March 2005

Published by the Farm Credit Administration, Office of Inspector General on 2005-03-01.

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

Office of
Inspector General

                    Semiannual Report
                      to the Congress

                      October 1, 2004
                      March 31, 2005

                       Number 32
                       March 2005
Farm Credit Administration                               Office of Inspector General
                                                         1501 Farm Credit Drive
                                                         McLean, VA 22102-5090
                                                         (703) 883-4030

   April 29, 2005

   The Honorable Nancy C. Pellett
   Chairman of the Board and
    Chief Executive Officer
   Farm Credit Administration
   McLean, Virginia 22102

   Dear Ms. Pellett:

   Enclosed is the semiannual report on the activities of the Farm Credit Administration’s Office of
   Inspector General for the period October 1, 2004 through March 31, 2005. We are filing this
   report in accordance with the Inspector General Act of 1978, as amended (Act). This is the
   thirty-second report since creation of the office on January 22, 1989. Section 5(b) of the Act
   requires that you send this report to the appropriate Congressional committees and
   subcommittees within 30 days after the date of this transmittal, with management’s report on the
   status of audit recommendations.

   In this second semiannual report addressed to you as Chairman, I am optimistic that the Agency
   has demonstrated a renewed commitment to address some long-standing management
   challenges. I am hopeful that the commitment results in the implementation of a number of
   agreed upon actions and continued recognition of the partnership to improve the Agency. There
   was a slight decline in the number of open recommendations during this reporting period which
   marked a reversal of the trend over the past several years. Moreover, management decisions
   were reached on all open recommendations. I look forward to working with you and FCA
   managers to continue these positive trends.


   Stephen G. Smith
   Inspector General

                             TABLE OF CONTENTS

EXECUT IVE SUM MAR Y __________________________________________________________1
BACKGR OUND __________________________________________________________________2
MANAGEMENT CHA LLEN GES ___________________________________________________2
  F ARM C REDIT S YSTEM R ISK _______________________________________________________2
  H UM AN C AP IT AL _________________________________________________________________3
  A GENCY G OV E RN AN C E ____________________________________________________________4
  S TR ATEGIC P L ANNING ____________________________________________________________4
  F IN ANCI AL M AN AGEMENT _________________________________________________________4
  L EVER AGIN G T ECHNOLOGY ________________________________________________________5
AUD IT A ND IN SPECT ION R EPOR T S ISSU ED ____________________________________6
  C ALL R EPORT D AT A V ERIFIC ATION _________________________________________________6
  I NDEPENDENT F IN ANCI AL A UDIT ___________________________________________________6
STA TU S OF UN IM PLEM EN TED R ECO MM ENDA T ION S ___________________________6
  A UDITS _________________________________________________________________________7
  I NSPECTIONS ____________________________________________________________________8
  I NVESTIGATI ONS _________________________________________________________________8
  L EGISL ATION   AND   R EGUL ATIONS ___________________________________________________8
  O THER A CTIVITIES _______________________________________________________________9
A PPEND IX A ____________________________________________________________________11
  TABLE 3. AUDIT / INSPECTION REPORTS ISSUED____________________________________________11
  TABLE 4. REPORTS WITH QUESTIONED COSTS _____________________________________________11
A PPEND IX B ____________________________________________________________________13
  FARM CREDIT ADMINISTRATION ORGANIZATION CHART_______________________________________13
  FCA OFFICE OF INSPECTOR GENERAL ORGANIZATION CHART _________________________________14
A PPEND IX C ____________________________________________________________________15
I N D E X O F R E P O R T I N G R E Q U I R E M E N T S _________________________________16


     This Semiannual Report to the Congress summarizes the activities and
     accomplishments of the Farm Credit Administration (FCA or Agency), Office of
     Inspector General (OIG) and covers the period October 1, 2004 through March 31,
     2005. Our efforts were directed toward performing audits, inspections, and
     evaluations of FCA programs and operations, conducting investigations, and
     providing technical assistance and advice on FCA programs.

     Dallas P. Tonsager was appointed as an FCA Board member on December 1, 2004
     for a term that expires May 21, 2010, replacing Michael M. Reyna as a Board

     The Chairman, Nancy C. Pellett, has made some changes in top management of the
     Agency. With such changes, there are opportunities to implement new ideas that
     can bring about improvements in the Agency. There are also risks that important
     controls may be lost in the changes.

     During this period of transition, management initiated several actions that show
     promise of resolving some of the long-standing recommendations. The number of
     unresolved recommendations has decreased and the Chairman has demonstrated a
     commitment to resolve long-standing recommendations and address the
     management challenges by committing resources to correct issues. Specifically,
     FCA strategic studies initiated by the Chairman are promising because they aim to
     refine Agency processes and prepare the organization for environmental changes
     over the next 5 to 7 years.
                                        FCA     SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                                       OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5


        The 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, as amended (Farm Credit Act). FCA is a non-
        appropriated agency with a fiscal year (FY) 2005 budget of $39.4 million for
        administrative costs. The FY 2005 budget for the OIG was $908,375. FCA is a
        “designated Federal entity” within the meaning of the Inspector General Act of 1978,
        as amended.

        FCA currently has 278 employees, about half of which are examiners located at five
        field offices. This is a three percent decrease in staffing during this reporting period
        and five percent decrease from the same reporting period last year. The OIG
        maintains five positions. Appendix B displays the organizational structure of FCA
        and Appendix C displays the OIG within that structure.


        This part of the semiannual report highlights major challenges confronting the
        Agency as it works to fulfill its mission. These challenges have remained for several
        years. While some are outside of the Agency’s control, most should be addressed
        through concerted action by management. Over the past 6 months, the OIG has
        observed a continued commitment by FCA management in addressing the

Farm Credit System Risk
        The Farm Credit System (FCS or System) is a single industry lender and is
        vulnerable to economic swings. FCS remains sound in all material respects.
        Earnings and capital levels have continued to strengthen and asset quality remains
        high. However, there are many challenges facing agriculture and rural America
        today that raise the question of whether there should be modifications to the Farm
        Credit Act in order to enhance agricultural and rural economies of the future.

        In the early 1990s, the Government Accountability Office (GAO) conducted a
        comprehensive study of the cost and availability of credit in rural America,1 The
        GAO concluded that the System did not need new statutory authorities in the near
        term, but that ongoing structural changes in agriculture and rural America could
        justify such changes in the longer term. GAO noted that over time, as agriculture
        and rural America continued to change, the System’s charter may need to be
        updated to ensure that the System is not hampered by outdated restrictions.

            GAO/GGD-94-39 Farm Credit System Repayment of Federal Assistance and Competitive Position, March 1994

                                FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                             OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

        The FCA must balance the often competing demands of ensuring the FCS fulfills its
        public purpose, proactively examining risk in the regulated institutions both
        individually and systemically, and controlling the cost of the regulator. FCA’s
        challenge is complex because it has become increasingly difficult to reconcile
        significant provisions of the Farm Credit Act with the realities of the agricultural
        industry, the business environment, and financial markets in the 21st Century. FCA
        management recognizes this challenge as evidenced by the Chairman’s testimony
        before the House Agriculture Subcommittee on Conservation, Credit, Rural
        Development, and Research in September 2004.

        As a financial regulator, FCA must maintain a flexible and responsive regulatory
        environment. The Agency can anticipate that the System will press for broader
        powers through regulatory interpretations of the Act. At the same time, FCA must
        anticipate that the System’s competitors will press for more regulatory constraints on
        the System. In balancing these forces, the FCA Board must remain vigilant that its
        actions are transparent and congruent with its regulatory philosophy. Without these
        ingredients, the Agency risks being labeled as inflexible by the System or a captive
        by the System’s competitors.

Human Capital
        In March 2001, the OIG recommended FCA develop a human capital plan and FCA
        management agreed to this recommendation. Under Chairman Pellett’s leadership,
        senior managers have focused on the challenge of marshalling, managing, and
        maintaining human capital to maximize FCA performance and assure its
        accountability. While FCA still does not have a human capital plan; the Agency has
        made a significant investment in these strategic studies that can serve as the plan’s
        foundation. The objective of the strategic studies is to create a picture of the System
        in 5 to 7 years and identify changes that can help FCA adapt to the environmental
        changes. The approach is a marked contrast to our prior semiannual reports where
        we noted the problem was the lack of a consistent strategic approach in establishing
        a human capital plan.

        FCA’s challenge will be to transform the strategic studies into management actions
        (organizational changes and process improvements) that achieve better results and
        clarify accountability. Realignment of resources and/or processes may help FCA
        pursue organizational approaches that recognize the reality of evolving technology, a
        changing workforce, and other environmental forces. For example, as competitive
        sourcing, electronic government (E-Government), financial management, and other
        initiatives lead to changes—how FCA meets its mission may need to change,
        including the skill sets it needs and how it organizes those skills to meet its mission.

        Transparency, staff commitment, and accountability are key ingredients to sustained
        improvements in human capital.

                                FCA    SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                              OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

Agency Governance
        The Farm Credit Act provides for a full time three-member Board. The Board
        members are appointed by the President and confirmed by the Senate. A small full-
        time Board presents a challenge in terms of defining the roles and responsibilities of
        the Board members relative to the governance of the Agency. The Board must be
        able to engage in professional policy debate and set a sound course for the Agency.
        The Board and the Agency are most effective when they can focus on the business
        of the Agency instead of lower level operational issues. The Board’s rules of
        operation are a foundation for trust and shared expectations among Board
        members. A collegial Board founded on mutual trust and respect is essential to
        FCA’s ultimate effectiveness.

        The Chairman has taken action to address this challenge by sharing authority and
        tasking a Board member with the responsibility to lead the Board in its efforts on
        governance issues. During the past 6 months, the OIG has noted management
        efforts to review, deliberate, and revise Board policies including the Board’s rules of
        operation. This has resulted in significant progress towards addressing this long-
        standing management challenge.

Strategic Planning
        The FCA Board adopted a Strategic Plan a year ago. Since adoption, the Agency
        has a new Chairman and a new Board member. The changes in top leadership
        provides an opportunity to refine strategies and alignment to ensure the Board’s
        vision is accomplished.

        The Board and Agency staff have refined the performance measures. Further
        refining performance measures may enhance a results-oriented culture at FCA. The
        Agency will need to achieve a balance among results, public expectations, and
        employee issues. FCA should evaluate its performance measures to ensure that
        they challenge and stretch the organization. Performance measures can be a
        powerful tool to continue the push into a results-oriented organization. An effective
        performance management system fosters performance and accountability at the
        individual, organizational, and ultimately overall Agency levels.

Financial Management
        Timely, accurate, and useful financial information is essential for:
                making day-to-day decisions;
                managing the Agency’s operations more efficiently, effectively, and
                supporting results-oriented management approaches; and
                ensuring accountability on an ongoing basis.

        During FY 2001, FCA successfully implemented a financial management system
        using the services of the Department of Interior’s National Business Center (NBC).

                               FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                            OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

        During September 2003, the Agency decided to reprogram funds and purchase a
        new financial system. Management originally scheduled implementation of the new
        system during FY 2004. However, implementation has been delayed until July 1,
        2005. During the prior reporting period, the OIG performed an inspection that
        showed significant improvements are needed in project management to successfully
        complete implementation.

        Management’s challenge is to bring yet another system on line at a reasonable cost
        to the FCA and concurrently leverage the system to deliver timely financial
        information critical for making well-informed management decisions. The challenge
        suggests the Agency should develop measures of financial management success
        beyond an unqualified financial statement audit opinion. Measures such as
        delivering financial information that managers can use for day-to-day operations, and
        developing reports that capture the full cost of programs and projects can help bring
        about improvements.

        During this reporting period, new financial reports were made available that can
        serve as an important tool to enhance FCA’s business operations and management
        culture. FCA took an important step to get information into the hands of managers.
        FCA will also need to improve managers’ ability to use the information to measure,
        control, and manage costs, to manage for results, and to make timely and fully
        informed decisions about allocating limited resources. Meeting this challenge will
        help FCA ensure that underlying financial management processes, procedures, and
        information are in place for effective program management.

Leveraging Technology
        Information technology (IT) is a key element of management reform efforts that can
        help dramatically reshape government to improve performance and reduce costs.
        The Agency has recognized that in order to meet the constraints of its budget, it
        must be able to maximize its return on investment in technology. FCA’s challenge is
        to establish effective mechanisms to ensure that current and future staff has the
        skills to use technology to operate in an efficient and effective manner.

        Internally, there is an opportunity for IT to complement human capital initiatives to
        reformulate the work processes of FCA. There is also an opportunity to capture
        knowledge of employees who are approaching retirement. In order to take
        advantage of these opportunities, FCA will need to invest in training and reward
        employees who are able to develop innovative approaches to accomplish Agency
        goals using technology.

        Externally, E-Government offers many opportunities to better serve the public, make
        FCA more efficient and effective, and reduce costs. FCA has begun to implement
        some E-Government applications, including the use of the Internet to collect and
        disseminate information and forms.        Here, FCA’s challenge is to identify
        opportunities to develop partnerships with other agencies to develop joint
        E-Government strategies.

                                FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                             OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5


         We conduct all audits in accordance with Government Auditing Standards issued
         by the Comptroller General of the United States for audits of Federal organizations,
         programs, activities, and functions. Inspections are in accordance with the
         President’s Council on Integrity and Efficiency’s Quality Standards for Inspections.
         Copies of most OIG reports are available on FCA OIG Web site (www.fca.gov/oig),
         or by contacting the OIG on (703) 883-4030, (703) 883-4359 for TTY, or by e-mail at

Call Report Data Verification
         The OIG completed an audit of the Agency's validation process for call report
         data. The call report is comprised of financial information including a report of
         condition, report of income, and supporting schedules on the financial condition
         of the Farm Credit System institutions. The audit objective was to assess the
         process used by FCA to ensure call report data is accurately reported. We
         found that overall the call report validation process is adequate to ensure data is
         accurately reported and examiners are routinely validating significant call report
         data. However, some improvements are needed in the risk-based examination
         process for conducting call report validation checks.

Independent Financial Audit
         The Accountability of Tax Dollars Act of 2002 was created as a government-
         wide initiative. The President’s Management Agenda states agencies must
         continue to improve their financial performance by improving timeliness,
         enhancing usefulness, and ensuring reliability by obtaining and sustaining a
         clean audit opinion. In November 2004, the OIG transmitted the Harper, Rains
         & Knight, PA (HRK) report on the audit of FCA’s financial statements for the
         fiscal year ended September 30, 2004. HRK issued an unqualified opinion.
         HRK opined the financial statements present fairly, in all material respects, the
         financial position of FCA as of September 30, 2004 and 2003, in conformity with
         generally accepted accounting principles. HRK issued two other reports. The
         report on internal controls noted no matters that HRK considered to be material
         weaknesses. The HRK report on compliance with laws and regulations found
         no instances of noncompliance.


         At the beginning of the period, there were 18 unimplemented agreed upon actions
         for audits and 8 unimplemented recommendations for inspections. During this
         period, two more agreed upon actions were issued. Management took final action
         on 5 of the agreed upon actions. At the end of this reporting period, 15 agreed upon
         actions and 8 recommendations remain unimplemented.

                                      FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                                   OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

         The following table summarizes the final actions management took on open audit

                                  Table 1. Audit Agreed-Upon Actions
                                                       Open during
                                                                       Management       Open on
          Audit Report                       Issued    this 6-month
                                                                      Actions during   04/01/2005
                                                                        this period
          Performance Budgeting             03/23/01        2               0              2
          Office of Chief Financial
                                            01/24/02        2               0              2
          Loan Account Reporting
                                            08/28/03        4               0              4
          FCSBA Business Practices          03/09/04        5               4              1
          Human Capital: Job
                                            06/29/04        5               1              4
          Call Report Data Verification     02/03/05        2               0              2
                              Total                        20               5             15

         The OIG issued audit reports on Performance Budgeting over 4 years ago and the
         Office of Chief Financial Officer more than 2 years ago. Two of the original agreed
         upon actions from each of these reports remain open. However, as noted in the
         management challenges, the Agency has made progress on the agreed upon action
         concerning a human capital plan.

         The OIG issued an audit report on the quarterly collection of detailed borrower data
         (Loan Account Reporting Data) 18 months ago that included nine action items.
         Since the report’s issuance, four action items remain open.

         The OIG issued an audit report during the last reporting period on the business
         practices of the FCS Building Association. The FCS Building Association, in
         coordination with FCA, implemented changes and improvements in operations that
         resulted in closing four of the five agreed upon actions and has made significant
         progress on the remaining agreed upon action.

                                FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                             OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

        The following table summarizes the final action that management took on
        recommendations contained in two inspection reports.

                               Table 2. Inspection Recommendations
                                               Open during
                                                                 Management         Open on
         Inspection Report         Issued      this 6-month
                                                                Actions during     04/01/2005
                                                                  this period

         FCA Board Policies        09/15/03           3                0               3
         Project Management        09/09/04           5                0               5
                       Total                          8                0               8

        The OIG issued an inspection report on FCA Board Policy Statements a year and a
        half ago. Management made decisions on the recommendations and has
        committed resources to address the issues noted in the report.

        In the inspection report on FCA’s project management, the OIG made five
        recommendations for improved project management that can be applied to FCA’s
        future large-scale projects. Management made decisions on these recommenda-
        tions and is working towards resolution.

        Most OIG Hotline calls and e-mails dealt with borrower complaints concerning FCS
        institutions and other FCS issues. These were referred to the FCA office responsible
        for reviewing such matters. All other Hotline calls were addressed or were referred
        to the appropriate FCA office or other Federal agency.

        One investigation was open at the beginning of this reporting period and it was
        closed during this reporting period. The investigation involved the performance
        rating program within the Agency. The OIG substantiated problems and referred the
        matter to the Chairman for administrative action. No new investigations were
        opened for this 6-month period.

Legislation and Regulations
        OIG staff reviewed several FCA regulations in both proposed and final form.
        Statutory and regulatory compliance issues were reviewed as they arose in the
        evaluative process. Also, we reviewed and commented on proposed legislation
        affecting the Inspector General community through the legislation committee of the
        President’s Council on Integrity and Efficiency and the Executive Council on Integrity
        and Efficiency (PCIE/ECIE).

                               FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                            OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

        OIG provided comment on the FCA proposed rule on Loan Syndication Waiver of
        Borrower Rights. The OIG also reviewed regulations on liquidity and investments,
        governance of the System and receivership.

Other Activities
        During this reporting period, the OIG has continued the use of Observations to
        provide management feedback on issues that came to our attention during the
        process of performing other OIG work. In this 6-month period, we commented on
        the internal procedures involving job evaluation reconsideration and on new
        legislation involving the appointment of a Chief Privacy Officer.

     Survey of Farm Credit System Institutions
        OIG administers an ongoing Agency survey of the regulated institutions of the FCS.
        The survey objectively measures the quality and consistency of the Agency’s
        examination and enforcement functions. During the reporting period, OIG issued a
        report on the survey results for fiscal year 2004. During fiscal year 2004 OIG sent
        71 surveys and received 53 responses. During this reporting period, there were
        no enforcement actions. Overall, Farm Credit institutions continued to provide
        favorable ratings. Further, the 75 percent response rate on the survey was a
        significant increase over the prior year’s rate of 54 percent.

     Investigation Peer Review
        Our office completed the fieldwork for the PCIE/ECIE quality assessment review
        of the U.S. Government Printing Office investigative operations.

     Internal Processes
        This reporting period we initiated a review of OIG operating procedures. In addition,
        OIG provided input into several Agency policies and procedures concerning
        governance and non-Federal audits.

     OIG Performance Measures and Strategic Plan
        This is the tenth year this office has been using performance measures. Each year
        we assess the validity of the measures, update our benchmarks, as appropriate, and
        use the performance results to review and/or improve our effectiveness. We issue a
        report on our performance each year. It is available on the FCA OIG Web page at

        During this reporting period, OIG issued a strategic plan for FY 2005-2010. See
        Appendix C.

     Staff Participation in Activities of the Professional Community
        OIG staff members are encouraged to take part in organizations that contribute to
        the mission of the Inspector General community, as well as their individual

                          FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                       OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

   professional development. Most staff is actively involved in one or more professional
   organizations as well as ad hoc activities of the PCIE/ECIE.

   During this reporting period, a staff member participated in a panel to recommend
   candidates for the Inspector General of Montgomery County, Maryland, to the
   County Council. The Inspector General participated as a panel member at the
   Government Printing Office for rating and ranking of the Assistant Inspector General
   for Auditing candidates.

Staff Participation in Agency Organizations
   Staff is active on several Agency workgroups and task forces. During this reporting
   period, the OIG was represented in Blacks in Government, Administrative Burden
   Reduction Workgroup, the Federal Women’s Program, the Combined Federal
   Campaign, and the E-Travel Workgroup.

Staff Development
   The OIG employees continually seek ways to improve skills and become
   knowledgeable in IG community efforts. The Inspector General participated in
   Association of Government Accountants’ 15th Annual Leadership conference and
   the Government Auditing Conference sponsored by the Institute of Internal Auditors.

                                         FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                                      OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5


                              Table 3. Audit / Inspection Reports Issued

                                               Number of Agreed         Questioned     That Funds Be Put
               Title of Report                   Upon Actions/            Costs          to Better Use

     Call Report Data Verification                     2                    $0                  $0

     FCA FY 2004 Financial Statement                   0                    $0                  $0

                                 Total                 2                    $0                  $0

                                 Table 4. 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              0            0            $0              $0
        of the reporting period

B.      Which were issued during the
                                                       0            0            $0              $0
        reporting period

Subtotals (A+B)                                        0            0            $0              $0

C.      For which a management decision was
                                                       0            0            $0              $0
        made during the reporting period

        (i) dollar value of disallowed costs           0            0            $0              $0

        (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                0            0            $0              $0
        reporting period

E.      For which no management decision
        was made within six months of                  0            0            $0              $0

                                  FCA    SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                                OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

       Table 5. Reports with Recommendations that Funds be Put to Better Use

                                                  Number of    Number of
                                                   Reports       Recs.      Dollar Value

A. For which no management decision has been
   made by the commencement of the reporting             0        0             $0

B. Which were issued during the reporting
                                                         0        0             $0

Subtotals (A + B)                                        0        0             $0

C. For which a management decision was made
                                                         0        0             $0
   during the reporting period

    (i) dollar value of recommendations that
                                                         0        0             $0
        were agreed to by management

        --based on proposed management
                                                         0        0             $0

        -- based on proposed legislative action          0        0             $0

    (ii) dollar value of recommendations that
                                                         0        0             $0
         were not agreed to by management

D. For which no management decision has been
                                                         0        0             $0
   made by the end of the reporting period

E. For which no management decision was
                                                         0        0             $0
   made within six months of issuance

                                       FCA      SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                                       OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

Farm Credit Administration Organization Chart

                                FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                             OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

FCA Office of Inspector General Organization Chart

                Farm Credit Administration
                Office of Inspector General

                                              Inspector General
                                                Stephen G. Smith

                    Investigator      Counsel to IG            Auditor       Management Analyst
                  Joan D. Ohlstrom    Elizabeth Dean       Veronica McCain   Mary Beth Barbagallo

                                     FCA    SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                                   OCTOB ER 1 , 2 00 4—MARCH 3 1 , 2 00 5

Key Effort 1: Provide value-added customer service to the FCA.
              Expected Outcomes                                                Initiatives
OIG will continue to ensure:                             Provide insight to the board where possible
     FCA is effective and independent arms-length        risks/challenges are foreseen in regulations and/or
     regulator                                           System initiatives.
     FCA efficiently manages its resources               Recommend improvement to make operations more
     FCA’s stakeholders have confidence in the           efficient/effective.
     integrity of the Agency and its employees           Prevent/detect fraud, abuse, and mismanagement to
                                                         ensure integrity of FCA employees and programs.
Key Effort 2: Enhance communication and coordination with Board, agency management and
other stakeholders.
              Expected Outcomes                                                Initiatives
OIG will build:                                          Ensure open communication between OIG and FCA
     A relationship of mutual trust with FCA             Board, management and staff.
     Effective communication with Congress               Timely inform Congress and other stakeholders of FCA
     A network of mutual support among other OIGs        operation and progress in meeting current challenges.
     Innovative approaches to reporting on work          Create innovative and user-friendly reporting
     performed.                                          mechanisms to educate and assist.

Key Effort 3: Continually assess OIG operations to identify methods to increase productivity
and enhance resource use.
              Expected Outcomes                                                Initiatives
We will foster continuous improvements by:               Utilize technology to increase productivity and reduce
     Refining our measures of performance                processing time.
     Evaluating and improving our work processes         Increase success in our accomplishments through
     Adhering to PCIE/ECIE quality standards             appropriate and rigorous performance measures.
     Investing in training and development               Meet established standards ensuring the quality, validity
     opportunities for OIG staff                         and integrity of products.
                                                         Expand knowledge through employee development
                                                         using external and internal opportunities and expertise.


INSPECTOR GENERAL ACT CITATION AND REQUIREMENT                                                                  PAGE

Section 4(a)(2)     Review of Legislation and Regulations...........................................................8

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

Section 5(a)(2)     Recommendations for Corrective Action ..................................................none

Section 5(a)(3)     Prior Recommendations Not Yet Implemented...........................................6-7

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

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

Section 5(a)(6)     List of OIG Audit/Inspection Reports...............................................................8

Section 5(a)(7)     Summary of Significant Reports .....................................................................6

Section 5(a)(8)     Statistical Table on Management Decisions.................................................11
                    with Questioned Costs

Section 5(a)(9)     Statistical Table on Management Decisions on ...........................................12
                    Recommendations that Funds be Put to Better Use

Section 5(a)(10)    Summary of Each Audit Over Six Months Old for .........................................7
                    Which No Management Decision Has Been Made

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

Section 5(a)(12)    Significant Management Decisions with Which .......................................none
                    the Inspector General Disagreed

Section 5(a)(13)    Compliance of Agency Financial Management System ................................6

            R E P O R T
Fraud        Waste          Abuse           Mismanagement


        phone: Toll Free (800) 437-7322

                           (703) 883-4316

           Fax:    (703) 883-4059

            e-mail: fca-ig-hotline@starpower.net

            mail:   Farm Credit Administration
                    Office of Inspector General
                    1501 Farm Credit Drive
                    McLean, VA 22102-5090