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: audits and inspections, technical assistance to agency officials and management, continuous improvement of the OIG staff, investigation of administrative and criminal violations, reviewing and commenting on legislation and regulations affecting the Agency and the IG community, and 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 FCA continues to improve and develop mechanisms to streamline to the Agency strategic planning goals. budget data to products and services. OIG contracted with a CPA firm to review FCA’s mission critical 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. 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. The strong trend previously established has lagged slightly this 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. 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. 80% of audit products contain recommendations to improve The new agency head has taken a broad approach to learning of agency operations. opportunities to streamline and gain efficiencies. There is a study 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 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 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. 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 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 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 An IG Observation compared compensation in the financial assistance. regulator agencies. Regularly, management requests the OIG to validate changes in 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 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. The IG identifies management’s top challenges in the 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 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. Peer review of OIG audit work by National Archives and Records Administration found compliance with standards. OIG training ensures the technical proficiency of staff. OIG website is improved. More products are made available on 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 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 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. 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. 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. Some anonymous complaints are vague, lacking sufficient 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. 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. Legislation is tracked on a daily basis. The PCIE/ECIE 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. 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. 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 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. OIG staff actively participated in the Executive Committee on 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 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. 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, 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. 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. 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
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)