oversight

March 1997

Published by the Farm Credit Administration, Office of Inspector General on 1997-03-01.

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

Office of
Inspector General




                    Semiannual Report
                      to the Congress
                          October 1, 1996
                                  through
                          March 31, 1997
                                               TABLE OF CONTENTS


SECTION I                                      FCA Semiannual Report to Congress
                                                                                                                                              Page

Reporting Requirements................................................................................................................... 1

Background....................................................................................................................................... 2

Audit Reports Issued ........................................................................................................................ 2

Status of Unimplemented Recommendations ................................................................................. 4

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

Legislation and Regulations............................................................................................................. 5

Other Activities................................................................................................................................. 6


APPENDICES:

           Appendix I -- Audit Reports Issued by FCA OIG ........................................................ 7
           Appendix Ia -- Inspector General Issued Reports with Questioned Costs ..................... 8
           Appendix Ib -- Inspector General Issued Reports with Recommendations
                            That Funds Be Put to Better Use.......................................................... 9
           Appendix II -- Farm Credit Administration Organization Chart................................. 10
           Appendix III -- FCA Office of Inspector General Organization Chart ........................ 11



SECTION II                                     FY 1996 OIG Performance Measures




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                                                                                            _

                                                                                                          October 1, 1996 - March 31, 1997
                                                                                   FCA Semiannual Report to Congress




                           REPORTING REQUIREMENTS


ACT CITATION AND REQUIREMENT                                                                                PAGE

Section 4(a)(2)     Review of Legislation and Regulations ....................................................5-6

Section 5(a)(1)     Significant Problems, Abuses and Deficiencies.................................... none

Section 5(a)(2)     Recommendations With Respect to Significant
                       Problems, Abuses and Deficiencies................................................. none

Section 5(a)(3)     Prior Recommendations Not Yet Implemented .......................................... 4

Section 5(a)(4)     Matters Referred to Prosecutive Authorities ......................................... none

Section 5(a)(5)     Summary of Instances Where Information
 and 6(b)(2)           Was Unreasonably Refused or Not Provided ................................. none

Section 5(a)(6)     List of OIG Audit Reports.........................................................................2-3

Section 5(a)(7)     Summary of Each Particularly Significant Report ...................................2-4

Section 5(a)(8)     Statistical Table on Management Decisions
                        on Questioned Costs............................................................................... 8

Section 5(a)(9)      Statistical Table on Management Decisions on
                        Recommendations That Funds Be Put to Better Use............................ 9

Section 5(a)(10)     Summary of Each Audit Over Six Months Old for
                       Which No Management Decision Has Been Made .............................. 4

Section 5(a)(11)     Significant Revised Management Decisions........................................ none

Section 5(a)(12)     Significant Management Decisions With Which
                        the Inspector General Disagrees ........................................................3-4




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_

1                                                                                  October 1, 1996 - March 31, 1997
                                     BACKGROUND

The Farm Credit Administration (FCA) is an independent Federal agency of the United States
government responsible for the regulation, examination and supervision of institutions chartered
under the Farm Credit Act of 1971. FCA is a non-appropriated agency with a fiscal year (FY)
1997 budget of $36,200,000 for administrative costs of the Agency. The FY 1997 budget for the
Office of Inspector General (OIG) is $753,000.

FCA currently has 330 established positions, about half of which are examiners located at six
field offices throughout the country. Also included in the established Agency positions are the
seven approved positions for the OIG. Appendix II displays the current organizational structure
of FCA and Appendix III displays the OIG within that structure.

FCA is a “designated Federal entity” within the meaning of the Inspector General Act of 1978, as
amended. The Inspector General is appointed by and is under the general supervision of the
Chairman of the FCA Board (Chairman).


                              AUDIT REPORTS ISSUED

Audits are conducted in accordance with audit standards established by the Comptroller General
of the United States for audits of Federal organizations, programs, activities and functions. Two
audit reports were issued during this reporting period and are summarized below.

OIG STAFF AUDIT

Agency Time Tracking System (ATTS).

The objectives of the audit were to: document management’s needs and expectations for time
tracking and project management information; evaluate whether the information provided is
accurate, complete and addresses management’s needs and expectations; evaluate the process for
collecting and recording information; perform benchmarking of other agencies and organizations;
and determine how managerial cost accounting standards promulgated by the Federal Accounting
Standards Advisory Board and the Office of Management and Budget will impact FCA’s need
for time tracking and cost accumulation data.

We concluded that ATTS, as currently configured, was unnecessarily complex and cumbersome
and, as a result, has not fully met its intended purpose. Also, the related information is
inaccurate. The cause of these weaknesses is largely due to the time tracking system being
combined with the payroll system.




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_

2                                                                October 1, 1996 - March 31, 1997
Factors contributing to the complexity and user difficulties at all levels include:

        •   ATTS is not organized in a logical scheme that would facilitate recording and
            reporting,
        •   data is collected in excessive detail, and
        •   reporting categories are established for efforts involving small amounts of time.

Factors contributing to the inaccuracy of the data include;

        •   constraints imposed by ATTS,
        •   human factors attendant to using a cumbersome system,
        •   unclear responsibility for the management and oversight of ATTS, and
        •   managers are not held accountable for the integrity of the data.

ATTS is scheduled to be migrated to the client/server computer architecture by September 30,
1997. The ATTS should not be migrated to a client/server environment until FCA makes a
number of decisions concerning the current problems with the time tracking system and its
associated applications and interfaces.

The report presented a total of six recommendations, all of which have been agreed to by
management.

CONTRACTED AUDIT

FCA’s Financial Statements for Fiscal Years Ended 1996 and 1995.

The OIG contracted with the independent accounting firm of Urbach Kahn & Werlin PC (UKW),
Certified Public Accountants, to audit FCA’s statements of financial position as of September 30,
1996, the related statements of operations and changes in net position, and cash flows for the
years then ended. UKW expressed an unqualified opinion on these financial statements.

UKW also issued two reports dated November 7, 1996, on FCA’s internal control structure and
its compliance with laws and regulations. The report on internal control structure disclosed no
material weaknesses in internal controls; however, it did disclose conditions existing during fiscal
year 1996 which UKW considered to be reportable. Specifically, UKW reported that: 1) FCA’s
core financial management system does not comply with the requirements of OMB Circular A-
127 or the JFMIP core financial management system requirements and lacks properly designed
controls, and 2) the controls in property management need improvement.

The report on compliance with laws and regulations disclosed two instances of noncompliance
with applicable laws and regulations that are required to be reported under Government Auditing
Standards. Specifically, UKW reported that interest due under the Prompt Payment Act was not
always paid by FCA (in approximately 500 out of 5,000 payments to FCA vendors), and that
material nonconformances of FCA’s core financial management system were not reported in

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_

3                                                                    October 1, 1996 - March 31, 1997
FCA’s annual Federal Managers’ Financial Integrity Act (FMFIA) report submitted in fiscal year
1996.

Management disagreed with UKW’s conclusion that weaknesses in FCA’s core financial
management system (GLOWS) were significant enough to be a “reportable condition” although
management did acknowledge the existence of “some problems.” In addition, management
stated “the Agency did not violate FMFIA and no material weaknesses of the GLOWS system
existed either then or now.” The OIG maintains that UKW’s position is accurate.

The report presented a total of four formal recommendations, all of which have been agreed to by
management.

SPECIAL AUDIT PROJECT

Survey of Farm Credit System (FCS) Institutions.

OIG administers an ongoing survey of the regulated institutions of the FCS. This survey program
is designed to provide the FCA Board with independent feedback concerning how well FCA is
performing its examination and enforcement activities. OIG administers and reports the results of
the survey to assure the confidential treatment of individual responses from FCS institutions. The
chairman of the board and the chief executive officer of each FCS institution is surveyed
following their receipt of the report of examination to solicit their voluntary feedback on the
quality and consistency of the examination/enforcement process. During this reporting period,
two quarterly status reports and one annual report was provided to the FCA Board.


     STATUS OF UNIMPLEMENTED AUDIT RECOMMENDATIONS

During this reporting period, management completed efforts begun during the preceding
reporting period to eliminate a long standing backlog of unimplemented audit recommendations.
This was accomplished by final action being taken on an open recommendation from the report
on Conformance Review of the Financial Management System, issued March 30, 1995. In
addition, final action was taken on two of the four recommendations from the report on FCA’s
Practices versus FCA’s Expectations of Farm Credit System Institutions, issued on September 26,
1996.

The remaining 12 unimplemented recommendations include the two remaining from the report
on FCA’s Practices versus FCA’s Expectations of Farm Credit System Institutions, issued late in
the previous reporting period. The other ten are from the current period: four from the
November 27, 1996 report on FCA Financial Statements for Fiscal Years Ended 1996 and 1995
and six from the January 16, 1997 report on the Agency Time Tracking System (ATTS). It is
expected that management will have a continued commitment to timely corrective action on all
open recommendations.


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_

4                                                                 October 1, 1996 - March 31, 1997
                                   INVESTIGATIONS

At the beginning of this reporting period there were five open investigations. One additional
investigation was opened during this period. Of those six investigations, two were closed during
this six-month period as follows:

•   An allegation was made that a former FCA employee received payments beyond what is
    allowable upon the employee’s departure from the Government. A thorough review of the
    employee’s personnel documentation revealed that no such inappropriate payments were
    made and no violations of law occurred when the employee was offered an early retirement
    option.

•   A projector with an estimated value of $4,000 was reported as missing during business hours
    from FCA Headquarters. The projector was subsequently returned from an unauthorized area
    by a person outside of FCA. We found no intentional wrongdoing; however, we did find
    weaknesses in FCA’s controls over the storage and accountability of the projectors. The OIG
    reported those weaknesses to management along with recommendations to strengthen
    property controls over the projectors.

At the close of this reporting period three investigations remain active and one investigation
remains open awaiting a response from management. The inactive investigation remains open
because numerous infractions were found in a division which we believe would best be resolved
through a comprehensive management solution rather than addressing each infraction
individually. Management has stated their commitment to resolve the problems in this division
through a comprehensive plan that will begin in May of this year and be completed before the
end of this fiscal year.

The OIG Hotline received 73 calls or walk-ins during this period. Five of the calls concerned
fraud in programs other than those under FCA’s jurisdiction and were referred to the appropriate
agency. Ten calls dealt with Farm Credit System borrower complaints and were either referred to
the FCA division responsible for reviewing such matters or are awaiting further information from
the complainant. Four calls alleged problems internal to FCA; one resulted in the opening of an
investigation and a second is in the preliminary review stage. The remaining 54 Hotline calls
warranted neither investigative action nor referral.


                       LEGISLATION AND REGULATIONS

During this period, OIG filed a report with the Chairmen on the Senate Committee for
Governmental Affairs and the House Committee on Governmental Reform and Oversight
concerning the Agency’s non-use of Administratively Uncontrollable Overtime. This report was
required by Section 650 of the Treasury, Postal Service and General Government Appropriations
Act of 1997.
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_

5                                                               October 1, 1996 - March 31, 1997
OIG reviewed and furnished comments on four FCA regulations as well as various Agency
policies and directives.


                                   OTHER ACTIVITIES

OIG staff are encouraged to participate in organizations which contribute to the mission of the
Inspector General community. Most staff are actively involved in one or more professional
organizations in addition to ad hoc activities of the Executive Council on Integrity and
Efficiency/President’s Council on Integrity and Efficiency (ECIE/PCIE) including:

Counsel to the Inspector General chairs the Legislative Committee of the ECIE/PCIE Council of
Counsels to Inspectors General.

The Assistant Inspector General for Audit serves as the Small Agency Council representative on
the CFO Council Financial Systems Committee, is a member of the Core Group for
IGNet/FinanceNet, serves as a guest instructor at the Inspector General Auditor Training Institute
(IGATI), and is a member of the USDA Graduate School Financial Management Advisory
Board.

A senior auditor is detailed to the IGATI to serve as an instructor for one year.

The Administrative Officer served on the subcommittee of the PCIE Federal Training Network.




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6                                                                   October 1, 1996 - March 31, 1997
                                                                                    APPENDIX I


                     AUDIT REPORTS ISSUED BY FCA OIG
                             October 1, 1996 to March 31, 1997


                                                                              Recommendations
    AUDIT REPORTS                Number of              Questioned           That Funds Be Put to
                              Recommendations             Costs                   Better Use

      Agency Time
     Tracking System                  6                     $0                          $0


     FY 1996 and 1995
    Financial Statements              4                      0                           0


           Total                      10                    $0                          $0




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7                                                                October 1, 1996 - March 31, 1997
                                                                                APPENDIX Ia


                  INSPECTOR GENERAL ISSUED REPORTS
                       WITH QUESTIONED COSTS


                                                Number                     Dollar Value

                                                                 Questioned          Unsupported
                                         Reports     Recs.         Costs                Costs
A. For which no management decision
    has    been     made by     the
    commencement of the reporting
    period                                  0            0    $ 0                  $ 0
B. Which were issued during the
   reporting period                         0            0        0                    0
   Subtotals (A+B)                          0            0        0                    0
C. For which a management decision
   was made during the reporting
   period                                   0            0        0                    0
   (i)     dollar value of disallowed       0            0        0                    0
   costs
   (ii) dollar value of costs not
   disallowed                               0            0        0                    0
D. For which no management decision
   has been made by the end of the
   reporting period                         0            0        0                    0
E. For which no management decision
   was made within six months of
   issuance                                 0            0        0                    0




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8                                                              October 1, 1996 - March 31, 1997
                                                                                APPENDIX Ib


         INSPECTOR GENERAL ISSUED REPORTS WITH
     RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE

                                                              Number

                                                    Reports            Recs.          Dollar Value
A. For which no management decision has been
   made by the commencement of the reporting
   period                                              1                 1               $53,400
B. Which were issued during the reporting
   period                                              0                 0                        0

   Subtotals (A + B)                                   1                 1               $53,400
C. For which a management decision was made
   during the reporting period                         0                 0                        0
   (i) dollar value of recommendations that
   were agreed to by management                        1                 1               $53,400
        --     based on proposed management
               action                                  1                 1               $53,400
        --     based on proposed legislative
               action                                  0                 0                        0
   (ii) dollar value of recommendations that
   were not agreed to by management                    0                 0                        0
D. For which no management decision has been
   made by the end of the reporting period             0                 0                        0
E. Reports for which no management decision
   was made within six months of issuance              0                 0                        0




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9                                                              October 1, 1996 - March 31, 1997