oversight

March 2007

Published by the Farm Credit Administration, Office of Inspector General on 2007-03-01.

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

Office of
Inspector General

                    Semiannual Report
                      to the Congress

                      October 1, 2006
                             to
                      March 31, 2007




                       Number 36
                        April 2007
Farm Credit Administration                                Office of Inspector General
                                                          1501 Farm Credit Drive
                                                          McLean, VA 22102-5090
                                                          (703) 883-4030




   April 4, 2007



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

   Dear Chairman Pellett:

   Enclosed is the semiannual report on the activities of the Farm Credit Administration’s (FCA or
   Agency) Office of Inspector General (OIG) for the period October 1, 2006 through March 31,
   2007. This is the thirty-sixth report since the establishment of the OIG on January 22, 1989.

   I am submitting this report in accordance with the Inspector General Act of 1978, as amended
   (IG Act). Section 5(b) of the IG Act requires that you send this report to the appropriate
   Congressional committees and subcommittees within 30 days after the date of this transmittal
   along with management’s report on the status of audit action items.

   During this reporting period, six previously open action items were closed. All six resulted from
   management’s completion of recommendations and agreed-upon actions relative to two audits,
   Performance Measures and Internal Controls, and Records Management and Preservation of
   Institutional Knowledge. Two new agreed-upon actions relating to the audit, Committees
   Established by the Farm Credit Administration Board, were opened during this period. I am
   confident that the Agency will continue its commitment to address OIG recommendations and/or
   agreed-upon actions and the management challenges delineated in this report.

   I look forward to a continuing positive relationship between the OIG and your office, which I view
   as a partnership, striving to strengthen FCA operations.

   Respectfully,



   Carl A. Clinefelter
   Inspector General

   Enclosure
                      TABLE OF CONTENTS
EXECUTIVE SUMMARY…………………………………………………………………………..                          2

BACKGROUND…………………………………………………………………………………….                              3

MANAGEMENT CHALLENGES………………………………………………………………….                          3
  ORGANIZATIONAL CHANGE……………………………………………………………………………                     3
  HUMAN CAPITAL………………………………………………………………………………………….                       4
  FINANCIAL MANAGEMENT……………………………………………………………………………...                   5
  LEVERAGING TECHNOLOGY…………………………………………………………………………..                    5
  AGENCY GOVERNANCE………………………………………………………………………………...                     6
  STRATEGIC PLANNING………………………………………………………………………………….                     6
  A CHANGING ENVIRONMENT…………………………………………………………………………..                   7

AUDIT AND INSPECTION REPORTS ISSUED………………………………………………… 7
  INDEPENDENT FINANCIAL AUDIT FOR FY 2006……………………………………………………. 8
  INDEPENDENT FEDERAL INFORMATION SECURITY MANAGEMENT ACT (FISMA)
     REVIEW FOR FY 2006………………………………………………………………………………                    8
  COMMITTEES ESTABLISHED BY THE FARM CREDIT ADMINISTRATION BOARD…………….   8

AUDIT AND INSPECTION REPORTS IN PROGRESS………………………………………... 9
  INDEPENDENT FINANCIAL AUDIT AND FISMA REVIEW FOR FY 2007………………………….. 9
  INSPECTION OF FCA’S ENFORCEMENT PROGRAM………………………………………………. 9

STATUS OF UNIMPLEMENTED RECOMMENDATIONS…………………………………….. 9
  AUDITS…………………………………………………………………………………………………….. 9

INVESTIGATIONS…………………………………………………………………………………. 10

LEGISLATION AND REGULATIONS…………………………………………………………… 10

OTHER ACTIVITIES……………………………………………………………………………..... 11
  OIG OBSERVATIONS ISSUED…………………………………………………………………………. 11
  SURVEY OF FARM CREDIT SYSTEM INSTITUTIONS……………………………………………… 11
  STAFF PARTICIPATION IN ACTIVITIES OF THE PROFESSIONAL COMMUNITY………………. 11
  STAFF PARTICIPATION IN AGENCY ORGANIZATIONS……………………………………………. 12
  STAFF DEVELOPMENT…………………………………………………………………………………. 12

APPENDICES……………………………………………………………………………………… 13
  APPENDIX A – INDEX OF REPORTING REQUIREMENTS………………………………………… 13
  APPENDIX B – AUDIT/INSPECTION REPORTS ISSUED…………………………………………… 14
  APPENDIX C – REPORTS WITH QUESTIONED COSTS…………………………………………… 14
  APPENDIX D – REPORTS WITH RECOMMENDATIONS THAT FUNDS
               BE PUT TO BETTER USE……………………………………………………………. 15
  APPENDIX E – FCA ORGANIZATIONAL CHART…………………………………………………….. 16
  APPENDIX F – OFFICE OF INSPECTOR GENERAL ORGANIZATIONAL CHART………………. 17
                            FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                         OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7




EXECUTIVE SUMMARY

      This Semiannual Report to the Congress summarizes the activities and
      accomplishments of the Farm Credit Administration’s (FCA or Agency) Office of
      Inspector General (OIG) for the period October 1, 2006 through March 31, 2007.
      The OIG’s efforts were directed toward performing audits, inspections, and
      evaluations of FCA programs and operations; conducting investigations, as
      necessary; and providing technical assistance and advice on FCA programs.

      The FCA Board Chairman continues to demonstrate a commitment to resolve open
      OIG recommendations and/or agreed-upon actions and to address the management
      challenges delineated in this report.

      The Agency’s senior management team, essentially formed in 2004 and 2005,
      continues to develop and refine operating processes, improve coordination between
      offices, and solidify as a unit. The evolution of this management team has resulted
      in the further strengthening of the performance and effectiveness of the Agency, a
      Federal financial regulator.

      During this period, the FCA Board underwent a transition in its composition. One
      member’s term expired and a new member’s term began.
                               FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                            OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7




BACKGROUND

       FCA is an independent Federal agency of the United States government responsible
       for the regulation and examination of Farm Credit System (FCS or System)
       institutions chartered under the Farm Credit Act of 1971, as amended (Farm Credit
       Act). FCA is also a “designated Federal entity” within the meaning of the Inspector
       General Act of 1978, as amended (IG Act).

       As a non-appropriated agency, FCA funds its expenses primarily through
       assessments to the institutions it regulates. The Agency’s fiscal year (FY) 2007
       budget is $45.7 million. Assessments by FCA to FCS institutions for FY 2007 totaled
       $41.5 million with other sources of funding totaling $4.2 million. The OIG’s FY 2007
       budget is $1,016,578.

       At the end of this semiannual period, FCA had 257 employees, about half of which
       are examiners located in five field offices. This is a 0.4 percent increase in staffing
       during this reporting period and a 4.0 percent increase from the same reporting
       period last year.

       The OIG maintains five positions, i.e., Inspector General (IG), General Counsel,
       Auditor, and Administrative Assistant. Another Auditor position remains vacant.
       Appendix E and Appendix F display the organizational structure of FCA and the OIG,
       respectively.


MANAGEMENT CHALLENGES

       This part of the semiannual report highlights major challenges confronting the
       Agency as it works to fulfill its mission. The OIG is required by Federal law to identify
       these challenges and present them in the Agency’s Performance and Accountability
       Report. Except for external environmental challenges, most can be addressed
       through concerted action by management. Over the past year, the OIG has
       observed progress by FCA management in addressing the internal challenges.

Organizational Change

       Strategic studies were completed in 2005 that resulted in the initiation of significant
       organizational change designed to enable the Agency to further address all internal
       challenges and to better prepare for external environmental challenges.

       A major change was the transition to a new Chief Examiner. This resulted in a
       substantive transformation in the Office of Examination’s (OE) organization and
       operating methodology. While these changes are essentially fully institutionalized,
                               FCA    SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                             OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7



       efforts are ongoing to refine OE’s organization and processes to achieve relative full
       efficiency.

       Another substantive change was to reconsolidate into a single office, the Office of
       Management Services (OMS), the Agency’s personnel, financial, and information
       technology functions under the umbrella of a new manager. This has evidenced
       positive results. For example, the Agency’s financial services function, including
       accounting, financial reporting, contracting, and procurement, were outsourced to the
       Department of the Treasury’s Bureau of the Public Debt (BPD) effective April 1,
       2006. The goal of this outsourcing was to achieve cost and performance efficiencies
       for the Agency. While there have been implementation hurdles that have been
       largely resolved, issues with BPD procurement processes have not. As a result, the
       FCA Board has authorized OMS management to pull the Agency’s procurement
       function back within the Agency. This was finalized during this reporting period.

       Nevertheless, one of several benefits from the BPD outsourcing is that this OIG
       acquired the audit services for the financial audit of the Agency for 2007 through an
       accounting firm that participates with the BPD under a blanket purchase agreement.
       This will result in a substantial cost savings for the 2007 financial audit of the Agency.

       These changes and others in the Agency’s organization and staffing are designed to
       promote improved efficiencies in the utilization of human capital, communication
       between the FCA Board and staff, and decision-making and oversight of the Agency
       by the FCA Board. Positive strides toward these objectives have been achieved.

Human Capital

       In March 2001, the OIG recommended FCA develop a human capital plan and FCA
       management agreed. Under Chairman Pellett’s leadership, senior managers have
       focused on the challenge of marshalling, managing, and maintaining human capital
       to assure accountability and maximize FCA performance. The Agency also made a
       significant investment in strategic studies in 2004 and 2005. The objective of the
       strategic studies was to create a picture of the System and the credit needs of rural
       America in 5 to 7 years and identify organizational and human capital opportunities
       to help FCA adapt. Chairman Pellett’s leadership in initiating the strategic studies, in
       reorganizing the Agency, and in emphasizing the importance of human capital
       resulted in the completion in 2006 of a comprehensive 5-year strategic human
       capital plan. The plan identifies five human capital goals and six human capital
       initiatives, including knowledge management and succession planning.

       A critical component in implementing the human capital plan is providing for
       management succession. Individuals with the potential to become managers should
       be identified, provided developmental opportunities, and, when appropriate,
       promoted to higher positions. This, as part of a human capital plan, should be linked
       to the Agency’s Strategic Plan for long-term achievement of the Agency’s mission.
                               FCA    SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                             OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7



       FCA’s challenge will be to implement the human capital plan to ensure
       organizational approaches that enable FCA to adapt to evolving technology, a
       changing workforce, and other environmental forces. In addition to achieving full
       transformation of the Agency’s organization and processes, how FCA meets its
       mission will be heavily dependent on quality of its human capital, having the
       appropriate skill sets, and how it organizes to meet its mission.

Financial Management

       Timely, accurate, and useful financial information is essential for:

           •   making day-to-day decisions;

           •   managing the Agency’s operations more effectively;

           •   supporting results-oriented management approaches; and

           •   ensuring accountability on an ongoing basis.

       As previously stated, in April 2006, FCA outsourced financial reporting, contracting,
       and procurement functions to BPD. While the transition is largely complete, its
       ultimate success will need to be measured by whether the Agency and its managers
       are receiving timely service, useful financial reporting, and improved efficiencies. As
       indicated earlier, timely and efficient service in the procurement area was not
       occurring and management is taking steps to bring procurement back within the
       Agency. To measure the effectiveness of BPD’s performance and the Agency’s
       reacquisition of the procurement function, OMS management will need to continue
       its ongoing assessment of performance and efficiencies in these service areas.

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. 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.            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. FCA’s
       ongoing challenge is to establish effective mechanisms to ensure that current and
       future members of staff have the skills to use technology to operate in an efficient
       and effective manner.
                               FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                            OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7



Agency Governance

        The Farm Credit Act provides for a full-time three-member board to govern the
        Agency. FCA Board members are appointed by the President and confirmed by the
        Senate. A small full-time FCA Board presents a challenge in defining the roles and
        responsibilities of its members relative to the governance of the Agency. The FCA
        Board must be able to engage in professional policy debate and set a sound course
        for the Agency. The FCA Board’s rules of operation are a foundation for trust and
        shared expectations among its members. A collegial FCA Board, founded on mutual
        trust and respect, is essential the Agency’s ultimate effectiveness.

        The Chairman has taken action to address this challenge by sharing authority and
        creating an environment at the FCA Board level that promotes a constructive
        working relationship between members. FCA Board members continually strive to
        remain current and knowledgeable in the dynamic agriculture, financial and
        regulatory environments. Changes in the membership of the FCA Board, a change
        that recently occurred, present opportunities and challenges to the FCA Board’s
        governance of the Agency.

Strategic Planning

        The FCA Board adopted its current Strategic Plan, which covers 2004-2009, in
        December 2003. Since adoption, the FCA Board has a new Chairman and two new
        members. These changes in leadership provide an opportunity to revise the plan to
        ensure the FCA Board’s vision is accomplished. The challenge is to establish a
        strategic plan that is ongoing in nature and in pace with the Agency’s environment.
        In 2005, the FCA Board established a Strategic Planning Committee (SPC), one of
        three committees established to facilitate the FCA Board’s oversight responsibilities
        and communication between the FCA Board and Agency staff. This committee has
        the potential to catalyze the strategic planning function and address this challenge.
        Steps in this regard were initiated by the SPC during this reporting period with an
        FCA Board and senior staff planning retreat.

        The FCA Board refined the Agency’s performance measures in January 2005. FCA
        should evaluate its performance measures on an ongoing basis to ensure that they
        challenge 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.
                                 FCA    SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                               OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7



A Changing Environment
       The System is a single industry lender and is vulnerable to economic swings.
       Nevertheless, the 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 1994, the Government Accountability Office (GAO) published a report on 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 continue to
       change, the System’s charter may need to be updated to ensure that the System is
       not hampered by outdated legislation.

       The System, through its Horizons project, has developed recommendations for the
       Congress to update the Farm Credit Act. The Agency can also anticipate that the
       System will press for broader powers through regulatory interpretations of the Farm
       Credit Act. At the same time, FCA must anticipate that the System’s competitors will
       press for the Agency to be a strict interpreter of the Farm Credit Act.

       As a financial regulator, FCA must maintain a flexible and responsive, yet
       independent and objective, regulatory environment. In this regard, the FCA must
       balance the often competing demands of ensuring the FCS fulfills its public policy
       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.


AUDIT AND INSPECTION REPORTS ISSUED

       The OIG conducts 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 the FCA OIG web site
       (www.fca.gov/oig), or by contacting the OIG at (703) 883-4030, or by TTY at (703)
       883-4359, or by e-mail at ig_information@fca.gov.



       1
        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 6—MARCH 3 1 , 2 00 7



Independent Financial Audit for FY 2006

        The Accountability of Tax Dollars Act of 2002 extended to FCA and certain other
        agencies a requirement to submit to the Congress and the Office of Management
        and Budget (OMB) an audited financial statement each fiscal year. Also, 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 continuing to assist the Agency in meeting these requirements, the OIG
        contracted with Harper, Rains, Knight & Company, P.A. (HRK) to perform the audit
        of FCA’s financial statements for FY 2006. The audit delivered an unqualified
        opinion and was issued November 3, 2006, meeting OMB’s reporting guideline.


Independent Federal Information Security Management Act (FISMA)
Review for FY 2006
        The OIG contracted with HRK to also perform a review of the Agency’s information
        security program’s compliance with FISMA for FY 2006. The evaluation was
        performed using guidelines established by FISMA, OMB Circular A-130, GAO’s
        Federal Information System Controls Audit Manual, and the National Institute of
        Standards and Technology. HRK found no exceptions during the evaluation of
        FCA’s compliance with FISMA.

Committees Established by the Farm Credit Administration Board

        The OIG completed an audit of the Regulation and Policy Development, Risk, and
        Strategic Planning committees established by the FCA Board. The objectives of the
        audit were to evaluate whether the committees’ operations reflect sound business
        practices and determine if the work of the committees is helping FCA Board
        members with their oversight responsibilities. The audit found that the establishment
        of the committees by the FCA Board has improved communication between FCA
        Board members and Agency staff. Also, the committees have assisted Board
        members in their oversight responsibilities. To ensure the committees continue to be
        an integral part of the Agency’s structure and function, we recommended steps be
        taken to fully incorporate or institutionalize the committees within the Agency. We
        also recommended the committees adhere to Federal and Agency guidance on
        recordkeeping.

        Upon concurrence of the Agency’s Chairman and Chief Executive Officer with the
        audit report’s two recommendations, they were changed to agreed-upon actions.
        The audit report is posted on the OIG web site at www.fca.gov/oig.
                               FCA    SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                             OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7




AUDIT AND INSPECTION REPORTS IN PROGRESS

Independent Financial Audit and FISMA Review for FY 2007

         The OIG has begun planning with outside accounting and auditing firms relating to
         the audit of the Agency’s financial statements and FISMA review for FY 2007.


Inspection of FCA’s Enforcement Program
         An inspection is underway to evaluate the status of FCA’s enforcement program and
         readiness of FCA to impose an enforcement action.


STATUS OF UNIMPLEMENTED RECOMMENDATIONS

         At the beginning of the reporting period, there were six unimplemented agreed-upon
         actions and recommendations from audits. These action items were closed, while
         two new agreed-upon actions were opened. At the end of the period, two agreed-
         upon actions remain open from audits.

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

                         Audit Agreed-Upon Actions and Recommendations
                                                                     Final
                                                 Open during
                                                                 Management      Open on
          Audit Report                 Issued    this 6-month
                                                                Actions during   4/01/2007
                                                    period
                                                                  this period
         Performance Measures and
                                      07/01/05        2               2              0
            Internal Controls
         Records Management &
            Preservation of           02/21/06        4               4              0
            Institutional Knowledge
         Committees Established
                                      01/26/07        2               0              2
            by the FCA Board
                           Total                      8               6              2



         The OIG issued the audit reports, Performance Measures and Internal Controls in
         July 2005, and Records Management and Preservation of Institutional Knowledge in
         February 2006. Management provided documentation to successfully close all
         recommendations and agreed-upon actions from these reports during this reporting
         period.
                             FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                          OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7



      An audit report on Committees Established by the FCA Board was issued in January
      2007. Management agreed with the report’s two recommendations. They remain
      open at this time as agreed-upon actions.


INVESTIGATIONS

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

      One investigation was closed during this reporting period. No investigations are
      open at this time.


LEGISLATION AND REGULATIONS

      In the furtherance of the OIG’s mandate to review existing and proposed legislation
      and regulations, the IG or Counsel to the IG attends joint briefings of the Board on
      regulations at the proposed and final stages. The following were reviewed by
      Counsel to the IG:

         Legislation

             1) H.R. 928 – Improving Government Accountability Act

             2) S. 680 – Accountability in Government Contracting Act of 2007

             3) H.R. 1309 – Freedom of Information Act Amendments of 2007

             4) H.R. 985 – Whistleblower Protection Enhancement Act of 2007

             5) H.R. 1300 – Program for Real Energy Security Act

             6) S. 789 – Government Credit Card Abuse Prevention Act of 2007

         Proposed Rule

             7) Priority of Claims – Farm Credit Banks

         Final Rule

             8) Farmer Mac Risk-Based Capital Stress Test Revisions
                               FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                            OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7



           Briefings

               9) Bookletter #043 Revised – Guidance on Farm Credit Bank and
                  Association Nominating Committees

              10) Spring 2007 Unified Agenda

              11) Risk Weighting for Rural Utility Loans

              12) Tax Credit

              13) Mission Related Investments

              14) Farm Credit System Economic Capital Overview

              15) Bookletter #009 Revised – Guidance on Farm Credit Bank and
                  Association Appointed Directors

              16) Ethanol


OTHER ACTIVITIES

OIG Observations Issued
        The OIG utilizes Observations to provide feedback to management on issues that
        come to our attention while performing other OIG work. In this period, the OIG
        issued one Observation, Number 07-01, providing recommendations to
        management regarding advising employees of the proper use of Agency computers
        and establishing internal reporting guidelines where Agency computer resources
        may have been inappropriately used.


Survey of Farm Credit System Institutions
        The OIG administers an ongoing survey of the regulated institutions of the FCS. The
        survey measures the quality and consistency of the Agency’s examination function.
        During this 6-month period, we completed the redevelopment of the survey and sent
        surveys to the Audit Committee Chairman and CEO of 30 FCS institutions. The OIG
        issues a quarterly report to the Chief Examiner and to the Chairman and a summary
        report at the end of each fiscal year on the responses to surveys.


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
        professional development. Most staff is actively involved in one or more professional
                               FCA    SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                             OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7



        organizations, as well as ad hoc activities of the President’s Council on Integrity and
        Efficiency (PCIE) and the Executive Council on Integrity and Efficiency (ECIE).

        The IG continues to meet monthly with Inspectors General from the other Federal
        financial regulatory agencies and participates as a member of the PCIE’s Inspection
        and Evaluation Committee.

        The IG General Counsel meets at least monthly with counsels to the IGs. Counsel
        also attends Directors of Investigations meetings.

        The OIG auditor meets periodically with the Federal Audit Executive Committee.


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 Combined Federal Campaign, and the FCA Employees’
        Council.


Staff Development
        OIG employees continually seek ways to improve skills and become knowledgeable
        in inspector general community efforts. During this period, the IG attended a one-
        day training course on A-123 and participated in a web cast training/information
        seminar on the role of the Audit Committee. In addition, the Counsel to the IG
        attended a National Intergovernmental Audit Forum. The auditor attended a
        symposium on Emerging Issues in Banking and an A-123 training course.
                                      FCA     SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                                     OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7




     APPENDIX A – INDEX OF REPORTING REQUIREMENTS


INSPECTOR GENERAL ACT CITATION AND REQUIREMENT                                                             PAGE

Section 4(a)(2)    Review of Legislation and Regulations......................................................... 10

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 ............................................. 9

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 Issued During the Period..................... 7

Section 5(a)(7)    Summary of Significant Reports Issued During the Period ........................... 7

Section 5(a)(8)    Statistical Table on Management Decisions ................................................ 14
                   with Questioned Costs

Section 5(a)(9)    Statistical Table on Management Decisions on ........................................... 15
                   Recommendations that Funds be put to Better Use

Section 5(a)(10)   Summary of Each Audit Over Six Months Old for ...................................none
                   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................................ 5
                                        FCA     SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                                       OCTOB ER 1 , 2 00 6—MARCH 3 1 , 2 00 7



                                                                                      APPENDIX B

                                 Audit / Inspection Reports Issued


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

 Committees Established by the
                                                    2                $0                     $0
 FCA Board

                              Total                 2                $0                     $0




                                                                                     APPENDIX C

                                  Reports with Questioned Costs

                                                        Number                     Dollar Value

                                                            Recom-        Questioned     Unsupported
                                                 Reports
                                                           mendations       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 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 reporting
                                                   0             0            $0              $0
   period

E. For which no management decision was
                                                   0             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 6—MARCH 3 1 , 2 00 7



                                                                                  APPENDIX D

              Reports with Recommendations that Funds be Put to Better Use

                                                                     Number of
                                                         Number of    Recom-
                                                          Reports    mendations    Dollar Value

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

B. Which were issued during the reporting period             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 action                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 made
                                                             0           0             $0
   within six months of issuance
          FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                    APRI L 1 , 2 0 06 —SEPTEM BER 3 0, 20 06



APPENDIX E – FCA Organizational Chart




                    16
                          FCA     SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                      APRI L 1 , 2 0 06 —SEPTEM BER 3 0, 20 06



APPENDIX F – Office of Inspector General Organizational Chart




                                       Inspector General
                                        Carl A. Clinefelter

         Counsel to IG          Auditor                       Auditor   Administrative Assistant
      Elizabeth M. Dean   Veronica G. McCain                  Vacant       Debra M. Miller




                                          17
                      FCA   SE MI ANNU AL REPOR T TO THE C ONGRE SS
                                APRI L 1 , 2 0 06 —SEPTEM BER 3 0, 20 06




             R E P O R T
Fraud        Waste            Abuse             Mismanagement




                 FARM CREDIT ADMINISTRATION
                OFFICE OF INSPECTOR GENERAL

        phone: Toll Free (800) 437-7322

                             (703) 883-4316

           Fax:    (703) 883-4059

            e-mail: fca-ig-hotline@rcn.com

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



                                18