oversight

Sept. 1998

Published by the Farm Credit Administration, Office of Inspector General on 1998-09-01.

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

Office of
Inspector General




                    Semiannual Report
                      to the Congress
                             April 1, 1998
                                 through
                       September 30, 1998
October 27, 1998


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 nineteenth report on the activities of the Farm Credit
Administration’s (Agency) 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.

Management’s acceptance and implementation of OIG recommendations continued to be
constructive and Agency programs have benefited. Your support has been instrumental in
maintaining this relationship.

Respectfully,



Eldon W. Stoehr
Inspector General




 __________________________________________________________________________________________

                                                               April 1, 1998 - September 30, 1998
                      REPORT HIGHLIGHTS


  Four final reports were issued.

  • Two program audits and two inspection reports. We made 15
    recommendations and identified $31,892 in questionable costs.

  Management has acted on recommendations in a timely manner.

 • Management decisions have been made for all but three
   recommendations.
 • Final action was taken on eleven recommendations.
 • The seven recommendations awaiting final action are all
   from reports issued this period.

 OIG’s budget request was approved by the FCA Board without change.

 The IG led a group of 22 designated federal entity Inspectors General in
 preparing a common response to S 2167, a bill to amend the IG Act.




__________________________________________________________________________________________

                                                             April 1, 1998 - September 30, 1998
                                               TABLE OF CONTENTS



                                      FCA Semiannual Report to Congress
                                                                                                                                            Page


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

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

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

Inspection Reports Issued.................................................................................................................3

Status of Unimplemented Recommendations..................................................................................4

Agency Financial Management Systems.......................................................................................4

Investigations ....................................................................................................................................5

Legislation and Regulations .............................................................................................................5

Other Activities.................................................................................................................................6


APPENDICES:

           Appendix I -- Audit/Inspection Reports Issued by FCA OIG.......................................7
           Appendix Ia -- Inspector General Issued Reports with Questioned Costs .....................8
           Appendix Ib -- Inspector General Issued Reports with Recommendations
                            That Funds Be Put To Better Use.........................................................9
           Appendix II -- Farm Credit Administration Organization Chart .................................10
           Appendix III -- FCA Office of Inspector General Organization Chart.........................11




  __________________________________________________________________________________________

                                                                                                      April 1, 1998 - September 30, 1998
                                                                                   FCA Semiannual Report to Congress




                           REPORTING REQUIREMENTS


INSPECTOR GENERAL ACT CITATION AND REQUIREMENT                                                                    PAGE

Section 4(a)(2)     Review of Legislation and Regulations ....................................................... 5

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

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/Inspection 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............................................................................... 8

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

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 .......................... 4




____________________________________________________________________________________________

1                                                                                April 1, 1998 - September 30, 1998
                                      BACKGROUND

The Farm Credit Administration (FCA or Agency) is an independent Federal agency of the
United States government responsible for the regulation, examination and supervision of
institutions chartered under the Farm Credit Act of 1971, as amended. FCA is a non-appropriated
agency with a fiscal year (FY) 1998 budget of $34,423,000 for administrative costs of the
Agency. The FY 1998 budget for the Office of Inspector General (OIG) is $710,433.

FCA currently has 310.5 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” (DFE) 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. Copies of these
reports are available by contacting the OIG on 703/883-4030 or via email at
BURRJ@FCA.GOV.

FCA's Use of Enforcement Actions

The objectives of this audit were to; evaluate FCA’s use of enforcement actions in obtaining
corrective actions in Farm Credit System (FCS) institutions, and document and evaluate FCA’s
current organizational structure and process as it pertains to achieving enforcement objectives.

We concluded that the Agency’s enforcement actions have, for the most part, been effective. Our
review identified opportunities to enhance the timeliness and efficiency of enforcement actions.
The Agency transferred the enforcement function during the course of audit fieldwork, from the
former Office of Policy Development and Risk Control to the Office of Examination. This action
streamlined the organization of enforcement activities and made it similar to other financial
regulators. Recommendations focused on means to improve the Agency’s process in this area
with an emphasis on more timely and efficient use of enforcement actions. The report presented
a total of three recommendations, management agreed with all and corrective actions have been
implemented.



FCA’s IMPAC Program

____________________________________________________________________________________________

2                                                                April 1, 1998 - September 30, 1998
The objectives of this audit were to evaluate the effectiveness of the IMPAC (International
Merchant Purchase Authorization Card) program and review the policies and procedures for
efficiency of operations.

Our review found that FCA’s IMPAC program has greatly streamlined the procurement process
and, as a result, goods and services are now acquired more quickly. In addition, Agency
employees have generally received the program enthusiastically. Recommendations centered on
opportunities to make the process more efficient and decrease some of the administrative burden
on Office of Resources Management staff. The report presented a total of five recommendations,
all of which have been agreed to by management with corrective actions having been
implemented on two of the five recommendations.


                          INSPECTION REPORTS ISSUED

This reporting period OIG expanded the use of inspection reports in an effort to provide a quick
turnaround on issues important to management. The OIG issued the final report on the
Bloomington Field Office inspection and completed the fieldwork for a second field office
inspection, although the final report will not be issued until the next reporting period.
Additionally, the OIG conducted an inspection of the Agency’s workmen’s compensation
program. The two inspection reports issued are summarized below.

Bloomington Field Office

The field office inspection involved the review of various administrative and examination areas
to assess compliance with Federal regulations and internal guidance. Our review disclosed that
the majority of areas reviewed showed no material weaknesses. However, three administrative
areas were noted as needing improvement as well as one examination area. Recommendations
were focused on improving operations and obtaining additional security over Agency personnel
and property. The report presented four recommendations, all of which have been agreed to by
management.

Workmen’s Compensation

The inspection was focused on data analysis of the Agency’s workmen’s compensation program
administered by the Department of Labor (DOL). Our analysis disclosed several aspects of the
program’s administration within the Agency that could be improved. The report presented a total
of three recommendations. In addition, the report identified “Questioned Costs” in the amount of
$31,891 due to weaknesses in the administration of the program in dealing with the claim of a
former employee.


                          STATUS OF UNIMPLEMENTED
                             RECOMMENDATIONS

____________________________________________________________________________________________

3                                                               April 1, 1998 - September 30, 1998
Management continued to implement most recommendations in a timely manner. The two
audit recommendations reported in our last semiannual report that had exceeded the 12-month
criteria for completion of final action established by section 5 of the Inspector General Act of
1978 were also closed during this period.

Audits

Management took final action on eight recommendations during this period: two from the report
on Agency Time Tracking System (ATTS) issued on January 16, 1997; one from the report on
Audit of FCA’s FY 1997 Financial Statements issued on November 14, 1997; three from the
audit report on FCA’s Use of Enforcement Actions issued on May 27, 1998; and two from the
audit report on FCA’s IMPAC Program. Three recommendations remain open at the close of this
period, all from the report on FCA’s IMPAC Program issued on August 11, 1998, although
management has expressed its agreement with them.

Inspections:

Final action was taken on three recommendations made in the report on the Inspection of the
Bloomington Field Office issued May 7, 1998; however, a management decision has been made
for the one open recommendation. No management decision has been made yet on the three
recommendations from the Inspection of FCA’s Workmen’s Compensation Program issued on
September 30, 1998.


               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, 1996, and 1997. However, the
auditors did identify some systemic weaknesses in that software, which were deemed a reportable
condition in FY 1996. During FY 1997, management selected new, highly advanced
replacement software, which is designed to satisfy all of the above mentioned Federal systems
requirements. The configuration, data conversion, testing, and implementation process began in
early FY 1998 and management ran the new software in parallel with the present software during
the third quarter of this fiscal year.


                                   INVESTIGATIONS

There were two open investigations at the beginning of this reporting period. One additional
investigation was opened during this period. One of the three open investigations was closed
during this six-month period.
____________________________________________________________________________________________

4                                                               April 1, 1998 - September 30, 1998
The investigation closed during this period concerned allegations of violations of
mismanagement and waste of funds in the closure of two FCA field offices and certain staffing
actions that resulted after the closure of the field offices. The investigation evidenced that
management’s decision to close the field offices were not indiscriminate, but rather were a result
of ongoing analysis of examination workload and FCS changes over a period of time. The
allegation concerning personnel actions was general in nature, but our review found no evidence
that those actions violated personnel laws. At the close of this reporting period, two
investigations remain open.

The OIG Hotline received few calls or walk-ins requiring action by this office. Three calls were
received that dealt with FCS borrower complaints. These calls were either referred to the FCA
division responsible for investigating such matters or we are awaiting further information from
the complainant. One call pertained to an internal violation, which is currently being
investigated. The remainder of the Hotline calls required no investigative action by the OIG.

This office provided assistance to two other Federal investigative units. One instance involved
the Federal Bureau of Investigation to whom we provided jurisdictional information. However,
no action by this office was required. The second instance involved the US Postal Service
(USPS). We obtained information from one of the FCS institutions to assist USPS in pursuit of
criminal prosecution of an employee. With the cooperation of the FCS institution, we were able
to provide helpful information to the Postal Inspector to further the case. The FCS institution was
not implicated in the violations.


                         LEGISATION AND REGULATIONS

During this reporting period, OIG continued to track legislation of interest to the Inspectors
General community, the Agency and the Federal government. Two bills proposing amendments
to the Inspector General Act of 1978 have been introduced: S. 2167 and S. 2521. The IG led a
group of 22 designated federal entity Inspectors General in preparing a common response to S.
2167, a bill to amend the IG Act.

The purpose of S. 2521 is to provide that offices of inspectors general shall be treated as
independent agencies in the preparation of the United States Budget. We would welcome that
opportunity.

During this period the IG joined several other DFE inspectors general in protesting a proposed
American Institute of Certified Public Accountants rule change which could be read as a
challenge to the existing independence of the DFE inspectors general.


                                  OTHER ACTIVITIES

Survey of Farm Credit System (FCS) Institutions

____________________________________________________________________________________________

5                                                                 April 1, 1998 - September 30, 1998
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 are 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,
58 surveys were mailed out and 46 responses were received from institutions, a 79% response
rate.

OIG Performance Measures

OIG developed performance measures during FY 1995 and implemented them in FY 1996. We
have refined the measures in each subsequent year and have issued performance reports for both
FY 1996 and 1997. We have revised OIG’s time reporting system for FY 1998 to accumulate
better data to support the measures.

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.




____________________________________________________________________________________________

6                                                                 April 1, 1998 - September 30, 1998
                                                                                  APPENDIX I



                           AUDIT/INSPECTION REPORTS
                               ISSUED BY FCA OIG



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

        FCA's Use of
     Enforcement Actions              3                     $0                        $0


      IMPAC Program                   5                     $0                        $0


Bloomington Field Office
      Inspection                      4                     $0                        $0


Workmen’s Compensation
      Inspection                      3                  $31,892                      $0


           Total                      15                 $31,892                      $0




____________________________________________________________________________________________

7                                                             April 1, 1998 - September 30, 1998
                                                                                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                         1            1    $ 31,892                 0
   Subtotals (A+B)                          1            1    $ 31,892                 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                         1            1    $ 31,892                 0
E. For which no management decision
   was made within six months of
   issuance                                 0            0        0                    0




____________________________________________________________________________________________

8                                                             April 1, 1998 - September 30, 1998
                                                                                 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. For which no management decision was
   made within six months of issuance                  0                  0                    0




____________________________________________________________________________________________

9                                                              April 1, 1998 - September 30, 1998