oversight

Semiannual Report March 31, 2011

Published by the Farm Credit Administration, Office of Inspector General on 2011-03-31.

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

Office of
Inspector General
                    Semiannual Report to the Congress

                             October 1, 2010
                                 through
                             March 31, 2011


                                 Number 44

                                April 20, 2011
Farm Credit Administration                                Office of Inspector General
                                                          1501 Farm Credit Drive
                                                          McLean, VA 22102-5090
                                                          (703) 883-4030




April 20, 2011


The Honorable Leland A. Strom, Chairman and Chief Executive Officer
The Honorable Kenneth A. Spearman, Board Member
The Honorable Jill Long Thompson, Board Member
Farm Credit Administration
1501 Farm Credit Drive
McLean, Virginia 22102-5090

Dear Chairman Strom and FCA Board Members Spearman and Long Thompson:

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, 2010 through March 31, 2011.
This is the forty-fourth 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 the FCA Board 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 the annual financial 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 2010. The audit delivered an unqualified opinion and was
issued November 8, 2010. Please refer to page 5 for further information.

Also, the OIG’s annual evaluation of the Agency’s compliance with the Federal Information Security
Management Act was completed. This annual evaluation was conducted by the OIG’s Senior
Information Technology Auditor and the report was issued November 15, 2010. The report
contained one agreed-upon action. Please refer to page 5 for further information.

Additionally, two audit reports were initiated and were still open during this reporting period. The
audits are of FCA’s contracting activities and FCA’s approval process of the Farm Credit System
(FCS) Funding Corporation’s debt issuances on behalf of the FCS banks. Please refer to pages 5-6
for further information.

At the end of the reporting period, there were eleven open agreed-upon actions from inspection
reports issued in the previous semiannual reporting period: one from the inspection report on FCA’s
Adherence to the Government in the Sunshine Act issued July 26, 2010, and ten from the
inspection report on FCA’s Borrower Complaint Process issued September 16, 2010.

During the period, the OIG, according to a schedule promulgated by the Council of the Inspectors
General on Integrity and Efficiency, received a peer review on our audit function from the
Commodity Futures Trading Commission’s Office of Inspector General, which reflected a “Pass”;
and began a peer review of the audit function of the Consumer Product Safety Commission’s Office
of Inspector General.

If you have any questions, please call me at 4241 or 4030. I look forward to continuing a positive
relationship between the OIG and the FCA Board which I view as a partnership, striving to
strengthen FCA operations.

Respectfully,



Carl A. Clinefelter
Inspector General

Enclosure
                                                 OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                           OCTOBER 1, 2010 – MARCH 31, 2011



                      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
    STRATEGIC PLANNING……..………………………………………………………………… 4
    LEVERAGING TECHNOLOGY…….…………………………………………………………… 4

AUDIT, INSPECTION, AND EVALUATION REPORTS ISSUED…..………………………….. 5
  FY 2010 INDEPENDENT FINANCIAL AUDIT OF FCA ………………………………………......... 5
  FY 2010 FEDERAL INFORMATION SECURITY MANAGEMENT ACT EVALUATION……………. 5

AUDITS, INSPECTIONS, AND EVALUATIONS IN PROGRESS….………..………………..... 6
  FCA’S APPROVAL PROCESS OF FUNDING CORPORATION DEBT ISSUANCES……….......... 6
  FCA’S CONTRACTING ACTIVITIES………………………………………………………………. 6

STATUS OF UNIMPLEMENTED RECOMMENDATIONS……………………………………… 6

INVESTIGATIONS…………………………………………………………………………………... 7

LEGISLATION AND REGULATIONS…………………………………………………………….. 7

OTHER ACTIVITIES………………………………………………………………………………...                                       8
  QUARTERLY SURVEY OF FARM CREDIT SYSTEM INSTITUTIONS…………………………….                       8
  STAFF PARTICIPATION IN ACTIVITIES WITHIN THE INSPECTOR GENERAL COMMUNITY….            9
  STAFF PARTICIPATION IN AGENCY ORGANIZATIONS…………………………………………                           9
  STAFF DEVELOPMENT……………………………………………………………………………                                        9

ANNEX……………………………………………………………………………………………..... 10

APPENDICES
  APPENDIX A – INDEX OF REPORTING REQUIREMENTS……………………………………...                        11
  APPENDIX B – AUDIT, INSPECTION, AND EVALUATION REPORTS ISSUED………………....              12
  APPENDIX C – REPORTS WITH QUESTIONED COSTS………………………………………..                          13
  APPENDIX D – REPORTS WITH RECOMMENDATIONS THAT FUNDS
                 BE PUT TO BETTER USE…………………………………………………….                             14
  APPENDIX E – PEER REVIEWS CONDUCTED OF THIS OFFICE………………………………                       15
  APPENDIX F – PEER REVIEWS CONDUCTED BY THIS OFFICE………………………….……                      16
  APPENDIX G – FCA ORGANIZATIONAL CHART………………………..………………….……                           17
  APPENDIX H – OFFICE OF INSPECTOR GENERAL ORGANIZATIONAL CHART..………….....             18
  APPENDIX I – GLOSSARY OF TERMS.………..…………………………………………...…….                           19
                                                        OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                  OCTOBER 1, 2010 – MARCH 31, 2011



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, 2010 through March 31, 2011.
      The OIG’s efforts were directed toward implementing the OIG’s fiscal year (FY) 2011
      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
      FCA Board 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 2010. The
      audit delivered an unqualified opinion and was issued November 8, 2010. See page
      5 for further information.

      Also, the OIG issued an evaluation report on the Agency’s compliance with the
      Federal Information Security Management Act (FISMA). One agreed-upon action
      resulted from the evaluation. The action was addressed and closed as of the end of
      this reporting period. This evaluation was conducted by the OIG’s Senior
      Information Technology (IT) Auditor. See page 5 for further information.

      Also initiated during this period were two audits, i.e., an audit of FCA’s contracting
      activities and an audit of FCA’s approval process of the FCS Funding Corporation’s
      debt issuances. Both audits remain ongoing. See pages 5-6 for further information.

      During the period, the OIG, according to a schedule promulgated by the Council of
      the Inspectors General on Integrity and Efficiency (CIGIE), received a peer review of
      our audit function reflecting a “Pass” from the Commodity Futures Trading
      Commission’s Office of Inspector General (CFTC OIG).

      According to the same schedule, our office began a peer review of the audit function
      of the Consumer Product Safety Commission’s Office of Inspector General (CPSC
      OIG).

      Additionally, the OIG issued two quarterly reports and one FY summary report to the
      Chief Examiner and FCA Board on results of OIG surveys of System institutions
      regarding the examination function and the examiners. These reports were for the
      quarters ended September 30 and December 31, 2010. The FY summary report
      was for the FY ended September 30, 2010.



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                                                         OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                   OCTOBER 1, 2010 – MARCH 31, 2011

        The OIG maintains five positions: the Inspector General (IG), a Deputy Inspector
        General (DIG) and Counsel, a Senior Auditor, a Senior IT Auditor, and an
        Administrative Assistant. Appendix G and Appendix H 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). The 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 2011 budget is
        $54,832,588. Assessments by FCA to FCS institutions for FY 2011 were
        $49,100,000, with other sources of funding totaling $5,732,588. The OIG’s FY 2011
        budget is $1,109,149.

        At the end of this reporting period, FCA had 290 employees, about half of which are
        examiners located in five field offices. At the end of the prior semiannual reporting
        period, the Agency had 288 employees.

Farm Credit System

        The FCS is a Government-sponsored enterprise comprised of 5 Farm Credit banks
        and 84 lending associations, as of March 31, 2011, 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.

        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.




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                                                        OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                  OCTOBER 1, 2010 – MARCH 31, 2011



MANAGEMENT AND PERFORMANCE CHALLENGES

     The following management challenges are from the IG’s November 8, 2010, letter to
     the FCA Board transmitting the reports of the independent outside auditor’s financial
     audit of the Agency’s financial statements for FY 2010. The November 8 letter,
     including management challenges, is in the Agency’s Performance and
     Accountability Report (PAR) for FY 2010.

     Management has made progress on each of these challenges. The challenges will
     be reassessed by the IG in the fall of 2011 for possible comment in the Agency’s FY
     2011 PAR.

                          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 FCA’s mandate of ensuring a
     safe, sound, and dependable FCS as a source of credit and related services to
     agriculture and rural America. 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, recent adversity in several major commodity groups has caused
     deterioration in a number of FCS institutions, although very recently this deterioration
     seems to have stabilized. The Agency’s challenge is to continue to ensure the
     System’s ability to withstand such vulnerabilities in the long term and to remain safe
     and sound.

     Mission
     Further, 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 that the FCS fulfills its public policy
     purpose.




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                                                    OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                              OCTOBER 1, 2010 – MARCH 31, 2011

                            Farm Credit Administration

Agricultural Economic Downturn
Several factors have caused deterioration in a number of FCS institutions in recent
years. This deterioration and the effect these factors have on the ongoing condition
of the FCS continue to warrant the careful attention of FCA. Some of these factors
are:
  •   inadequate oversight and management by institution boards and
      management teams, respectively;
  •   price volatility in several major commodity groups, such as feed grains;
  •   volatility in livestock operations as a result of swings in feed prices;
  •   continued risk concentrations in large shared assets among many FCS
      institutions; and
  •   escalated land values that may not be sustainable.

Thus, a challenge for the Agency is to continue to assess in a timely manner
economic and operational conditions affecting the welfare of System institutions, and
to take prompt preemptive or remedial actions to ensure their ongoing safety and
soundness.

Strategic Planning
In accordance with the Government Performance and Results Act, the FCA Board
issued in May 2008 a revised six-year strategic plan for FYs 2008–2013. Since that
issuance, the FCA Board has acquired a new Chairman and two new FCA Board
Members. The Agency’s Strategic Planning Committee is currently working with the
FCA Board and senior staff to ensure the issuance by the FCA Board of a revised
six-year strategic plan covering FYs 2011–2016. The challenge for the Agency is to
ensure that the current FCA Board’s vision and leadership are incorporated into the
revised strategic plan and that the plan is issued in a timely manner.

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 to improve Agency operations. Over
the past few years, the Agency made significant investments in new
technologies and began implementing several tools to improve communication,
collaboration, and efficiency of operations. FCA’s challenge is to take full
advantage of the new capabilities the IT infrastructure provides. The successful




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                                                        OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                  OCTOBER 1, 2010 – MARCH 31, 2011

        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 build business intelligence to provide
              decision makers with timely management information;
          •   develop electronic recordkeeping and knowledge management capability
              for capturing, maintaining, and sharing institutional knowledge; 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
        conducted in accordance with the CIGIE Quality Standards for Inspections. Copies
        of   most     OIG    reports     are    available   on    the    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.


FY 2010 Independent Financial Audit of FCA

        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 2010. The audit resulted in an unqualified opinion and was issued
        November 8, 2010.

FY 2010 Federal Information Security Management Act Evaluation

        The evaluation of the Agency’s compliance with FISMA for FY 2010 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 contained one agreed-upon action, which was closed
        during the period. The report was issued November 15, 2010.




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                                                            OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                      OCTOBER 1, 2010 – MARCH 31, 2011



AUDITS, INSPECTIONS, AND EVALUATIONS IN PROGRESS


FCA’s Approval Process of Funding Corporation Debt Issuances

        The objective of this audit is to assess whether FCA’s approval process of Funding
        Corporation debt issuances is operating efficiently and effectively and in compliance
        with applicable guidelines.

FCA’s Contracting Activities

        The objective of this audit is to determine whether the FCA’s contracting
        environment is efficient and effective in acquiring products and services that provide
        the best value to FCA.



STATUS OF UNIMPLEMENTED RECOMMENDATIONS

        At the beginning of the reporting period, there were eleven open action items
        resulting from OIG audits, inspections, or evaluation reports. The FISMA action item
        opened and closed 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       04/01/2011
                                                     Period
                                                                      this Period
         Adherence to the
           Government in the         7/26/2010         1                    0                 1
           Sunshine Act
         Borrower Complaint
                                     9/16/2010         10                   0                 10
           Processing
         Evaluation of the FCA’s
           Compliance with          11/15/2010         1                    1                 0
           FISMA

                           Total                       12                   1                 11




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                                                         OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                   OCTOBER 1, 2010 – MARCH 31, 2011

      All eleven remained open at the end of the reporting period. The eleven open or
      unimplemented agreed-upon actions are procedural and/or administrative in nature.


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 DIG and Counsel attends joint briefings of the FCA Board on
       regulations at the proposed and final stages. The following were reviewed by the
       DIG and Counsel:

       Legislation

           1) Public Law 111-258, The Reducing Over-Classification Act (H.R. 553),
              October 7, 2010
           2) Public Law 111-259, The Intelligence Authorization Act, October 7, 2010
           3) Public Law 111-352, The GPRA Modernization Act, January 4, 2011
           4) Executive Order 13556, Controlled Classified Information, November 4, 2010
           5) S. 241, The Non-Federal Whistleblower Protection Act
           6) S. 300, The Government Charge Card Abuse Protection Act
           7) S. 413, The Cybersecurity and Internet Freedom Act (would amend
              Homeland Security Act of 2002)
           8) S. 493, The Small Business Innovation Research and Small Business
              Technology Transfer Reauthorization Act.
           9) House Resolution (H.R. 209), The Reducing Information Controls
              Designation Act
          10) H.R. 808, The Department of Peace Act




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                                                         OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                   OCTOBER 1, 2010 – MARCH 31, 2011

           11) H.R. 428, a bill to establish an Inspector General for the U.S. Senate
           12) H.R. 727/S. 348, The Judicial Transparency and Ethics Enhancement Act
           13) H.R. 5815, The Inspector General Authority Improvement Act

        Proposed Rule
           14) Operating and Strategic Business Plan

        Advance Notice of Proposed Rulemaking
           15) Disclosure to Shareholders and Investors on FCS Senior Officer
               Compensation
        Bookletter
           16) Farm Credit System Investment Asset Management

        Resolution and Agreement
           17) FCA Board Resolution on Cooperative Operating Philosophy
           18) FCS Joint and Several Liability Reallocation Agreement

        Informational Memorandum
           19) Guidance on USDA Guaranteed Investments
           20) Spring 2011 Abstract of the FCA Unified Agenda of Federal Regulatory and
               Deregulatory Actions
           21) Loan Underwriting Standards – Borrower Financial Information
           22) Frequently Asked Questions on Borrower Rights



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, at the end of each FY, a summary report on the surveys’ results
        to the Chief Examiner and the FCA Board.

        During this 6-month period, the OIG sent surveys to the Audit Committee Chairmen
        and Chief Executive Officers of 29 FCS institutions. Quarterly reports for the 3-
        month periods ended September 30 and December 31, 2010, were issued by the




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                                                          OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                    OCTOBER 1, 2010 – MARCH 31, 2011

        OIG to the Chief Examiner and the FCA Board. A summary FY 2010 report as of
        September 30, 2010, was also issued.

Staff Participation       in   Activities       Within     the      Inspector          General
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 activities within the CIGIE.

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

        The OIG DIG and Counsel meets monthly with counsels to the other Inspectors
        General. Counsel also attends DIG and Directors of Investigations meetings.
        Counsel also led, on behalf of CIGIE and the Council of Counsels to Inspectors
        General, the development of a course for new Offices of Inspector General attorneys
        and participated on a panel to select candidates for the Inspector General of
        Montgomery County, Maryland.

        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.

        In addition to all administrative duties, the OIG Administrative Assistant handles the
        registration and ongoing interface with the Institute of Internal Auditors for the
        auditors in 20 Offices of Inspector General at designated Federal entities.

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




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                                                           OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                     OCTOBER 1, 2010 – MARCH 31, 2011

        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
                                                                           OCTOBER 1, 2010 – MARCH 31, 2011




                                                                                       APPENDIX A




                              INDEX OF REPORTING REQUIREMENTS                                    Page

Section 4(a)(2)    Review of Legislation and Regulations                                          7–8

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

Section 5(a)(4)    Matters Referred to Prosecutive Authorities                                   None
                   Summary of Instances Where Information Was Unreasonably
Section 5(a)(5)                                                                                  None
                      Refused or Not Provided
Section 5(a)(6)    List of OIG Audit/Inspection Reports Issued During the Period                    5

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

Section 5(a)(8)    Statistical Table on Management Decisions with Questioned Costs                 13
                   Statistical Table on Management Decisions on Recommendations that
Section 5(a)(9)                                                                                    14
                       Funds be put to Better Use
                   Summary of Each Audit Over Six Months Old for Which No
Section 5(a)(10)                                                                                 None
                       Management Decision Has Been Made
Section 5(a)(11)   Significant Revised Management Decisions                                      None
                   Significant Management Decisions with Which the Inspector General
Section 5(a)(12)                                                                                 None
                      Disagreed
Section 5(a)(13)   Compliance of Agency Financial Management System                                 5




                    FY 2008 NATIONAL DEFENSE AUTHORIZATION ACT CITATION
                                                                                                 Page
                                      AND REQUIREMENT

Section 845        Review of Legislation and Regulations                                          7-8




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                                                       OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                 OCTOBER 1, 2010 – MARCH 31, 2011




                                                                             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
    2010
Federal Information Security
                                           1                $0                    $0
   Management Act for FY 2010

                            Total          1                $0                    $0




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                                                                     OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                               OCTOBER 1, 2010 – MARCH 31, 2011




                                                                                           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, 2010 – MARCH 31, 2011




                                                                                     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, 2010 – MARCH 31, 2011

                                                                                    APPENDIX E


               PEER REVIEWS CONDUCTED OF THIS OFFICE

In accordance with Section 989C of the Dodd-Frank Wall Street Reform and Consumer
Protection Act signed by the President on July 21, 2010, which amended the IG Act, the
following information is provided:

IG Act’s Section 5(a)(14)(A) – An external peer review of this office’s audit function was
       conducted during this reporting cycle by the CFTC OIG. It was conducted in October
       2010 and the final peer review report, reflecting a “Pass,” was issued February 4, 2011.
       Federal audit organizations receive either a “Pass,” “Pass with deficiencies,” or a “Fail.”
       The final peer review report is on our office’s web site at
       http://www.fca.gov/Download/InspectorGeneral/Peer/2010PeerReviewOIGAuditFunction.pdf

       There was one finding issued in a separate letter dated February 4, 2011, that was not
       considered sufficiently significant by the CFTC OIG to have altered its rating of our audit
       function. This finding has been corrected.




                                                15
                                                          OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                    OCTOBER 1, 2010 – MARCH 31, 2011

                                                                                APPENDIX F


               PEER REVIEWS CONDUCTED BY THIS OFFICE



In accordance with Section 989C of the Dodd-Frank Wall Street Reform and Consumer
Protection Act signed by the President on July 21, 2010, which amended the IG Act, the
following information is provided:

IG Act’s Section 5(a)(16) – This office began a peer review of the audit function of the CPSC
        OIG. At this writing, this peer review remained ongoing.




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                                                                                                    OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                                                              OCTOBER 1, 2010 – MARCH 31, 2011




                                                                                                                                 APPENDIX G




                                                      FCA Organizational Chart



                                                        Farm Credit Administration Board
                                                                                                                       Office of
                                                                          Board                                   Inspector General1
                                                            Leland A. Strom, Chairman
                                                          Kenneth A. Spearman, Member
                                                           Jill Long Thompson, Member                             Carl A. Clinefelter



                      Secretary to the Board
                                                                                                                 Office of
                         Dale L. Aultman
                                                                                                             Congressional and
                                                                                                               Public Affairs

                       Designated Agency                                                                     Michael A. Stokke
                                                               Office of the Chairman
                         Ethics Official                              and CEO
                       Wendy R. Laguarda                           Leland A. Strom                       Office of Secondary
                                                                                                          Market Oversight2
                       Equal Employment
                                                                                                               Laurie A. Rea
                       Opportunity Director

                      B. Jeffrey McGiboney


                                                                   Office of the Chief
                                                                   Operating Officer

                                                                 William J. Hoffman




     Office of Management                     Office of Examination                         Office of                               Office of
            Services                                                                     Regulatory Policy                       General Counsel3
                                               S. Robert Coleman
       Stephen G. Smith                                                          Gary K. Van Meter (Acting)                      Charles R. Rawls




1
    The Dodd-Frank Wall Street and Consumer Protection Act, Public Law 111-203, amended the Inspector General Act, 5 U.S.C. App 3,
    changing the meaning of “head of the designated Federal entity.” The effect is that the Inspector General now reports to the FCA Board.
    Prior to the amendment, the FCA Chairman was the “head of the designated Federal entity” under the IG Act and the IG reported to the
    Chairman.
2
    Reports to the Board for policy and to the CEO for administration.
3
    Maintains a confidential advisory relationship with each of the Board members.




                                                                               17
                                                              OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                        OCTOBER 1, 2010 – MARCH 31, 2011



                                                                                    APPENDIX H




               Office of Inspector General Organizational Chart




                                  Inspector General
                                  Carl A. Clinefelter


                       Administrative
                         Assistant
                      Debra M. Miller


          Deputy Inspector
         General and Counsel
                                    Senior Auditor                  Senior IT Auditor
         Elizabeth M. Dean       Veronica G. McCain                     Tammy F. Rapp




                                                                               December 9, 2010
                               Carl A. Clinefelter, Inspector General          Date
Carl C




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                                                           OIG SEMIANNUAL REPORT TO THE CONGRESS
                                                                     OCTOBER 1, 2010 – MARCH 31, 2011



                                                                                  APPENDIX I



                                  Glossar y of Terms



Agency            – Farm Credit Administration
BPD               – Bureau of the Public Debt
Brown & Co.       – Brown & Company CPAs, PLLC
CIGIE             – Council of the Inspectors General on Integrity and Efficiency
CFTC OIG          – Commodity Futures Trading Commission Office of Inspector General
CPSC OIG          – Consumer Product Safety Commission Office of Inspector General
DIG               – Deputy Inspector General
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 Accountability Report
System            – Farm Credit System




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                                    OIG SEMIANNUAL REPORT TO THE CONGRESS
                                              OCTOBER 1, 2010 – MARCH 31, 2011




        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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