oversight

Sept. 1997

Published by the Farm Credit Administration, Office of Inspector General on 1997-09-01.

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

Office of
Inspector General




                    Semiannual Report
                      to the Congress

                          April 1, 1997
                            through
                    September 31, 1997
October 22, 1997


The Honorable Marsha Pyle Martin
Chairman of the Board and
 Chief Executive Officer
Farm Credit Administration
McLean, Virginia

Dear Ms. Martin:

This semiannual report is submitted in accordance with the Inspector General Act of 1978, as
amended (Act), and is the seventeenth report on the activities of the Farm Credit Administration’s
(FCA) Office of Inspector General (OIG) since the office was created on January 22, 1989.
Section 5(b) of the Act requires that this report be submitted to the appropriate Congressional
committees and subcommittees within 30 days after the date of this transmittal, together with
management’s report on the status of audit recommendations.

The FY 1997 OIG Performance Measures Report included at Section II of this document presents
OIG’s performance measures and the results of those measures as applied to fiscal year 1997
activities.

Your leadership and support have been key elements in perpetuating the positive working
relationship between OIG and management

Respectfully,



Eldon W. Stoehr
Inspector General




 ____________________________________________________________________________________________

                                                                    April 1, 1997 - September 30, 1997
                                               TABLE OF CONTENTS


SECTION I                                      FCA Semiannual Report to Congress
                                                                                                                                              Page

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

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

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

Agency Financial Management Systems........................................................................................3

Status of Unimplemented Recommendations ................................................................................. 3

Investigations.................................................................................................................................... 4

Legislation and Regulations............................................................................................................. 4

Other Activities................................................................................................................................. 5


APPENDICES:

           Appendix I -- Audit Reports Issued by FCA OIG ........................................................ 6
           Appendix Ia -- Inspector General Issued Reports with Questioned Costs ..................... 7
           Appendix Ib -- Inspector General Issued Reports with Recommendations
                            That Funds Be Put to Better Use.......................................................... 8
           Appendix II -- Farm Credit Administration Organization Chart................................... 9
           Appendix III -- FCA Office of Inspector General Organization Chart ........................ 10



SECTION II                                     FY 1997 OIG Performance Measures




  ____________________________________________________________________________________________

                                                                                                        April 1, 1997 - September 30, 1997
                                                                                   FCA Semiannual Report to Congress




                           REPORTING REQUIREMENTS


INSPECTOR GENERAL ACT CITATION AND REQUIREMENT                                                                    PAGE

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

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

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

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

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

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

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

Section 5(a)(7)     Summary of Each Particularly Significant Report ...................................2-3

Section 5(a)(8)     Statistical Table on Management Decisions
                        on Questioned Costs............................................................................... 7

Section 5(a)(9)      Statistical Table on Management Decisions on
                        Recommendations That Funds Be Put to Better Use............................ 8

Section 5(a)(10)     Summary of Each Audit Over Six Months Old for
                       Which No Management Decision Has Been Made ........................ none

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

Section 5(a)(12)     Significant Management Decisions With Which
                        the Inspector General Disagrees ..................................................... none

Section 5(a)(13)     Compliance of Agency Financial Management Systems .......................... 3




____________________________________________________________________________________________

1                                                                                April 1, 1997 - September 30, 1997
                                      BACKGROUND

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

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

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


                               AUDIT REPORTS ISSUED

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


OIG STAFF AUDITS

FCA’s Process for Complaints and Congressional Inquiries

The objectives of the audit were to: document FCA’s existing processes for handling
complaints/inquiries, benchmark FCA’s practices with some other financial regulatory agencies,
and evaluate the efficiency and effectiveness of FCA’s processes and practices.

We found the Agency’s process for handling complaints and Congressional inquiries was
adequate to meet the criteria established by Agency policy but improvements should be made.
FCA’s process was generally comparable with those of other financial regulatory agencies
selected for benchmarking; however, some practices of the other agencies were worthy of
emulation. Recommendations focused on means to improve the Agency process in this area with
emphasis on more timely and efficient service for the Agency’s customers. The report presented
a total of five recommendations, all of which have been agreed to by management and the
corrective actions have been implemented.




____________________________________________________________________________________________

2                                                                April 1, 1997 - September 30, 1997
FCA’s Use of Task Forces

The objectives of this audit were to: document the use of Agencywide task forces over the
preceding three fiscal years, benchmark other financial regulatory agencies use of task forces,
and evaluate the efficiency and effectiveness of the FCA’s use of task forces.

We concluded that the Agency’s use of interoffice task forces could be improved. The
contributions made by the task forces we reviewed were probably not, as a package, worth the
associated costs. In addition, the combination of instances of unclear task force objectives and
lack of action on some task force products has been a frustration to task forces members as well
as other FCA staff. Recommendations focused on ways to strengthen the Agency’s process for
interoffice task forces to increase the effectiveness and efficiency of these activities.

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


              AGENCY FINANCIAL MANAGEMENT SYSTEMS

The Federal Financial Management Improvement Act of 1996 requires agencies to implement
and maintain financial management systems that substantially comply with Federal financial
management requirements, government accounting standards, and the U.S. Government standard
general ledger. This act also requires the OIG to report on the Agency’s compliance.

FCA implemented off-the-shelf software in FY 1994 which was sufficient to support unqualified
opinions on the financial statements for fiscal years 1994, 1995 and 1996. However, the auditors
did identify some systemic weaknesses in that software which were deemed a reportable
condition. Management is now implementing a different software package for FY 1998 which
appears to more fully comply with applicable requirements.


     STATUS OF UNIMPLEMENTED AUDIT RECOMMENDATIONS

Management’s continued commitment to timely resolution of all audit recommendations is
apparent, even though some slippage occurred in meeting the target dates for final action on some
audit recommendations agreed to by management. One open recommendation currently exceeds
the 12 month criteria for completion of final action established by section 5(b) of the Inspector
General Act of 1978.

Management completed final action on several recommendations which were open at the
beginning of this reporting period including: one from the report on FCA’s Practices versus
FCA’s Expectations of Farm Credit System Institutions issued on September 26, 1996; and three
from the report on FCA Financial Statements for Fiscal Years Ended 1996 and 1995 issued on
November 27, 1996. Final action was also completed on five recommendations made during this

____________________________________________________________________________________________

3                                                               April 1, 1997 - September 30, 1997
reporting period in the report on FCA’s Process for Complaints and Congressional Inquiries issued on
May 7, 1997.

The thirteen open recommendations at the close of this period are as follows: one from the report
on FCA’s Practices versus FCA’s Expectations of Farm Credit System Institutions; one from the
report on FCA Financial Statements for Fiscal Years Ended 1996 and 1995; six from the report
on Agency Time Tracking System (ATTS) issued on January 16, 1997; and five from the report
on FCA’s Use of Task Forces issued on September 15,1997.


                                    INVESTIGATIONS

At the beginning of this reporting period there were four open investigations. One additional
investigation was opened during this period. Of those five investigations, two were closed during
this six-month period. Both investigations concerned allegations of violations of Federal
personnel law, but neither was substantiated.

At the close of this reporting period two investigations remain active and one investigation
remains open awaiting further action. In the case of the inactive investigation, management has
stated their commitment to resolving the problems in the affected office and has taken steps,
although not complete, towards resolving the issues.

The OIG Hotline received eleven calls or walk-ins during this period which required action by
this office. Four of the calls dealt with Farm Credit System borrower complaints and were either
referred to the FCA division responsible for investigating such matters or we are awaiting further
information from the complainant. Three calls concerned fraud in programs other than those
under FCA’s jurisdiction and were referred to the appropriate agency. One call was responded to
by providing information about the FCA and the institutions it regulates. Three calls concerned
complaints/allegations internal to FCA. Two were successfully resolved without necessitating
formal investigations. The third allegation is currently in a preliminary review stage. The
remainder of the Hotline calls required no investigative action by the OIG.


                        LEGISLATION AND REGULATIONS

During this reporting period, OIG continued to track legislation of interest to the Inspector
General community, the Agency and the Federal government. OIG reviewed three final Agency
regulations; one which was developed under fast track regulation procedures to implement the
Electronic Freedom of Information Act Amendments of 1996 (Public Law 104-231).




____________________________________________________________________________________________

4                                                                 April 1, 1997 - September 30, 1997
                                  OTHER ACTIVITIES


Survey of Farm Credit System (FCS) Institutions.

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

Staff Participation in Activities of the Professional Community.

OIG staff are encouraged to participate in organizations which contribute to the mission of the
Inspector General community as well as their individual professional development. Most staff
are actively involved in one or more professional organizations in addition to ad hoc activities of
the Executive Council on Integrity and Efficiency/President’s Council on Integrity and
Efficiency.




____________________________________________________________________________________________

5                                                                April 1, 1997 - September 30, 1997
                                                                                  APPENDIX I


                       AUDIT REPORTS ISSUED BY FCA OIG
                              April 1, 1997 to September 30, 1997


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

      FCA’s Process for
       Complaints and                  5                    $0                        $0
    Congressional Inquiries


FCA’s Use of Task Forces               5                      0                         0


            Total                     10                    $0                        $0




____________________________________________________________________________________________

6                                                             April 1, 1997 - September 30, 1997
                                                                                 APPENDIX Ia


                  INSPECTOR GENERAL ISSUED REPORTS
                       WITH QUESTIONED COSTS


                                                Number                     Dollar Value

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




____________________________________________________________________________________________

7                                                             April 1, 1997 - September 30, 1997
                                                                                 APPENDIX Ib


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

                                                              Number

                                                    Reports             Recs.          Dollar Value
A. For which no management decision has been
   made by the commencement of the reporting
   period                                              0                  0                  $0
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
   during the reporting period                         0                  0                    0
   (i) dollar value of recommendations that
   were agreed to by management                        0                  0                    0
        --     based on proposed management
               action                                  0                  0                    0
        --     based on proposed legislative
               action                                  0                  0                    0
   (ii) dollar value of recommendations that
   were not agreed to by management                    0                  0                    0
D. For which no management decision has been
   made by the end of the reporting period             0                  0                    0
E. Reports for which no management decision
   was made within six months of issuance              0                  0                    0




____________________________________________________________________________________________

8                                                              April 1, 1997 - September 30, 1997