oversight

Semiannual Report March 31, 2010

Published by the Farm Credit Administration, Office of Inspector General on 2010-03-31.

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

Office of
Inspector General
                    Semiannual Report to the Congress

                             October 1, 2009
                                 through
                             March 31, 2010


                                Number 42
                                April 2010
Farm Credit Administration                                Office of Inspector General
                                                          1501 Farm Credit Drive
                                                          McLean, VA 22102-5090
                                                          (703) 883-4030




April 21, 2010

The Honorable Leland A. Strom
Chairman of the Board
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090

Dear Chairman Strom:

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, 2009 through March 31, 2010.
This is the forty-second 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, accompanied by
management’s report on the status of audit, inspection, and/or evaluation action items.

During this reporting period, the OIG issued one audit report. The OIG contracted with the Bureau
of the Public Debt for Brown & Company CPAs, PLLC, to perform the audit of FCA’s financial
statements for fiscal year 2009. The audit delivered an unqualified opinion and was issued
November 4, 2009. Please refer to page 6 for further information.

Also, the OIG’s annual evaluation of the Agency’s compliance with the Federal Information Security
Management Act (FISMA) was completed. This annual evaluation was conducted by the OIG’s
Senior Information Technology Auditor and the report was issued November 18, 2009. There were
no significant deficiencies in FCA’s information security program and the FISMA report did not
contain any recommendations or agreed-upon actions. Please refer to page 7 for further
information.

Additionally, one audit and two inspections were initiated. The audit is of FCA’s and the Office of
Secondary Market Oversight’s regulation and policy development processes. The inspections are
of the Agency’s compliance with the Government in the Sunshine Act and the Agency’s process for
reviewing, tracking, and responding to complaints from borrowers of the Farm Credit System. All
three remain ongoing. Please refer to page 7 for further information.
                                                                                                 2

If you have any questions, please call me at 4241 or 4030. I look forward to continuing a 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…………………………………………………………….………………. 1

BACKGROUND……………………………………………………………………………………… 2
  FARM CREDIT ADMINISTRATION…………………………………………………………………. 2
  FARM CREDIT SYSTEM…………………………………………………………………………… 2

MANAGEMENT AND PERFORMANCE CHALLENGES………………………………………... 3
  FARM CREDIT SYSTEM……………………………………………………………………………………. 3
    SAFETY AND SOUNDNESS…………………………………………………………………………… 3
    MISSION……………………..…………………………………………………………………………… 3
  FARM CREDIT ADMINISTRATION…………………………………………………………………. 4
    AGRICULTURAL ECONOMIC DOWNTURN………………………………….…………………….4
    AGENCY GOVERNANCE………………………………………………………………………………. 4
    STRATEGIC PLANNING……..…………………………………………………………………. 5
    HUMAN CAPITAL……………..…………………………………………………………………. 5
    LEVERAGING TECHNOLOGY…….…………………………………………………………… 5

AUDIT, INSPECTION, AND EVALUATION REPORTS ISSUED…..…………………………… 6
  INDEPENDENT FINANCIAL AUDIT FOR FY 2009………………………………………………..... 6
  FEDERAL INFORMATION SECURITY MANAGEMENT ACT
    EVALUATION FOR FY 2009……………………………………………………………………..7

AUDITS AND INSPECTIONS IN PROGRESS……………………………………………………. 7
  AUDIT OF FCA’S AND OSMO’S REGULATION AND POLICY DEVELOPMENT PROCESSES ….. 7
  INSPECTION OF FCA’S ADHERENCE TO THE GOVERNMENT IN THE SUNSHINE ACT ……….7
  INSPECTION OF FCS BORROWER COMPLAINT PROCESSING ………………………………... 7

STATUS OF UNIMPLEMENTED RECOMMENDATIONS………………………………………. 8

OIG OBSERVATIONS ISSUED…………………………………………………………………….. 8

INVESTIGATIONS…………………………………………………………………………………….9

LEGISLATION AND REGULATIONS………………………………………………………………9

OTHER ACTIVITIES………………………………………………………………………………....11
  QUARTERLY 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

ANNEX……………………………………………………………………………………………...... 12

APPENDICES
  APPENDIX A – INDEX OF REPORTING REQUIREMENTS………………………………………. 13
  APPENDIX B – AUDIT, INSPECTION, AND EVALUATION REPORTS ISSUED………………….. 14
  APPENDIX C – REPORTS WITH QUESTIONED COSTS………………………………………… 15
APPENDIX D – REPORTS WITH RECOMMENDATIONS THAT FUNDS
               BE PUT TO BETTER USE……………………………………………………… 16
APPENDIX E – FCA ORGANIZATIONAL CHART…………………………………………….…… 17
APPENDIX F – OFFICE OF INSPECTOR GENERAL ORGANIZATIONAL CHART……………..... 18
APPENDIX G – GLOSSARY OF TERMS…………..………………………………………….……. 19
                                                       OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                 OCTOBER 1, 2009 – MARCH 31, 2010




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, 2009 through March 31, 2010.
      The OIG’s efforts were directed toward implementing the OIG’s fiscal year (FY) 2010
      strategic and operational plan and budget; performing audits, inspections, and
      evaluations of FCA programs and operations; conducting investigations, as
      necessary; independently and confidentially surveying Farm Credit System (FCS or
      System) institutions regarding the effectiveness of the Agency’s examination function
      and examiners; and providing objective, independent reporting and counsel to the
      Agency Chairman on FCA programs and operations.

      During this reporting period, the OIG issued one audit report. The OIG contracted
      with the Bureau of the Public Debt (BPD) for Brown and Company CPAs, PLLC
      (Brown & Co.) to perform the audit of FCA’s financial statements for FY 2009. The
      audit delivered an unqualified opinion and was issued November 4, 2009. See page
      6 for further information.

      Also, the OIG issued an evaluation report on the Agency’s compliance with the
      Federal Information Security Management Act (FISMA). The results of the
      evaluation revealed that FCA has an effective information security program that
      continues to mature. There were no significant deficiencies in FCA’s information
      security program and the FISMA report did not contain any recommendations or
      agreed-upon actions. This evaluation was conducted by the OIG’s Senior
      Information Technology (IT) Auditor. See page 7 for further information.

      Also initiated during this period were one audit and two inspections. The audit is of
      FCA’s and the Office of Secondary Market Oversight’s regulation and policy
      development processes. One inspection is of the Agency’s compliance with the
      Government in the Sunshine Act. The other inspection is of the Agency’s process
      for reviewing, tracking, and responding to complaints from borrowers of the FCS. All
      three remain ongoing. See page 7 for further information.

      Additionally, the OIG issued two quarterly reports and one FY summary report to the
      Chief Examiner and FCA Chairman on results of OIG surveys of System institutions
      regarding the examination function and the examiners. These reports were for the
      quarters ended September 30, 2009 and December 31, 2009. The FY summary
      report was for the FY ended September 30, 2009.




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                                                         OIG SEMIANNUAL REPORT TO THE CONGRESS
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        The OIG maintains five positions: the Inspector General (IG), a General Counsel, a
        Senior Auditor, a Senior IT Auditor, and an Administrative Assistant. Appendix E
        and Appendix F reflect the organizational structure of FCA and the OIG,
        respectively.


BACKGROUND

Farm Credit Administration

        The FCA is an independent Federal agency of the United States government
        responsible for the regulation and examination of FCS 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 FY 2010 budget is
        $54,832,588. Assessments by FCA to FCS institutions for FY 2010 total
        $49,100,000, with other sources of funding totaling $5,732,588. The OIG’s FY 2010
        budget is $1,088,219.

        At the end of this reporting period, FCA had 274 employees, about half of which are
        examiners located in five field offices. At the end of the prior semiannual reporting
        period, the Agency also had 274 employees. While the total number of employees
        remained constant, the Office of Examination (OE) has been actively recruiting and
        hiring entry-level examiner trainees. Even though the OE has been hiring, normal
        Agencywide attrition accounts for the overall number of employees remaining
        constant.

Farm Credit System

        The FCS is a Government-sponsored enterprise comprised of 5 Farm Credit banks
        and 88 lending associations in all 50 states and Puerto Rico that primarily make
        loans to agriculture. The System raises funds by selling securities in the national
        and international money markets through its special purpose entity, the Federal
        Farm Credit Banks Funding Corporation. These securities are not guaranteed by
        the U.S. Government.




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                                                        OIG SEMIANNUAL REPORT TO THE CONGRESS
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     The Federal Agricultural Mortgage Corporation (Farmer Mac), also a part of the
     FCS, is chartered by the Federal government to provide a secondary market for
     agricultural mortgage loans. Farmer Mac is publicly traded and issues its own debt
     securities.

     Additionally, there are four active service corporations organized under the Farm
     Credit Act that provide services to FCS entities and eligible borrowers.


MANAGEMENT AND PERFORMANCE CHALLENGES

     As part of the Agency’s annual Performance and Accountability Report, the IG is
     required by law to provide a summary statement on the most serious management
     and performance challenges facing the Agency. These challenges fall into two
     general categories. First are the challenges related to the FCA’s mandate of
     ensuring a safe, sound, and dependable FCS as a source of credit and related
     services to agriculture. Some of these challenges may be influenced by events that
     are outside the control of the Agency. Second, but no less important, are the
     challenges related to Agency operations.

                                     Farm Credit System
     Safety and Soundness

     The System is a lender to a single industry, agriculture, and is therefore vulnerable to
     the economic volatility and risks in that industry. While the FCS remains generally
     safe and sound, adversity in several major commodity groups has caused
     deterioration in a number of FCS institutions. The Agency’s challenge is to continue
     to ensure the System’s ability to withstand such vulnerabilities and remain safe and
     sound in the long-term.

     Mission

     The environment facing agriculture, rural America, and the institutions of the FCS is
     ever-changing, presenting new opportunities and altering historical perspectives on
     System operations. FCA’s challenge is to continue to maintain an independent and
     objective, yet flexible and responsive, regulatory environment for the System, geared
     to continually ensuring the FCS fulfills its public policy purpose.




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                                                  OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                            OCTOBER 1, 2009 – MARCH 31, 2010



                            Farm Credit Administration

Agricultural Economic Downturn

There are many factors in agriculture today that have caused deterioration in a
number of FCS institutions and may cause continued stress for FCS institutions. For
example,
     •   the System has experienced rapid growth for several years, which has had
         the effect of eroding the System’s capital to assets ratio;
     •   large shared assets among many System institutions are experiencing
         serious difficulty;
     •   several major commodity groups are experiencing extreme stress;
     •   asset quality at many associations and several Farm Credit banks has
         deteriorated; and
     •   land values, which may not be sustainable, are high.

Thus, a challenge for the Agency is to ensure its ongoing ability to timely assess
economic and operational conditions affecting the welfare of System institutions, and
to take preemptive or remedial actions to ensure the ongoing safety and soundness
of the System. The first line of preparedness for the Agency in accomplishing this is
an effective examination and risk assessment program. Aligned with this is the
challenge for the Agency to effectively and timely utilize its enforcement authorities.
When significant deterioration in a System institution(s) is first evident, the Agency
should expeditiously consider implementing appropriate rehabilitative enforcement
measures.

Agency Governance

In early FY 2010, the FCA Board received two new members, filling out the FCA
Board’s statutory three-person complement. One new member came on the FCA
Board in October 2009 and the other in March 2010. This reemphasizes the need
for the Chairman and Agency staff to ensure an environment in which new members
may quickly learn their duties and responsibilities, and the mission and functioning of
the Agency and the System. The Board member arriving in October 2009 received
a newly implemented orientation program. The challenge for the Agency is to
formalize and institutionalize an effective orientation and ongoing training program
for FCA Board members. This should enable FCA Board members to readily
become knowledgeable about Agency and System operations and issues, and be
able to properly focus Agency resources through, for example, the strategic planning
mechanism.




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                                                  OIG SEMIANNUAL REPORT TO THE CONGRESS
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Strategic Planning

Since the adoption in May 2008 of the strategic plan for FYs 2008-2013, the FCA
Board has a new Chairman and two new FCA Board Members. This change in
Board leadership and the two new FCA Board Members provide an opportunity and
a challenge to ensure the vision of the newly constituted FCA Board is timely
incorporated into the next strategic plan.

In 2005, the FCA Board established a Strategic Planning Committee (SPC)
composed of Agency staff to facilitate FCA Board input into the plan and the
planning process. The SPC should ensure the updating and issuance by the FCA
Board of the next 6-year strategic plan covering FYs 2011-2016.

Human Capital

In 2006, a 5-year strategic human capital plan was completed spanning FYs 2007-
2011. The Agency has adopted a strategy of annually updating the plan, resulting in
a moving 5-year plan. The plan is comprehensive and, because of the ongoing
updating, reflective of current human capital issues facing the Agency. For example,
in addressing the attrition of seasoned staff, the Agency has been actively recruiting
and hiring at both the entry and midcareer-levels, particularly as it pertains to
ensuring the ongoing capability of examination staff. FCA’s challenge is to continue
to emphasize, implement, and update the human capital plan to ensure FCA has the
staff it needs to effectively regulate a constantly evolving FCS, as managing human
capital is an ever-present and evolving necessity. This is particularly important as it
applies to the training and commissioning program for newly hired entry and
midcareer-level examination staff.

Leveraging Technology

The Agency’s ability to leverage investments in new technologies is a key
element in management’s efforts to continually improve Agency performance by
increasing the efficiency and effectiveness of operations. The Agency has an
active information resource management planning process that identifies,
reviews, and prioritizes new IT initiatives that will improve Agency operations.
Over the past couple of years, the Agency made significant investments in new
technologies and began implementing several tools that improve
communication, collaboration, and efficiency of operations. FCA’s challenge is
to take full advantage of the new capabilities the IT infrastructure provides. The




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                                                        OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                  OCTOBER 1, 2009 – MARCH 31, 2010



        successful implementation of new technologies will provide FCA staff with the IT
        tools and skills that will enable the Agency to:

            •   improve the quality and availability of data without creating an undue
                burden on the FCS;
            •   streamline business processes and enhance communication and
                collaboration to improve the effectiveness of how FCA interacts with the
                FCS, the public, and business partners;
            •   build business intelligence that will provide decision makers with timely
                management information;
            •   develop an electronic recordkeeping and knowledge management
                capability that effectively manages electronic data, documents, and
                reports; and
            •   protect FCA information systems and data from increasing external and
                internal threats.


AUDIT, INSPECTION, AND EVALUATION 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 and evaluations are
        in accordance with the Council of the Inspectors General on Integrity and Efficiency
        (CIGIE) Quality Standards for Inspections. Copies of most OIG reports are available
        on the FCA OIG web site www.fca.gov/home/inspector.html, 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.


Independent Financial Audit for FY 2009

        The Accountability of Tax Dollars Act of 2002 extended to FCA and certain other
        agencies a requirement to submit to Congress and the Office of Management and
        Budget (OMB) an audited financial statement each fiscal year.

        In continuing to assist the Agency in meeting these requirements, the OIG
        contracted with the BPD for Brown & Co. to perform the audit of FCA’s financial
        statements for FY 2009. The audit resulted in an unqualified opinion and was issued
        November 4, 2009.




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                                                         OIG SEMIANNUAL REPORT TO THE CONGRESS
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Federal Information Security Management Act Evaluation for FY 2009

        The evaluation of the Agency’s compliance with FISMA for FY 2009 was performed
        by the OIG’s Senior IT Auditor, using guidelines established by FISMA, OMB, and the
        National Institute of Standards and Technology. The report revealed no significant
        deficiencies and did not contain any recommendations or agreed-upon actions. The
        report was issued November 18, 2009.


AUDITS AND INSPECTIONS IN PROGRESS


Audit of FCA’s and OSMO’s Regulation and Policy Development Processes

        The objective of the audit is to assess whether the regulation and policy
        development processes are operating efficiently and in compliance with
        applicable Federal requirements.

Inspection of FCA’s Adherence to the Government in the Sunshine Act

        The inspection will assess whether FCA is in compliance with the letter and spirit of
        the Government in the Sunshine Act.


Inspection of FCS Borrower Complaint Processing

        The objective of this inspection is to review FCA’s process for reviewing, tracking
        and responding to FCS borrowers’ complaints and identify whether
        improvements are needed.




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                                                              OIG SEMIANNUAL REPORT TO THE CONGRESS
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STATUS OF UNIMPLEMENTED RECOMMENDATIONS

          At the beginning of the reporting period, there were no open action items resulting
          from OIG audits, inspections, or evaluation reports. No action items were opened
          during the period.

             Audit, Inspection, and Evaluation Agreed-Upon Actions and Recommendations
                                                                           Final
                                                    Open During
                                                                       Management           Open on
                     Report              Issued     this 6-Month
                                                                      Actions During       10/01/2009
                                                       Period
                                                                        this Period
            None                           N/A            0                   0                 0

                              Total                       0                   0                 0




OIG OBSERVATIONS ISSUED


OIG Observations are designed to be a quick mechanism to offer the Agency head suggestions
on ways to strengthen Agency operations.


Observation FY 2010-01

          The OIG issued to the Chairman on October 27, 2009, Observation FY 2010-01,
          Review and Updating of all FCA Board Policies, suggesting that all FCA Board
          policies should be reviewed and updated, as appropriate, and that all policies contain
          a clause requiring review within a specified time period or by a date certain.

Observation FY 2010-02

          The OIG issued to the Chairman on December 14, 2009, Observation FY 2010-02,
          Compensation and Job Grading, recommending opportunities to enhance the
          management and integrity of FCA’s pay program and grade structure.




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                                                           OIG SEMIANNUAL REPORT TO THE CONGRESS
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Observation FY 2010-03

        The OIG issued to the Chairman on March 24, 2010, Observation FY 2010-03,
        Inspector General’s Oversight of the FCSIC and FCA’s Prior Approval of Funding
        Corporation Debt Issuances, making suggestions regarding legislative initiatives.



INVESTIG ATIONS

         No hotline calls were received alleging impropriety that would fall within the purview
         of the OIG.

         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.

         No investigations were opened during the reporting period.


LEGISLATION AND REGULATIONS

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

         Legislation

            1) Public Law 111-80, October 21, 2009 Agriculture, Rural Development,
               Food and Drug Administration, and Related Agencies Appropriations
               Act, 2010 -- An act making appropriations for Agriculture, Rural
               Development, Food and Drug Administration, and Related Agencies
               programs for the FY ending September 30, 2010, and for other
               purposes.

            2) S. 1745: Non-Federal Employee Whistleblower Protection Act of 2009

            3) S. 2991 or H.R. 2646: Government Accountability Office Improvement
               Act of 2009

            4) S. 139 or S. 1490: The Data Breach and Personal Privacy and Security
               Acts of 2009



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                                                OIG SEMIANNUAL REPORT TO THE CONGRESS
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   5) S. 372 or H.R. 1507: The Whistleblower Protection Enhancement Act of
      2009

   6) H.R. 3848: Inspector General Improvement Act of 2009

   7) H.R.885: Improved Financial and Commodity Markets Oversight and
      Accountability Act

   8) H.R. 3795: Over the Counter Derivatives Markets Act of 2009

   9) H.R. 4173: The Wall Street Reform and Consumer Protection Act of
      2009

  10) H.R. 4450: Federal Housing Finance Agency IG Technical Correction
      Act of 2009

  11) H.R. 4581: Fannie Mae and Freddie Mac Accountability and
      Transparency for Taxpayers Act of 2010

  12) FCA Legislation Short List

Executive Orders

  13) Executive Order 13520 (and implementing guidance), Reducing Improper
      Payments

Final Rules

  14)   Effective Interest Rates
  15)   Director Elections
  16)   Final Notice Responding to Regulatory Burden Solicitation
  17)   Unified Agenda

Proposed Rules

  18) Farmer Mac Risk-Based Capital

Bookletters (BL)

  19) Rural Housing Mortgage –Backed Securities (BL-061)

Briefings

  20) Confronting Current and Future Challenges




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                                                           OIG SEMIANNUAL REPORT TO THE CONGRESS
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OTHER ACTIVITIES

Quarterly Survey of Farm Credit System Institutions

        The OIG administers an ongoing survey of FCS institutions regarding the quality and
        consistency of the Agency’s examination function and examiners. The OIG issues a
        quarterly report and a summary report on the surveys’ results at the end of each FY
        to the Chief Examiner and the Chairman.

        During this 6-month period, we sent surveys to the Audit Committee Chairmen and
        Chief Executive Officers of 35 FCS institutions. Quarterly reports for the 3-month
        periods ended September 30 and December 31, 2009, were issued by the OIG to
        the Chief Examiner and the Chairman. A summary FY 2009 report as of September
        30, 2009, was also issued.


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 Inspectors General community, as well as their individual
        professional development. Most staff members are actively involved in one or more
        professional organizations, as well as ad hoc activities of the CIGIE.

        The IG serves as the Vice Chairperson of CIGIE, helps chair the monthly meetings
        of all Inspectors General comprising CIGIE, meets monthly with the Inspectors
        General from the other Federal financial regulatory agencies, and participates as a
        member of the CIGIE’s Inspection and Evaluation (I&E) Committee.

        The OIG General Counsel meets monthly with counsels to the other Inspectors
        General. Counsel also attends Directors of Investigations meetings.

        The OIG Senior Auditor and Senior IT Auditor attend Federal Audit Executive
        Committee meetings and conferences. The Senior Auditor participates as a
        member of the I&E Committee’s Roundtable. The Senior IT Auditor also attends
        local ISACA (formerly known as Information Security and Control Association)
        meetings and Federal information security and audit meetings. The Senior IT
        Auditor is a member of CIGIE’s administrative operations task force charged with
        developing a business, staffing, and financial plan as well as identifying and
        implementing the infrastructure needed to establish CIGIE operations.

        The OIG Administrative Assistant handles the registration and ongoing interface with
        the Institute of Internal Auditors for the auditors in 21 Offices of Inspector General at
        designated Federal entities.



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                                                           OIG SEMIANNUAL REPORT TO THE CONGRESS
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Staff Participation in Agency Organizations

        OIG employees are active on Agency workgroups and task forces, as appropriate.

Staff Development

        OIG employees continually seek ways to improve skills and become knowledgeable
        in the initiatives of the community of Inspectors General. Audit and legal staff must
        meet continuing education requirements. Individual development plans are used to
        identify long and short-term career goals along with specific training and
        developmental needs. These plans are geared to enhance individual skills in the
        performance of official duties and meet the criteria needed to achieve OIG
        performance goals and objectives.



ANNEX

        This annex is provided in accordance with the National Defense Authorization Act for
        FY 2008.

        This referenced statute requires all Inspectors General appointed under the IG Act to
        include an annex to their semiannual reports as follows:

           1) listing all contract audit reports issued during the reporting period containing
              significant audit findings;

           2) briefly describing the significant audit findings in the report; and

           3) specifying the amounts of costs identified in the report as unsupported,
              questioned, or disallowed.

        Significant audit findings are defined as unsupported, questioned, or disallowed
        costs in excess of $10,000,000, or other findings that the Inspector General
        determines to be significant. It defines contracts as a contract, an order placed
        under a task or delivery order contract, or a subcontract.

        No contract audit reports meeting these criteria were issued on behalf of the OIG
        during this reporting period.




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                                                                       OIG SEMIANNUAL REPORT TO THE CONGRESS
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     APPENDIX A – INDEX OF REPORTING REQUIREMENTS


INSPECTOR GENERAL ACT CITATION AND REQUIREMENT                                                                 PAGE

Section 4(a)(2)    Review of Legislation and Regulations .......................................................... 9-10

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............................................. none

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 ....................... 6-7

Section 5(a)(7)    Summary of Significant Reports Issued During the Period .............................. 6-7

Section 5(a)(8)    Statistical Table on Management Decisions ..................................................... 15
                   with Questioned Costs

Section 5(a)(9)    Statistical Table on Management Decisions on ................................................ 16
                   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 ..................................... 6

FY 2008 NATIONAL DEFENSE AUTHORIZATION ACT CITATION AND REQUIREMENT

Section 845        Requires Information from OIG Contract Audit Reports…………………….…..12




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                                                       OIG SEMIANNUAL REPORT TO THE CONGRESS
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                                                                             APPENDIX B




                   Audit, Inspection, and Evaluation Reports Issued


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

Financial Statement Audit for FY
                                           0                $0                    $0
    2009
Federal Information Security
                                           0                $0                    $0
   Management Act for FY 2009

                            Total          0                $0                    $0




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                                                                   OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                             OCTOBER 1, 2009 – MARCH 31, 2010



                                                                                            APPENDIX C




                                  Reports with Questioned Costs

                                                      Number                          Dollar Value

                                                           Recom-           Questioned       Unsupported
                                                Reports
                                                          mendations          Costs             Costs




A. For which no management decision has           0            0                 $0                $0
   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)
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 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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                                                            OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                      OCTOBER 1, 2009 – MARCH 31, 2010




                                                                                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




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                                          OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                    OCTOBER 1, 2009 – MARCH 31, 2010




A P P E N D I X E – F C A O R G A N I Z AT I O N A L C H A R T




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                                                             OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                       OCTOBER 1, 2009 – MARCH 31, 2010




     APPENDIX F – Office of Inspector General Organizational Chart




                                  Inspector General
                                  Carl A. Clinefelter


                      Administrative
                        Assistant
                      Debra M. Miller



         Counsel to the IG          Senior Auditor                     Senior IT Auditor
         Elizabeth M. Dean       Veronica G. McCain                     Tammy F. Rapp




                                                                                 September 4, 2008
                              Carl A. Clinefelter, Inspector General             Date
Carl C




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                                                    OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                              OCTOBER 1, 2009 – MARCH 31, 2010




APPENDIX G – Glossary of Terms



  Agency            – Farm Credit Administration
  BPD               – Bureau of the Public Debt
  Brown & Company   – Brown & Company CPAs, PLLC
  CIGIE             – Council of the Inspectors General on Integrity and Efficiency
  DFE               – Designated Federal Entity
  E.O.              – Executive Order
  Farm Credit Act   – Farm Credit Act of 1971, as amended
  Farmer Mac        – Federal Agricultural Mortgage Corporation
  FCA               – Farm Credit Administration
  FCS               – Farm Credit System
  FISMA             – Federal Information Security Management Act
  FY                – Fiscal Year
  H.R.              – House Resolution
  IG                – Inspector General
  IG Act            – Inspector General Act of 1978, as amended
  I&E               – Inspection and Evaluation
  ISACA             – Information Security and Control Association
  IT                – Information Technology
  OE                – Office of Examination
  OIG               – Office of Inspector General
  OMB               – Office of Management and Budget
  PAR               – Performance and Accountability Report
  SPC               – Strategic Planning Committee
  System            – Farm Credit System




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                                  OIG SEMIANNUAL REPORT TO THE CONGRESS
                                            OCTOBER 1, 2009 – MARCH 31, 2010




        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


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