oversight

FYs 2006-2007 Performance Report

Published by the Farm Credit Administration, Office of Inspector General on 2008-02-11.

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

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




February 11, 2008


The Honorable Nancy C. Pellett
Chairman
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102

Dear Chairman 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) during fiscal years 2006 and 2007.

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 in achieving 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, please call me.

Respectfully,




Carl A. Clinefelter
Inspector General

Enclosure
                                                 TABLE OF CONTENTS

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

Audits and Inspections ............................................................................................................... 3

Investigations ............................................................................................................................. 6

Legislative and Regulatory Review ............................................................................................ 8

Outreach .................................................................................................................................... 9

Appendix .................................................................................................................................. 11
            Farm Credit Administration
            Office of Inspector General
   Fiscal Years 2006 & 2007 Performance Report

                                EXECUTIVE SUMMARY


The Office of Inspector General (OIG) of the Farm Credit Administration (FCA or Agency) met
or exceeded most goals for performance in fiscal years (FY) 2006 and 2007. 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
       Inspector General (IG) community, and
   •   outreach.

During the reporting period the OIG issued four program audits:
           •   Records Management and Preservation of Institutional Knowledge
           •   Committees Established by the FCA Board
           •   Audit of the FCA’s FY 2005 Financial Statement
           •   Audit of the FCA’s FY 2006 Financial Statement

Two evaluations were issued:
           •   The Federal Information Security Management Act Review for FY 2006
           •   The Federal Information Security Management Act Review for FY 2007

One inspection was issued:
           •   FCA’s Enforcement Program
The OIG also 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: Computer Banners; the results of a
consultation with the Office of Management and Budget regarding the applicability of legislation
mandating third-party review of information and data protection; and re-advising employees of
the proper use of Agency computers, as well as the establishment of proper internal reporting
guidelines related to misuse of Agency computers.
OIG products were timely and constructive while accommodating the priorities of the Agency.
Most products addressed risk to the Agency. Most of the products contained recommendations
to improve Agency operations.




Since 1995, the OIG has developed, administered, and collected survey data on the quality and
effectiveness of the Agency’s examination function from the Farm Credit System (FCS or
FCA OIG FY 2006-2007 Performance Report                                                       1
System) for use by the Chief Examiner and FCA Chairman as a feedback mechanism. During
FY 2006, the survey was discontinued while the survey was being substantially revamped by
the OIG, aided by consultation with the Office of Examination and an outside professional.
Beginning with FY 2007, the survey was reinstituted and continues to provide useful and
positive feedback.
A measure of the OIG’s success is contributing to the Agency’s continuous utilization of sound
business practices and basic integrity. We are confident the Agency will continue to show firm
commitment to follow-up on OIG report findings, conclusions, and recommendations to improve
operations and programs.
The OIG welcomes comments and suggestions related to performance measurement.




FCA OIG FY 2006-2007 Performance Report                                                     2
                                      Farm Credit Administration
                                      Office of Inspector General
                             Fiscal Years 2006 & 2007 Performance Report
                                                            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.

                     PERFORMANCE MEASURES                                                               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 percent of those suggested by the            programs and operations is reduced. Better business practices are
Board and management. Risk is addressed. One hundred percent of              initiated.
the OIG audits are performed in high risk/high dollar programs and
activities and/or are tied to the Agency strategic planning goals.               •   FCA continues to improve and develop mechanisms to streamline
                                                                                     budget data to products and services.
   •     OIG conducted an audit and an inspection of two mission critical        •   Unqualified opinions for Agency financial statements have
         operational areas.                                                          continued. Security of information has been validated through
                                                                                     FISMA reviews.
   •     OIG contracted with two Certified Public Accountant (CPA) firms
                                                                                 •   OIG found an opportunity to save contracting funds by utilizing the
         to review FCA’s mission critical systems under the Federal
                                                                                     Department of the Treasury’s Bureau of the Public Debt contract for
         Information Security Management Act (FISMA) and by auditing
                                                                                     financial statement auditing services.
         FCA’s financial statements.
                                                                             FCA is more effective in carrying out its mission.
Products are timely, i.e., average time to complete audits and issue draft
reports will not exceed 6 months.                                                •   The Chairman has taken a broad approach in seeking opportunities
                                                                                     to streamline and gain efficiencies. Management has made
   •     Audits were performed within 6 months (average).
                                                                                     changes. Financial management services have been outsourced
Audits are constructive. At least 75 percent of audit products contain               and a 5-year Human Capital Plan has been issued.
recommendations to improve Agency operations. The Agency accepts                 •   Management’s attention to resolving open OIG recommendations
at least 80 percent of the OIG audit recommendations.                                and agreed-upon actions has improved.
   •     100 percent of audit products have contained recommendations
         to improve Agency operations.
   •     The Agency accepted 100 percent of audit recommendations.
   •     7 agreed-upon actions remain open: 23 were closed.
       See Appendix (page 11) for details of audits and inspections.


Performance Goal 2—Provide technical advice and assistance to Agency officials in developing sound management
FCA OIG FY 2006-2007 Performance Report                                                                                                               3
                                       Farm Credit Administration
                                       Office of Inspector General
                              Fiscal Years 2006 & 2007 Performance Report
                                                             AUDITS AND INSPECTIONS
       Objective—Audit and evaluate the Agency’s programs and operations to promote economy, efficiency and effectiveness.
information and financial reporting systems and in streamlining programs and organizations.

                      PERFORMANCE MEASURES                                                             OUTCOME/IMPACT

The IG advises the Chairman concerning policy direction or                    OIG input and advice contributes to Agency decisions and actions that are
administrative priorities.                                                    more complete and valid at their inception.
   •       The OIG, through its audit and inspection reports, provides the       •   The OIG advised the Agency on the need for more rigorous
           Chairman with recommendations to strengthen Agency                        attention to the enforcement authorities and processes. Staff is
           operations.                                                               updating the program.
   •       The IG identifies management’s top challenges in the semiannual       •   The Office of the Board sought technical perspective on certain
           reports and the Agency’s Performance and Accountability Report.           aspects of Agency operations.
   •       The OIG conducts an ongoing survey of FCS institutions as to the      •   The Office of Examination participated with OIG in revamping the
           effectiveness of the examination function. The survey of FCS              survey of FCS institutions to ensure the revised instrument
           institutions has been revamped and is electronic. The OIG                 remained relevant as a feedback mechanism on the quality and
           preserves the anonymity of respondents and the integrity of the           effectiveness of the Agency’s examination function.
           survey.
                                                                              Increase in management requests for advice, audit work or technical
The OIG performs analysis and provides technical advice to                    assistance.
management concerning accounting, management systems and
controls, and performance measures.                                              •   The OIG is always receptive to management’s requests for audit
                                                                                     work or for OIG’s perspective on FCA operations, whether technical
       •    The OIG’s contract auditing firm assesses the Agency’s                   or non-technical in nature.
            accounting and financial reporting annually, including controls
            and compliance with laws and regulations. Any
            recommendations are conveyed to the Chairman and CEO, and
            to the Chief Financial Officer.
       •    The OIG’s contract FISMA auditing firm assesses the Agency’s
            compliance with Federal information security guidelines. Any
            recommendations are conveyed to the Chairman and CEO, and
            to the Chief Information Officer.

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


FCA OIG FY 2006-2007 Performance Report                                                                                                                 4
                                     Farm Credit Administration
                                     Office of Inspector General
                            Fiscal Years 2006 & 2007 Performance Report
                                                           AUDITS AND INSPECTIONS
       Objective—Audit and evaluate the Agency’s programs and operations to promote economy, efficiency and effectiveness.

                     PERFORMANCE MEASURES                                                              OUTCOME/IMPACT

OIG training ensures the technical proficiency of staff.                     Peer review reports provide an unqualified opinion that the OIG audit work
                                                                             meets or exceeds quality audit standards prescribed by GAO and the
   •     The OIG team has taken technical courses to gain proficiencies.     PCIE/ECIE.
         Courses attended include: OIG Leadership courses, A-123
         course, Yellow Book Auditing (Government Accountability Office),       •    OIG peer review of the audit function was performed by the
         Professionalism, Substance Abuse & Legal Ethics, Federal Audit              National Archives and Records Administration in April of 2007 and
         Executive Council Conference, MIS Training Institute Conference             we were found to be in full compliance with auditing standards.
         on IT Audit and Controls, ISACA seminars, Ethics for Virginia
                                                                             The IG’s opportunity to facilitate positive change within the Agency is
         CPAs, BASEL Accord II Seminar, Problem Solving, Symposium
                                                                             enhanced by the quality and credibility of OIG products and advice.
         on Emerging Banking Issues, IIA Auditing in Government, IIA
         Audit Project Management, National Intergovernmental Audit             •    Management seeks and listens to the OIG’s perspective on issues.
         Forum, and President’s Council on Integrity and                        •    OIG staff members receive recognition through awards from the
         Efficiency/Executive Council on Integrity and Efficiency                    PCIE/ECIE community.
         (PCIE/ECIE) Retreat, Mediation, Business Writing.                      •    The IG is a sounding board for the Office of the Board on aspects of
         In addition, PCIE/ECIE training sessions and legal forums are               Agency operations.
         attended. The OIG team also stays current in FCA operations            •    The quarterly reports on the OIG’s survey of FCS institutions
         training courses and strategic management initiatives.                      relative to the Agency’s examination function provide Agency
                                                                                     management with quantitative and narrative feedback that assists
OIG implements administrative improvements identified through reviews                in facilitating positive change.
of Agency programs and through staff involvement with the professional
community.
   •     OIG website is improved. Most OIG products are made available
         on line. A direct link to the OIG pages is provided on the Agency
         homepage.




FCA OIG FY 2006-2007 Performance Report                                                                                                                  5
                                  Farm Credit Administration
                                  Office of Inspector General
                        Fiscal Years 2006 & 2007 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, the Attorney General (when appropriate) and Congress.

                   PERFORMANCE MEASURES                                                                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
   •   Counsel to the IG has taken over the OIG’s investigative function
                                                                             and/or detect future wrongdoing.
       since the OIG’s investigator left in early FY 2006.
   •   However, there were no investigations with substantiated findings      •   Policies and procedures involving lost laptops were strengthened to
       during FYs 2006 and 2007.                                                  protect personally identifiable information.
                                                                              •   The Office of Examination heightened awareness of risk and
                                                                                  vulnerability of national shared credits and adjusted examination and
                                                                                  monitoring policies accordingly.
                                                                             Public confidence in the integrity of FCA programs and internal operations
                                                                             is heightened.




FCA OIG FY 2006-2007 Performance Report                                                                                                                   6
                                 Farm Credit Administration
                                 Office of Inspector General
                       Fiscal Years 2006 & 2007 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.

                  PERFORMANCE MEASURES                                                            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.
   •   The OIG has a secure email hotline, fca-ig-hotline@rcn.com and      •    One allegation of pornography was handled expeditiously and
       phone numbers 703-883-4316 and toll free 800-437-7322.                   found to be unsubstantiated.
   •   Follow-up by OIG and appropriate forwarding to other Agency         •    Several hotline complaints were referred to the Office of
       offices.                                                                 Congressional and Public Affairs and Office of Examination for
                                                                                review and follow-up. In one potential criminal case, OIG acted as
                                                                                a liaison with the U.S. Attorney’s office.
                                                                           •    The IG led an attempt to retrieve a lost laptop through coordination
                                                                                with airline officials at Dulles Airport.
                                                                        FCA employees are more willing to report real or suspected wrongdoing
                                                                        because they trust the competence and fairness of OIG’s investigations.




FCA OIG FY 2006-2007 Performance Report                                                                                                             7
                                 Farm Credit Administration
                                 Office of Inspector General
                       Fiscal Years 2006 & 2007 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.

                   PERFORMANCE MEASURES                                                              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 and proposed rules are tracked on a regular basis.          •   OIG collaborated with the Office of Regulatory Policy to designate
   •   The PCIE/ECIE legislation committee is active in forwarding                 points in time when information on regulations and briefings will be
       interest items.                                                             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.
                                                                            FCA Board and management are informed about the status of new or
                                                                            pending legislation or regulations initiated externally.
                                                                               •   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.
                                                                               •   Several bills were introduced to update the Inspector General Act.
                                                                                   Comments were collected and briefings with Congressional staff
                                                                                   were held.
                                                                               •   Legislative update and reform is continually considered as a future
                                                                                   remedy to outdated provisions in the Farm Credit Act.
                                                                               •   Review of several regulations including: Proposed and Final Rule
                                                                                   on Priority of Claims; Proposed Rule on Processing and Marketing;
                                                                                   Final Rule on Farmer Mac Risk-Based Capital Stress Test
                                                                                   Revisions; and Proposed Rule on Liquidity and Investment.




FCA OIG FY 2006-2007 Performance Report                                                                                                                8
                                Farm Credit Administration
                                Office of Inspector General
                      Fiscal Years 2006 & 2007 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.

                  PERFORMANCE MEASURES                                                          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.
   •   Examples include Strategic Planning brochure, The IG at FCA
       pamphlet, FCA Orientation PowerPoint presentation, and the        •    OIG updated several Directives.
       PCIE/ECIE Annual Report.                                          •    Developed PowerPoint presentation on the OIG at FCA for web use
                                                                              and for new employee training.
Facilitate feedback from Agency employees and refine products and
practices based on the feedback to OIG products and educational          •    IG led an attempt to retrieve a lost laptop through coordination with
materials.                                                                    airline officials at Dulles Airport.
                                                                         •    Reaction to OIG Observations has been positive.
   •   The OIG would be receptive to any and all feedback received
       from Agency management and staff regarding OIG practices and   Audit follow-up is improved.
       products.                                                         •    Agreed-upon actions are taken more expeditiously. Rarely does an
                                                                              action take more than a year to clear.




FCA OIG FY 2006-2007 Performance Report                                                                                                          9
                                 Farm Credit Administration
                                 Office of Inspector General
                       Fiscal Years 2006 & 2007 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.

                  PERFORMANCE MEASURES                                                            OUTCOME/IMPACT

Time and resources are provided to OIG staff members as an incentive     Projects and activities of adjunct organizations such as the AGA, the
to contribute to the Agency and outside organizations by serving on      Institute of Internal Auditors, PCIE/ECIE, CCIG, FLETC, and IGATI are
committees and holding offices.                                          improved by OIG staff contributions and participation.
   •   OIG staff actively participated in the ECIE, the Inspection and      •   IG participates in the PCIE working group on inspections and
       Evaluation Committee of the PCIE/ECIE, Association of                    evaluations. The group collaborates and shares common areas for
       Government Accountants (AGA), Council of Counsels (CCIG),                inspection and evaluation work.
       PCIE/ECIE Federal Audit Executive Committee, Instructor at the       •   IG was asked to participate on a panel discussion at the IG Training
       Inspectors General Auditor Training Institute (IGATI), FCA               Institute.
       Employees’ Council, Council for Excellence in Government,            •   IG participates in monthly Financial Regulatory Coordinating
       Accountability Report Workgroup, Federal Women’s Program                 Committee meetings.
       Committee, Blacks In Government, Administrative Burden               •   Counsel was on several workgroups with other counsels, including
       Reduction Workgroup, and the Combined Federal Campaign.                  investigation curriculum and awards workgroups.
   •   OIG networking opportunities have resulted in an expanded            •   OIG Auditor performed a peer review of the audit program of the
       consideration of FCA ideas and practices by community contacts           Office of Inspector General, National Labor Relations Board.
       and experts. OIG has shared telecommuting policies, hotline       FCA programs and operations are more effective and efficient.
       procedures, performance measures and performance contracts
       and evaluation methods. Likewise, FCA benefits from the              •   OIG made presentations about the OIG at FCA at New Employee
       opportunity to benchmark practices in other agencies.                    Orientation.
                                                                            •   OIG employee led a successful Combined Federal Campaign as
                                                                                co-chair during FY 2006.




FCA OIG FY 2006-2007 Performance Report                                                                                                           10
                                 Farm Credit Administration
                                 Office of Inspector General
                       Fiscal Years 2006 & 2007 Performance Measures
                                                             APPENDIX

                                                                  AUDITS

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

Records Management          OIG Initiated        Strategic Plan            6 Months            4 Agreed-Upon        Management
and Preservation of                                                                               Actions           Accepted All;
Institutional                                                                                                      4 Implemented
Knowledge

FY 2005 and 2006       Legislatively Mandated    Strategic Plan            6 Months             No Findings             N/A
Financial Statements        Annual Audit

FCA Board                   OIG Initiated        Strategic Plan                                2 Agreed-Upon        Management
Committees                                                                                        Actions           Accepted All:
                                                                                                                   1 Implemented
                                                                                                                   1 Outstanding

                                                              REVIEWS

Federal Information    Legislatively Mandated    Strategic Plan            2 Months             No Findings             N/A
Security Management
                                                                                            OMB Receives Report
Act Review for FY
                                                                                              and Follow-up
2006 and 2007




FCA OIG FY 2006-2007 Performance Report                                                                                             11
                               Farm Credit Administration
                               Office of Inspector General
                     Fiscal Years 2006 & 2007 Performance Measures
                                                APPENDIX (CONTINUED)

                                                    INSPECTIONS

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

FCA’s Enforcement        OIG Initiated     Strategic Plan       11.5 months       6 Agreed-Upon       Management
Program                                                                              Actions          Accepted All;
                                                                                                     0 Implemented




FCA OIG FY 2006-2007 Performance Report                                                                               12