Office of Inspector General FISCAL YEARS 2008 & 2009 PERFORMANCE REPORT January 2010 Farm Credit Administration Office of Inspector General 1501 Farm Credit Drive McLean, Virginia 22102-5090 January 20, 2010 The Honorable Leland A. Strom Chairman Farm Credit Administration 1501 Farm Credit Drive McLean, Virginia 22102-5090 Dear Chairman Strom: 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 2008 and 2009. The OIG continues to work to enhance 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 to improve OIG services that help you achieve your goals for FCA’s operations. If you have any questions, please call me at extension 4241 or 4030. Respectfully, Carl A. Clinefelter Inspector General Enclosure FARM CREDIT ADMINISTRATION OFFICE OF INSPECTOR GENERAL FISCAL YEARS 2008 & 2009 PERFORMANCE REPORT TABLE OF CONTENTS Page Executive Summary .................................................................................................................1 Audits, Inspections, and Evaluations ........................................................................................ 3 Investigations ...........................................................................................................................7 Legislative and Regulatory Review .......................................................................................... 9 Outreach ................................................................................................................................ 10 Appendix ................................................................................................................................ 12 FARM CREDIT ADMINISTRATION OFFICE OF INSPECTOR GENERAL FISCAL YEARS 2008 & 2009 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) 2008 and 2009. 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 community, and outreach. OIG products listed below 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. During the reporting period the OIG issued four program audits: • Efficiencies Realized Through Outsourcing • Information Technology (IT) Infrastructure Project Management • Certification and Accreditation Process • Office of Examination (OE) Travel Expenses Two financial statement audits were issued: • Audit of the FCA’s FY 2007 Financial Statements • Audit of the FCA’s FY 2008 Financial Statements Two evaluations were issued: • The Federal Information Security Management Act (FISMA) Evaluation for 2007 • The FISMA Evaluation for 2008 One inspection was issued: • Agency Travel and Purchase Card Distribution, Usage, and Control Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 1 The OIG also continued the practice of issuing Inspector General (IG) Observations. The purpose of issuing an Observation is to alert Agency leadership to new issues, problems or information to aid in decision making. The IG issued Observations on: • Orientation and Ongoing Training of Governing Board Members • Possible Message to FCS Institutions Regarding Agricultural Stress on Borrowers • Policy and Organizational Change Suggestions to be Better Positioned for a Downturn in the Condition of the Farm Credit System • Consideration of Formalization of Agency Functions Through Establishment of Committees to Serve the FCA Board • Preparation for Pandemic Flu Outbreak Survey to Gather Feedback on FCA Examination of System Institutions Since 1995, the OIG has developed, administered, and collected survey data from the Farm Credit System (FCS or System) on the quality and effectiveness of the Agency’s examination function and examiners 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 OE and an outside professional. Beginning with FY 2007, the survey was reinstituted and continues to provide useful feedback, mostly positive. FCA’s Inspector General Selected to Serve as Vice Chair of the Council of the Inspectors General on Integrity and Efficiency (CIGIE or Council) The IG assumed a major role as Vice Chairperson of the CIGIE, a council formed as a result of the passage of the IG Reform Act of 2008. He assists the Chairperson in planning and carrying out all agenda items and cross cutting projects undertaken by the Council, consisting of all 69 Inspectors General and six other Federal officials. A charter and strategic plan have been developed and a fully functioning Council, including permanent staff, is being established. There is national and international interest by governmental groups to learn and use CIGIE as a model. As a result, presentations on CIGIE are made by the IG at the request of foreign governmental organizations. 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. Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 2 AUDITS, INSPECTIONS, AND EVALUATIONS Objective – Audit and evaluate the Agency’s programs and operations to promote economy, efficiency, and effectiveness. Performance Goal 1 – Deliver quality audit, inspection, and evaluation products and services that are useful to the Board. PERFORMANCE MEASURES OUTCOME / IMPACT Audits, inspections, and evaluations are relevant. FCA programs and operations are more effective. Audit coverage includes all mandated audits and at Waste in Agency programs and operations is reduced. least 75 percent of those suggested by the Board and Better business practices are initiated. management. Risk is addressed. One hundred percent of the OIG audits are performed in high FCA continues to improve and develop risk/high dollar programs and activities and/or are tied mechanisms to streamline budget data to to the Agency strategic planning goals. products and services. Unqualified opinions for Agency financial OIG performed or supervised the following audits, statements have continued. inspections, and evaluations of mission critical Security of information has been validated and operational areas: strengthened through FISMA reviews. The OIG found opportunities to save contracting Four audits: funds by utilizing the Department of the Efficiencies Realized Through Outsourcing Treasury’s Bureau of the Public Debt contract IT Infrastructure Project Management for financial statement auditing services. Certification and Accreditation (C&A) In lieu of a contractor, the OIG Senior IT Auditor Process performs the FISMA evaluation. OE Travel Expense Budgeting and Control The OIG Inspection of Purchase and Travel An inspection of Agency Travel and Purchase Card Usage and Control resulted in Card Usage and Control. strengthened controls and policies. Through For FY 2007 and FY 2008, OIG contracted with reports, managers are made more aware of a Certified Public Accountant (CPA) firm to audit employee usage of credit cards. FCA’s financial statements. The OE travel expense budgeting was adequate During 2007, OIG contracted with a CPA firm to and well documented. review FCA’s mission critical systems under A quality assurance process was developed for FISMA. For 2008, the OIG’s Senior IT Auditor the Information Resources Management plan. performed the FISMA evaluation. An audit of the Agency’s C&A process revealed the process was well planned and managed, Products are timely, i.e., average time to complete and the process complied with the requirements audits and issue draft reports will not exceed 6 and guidance provided by FISMA, OMB, and months. NIST. Draft reports for audits, inspections, and evaluations were issued in less than 6 months (average). Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 3 AUDITS, INSPECTIONS, AND EVALUATIONS Objective – Audit and evaluate the Agency’s programs and operations to promote economy, efficiency, and effectiveness. Performance Goal 1 (continued) – Deliver quality audit, inspection, and evaluation products and services that are useful to the Board. PERFORMANCE MEASURES OUTCOME / IMPACT Audits are constructive. At least 75 percent of audit FCA is more effective in carrying out its mission. products contain recommendations or agreed-upon actions to improve Agency operations. The Agency Management’s attention to resolving open OIG accepts at least 80 percent of the OIG audit action recommendations or agreed-upon actions items. continues to be diligent and more timely than in the past. Not all audits contained action items if the findings did not warrant corrective action. Those audit and inspection products containing recommendations to improve Agency operations have been accepted as agreed-upon actions and are addressed within a year. In some cases, Agency management took immediate action for improvement as a result of an OIG suggestion so no formal recommendation was necessary. At the close of FY 2007, six agreed-upon actions were open. During the 2-year reporting period, the four audits and one inspection resulted in eight agreed upon actions. All open items have been addressed and closed. See Appendix (page 12) for details of audits and inspections. Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 4 AUDITS, INSPECTIONS, AND EVALUATIONS 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 officials in developing sound management information and financial reporting systems and in streamlining programs and organizations. PERFORMANCE MEASURES OUTCOME / IMPACT The IG advises the Chairman concerning policy The OIG input and advice contributes to Agency direction or administrative priorities. decisions and actions that are more complete and valid at their inception. The OIG, through its audit, inspection, and evaluation reports, provides the Chairman with The Agency has initiated an in-depth and well recommendations to strengthen Agency structured orientation and training program for operations. FCA Board members. The IG identifies management’s top The Office of the Board sought technical challenges in the Agency’s Performance and perspective on certain aspects of Agency Accountability Report and the semiannual operations: compensation, organizational reports. structure, etc. IG Observations most often address Agency The OMS implemented a quality assurance policy or administrative functions. For process for the IRM Plan to ensure the example, the observation relating to accuracy of cost projections and support orientation and training of Board members, informed decisions. policy and organizational changes regarding the Agency being better positioned to deal We made suggestions throughout the C&A with the FCS downturn, etc. audit to further strengthen the process that were well received. In addition, we informed The OIG conducts an ongoing survey of FCS Agency officials of various new requirements institutions as to the effectiveness of the and other changes being deliberated that will examination function and examiners. The have an impact on FCA’s IT security program. survey of FCS institutions was revamped in 2006 and is electronic. The OIG preserves OMS continues to strengthen its information the anonymity of respondents and the integrity security program. For example, OMS arranged of the survey. for an independent penetration test of the The OIG performs analysis and provides technical infrastructure. OMS created a process to advice to management concerning accounting, ensure the Personnel Security Officer and IT management systems and controls, and performance Security Specialist are notified prior to hiring a measures. contractor so that adequate documentation and clearances are complete before providing The OIG’s contract auditing firm assessed the access to FCA’s information systems. In Agency’s accounting and financial reporting addition, FCA initiated a review and revision annually, including controls and compliance cycle for its information security policies and with laws and regulations. Any procedures which will include updates of recommendations were conveyed to the employee and contractor security certifications. Chairman and CEO, and to the Chief Financial Officer. Increase in management requests for advice, audit work, or technical assistance. The OIG’s Senior IT Auditor assessed the Agency’s compliance with Federal Information The OIG is carrying out a request for an security guidelines. Any recommendations inspection of the Agency’s compliance with the were conveyed to the Chairman and CEO, to Government in Sunshine Act. the Chief Information Officer and the Director The OIG is always receptive to management’s of the Office of Management Services (OMS). requests for audit work or for the OIG’s perspective on FCA operations, whether technical or non-technical in nature. Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 5 AUDITS, INSPECTIONS, AND EVALUATIONS 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. PERFORMANCE MEASURES OUTCOME / IMPACT OIG training ensures the technical proficiency of staff. Peer review reports provide an unqualified opinion that the OIG audit and investigative work meets or The OIG team has taken technical courses to exceeds quality audit standards prescribed by GAO gain proficiencies. Courses attended include: and the CIGIE. - OIG Leadership courses - A-123 course OIG peer review of the audit function was - Yellow Book Auditing (Government performed by the National Archives and Accountability Office) Records Administration in April of 2007 and we - Professionalism, Substance Abuse & Legal were found to be in full compliance with Ethics auditing standards. Next such review is - Federal Audit Executive Council Conference scheduled for March 2010. - MIS Training Institute Conference on IT Audit The IG’s opportunity to facilitate positive and Controls change within the Agency is enhanced by the - Information Security Control Association quality and credibility of OIG products and seminars advice. - Federal Audit Executive Committee meetings and conferences Management seeks and listens to the OIG’s - Ethics for Virginia CPAs perspective on issues. - Problem Solving - Symposium on Emerging Banking Issues OIG staff members receive recognition through - Institute of Internal Auditors (IIA) Auditing in awards from the CIGIE community. Government The IG is a sounding board for the Office of the - IIA Audit Project Management Board on aspects of Agency operations. - National Intergovernmental Audit Forum - CIGIE Retreat The quarterly reports on the OIG’s survey of - Mediation FCS institutions relative to the Agency’s - American University, Public Policy, examination function provide Agency Leadership Institute management with quantitative and narrative feedback that assists in facilitating positive In addition, CIGIE training sessions and legal change. forums are attended. The OIG team also stays Audit, inspection and other reports are made public current in FCA operations training courses and upon issuance and the OIG uses an email mechanism strategic management initiatives. to alert those on the mailing list of new publications. The OIG implements administrative improvements identified through reviews of Agency programs and through staff involvement with the professional community. The OIG website is continually improved and kept current. As required by the Consolidated Appropriation Act, Pub.L. 110-161, the OIG initiated an effort to establish an email list for those who wish to receive notification when OIG reports are posted to the Agency’s website. There is a direct link to the OIG on the Agency homepage. Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 6 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 Administrative action, convictions, or pleas are objective and factual manner. Memoranda are obtained for employees and/or contractors found issued to management describing internal control guilty of wrongdoing. weaknesses or program deficiencies found during the Management actions taken against employees serve investigative process with suggestions to prevent as deterrent to future wrongdoing. and/or detect future wrongdoing. FCA internal policies, procedures, and controls are There were no investigations with strengthened to prevent and/or detect future substantiated findings during FYs 2008 and wrongdoing. 2009. The OIG is notified of missing equipment if it contains personally identifiable information Policies and procedures involving lost laptops (PII). Coordinate with law enforcement to the were strengthened to protect PII. extent there is opportunity for recovery. The OE 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. Peer review of investigative operations conducted by the Securities and Exchange Commission OIG completed December 2007. Found full compliance with quality standards established by CIGIE (formerly President’s Council on Integrity and Efficiency/Executive Council on Integrity and Efficiency (PCIE/ECIE). FCA OIG revised investigation guidance to further strengthen the program. Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 7 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 Investigations are more successful because they are manner and are supported by specific information. initiated in a timely manner and have better information. The OIG has a secure email hotline, email@example.com and phone numbers Several hotline complaints were referred to the 703-883-4316 and toll free 800-437-7322. Office of Congressional and Public Affairs and OE for review and follow-up. In one potential Follow-up by OIG and appropriate forwarding criminal case, the OIG acted as a liaison with to other Agency offices. the U.S. Attorney’s office. The IG led an attempt to retrieve a lost laptop through coordination with airline officials at Dulles Airport. An airline employee was suspected of involvement with missing equipment. FCA employees are more willing to report real or suspected wrongdoing because they trust the competence and fairness of OIG’s investigations. The OIG’s Counsel made presentations to new employees regarding their responsibility to report observed or suspected fraud, waste, abuse of authority, mismanagement, or other wrongdoing. Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 8 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 The OIG input is part of the decision making process identifying and circulating (as appropriate) relevant in approving or amending legislation, regulations, documents. circulars and other policy positions. Legislation and proposed rules are tracked on a The OIG collaborated with the Office of regular basis. Regulatory Policy to designate points in time The CIGIE legislation committee is active in when information on regulations and briefings forwarding interest items. will be sent to the OIG. Constructive comments on relevant documents are Constructive criticism and creative alternatives offered submitted by the deadlines requested by the office, in OIG comments improve the quality and usefulness Agency, or staff circulating comments. of documents initiated by the Agency. FCA Board and management are informed about the status of new or pending legislation or regulations initiated externally. The IG Reform Act of 2008 made Program Fraud Civil Remedies Act applicable to a broader (more than cabinet level) range of agencies. When FCA develops implementing regulations, this act may be utilized as a tool to combat fraud. The IG and Counsel were active in planning implementation of the IG Reform Act provisions, especially those concerning funding of the CIGIE. 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. Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 9 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 governmentwide 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 Agency employees’ acceptance of and cooperation pamphlets describing OIG roles and activities. with OIG activities is improved through better understanding. OIG programs and products are Examples include Strategic Planning brochure, improved through feedback from Agency employees. The IG at FCA pamphlet, FCA Orientation PowerPoint presentation, and the CIGIE Annual OIG updates Directives periodically. Report. Developed PowerPoint presentation on the OIG Facilitate feedback from Agency employees and refine at FCA for web use and for new employee products and practices based on the feedback to OIG training. products and educational materials. IG led an attempt to retrieve a lost laptop The OIG would be receptive to any and all through coordination with airline officials at feedback received from Agency management Dulles Airport. and staff regarding OIG practices and products. Reaction to IG Observations has been positive. Observation on pandemic flu influenced Agency action to be proactive. Observation on record retention, particularly related to minutes of senior staff meetings, proved effective. An inspection from a prior time period suggested revision of enforcement policies and procedures. Although at first reluctant, FCA management reaps the benefits of revising and upgrading enforcement policies and practices since they have been needed in recent times. Audit follow-up is improved. Agreed-upon actions are taken more expeditiously. Rarely does an action take more than a year to clear. Responded to Congressional Request (Rep. Issa, December 2008) inquiries about “unimplemented recommendations.” Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 10 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 governmentwide 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 Projects and activities of adjunct organizations such members as an incentive to contribute to the Agency as the AGA, the Institute of Internal Auditors, CIGIE, and outside organizations by serving on committees CCIG, FLETC, and IG Training forums are improved and holding offices. by OIG staff contributions and participation. OIG staff actively participated in CIGIE: IG is the IG participates in the CIGIE working group on Vice Chairperson of CIGIE. The IG is a member inspections and evaluations. The group of the Executive Council of CIGIE. The IG and collaborates and shares common areas for staff participate on the Inspection and Evaluation inspection and evaluation work. Council of CIGIE, Association of Government IG frequently makes presentations on the IG Accountants (AGA), Council of Counsels (CCIG), Reform Act and CIGIE to organizations and CIGIE Federal Audit Executive Committee international groups. (FAEC), CIGIE FAEC IT Committee, Instructor at IG participates in monthly Financial Regulatory the Federal Law Enforcement Training Center Coordinating Committee meetings. (FLETC), FCA Employees’ Council, Federal Counsel was on several workgroups with other Women’s Program Committee, Blacks In counsels, including investigation curriculum Government, Administrative Burden Reduction development. Workgroup, and the Combined Federal Counsel was involved in reviewing CIGIE Campaign. legislation, funding mechanisms, and initial planning. OIG networking opportunities have resulted in an Counsel led an effort to prepare policies and expanded consideration of FCA ideas and practices documentation for use in sharing OIG counsel by community contacts and experts. The OIG has within the OIG community. shared telecommuting policies, hotline procedures, OIG auditors performed a peer review of the audit performance measures and performance contracts program of the OIG, Equal Employment and evaluation methods. Likewise, FCA benefits from Opportunity Commission (EEOC) in 2008. FCA the opportunity to benchmark practices in other OIG shared with the EEOC OIG our process for agencies. conducting quality control reviews on work papers and also provided EEOC OIG with a template for auditor’s statement on independence. OIG auditor actively participates in the FAEC IT Committee. This subcommittee is currently working with the Office of Management and Budget to revise the performance metrics for FISMA reporting by OIGs. OIG auditor participates on an administrative workgroup charged with setting up the infrastructure for CIGIE operations which includes developing business, financial and staffing plans; and acquiring business services, office space, IT equipment and services, and telecommunications. FCA programs and operations are more effective and efficient. OIG was acknowledged by the Project on Government Oversight (POGO) for having effective performance reporting. Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 11 APPENDIX AUDITS AUDITS ARE PRODUCTS ARE AUDITS ARE AGENCY ACCEPTS AUDIT NAME RISK ADDRESSED RELEVANT TIMELY CONSTRUCTIVE ≥ 80 % Efficiencies Realized OIG Initiated Strategic Plan 7 Months No Findings N/A Through Outsourcing IT Infrastructure Project Management Accepted OIG Initiated Strategic Plan 6 Months 1 Agreed-Upon Action Management and Implemented OE Travel Expenses OIG Initiated Strategic Plan 5 Months No Findings N/A FY 2007 and 2008 Legislatively Mandated Strategic Plan 6 Months No Findings N/A Financial Statements Annual Audit Certification and OIG Initiated Strategic Plan 6 Months No Findings N/A Accreditation Process INSPECTIONS FCA Travel and Purchase Card Management Accepted; OIG Initiated Strategic Plan 5 Months 4 Agreed-Upon Actions Distribution, Usage, and All Implemented Control EVALUATIONS Federal Information 3 Agreed-Upon Actions Security Management Management Accepted; Legislatively Mandated Strategic Plan 3 Months (FY 08 Evaluation Act Evaluation for FY All Implemented Report) 2008 and 2007 Farm Credit Administration ♦ Office of Inspector General Fiscal Years 2008-2009 Performance Report 12
FYs 2008-2009 Performance Report
Published by the Farm Credit Administration, Office of Inspector General on 2010-01-20.
Below is a raw (and likely hideous) rendition of the original report. (PDF)