oversight

FY 2005

Published by the Farm Credit Administration, Office of Inspector General on 2006-01-10.

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

Office of
Inspector General

                    FISCAL YEAR 2005
                PERFORMANCE REPORT




                        January 2006
Farm Credit Administration                                    Office of Inspector General
                                                              1501 Farm Credit Drive
                                                              McLean, Virginia 22102-5090




January 10, 2006


The Honorable Nancy C. Pellett
Chairman
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
products, services and leadership of the Office of Inspector General (OIG).

The OIG has been successful in its role as an agent for positive change within the
Farm Credit Administration (FCA or Agency). The results reflect the commitment that
OIG staff has to assisting you, the FCA Board, and FCA employees achieve the
Agency’s mission of ensuring a safe and sound Farm Credit System that provides a
dependable source of credit to farmers and ranchers.

We look forward 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,



Carl A. Clinefelter
Inspector General

Enclosure
                                                 TABLE OF CONTENTS

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

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

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

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

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

Appendix .................................................................................................................................. 10
                     Farm Credit Administration
                     Office of Inspector General
                   FY 2005 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) 2005. 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 FY 2005 the OIG issued two program audits: 1) the Call Report Data Verification and 2)
Performance Measures and Internal Controls. The FY 2004 Audit of the FCA’s Financial
Statement was also issued without material findings.

An inspection of Protection of Credit Card Numbers was issued, as well as a review of the
Federal Information Security Management Act (FISMA). The OIG continued the practice of
issuing IG Observations. The purpose of issuing an Observation is to alert Agency officials and
managers to new issues, problems or information to aid in decision making. The OIG issued
observations on the following topics: Identity Theft, Building Security, Position Evaluation
Program, Adherence to Board Policy 64, Suggestions concerning the Proposed Rule on Waiver
of Borrower Rights–Syndications, Work-Life Benefits, Notification of impact of legislation
concerning privacy of confidential information, and Opt-out provisions for consumers of a rule
set forth by the Federal Trade Commission.

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
showed management’s satisfaction with OIG products.

Since 1995, the OIG has developed, administered, and collected survey data from the Farm
Credit System (FCS or System), following a System institution’s examination, for use by the
Agency as a feedback mechanism on the quality and effectiveness of the examination function.

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 2005 Performance Report                                                      1
                                             Farm Credit Administration
                                             Office of Inspector General
                                           FY 2005 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 from
    ƒ   8 recommendations and 11 agreed-upon actions remain open:                    audit and inspection reports.
        15 were closed.
                                                                             FCA is more effective in carrying out its mission.
Products are timely, i.e., average time to complete audits and issue draft
                                                                                 ƒ   The Chairman has taken a broad approach in seeking opportunities
reports will not exceed six months.
                                                                                     to streamline and gain efficiencies. As a result of studies under
Audits are constructive. At least 75% of audit products contain                      contract, management has made extensive changes. It is
recommendations to improve agency operations. The Agency accepts                     contemplated that this will also eventually result in a
at least 80% of the OIG audit recommendations. The Agency actually                   comprehensive staffing plan and a solid approach to succession
implements all corrective actions prescribed by management decisions.                planning.
    ƒ   100% of audit products contain recommendations to improve                ƒ   FCA is faced with evaluating the cost effectiveness of the financial
        agency operations.                                                           management system as well as the adequacy of planning for
                                                                                     upgrades and integrated programs.
    ƒ   The Agency accepted 75% of audit recommendations.
    ƒ   Audits were performed within 6 months (average).
    See Appendix for details of audits and inspections.


FCA OIG FY 2005 Performance Report                                                                                                                      2
                                           Farm Credit Administration
                                           Office of Inspector General
                                         FY 2005 Performance Measures
                                                         AUDITS AND INSPECTIONS
    Objective—Audit and evaluate the Agency’s programs and operations to promote economy, efficiency and effectiveness.

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. An OIG Observation resulted in clarification of a Board
                                                                                  Policy concerning operations.
    ƒ   The OIG conducts an ongoing survey as to the effectiveness of
        the examination function. The survey is electronic. Results are   Increase in management request for advice, audit work or technical
        benchmarked from year to year. The OIG preserves anonymity        assistance.
        and integrity of the survey.
                                                                              ƒ   Regularly, management requests the OIG to validate changes in
The OIG performs analysis and provides technical advice to                        business practices. The OIG is a laboratory of change, a model for
management concerning accounting, management systems and                          best practices. The OIG’s budget preparation, with linkage to
controls, and performance measures.                                               performance measures was used as a model for the Agency.
    ƒ   The IG identifies management’s top challenges in the                  ƒ   The OIG advised the Agency on need for more rigorous controls
        semiannual reports and the Agency’s Performance and                       during project management. It is imperative that management has
        Accountability Report.                                                    the appropriate information to make informed decisions.
                                                                              ƒ   OIG frequently serves as a sounding board and the conscience of
                                                                                  the Agency.




FCA OIG FY 2005 Performance Report                                                                                                                   3
                                              Farm Credit Administration
                                              Office of Inspector General
                                            FY 2005 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   The OIG team is studying ways to develop more feedback for
                                                                           PCIE/ECIE.
        audits, inspections and other reviews as well.
                                                                               ƒ   OIG website is improved. Most products are made available on
OIG training ensures the technical proficiency of staff.
                                                                                   line.
    ƒ   The OIG team has taken technical courses to gain proficiencies:
                                                                               ƒ   OIG audit follow-up database is revised and improved, making
        A incoming IG took Kolbe assessment and OIG will continue to
                                                                                   access and sharing of information much more accessible.
        develop strategies to build a high performance team. Courses
        attended include: Building High Performance Organizations,         Customer survey feedback evidences satisfaction with report practices.
        Professionalism, Substance Abuse & Legal Ethics, BASEL
                                                                               ƒ   OIG seeks feedback on products. Office of Examination (OE) was
        Accord II Seminar, Problem Solving, Practical Kinesic
                                                                                   particularly pleased with innovative PowerPoint presentation of the
        Interviewing & Interrogation, Managing Emotions Under
                                                                                   Call Report Verification audit. The Auditor-in-Charge gave a
        Pressure, Presenting Data and Information, Oversight of Federal
                                                                                   presentation and demonstration to OE.
        Financial Auditing, 14th Annual Government Ethics Conference,
        AGA 15th Annual Leadership Conference, IIA Auditing in             The IG’s opportunity to facilitate positive change within the Agency is
        Government, National Intergovernmental Audit Forum, and            enhanced by the quality and credibility of OIG products and advice.
        Presdent’s Council on Integrity and Efficiency/Executive Council
                                                                               ƒ   Solving a longstanding situation whereby an anonymous letter
        on Integrity and Efficiency (PCIE/ECIE) Retreat.
                                                                                   writer sought to undermine various management officials brought
        In addition, PCIE/ECIE training sessions and legal forums are              relief to those troubled by the behavior.
        attended. The OIG team also stays current in FCA operations
                                                                               ƒ   PCIE/ECIE honored OIG staff with three Awards of Excellence for
        training courses and strategic management initiatives.
                                                                                   work performed during this period.
OIG implements administrative improvements identified through reviews
of Agency programs and through staff involvement with the professional
community.




FCA OIG FY 2005 Performance Report                                                                                                                   4
                                             Farm Credit Administration
                                             Office of Inspector General
                                           FY 2005 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
                                                                             Management actions taken against employees serve as deterrent to future
investigative process with suggestions to prevent and/or detect future
                                                                             wrongdoing.
wrongdoing.
                                                                             FCA internal policies, procedures, and controls are strengthened to prevent
    ƒ   One investigation was open at the beginning of FY 2005; five
                                                                             and/or detect future wrongdoing.
        additional investigations were opened during the year. Three
        were unsubstantiated and closed. One investigation, involving        Public confidence in the integrity of FCA programs and internal operations
        allegations concerning abuse of power and mismanagement              are heightened.
        were substantiated and resolved. Investigations took from four
                                                                                 ƒ   Investigations involving mismanagement and abuse of power by
        to eleven months. Another involved a series of anonymous
        letters. Offenses included impersonating a Federal official and              senior management were developed and forwarded to appropriate
        undermining authority. The offending employee was identified                 officials; subsequently, management changes occurred.
        by the OIG. The case was substantiated and referred for
        prosecution; but it was declined.




FCA OIG FY 2005 Performance Report                                                                                                                        5
                                            Farm Credit Administration
                                            Office of Inspector General
                                          FY 2005 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 2005 Performance Report                                                                                                                    6
                                             Farm Credit Administration
                                             Office of Inspector General
                                           FY 2005 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 collaborated with the Office of Regulatory Policy to designate
        legislation committee is active in forwarding interest items.               points in time when information will be sent to the OIG.
Constructive comments on relevant documents are submitted by the            Constructive criticism and creative alternatives offered in OIG comments
deadlines requested by the office, Agency, or staff circulating comments.   improve the quality and usefulness of documents initiated by the Agency.
    ƒ   OIG updated its Privacy Act Routine Uses in order to participate    FCA Board and management are informed about the status of new or
        in IG community quality assurance reviews of the investigation      pending legislation or regulations initiated externally.
        program. This new routine use became a model for the ECIE
                                                                                ƒ   ECIE IGs continue to support a legislative effort to have the
        community.
                                                                                    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.
                                                                                ƒ   Review of several regulations: Proposed Rule on Governance;
                                                                                    Proposed Rule on Loan Syndication; Proposed Rule on Waiver of
                                                                                    Borrower Rights; and Proposed Rule on Liquidity and Investment.




FCA OIG FY 2005 Performance Report                                                                                                                       7
                                          Farm Credit Administration
                                          Office of Inspector General
                                        FY 2005 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 updated Strategic Plan brochure form and several Directives.
materials.
                                                                         ƒ   New PowerPoint format used for audit presentation and received
                                                                             well.
                                                                         ƒ   Hosted event to honor outgoing IG; the three FCA IGs and the Vice
                                                                             Chairman of the ECIE attended.
                                                                         ƒ   Reaction to OIG Observations is deliberate and quick.
                                                                     Audit follow-up is improved. Compared to last reporting period, there are
                                                                     seven less open recommendations.




FCA OIG FY 2005 Performance Report                                                                                                               8
                                            Farm Credit Administration
                                            Office of Inspector General
                                          FY 2005 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 ECIE, the Inspection and       ƒ   Participating in the PCIE working group on inspections and
        Evaluation Committee of the ECIE, Association of Government               evaluations.
        Accountants (AGA), Council of Counsels (CCIG), International
                                                                              ƒ   Performed Quality Assurance Review on investigation operations of
        Association of Financial Crime, Instructor at the Inspectors
                                                                                  U.S. Government Printing Office.
        General Auditor Training Institute (IGATI), GPRA Roundtable,
        Employee Council, Council for Excellence in Government,           FCA programs and operations are more effective and efficient.
        Senior Staff, Accountability Report Workgroup, and Federal
                                                                              ƒ   OIG has a goal to help the Agency build continuous, better,
        Women’s Program Committee.
                                                                                  concrete measures with outcomes important to its stakeholders.
    ƒ   OIG networking opportunities have resulted in an expanded                 This was specifically stressed in the audit of Performance
        consideration of FCA ideas and practices by community                     Measures. Implementation occurred immediately.
        contacts and experts. OIG has shared telecommuting policies,
        hotline procedures, performance measures and performance              ƒ   Contractors performing studies for the Agency validate the
        contracts and evaluation methods. Likewise, FCA benefits from             evaluations by OIG and urge recommendations to be
                                                                                  accomplished.
        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.




FCA OIG FY 2005 Performance Report                                                                                                                 9
                                              Farm Credit Administration
                                              Office of Inspector General
                                            FY 2005 Performance Measures
                                                                  APPENDIX

                                                                       AUDITS

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

Call Report Data            OIG initiated             Strategic Plan              6 Months         2 Agree Upon Actions    Accepted all;
Verification                                                                                                               0 implemented

FY 2004 Financial           Mandated Annual           Strategic Plan              6 Months              No findings        n/a
Statements                  Audit

Performance                 OIG initiated                                         5 Months         1 Agreed Upon Action    1 implemented
Measures and Internal                                                                                      and             2 recommendations
Controls                                                                                            2 Recommendations      pending decision


                                                               INSPECTIONS

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

Protection of Credit Card        OIG initiated                         6 months              3 Agreed Upon Action     3 implemented
Numbers


                                                                   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 2005 Performance Report                                                                                                             10