agency strategic planning goals.
                                                                                     budget data to products and services.
    ƒ   OIG contracted with a CPA firm to review FCA’s mission critical
                                                                                 ƒ   Unqualified opinion for agency financial statements. Security of
        systems under the Federal Information Security Management
                                                                                     information validated through FISMA review.
        Act (FISMA) and by auditing FCA’s financial statements.
                                                                                 ƒ   FCA has a redesign project underway to improve the Loan Account
Findings made during audit fieldwork are recognized and corrected by
                                                                                     Reporting System. FCA is more inclined to explore E-Government
management prior to drafting of the audit or inspection report.
                                                                                     initiatives. These changes are due in part to OIG findings.
    ƒ   The strong trend previously established has lagged slightly this
                                                                                 ƒ   The Agency continues to move ahead in developing more
        reporting period as ten agreed upon actions are pending
                                                                                     comprehensive continuity of operations plan. Emergency supplies
        implementation and eight recommendations have yet to be
                                                                                     have been distributed, drills have taken place and policies revised.
        acted upon.
                                                                                     The Chief Information Officer credited the thoroughness of OIG’s
Products are timely, i.e., average time to complete audits and issue draft           work.
reports will not exceed six months.
                                                                                 ƒ   Eight recommendations await management decision from two
Audits are constructive. At least 75% of audit products contain                      inspections; Program Management and FCA Board Policies. The
recommendations to improve agency operations. The Agency accepts                     delay in decision making challenges OIG to create a remedy by
at least 80% of the OIG audit recommendations. The Agency actually                   working with the new leadership.
implements all corrective actions prescribed by management decisions.
                                                                             FCA is more effective in carrying out its mission.
    ƒ   80% of audit products contain recommendations to improve
                                                                                 ƒ   The new agency head has taken a broad approach to learning of
        agency operations.
                                                                                     opportunities to streamline and gain efficiencies. There is a study
    ƒ   The Agency accepted 66 2/3% of audit recommendations.                        under contract to assist management in this assessment. It is
                                                                                     contemplated that this will result in a comprehensive staffing plan
    ƒ   Audits were performed within 7.5 months (average).

FCA OIG FY 2004 Performance Report                                                                                                                         2
                                            Farm Credit Administration
                                            Office of Inspector General
                                          FY 2004 Performance Measures
                                                            AUDITS AND INSPECTIONS
    Objective—Audit and evaluate the Agency’s programs and operations to promote economy, efficiency and effectiveness.
CONTINUED                                                                  CONTINUED
    ƒ   An inspection of Project Management of the Financial System                and a solid approach to succession planning.
        and Travel Manager was conducted. This inspection was
        completed in 3 months.                                                 ƒ   FCA is faced with evaluating the cost effectiveness of the financial
                                                                                   management system as well as the adequacy of planning for
    See Appendix 1 for details of audits and inspections.
                                                                                   upgrades and integrated programs.

Performance Goal 2—Provide technical advice and assistance to agency official in developing sound management information
and financial reporting systems and in streamlining programs and organizations.

                        OUTPUT/CRITERIA                                                              OUTCOME/IMPACT

Assist the Agency in building continuous, meaningful measures with         OIG input and advice contributes to agency decisions and actions that are
outcomes important to their stakeholders.                                  more complete and valid at their inception.
The IG advises the Chairman concerning policy direction or                     ƒ   Advice on governance issues was sought by Board members and
administrative priorities.                                                         senior staff. OIG initiated a remedy for problems and wrote a
                                                                                   memorandum reminding staff of basic guidance for Board process
    ƒ   An ongoing survey conducted by the OIG to preserve anonymity
                                                                                   and procedures during meetings and in confidential treatment of
        and integrity, involves the effectiveness of the examination
                                                                                   agency business in closed Board meetings.
        function. Results are benchmarked from year to year.
                                                                           Increase in management request for advice, audit work or technical
    ƒ   An IG Observation compared compensation in the financial
                                                                           assistance.
        regulator agencies.
                                                                               ƒ   Regularly, management requests the OIG to validate changes in
    ƒ   IG Advisories provided information on consolidation of financial
                                                                                   business practices. The OIG is a laboratory of change, a model for
        regulators and predatory pricing, made suggestions in the
                                                                                   best practices. The OIG’s budget preparation, with linkage to
        process of informing the public of FCA’s mission.
                                                                                   performance measures was used as a model for the Agency.
The OIG performs analysis and provides technical advice to
                                                                               ƒ   The OIG advised the Agency on need for more rigorous controls
management concerning accounting, management systems and
                                                                                   during project management. It is imperative that management has
controls, and performance measures.
                                                                                   the appropriate information to make informed decisions.
    ƒ   The IG identifies management’s top challenges in the
                                                                               ƒ   OIG frequently serves as a sounding board and the conscience of
        semiannual reports and the Agency’s performance and
                                                                                   the Agency.
        accountability report.
FCA OIG FY 2004 Performance Report                                                                                                                     3
                                              Farm Credit Administration
                                              Office of Inspector General
                                            FY 2004 Performance Measures
                                                           AUDITS AND INSPECTIONS
    Objective—Audit and evaluate the Agency’s programs and operations to promote economy, efficiency and effectiveness.

Performance Goal 3—Continuous improvement of the OIG staff, products and internal administration. Quality is highly valued.

                         OUTPUT/CRITERIA                                                            OUTCOME/IMPACT

Customer survey feedback is used to improve products and services.        Peer review reports provide an unqualified opinion that the OIG audit work
                                                                          meets or exceeds quality audit standards prescribed by GAO and the
    ƒ   Audit feedback averaged a rating slightly above 4 (5 being the
                                                                          President’s Council on Integrity and Efficiency/Executive Council on
        highest grade 1 being the lowest). The OIG team is studying
                                                                          Integrity and Efficiency (PCIE/ECIE).
        ways to develop more feedback for audits, inspections and other
        reviews as well.                                                      ƒ   Peer review of OIG audit work by National Archives and Records
                                                                                  Administration found compliance with standards.
OIG training ensures the technical proficiency of staff.
                                                                              ƒ   OIG website is improved. More products are made available on
    ƒ   The OIG team has taken technical courses to gain proficiencies:
                                                                                  line.
        A teambuilding session included a Kolbe assessment and
        strategies to build a high performance team. Courses attended     Customer survey feedback evidences increased satisfaction with report
        include: Using Strategic Leadership: Building Performance         practices.
        Based Organizations, Auditing in Government, IT Auditing and
                                                                              ƒ   Audit survey feedback was positive. On a scale of 1 to 5 (5 being
        Controls, Quantitative Application in Administrative Decision
                                                                                  the highest grade) survey results for FY 2004 was a rating of
        Making, Agricultural Outlook Forum 2004, Using MS to
                                                                                  slightly above 4.
        Automate Reports, Essentials of Report Writing, Internet and
        Advanced Search for Investigators and Leadership Academy          The IG’s opportunity to facilitate positive change within the Agency is
        Workshop. In addition PCIE/ECIE training sessions and legal       enhanced by the quality and credibility of OIG products and advice.
        forums are attended. The OIG team also stays current in FCA
        operations training courses and strategic management                  ƒ   Contributed to strengthening FCA Board governance by
        initiatives.                                                              emphasizing to agency leadership and staff the confidential nature
                                                                                  of closed Board sessions and urged continuing education on the
OIG implements administrative improvements identified through reviews             specifics of the Government in the Sunshine Act. Emphasized that
of the agency programs and through staff involvement with the                     Board policies and approach should reflect the agreement of all
professional community.                                                           Board members concerning the way business will be done.




FCA OIG FY 2004 Performance Report                                                                                                                    4
                                             Farm Credit Administration
                                             Office of Inspector General
                                           FY 2004 Performance Measures
                                                                 INVESTIGATIONS
        Objective—Investigate observed, alleged or suspected wrongdoing to prevent and detect fraud, waste, abuse and
                                    mismanagement in agency programs and operations.

Performance Goal 1—Effectively investigate and report administrative and criminal violations relating to FCA programs and
personnel to agency officials and Congress.

                         OUTPUT/CRITERIA                                                               OUTCOME/IMPACT

Investigative reports are timely and presented in an objective and factual   Administrative action, convictions or pleas are obtained for employees
manner. Memoranda are issued to management describing internal               and/or contractors found guilty of wrongdoing.
control weaknesses or program deficiencies found during the
investigative process with suggestions to prevent and/or detect future       Management actions taken against employees serve as deterrent to future
wrongdoing.                                                                  wrongdoing.

    ƒ   One investigation was open at the beginning of FY 2004; five         FCA internal policies, procedures, and controls are strengthened to prevent
        additional investigations were opened during the year. Three         and/or detect future wrongdoing.
        were unsubstantiated and closed. One investigation, involving
        allegations concerning abuse of power and mismanagement              Public confidence in the integrity of FCA programs and internal operations
        were substantiated and management changes were made.                 are heightened.
        Investigations took from four to eleven months.
                                                                                 ƒ   Investigations involving mismanagement and abuse of power by
                                                                                     senior officials were developed and forwarded to appropriate
                                                                                     officials, subsequently management changes occurred.




FCA OIG FY 2004 Performance Report                                                                                                                        5
                                            Farm Credit Administration
                                            Office of Inspector General
                                          FY 2004 Performance Measures
                                                                 INVESTIGATIONS
        Objective—Investigate observed, alleged or suspected wrongdoing to prevent and detect fraud, waste, abuse and
                                    mismanagement in agency programs and operations.

Performance Goal 2—Cause FCA employees and managers to recognize their responsibility and report observed or suspected
wrongdoing to the OIG.

                        OUTPUT/CRITERIA                                                             OUTCOME/IMPACT

Allegations of wrongdoing are received in a timely manner and are         Investigations are more successful because they are initiated in a timely
supported by specific information.                                        manner and have better information.

    ƒ   Some anonymous complaints are vague, lacking sufficient               ƒ   There was a high level of cooperation from senior officials who
        information to pursue an investigation. As a result, the OIG is           reported problems to OIG and assisted in pinpointing
        developing ways to obtain further information.                            mismanagement and abuse of power.

                                                                          FCA employees are more willing to report real or suspected wrongdoing
                                                                          because they trust the competence and fairness of OIG’s investigations.

                                                                              ƒ   OIG receives allegations through the hotline mechanisms and
                                                                                  through anonymous correspondence. Agency management
                                                                                  notifies the OIG team when anonymous allegations are sent to
                                                                                  them.




FCA OIG FY 2004 Performance Report                                                                                                                    6
                                             Farm Credit Administration
                                             Office of Inspector General
                                           FY 2004 Performance Measures
                                                 LEGISLATIVE AND REGULATORY REVIEW
 Objective—Review and make recommendations regarding existing and proposed legislation and regulations relating to agency
                            programs and operations and the Inspectors General Community.

Performance Goal 1—Maintain an effective program for reviewing and commenting on proposed and existing legislation and
regulations affecting the Agency and the IG community.

                         OUTPUT/CRITERIA                                                              OUTCOME/IMPACT

Processes are established and documented for identifying and                OIG input is part of the decision making process in approving or amending
circulating (as appropriate) relevant documents.                            legislation, regulations, circulars and other policy positions.

    ƒ   Legislation is tracked on a daily basis. The PCIE/ECIE                  ƒ   OIG is attempting to become more proactive in tracking projects.
        legislation committee is active in forwarding interest items.
                                                                            Constructive criticism and creative alternatives offered in OIG comments
Constructive comments on relevant documents are submitted by the            improve the quality and usefulness of documents initiated by the Agency.
deadlines requested by the office, Agency, or staff circulating comments.
                                                                            FCA Board and management are informed about the status of new or
OIG updated its Privacy Act Routine uses in order to participate in IG      pending legislation or regulations initiated externally.
community quality assurance reviews of the investigation program. This
new routine use became a model for the ECIE community.                          ƒ   ECIE IGs continue to support a legislative effort to have the
                                                                                    Program Fraud Civil Remedies Act made applicable to a broader
                                                                                    (more than cabinet level) range of Agencies.

                                                                                ƒ   Legislative update and reform is continually considered as a future
                                                                                    remedy to outdated provisions in the Farm Credit Act.




FCA OIG FY 2004 Performance Report                                                                                                                     7
                                          Farm Credit Administration
                                          Office of Inspector General
                                        FY 2004 Performance Measures
                                                                    OUTREACH
   Objective—Work with our agency head and the Congress to improve program management; and work with the Inspectors
                 General community and other related organizations to address government wide issues.

Performance Goal 1—Promote OIG’s role within the FCA and the community at large.

                       OUTPUT/CRITERIA                                                           OUTCOME/IMPACT

Develop and maintain educational brochures or pamphlets describing     Agency employees’ acceptance of and cooperation with OIG activities is
OIG roles and activities.                                              improved through better understanding. OIG programs and products are
                                                                       improved through feedback from agency employees.
Facilitate feedback from agency employees and refine products and
practices based on the feedback to OIG products and educational           ƒ    OIG plans to update Strategic Plan and Directives in the first
materials.                                                                     quarter of FY ’05. Hosted event to celebrate 25th Anniversary of the
                                                                               IG Act. Had power point presentation, news article time line and
                                                                               open house.




FCA OIG FY 2004 Performance Report                                                                                                               8
                                           Farm Credit Administration
                                           Office of Inspector General
                                         FY 2004 Performance Measures
                                                                  OUTREACH
   Objective—Work with our agency head and the Congress to improve program management; and work with the Inspectors
                 General community and other related organizations to address government-wide issues.

Performance Goal 2—Provide leadership to organizations directly contributing to the IG community, the Agency and the
Federal Government.

                        OUTPUT/CRITERIA                                                           OUTCOME/IMPACT

Time and resources are provided to OIG staff members as an incentive    Projects and activities of adjunct organizations such as the AGA, IIA,
to contribute to the Agency and outside organizations by serving on     PCIE/ECIE, CCIG, FLETC, and IGATI are improved by OIG staff
committees and holding offices.                                         contributions and participation.

    ƒ   OIG staff actively participated in the Executive Committee on       ƒ   Participating in the PCIE working group on revision to peer review
        Integrity and Efficiency (ECIE), Association of Government              guidance for audits. Providing a small agency perspective.
        Accountants (AGA), Council of Counsels (CCIG), International
        Association of Financial Crime, Instructor at the Inspectors        ƒ   Participation on work group that develops guidance on quality
        General Auditor Training Institute (IGATI), GPRA Roundtable,            assurance review of investigations in the OIG community.
        Employee Council, Council for Excellence in Government,                 Contribute to developing guidance on Freedom of Information Act
        Senior Staff, Accountability Report Workgroup, and Federal              requests and new routine use under the Privacy Act, used as a
        Women’s Program Committee.                                              model for other agencies.

    ƒ   OIG networking opportunities have resulted in an expanded       FCA programs and operations are more effective and efficient.
        consideration of FCA ideas and practices by community
        contacts and experts. OIG has shared telecommuting policies,        ƒ   OIG has a goal to help the Agency build continuous, better,
        hotline procedures, performance measures and performance                concrete measures with outcomes important to its stakeholders.
        contracts and evaluation methods. Likewise, FCA benefits from
        the opportunity to benchmark practices in other Agencies.           ƒ   OIG assisted the Agency in improving electronic communication by
                                                                                making suggestions to improve the web site and consider more
                                                                                electronic transactions with regulated entities and the public.

                                                                            ƒ   Mentoring and coaching a summer intern through meaningful
                                                                                projects.



FCA OIG FY 2004 Performance Report                                                                                                                   9
                                         Farm Credit Administration
                                         Office of Inspector General
                                       FY 2004 Performance Measures
                                                               APPENDIX 1

                                                                     AUDITS

                                                                                                     AUDITS ARE
     AUDIT NAME         AUDITS ARE RELEVANT      RISK IS ADDRESSED        PRODUCTS ARE TIMELY                            AGENCY ACCEPTS 80%
                                                                                                    CONSTRUCTIVE

Human Capital: Job     OIG initiated                Strategic Plan              7.5 Months          5 Agreed Upon        Accepted all; 0
Classification                                                                                         Actions           implemented

FY 2003 Financial      Annual Audit                 Strategic Plan              6.5 Months            No findings,       Completed
Statements                                                                                                               implementation of
                                                                                                  Management Letter      recommendations in
                                                                                                                         Management Letter.

Farm Credit System     OIG initiated                                            8.5 Months          5 Agreed Upon        Accepted all; 0
Building Association                                                                                   Actions           implemented.
Business Practices


                                                             INSPECTIONS

                                                                                             INSPECTIONS ARE
     INSPECTION NAME         INSPECTIONS ARE RELEVANT       PRODUCTS ARE TIMELY                                        AGENCY ACCEPTS 80%
                                                                                              CONSTRUCTIVE



Project Management          OIG initiated                            3 Months           5 Recommendations            No management decision.


                                                                 REVIEW

Federal Information Security Management Act Review—Legislatively mandated. Performed in 2 months. No material findings. Reports to OMB as a
follow-up.


FCA OIG FY 2004 Performance Report                                                                                                             10