oversight

Sept. 2008

Published by the Farm Credit Administration, Office of Inspector General on 2008-09-01.

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

Office of
Inspector General
                    Semiannual Report to the Congress

                             April 1 through
                           September 30, 2008



                                Number 39
                               October 2008
Farm Credit Administration                                 Office of Inspector General
                                                           1501 Farm Credit Drive
                                                           McLean, VA 22102-5090
                                                           (703) 883-4030




October 21, 2008

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

Dear Chairman Strom:

Enclosed is the semiannual report on the activities of the Farm Credit Administration’s (FCA or
Agency) Office of Inspector General (OIG) for the period April 1 through September 30, 2008. This
is the thirty-ninth report since the establishment of the OIG on January 22, 1989.

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

During the prior reporting period, the open agreed-upon action regarding establishing charters for
the Strategic Planning, Risk, and Regulation and Policy Development committees that resulted from
the audit report entitled Committees Established by the FCA Board issued in January 2007 was
closed by the OIG. The closing of this open agreed-upon action was due to the OIG being notified
by the former chairman that it was felt the committees were operating satisfactorily and the OIG’s
concurrence that management had sufficiently complied with the agreed-upon action would no
longer be sought. In our first monthly meeting on June 23, 2008, after you were named chairman, I
recommended that you revisit this audit report. I indicated that without well constructed charters the
three committees may not achieve their intended purposes.

The audit report’s other agreed-upon action was that minutes of the committees’ meetings would be
maintained in official Agency files. Federal law and Agency guidelines require this. Prior
management presented to the OIG documentation indicating compliance with this agreed-upon
action and the OIG closed the open action item in August 2007. On September 18, 2008, the OIG
initiated a follow-up activity regarding this agreed-upon action. We determined that the committees’
minutes are satisfactory in content. However, the Strategic Planning Committee was not recording
its minutes in an official Agency filing system. Please refer to my October 14, 2008, email to the
Agency’s Audit Follow-up Official, on which you were copied, for details.
I am taking this opportunity to reiterate the importance of the Agency’s compliance with these two
agreed-upon actions to ensure these very important committees are fulfilling the FCA Board’s
expectations.

On May 20, 2008, the OIG issued a final report of an audit to evaluate efficiencies or inefficiencies
resulting from the outsourcing of the Agency’s financial services to the Bureau of the Public Debt.
Please refer to page 6 for further information on this audit report.

On June 18, 2008, we issued a final report of an audit to determine if FCA used sound project
management practices to minimize risks associated with making significant changes to the Agency’s
information technology infrastructure. Please refer to page 6 for further information on this audit
report.

On September 29, 2008, the OIG issued a final report of an evaluation to assess the Agency’s
compliance with the Federal Information Security Management Act (FISMA) for fiscal year 2008.
Please refer to page 6 for further information on this evaluation report.

At the end of the prior reporting period, three agreed-upon actions of an initial six action items
remained open from the inspection report entitled FCA’s Enforcement Program issued in July 2007.
During this period, these three open action items were satisfactorily addressed by management and
closed. At the end of this reporting period, three new agreed-upon actions from the FISMA
evaluation were open.

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

Respectfully,



Carl A. Clinefelter
Inspector General

Enclosure
                      TABLE OF CONTENTS
EXECUTIVE SUMMARY…………………………………………………………….………………. 1

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

MANAGEMENT CHALLENGES………………………………………………………….……….. 3
  FARM CREDIT SYSTEM…………………………………………………………………………………… 3
  FARM CREDIT ADMINISTRATION………………………………………………………………… 3
  THE NEXT POSSIBLE AGRICULTURAL ECONOMIC DOWNTURN………….……………………. 4
  HUMAN CAPITAL……………………………………………………………………………………………. 4
  STRATEGIC PLANNING……………………………………………………………………………. 5
  LEVERAGING TECHNOLOGY………………………………………………………………………5

AUDIT, INSPECTION, AND EVALUATION REPORTS ISSUED……………………………… 5
  AUDIT OF EFFICIENCIES REALIZED THROUGH OUTSOURCING………………………………. 6
  AUDIT OF INFORMATION TECHNOLOGY INFRASTRUCTURE PROJECT
     MANAGEMENT…..…………………………………………………………………………….. 6
  FEDERAL INFORMATION SECURITY MANAGEMENT ACT (FISMA)
     EVALUATION FOR FY 2008……………………………………………………………………. 6

AUDITS AND INSPECTIONS IN PROGRESS……………………………………………………. 7
  INDEPENDENT FINANCIAL AUDIT FOR FY 2008…………………………………………………. 7

STATUS OF UNIMPLEMENTED RECOMMENDATIONS………………………………………. 8
  AUDITS, INSPECTIONS, AND EVALUATIONS…………………………………………………….. 8

INVESTIGATIONS…………………………………………………………………………………… 8

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

OTHER ACTIVITIES………………………………………………………………………………… 10
  PEER REVIEW OF EQUAL EMPLOYMENT OPPORTUNITY COMMISSION’S
     (EEOC) OIG AUDIT OPERATIONS…………………………………………........................... 10
  SURVEY OF FARM CREDIT SYSTEM INSTITUTIONS…………………………………………… 10
  STAFF PARTICIPATION IN ACTIVITIES OF THE PROFESSIONAL COMMUNITY………………. 10
  STAFF PARTICIPATION IN AGENCY ORGANIZATIONS………………………………………… 11
  STAFF DEVELOPMENT…………………………………………………………………………… 11

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

APPENDICES
  APPENDIX A – INDEX OF REPORTING REQUIREMENTS………………………………………. 13
  APPENDIX B – AUDIT, INSPECTION, AND EVALUATION REPORTS ISSUED………………… 14
  APPENDIX C – REPORTS WITH QUESTIONED COSTS………………………………………… 15
  APPENDIX D – REPORTS WITH RECOMMENDATIONS THAT FUNDS
                 BE PUT TO BETTER USE……………………………………………………… 16
  APPENDIX E – FCA ORGANIZATIONAL CHART…………………………………………….…… 17
  APPENDIX F – OFFICE OF INSPECTOR GENERAL ORGANIZATIONAL CHART……………..... 18
                                                       FCA SEMIANNUAL REPORT TO THE CONGRESS
                                                                    APRIL 1 – SEPTEMBER 30, 2008




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 April 1 through September 30, 2008. The
      OIG’s efforts were directed toward operational and audit planning; 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
      examiners and examination function; and providing objective, independent reporting
      and counsel to the Agency Chairman on FCA programs and operations.

      During the period, the OIG issued two audit reports. On May 20, a final audit report
      on Efficiencies Realized Through Outsourcing was issued. This audit evaluated the
      outsourcing of the Agency’s financial services to the Bureau of the Public Debt
      (BPD). On June 18, a final audit report on Information Technology (IT) Infrastructure
      Project Management was issued. This audit determined if FCA used sound project
      management practices to minimize risks associated with making significant changes
      to the information technology infrastructure.

      The independent financial audit of FCA for fiscal year (FY) 2008 and the Federal
      Information Security Management Act (FISMA) evaluation for FY 2008 were
      initiated. The financial audit is ongoing. The FISMA evaluation, completed as of
      September 29, 2008, by the OIG’s Senior IT Auditor, did not identify any significant
      weaknesses.

      Also during the period, the OIG conducted a peer review of the audit function of the
      Equal Employment Opportunity Commission’s Office of Inspector General (EEOC
      OIG). A final peer review report was provided to the EEOC OIG’s Inspector General
      on September 3, 2008.

      Additionally, the OIG issued two quarterly reports on the survey of System
      institutions regarding the examination function and the examiners. These reports
      were for the quarters ended March 31 and June 30, 2008.

      To comply with requirements involving all Office of Inspectors General web sites set
      forth in recent legislation, the OIG worked with the Agency’s Office of Congressional
      and Public Affairs and Office of Management Services (OMS) to establish a service
      on the OIG’s web site to allow members of the public to register their email
      addresses to receive notification from the OIG of any new postings to the OIG web
      site. This requirement and other requirements that were previously implemented on




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        the OIG web site were set forth in the Consolidated Appropriations Act (Public Law
        110-161), Division B--Commerce, Justice, Science and Related Agencies
        Appropriations Act, 2008, Section 746.

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


BACKGROUND

Farm Credit Administration

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

        As a non-appropriated agency, FCA funds its expenses primarily through
        assessments to the institutions it regulates. The Agency’s FY 2008 budget was
        $47,284,404. Assessments by FCA to FCS institutions for FY 2008 totaled
        $42,550,000, with other sources of funding totaling $4,734,404. The OIG’s FY 2008
        budget was $1,017,558.

        At the end of this semiannual reporting period, FCA had 260 employees, about half
        of which are examiners located in five field offices. At the end of the prior
        semiannual reporting period, the Agency had 251 employees.

Farm Credit System

        The FCS is a Government-sponsored enterprise comprised of 5 Farm Credit banks
        that provide funds to 92 associations in all 50 states and Puerto Rico to make loans
        to agriculture and rural America. 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




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     agricultural mortgage loans. Farmer Mac is publicly traded and issues its own debt
     securities.

     There are also five service corporations organized under the Farm Credit Act that
     provide services to FCS entities and eligible borrowers.


MANAGEMENT CHALLENGES

     The OIG is required by statute to identify the most serious management and
     performance challenges and present them in the Agency’s Performance and
     Accountability Report. The OIG also presents them in its semiannual reports to the
     Congress. Except for external environmental challenges, they can be effectively
     addressed through concerted action by Agency management.

                                     Farm Credit System
     The System is a lender to a single industry, agriculture, and is therefore vulnerable to
     economic swings in that industry. Nevertheless, the FCS remains sound in all
     material respects. Earnings and capital levels have continued to strengthen, and
     asset quality remains high. The Agency’s challenge is to continue to ensure the
     System’s ability to withstand this vulnerability through effective examination and
     regulatory activities. The Agency’s regulatory attention must also address other
     vulnerabilities in the System. Among these are scope of lending excesses and risks
     associated with exposure to new enterprises, such as alternative fuel production and
     System institutions’ “investments in rural America.”

                                 Farm Credit Administration
     There continue to be many issues facing agriculture and rural America today that
     raise the question of whether there should be modifications to the Farm Credit Act to
     enable the System to better serve agricultural and rural economies of the future.
     Whether or not there are modifications to the Farm Credit Act, the Agency should
     anticipate that the System will continue to seek broad regulatory interpretations.
     However, as a financial regulator, FCA’s challenge is to continue to maintain an
     independent and objective, yet flexible and responsive, regulatory environment for
     the System, geared to continually ensuring the FCS fulfills its public policy purpose.
     Key to this for FCA is effective examination and regulation of System institutions by
     maintaining a properly staffed and resourced Agency.




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              The Next Possible Agricultural Economic Downturn
There are many factors in agriculture today that may indicate future serious
difficulties for agriculture and the FCS. For example,
   •   the System has been experiencing rapid growth for several years, which has
       had the effect of eroding the System’s capital to assets ratio;
   •   land values, which may not be sustainable, are high;
   •   the livestock sector is experiencing stress;
   •   there is volatility in commodity prices; and
   •   input costs, including fuel, are high.

While some sectors of agriculture are prospering and the Agency’s Office of
Examination (OE) reports that System institutions remain safe and sound, these
factors have also led the OE to state that credit deterioration is likely and risks are
rising.

Thus, a major challenge for the Agency is to ensure its ongoing ability to timely
assess economic and operational conditions affecting the welfare of the System’s
borrowers and thus System institutions, and to take preemptive or remedial actions
to ensure the ongoing safety and soundness of the System. The first line of
preparedness for the Agency in accomplishing this is an effective risk assessment
and examination program, including the continual assessment of the reliability of risk
evaluation and examination findings, and the sufficiency of the Agency’s supervision
and enforcement processes.

                                   Human Capital
In 2006, a five-year strategic human capital plan was completed. FCA’s challenge
is to continue to implement the human capital plan to ensure that FCA has the staff it
needs to effectively regulate a constantly evolving FCS. In meeting this challenge,
the Agency should continue to address the attrition of seasoned staff and ensure the
viability of the examination staff, a critical component of the Agency’s regulatory
capability.

As the Agency moves farther into the human capital plan’s five-year cycle, the
Agency must critically assess the implementation of the current plan and, as the
current plan nears completion, establish a new five-year human capital plan based
on current human capital experience and future perceived human resource needs.




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                                     Strategic Planning
      In December 2003, the FCA Board adopted the Strategic Plan for Fiscal Years
      2004–2009. The next Agency strategic plan was not adopted by the FCA Board until
      May 2008. In accordance with the Government Performance and Results Act of
      1993 and Office of Management and Budget Circular A-11, an updated and revised
      strategic plan is required within three years of submitting a prior strategic plan.

      Since the adoption of the 2008-2013 strategic plan, the FCA Board has a new
      Chairman. This change in leadership and the likelihood of two new FCA Board
      Members prior to the next major updating of the strategic plan will provide an
      opportunity and a challenge to ensure the then FCA Board’s vision is timely
      incorporated into the next strategic plan.

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

                                  Leveraging Technology
      Information technology (IT) is a key element in management’s efforts to
      continually improve Agency performance. The Agency is in the process of a
      major infrastructure transition designed to promote efficient work processes and
      to provide staff with enhanced communication and collaboration tools. The
      challenge is to stay abreast of emerging technologies and to establish an IT
      infrastructure that provides FCA staff with IT tools and skills to operate in an
      efficient, effective, and secure manner. In addition, the Agency must ensure that
      its technical staff has the skills and knowledge to implement and maintain its
      infrastructure, and initiatives in this regard are underway.


AUDIT, INSPECTION, AND EVALUATION REPORTS ISSUED

      The OIG conducts all audits in accordance with Government Auditing Standards
      issued by the Comptroller General of the United States for audits of Federal
      organizations, programs, activities, and functions. Inspections and evaluations are
      in accordance with President’s Council on Integrity and Efficiency (PCIE) Quality
      Standards for Inspections. Copies of most OIG reports are available on the FCA
      OIG web site www.fca.gov/home/inspector.html, or by contacting the OIG at (703)
      883-4030, or by TTY at (703) 883-4359, or by e-mail at ig_information@fca.gov.




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Audit of Efficiencies Realized Through Outsourcing

        On April 24, 2008, the OIG issued the final draft report to management on the audit of
        Efficiencies Realized Through Outsourcing, which evaluated the outsourcing of the
        Agency’s financial services to the BPD. On May 13, the Director of the OMS
        provided the OIG a memorandum stating that as a result of the final draft report,
        OMS’s Finance Team (FT) conducted a comprehensive evaluation that addressed all
        areas recommended in the final draft report. In addition, the OMS Director created
        new direction to the FT to evaluate FCA’s financial service agreement every three
        years or sooner. The OIG reviewed OMS’s evaluation report regarding BPD and
        found it to be satisfactory. On May 20, the OIG issued the final report with the audit
        recommendation resolved. The audit determined that FCA’s decision to implement a
        shared financial services agreement with BPD was positive in improving efficiencies
        and effectiveness in the Agency’s financial management services.

Audit of Information Technology Infrastructure Project Management

         The OIG issued a final audit report on June 18, 2008. The audit evaluated whether
         FCA was using sound project management practices to minimize risks associated
         with making significant changes to the IT infrastructure. We determined that the IT
         Infrastructure Project was well planned and managed, and the process complied
         with Agency policy and best practices. The report contained one agreed-upon
         action. This agreed-upon action was closed on September 29, 2008, upon
         management’s satisfactory completion of the agreed-upon action.

Federal Information Security Management Act (FISMA) Evaluation for
FY 2008
         The evaluation of the Agency’s information security program’s compliance with
         FISMA for FY 2008 was performed by the OIG’s Senior Information Technology
         Auditor, versus by an outside contractor, using guidelines established by FISMA,
         OMB, and the National Institute of Standards and Technology. The OIG issued the
         final FISMA evaluation report on September 29, 2008. The results of our evaluation
         revealed that FCA has an effective information security program and did not identify
         any significant deficiencies. However, the CIO agreed to take action on a few areas




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        we identified that will strengthen the information security program as follows:
            1. Implement a policy review and revision cycle to ensure that information
               security policies and procedures are current;
            2. Update the security policies and security plans to reflect the frequency
               and types of security assessments to be performed and arrange for an
               independent third party to perform a penetration test of its infrastructure;
               and
            3. Improve the process for information system access agreements for
               employees and contractors.


AUDITS AND INSPECTIONS IN PROGRESS

Independent Financial Audit for FY 2008

        The Accountability of Tax Dollars Act of 2002 extended to FCA and certain other
        agencies a requirement to submit to the Congress and the Office of Management
        and Budget (OMB) an audited financial statement each fiscal year. Also, the
        President’s Management Agenda states agencies must continue to improve their
        financial performance by improving timeliness, enhancing usefulness, and ensuring
        reliability by obtaining and sustaining a clean audit opinion.

        In continuing to assist the Agency in meeting these requirements, the OIG
        contracted with the BPD for Brown & Company, CPAs, PLLC to perform the audit of
        FCA’s financial statements for FY 2008. The audit is ongoing.




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STATUS OF UNIMPLEMENTED RECOMMENDATIONS

        At the beginning of the reporting period, there were three open agreed-upon actions
        from the OIG inspection report on FCA’s Enforcement Program issued July 31,
        2007. These were closed during the period.

        During the period, one agreed-upon action resulted from the OIG audit report on IT
        Infrastructure Project Management issued June 18, 2008. It was closed on
        September 29, 2008.

        Three agreed-upon actions from the FISMA evaluation issued September 29, 2008,
        were open at the end of the period.

Audits, Inspections, and Evaluations

        The following table summarizes the status of action items from audits, inspections,
        and evaluations.

          Audit, Inspection, and Evaluation Agreed-Upon Actions and Recommendations
                                                                        Final
                                                 Open during
                                                                    Management         Open on
                 Audit Report         Issued     this 6-month
                                                                   Actions during     10/01/2008
                                                    period
                                                                     this period
         FCA’s Enforcement
                                      7/31/07         3                   3                 0
             Program
         Efficiencies Realized
                                      5/20/08         0                   0                 0
             Through Outsourcing
         IT Infrastructure Project
                                      6/18/08         1                   1                 0
             Management
         FISMA                        9/29/08         3                   0                 3

                            Total                     7                   4                 3



INVESTIGATIONS

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

        No investigations were opened during the reporting period.



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LEGISLATION AND REGULATIONS

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

         Legislation

            1)       S. 789 – The Government Credit Card Abuse Prevention Act of 2008

            2)       H.R. 5683 – Government Accountability Act of 2008

            3)       S. 3077 – Strengthening Transparency and Accountability in Federal
                     Spending Act of 2008

            4)       S. 2583 – Improper Payments Elimination and Recovery Act of 2008

            5)       Amended Executive Order 12989 – Economy and Efficiency in
                     Government Procurement Through Compliance with Certain
                     Immigration and Nationality Act Provisions and Use of an Electronic
                     Eligibility Verification System

         Proposed Rules

            6)       Rural Community Investment

            7)       Farmer Mac Risk-Based Capital Stress Test, Ver.4.0

         Final Rules

            8)       Eligibility and Scope of Financing: Processing and Marketing

         Other

            9)       Interagency Questions and Answers Regarding Flood Insurance

           10)       Regulatory Burden (Notice with Request for Comment)

         Briefings

           11)       Rural Community Investments




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             12)      Fall 2008 Unified Agenda

             13)      Bookletter on Director Candidate Disclosure

             14)      Farmer Mac-Convertible Long Term Standby Commitment to
                      Purchase

             15)      Debt Cancellation Services


OTHER ACTIVITIES

Peer Review of Equal Employment                      Opportunity          Commission’s
(EEOC) OIG Audit Operations

        The OIG conducted a peer review of the audit function of the EEOC OIG. We
        determined that the EEOC OIG’s audit function was in compliance with guidelines of
        the PCIE and the Executive Council on Integrity and Efficiency (ECIE). However, we
        made a number of recommendations to strengthen their audit operations. The
        EEOC OIG concurred with our recommendations. The final peer review report was
        provided to the EEOC OIG’s Inspector General on September 3, 2008.

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. During this 6-
        month period, we sent surveys to the Audit Committee Chairmen and Chief
        Executive Officers of 52 FCS institutions. Quarterly reports for the 3-month periods
        ended March 31 and June 30, 2008, were issued by the OIG to the Chief Examiner
        and the Chairman.

        The OIG issues a quarterly report and a summary report at the end of each fiscal
        year to the Chief Examiner and the Chairman on the surveys’ results.


Staff Participation in Activities of the Professional Community

        OIG staff members are encouraged to take part in organizations that contribute to
        the mission of the Inspectors General community, as well as their individual
        professional development. Most staff members are actively involved in one or more
        professional organizations, as well as ad hoc activities of the PCIE and ECIE.




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        The IG continues to attend monthly meetings of all Inspectors General from the
        ECIE, meet monthly with Inspectors General from the other Federal financial
        regulatory agencies, participate as a member of the PCIE’s Inspection and
        Evaluation Committee, and was part of a PCIE/ECIE work group that met regularly
        to plan for the transition within the Inspectors General community if the legislation
        passed by the Congress amending the IG Act became law. The President signed
        the legislation on October 14, 2008.

        The IG General Counsel meets at least monthly with counsels to the other
        Inspectors General. Counsel also attends Directors of Investigations meetings and
        participates with the IG on the legislation implementation planning work group.

        The OIG Senior Auditor and Senior IT Auditor attend Federal Audit Executive
        Committee meetings and conferences. The Senior IT Auditor also attends local
        Information Security and Control Association (ISACA) meetings and Federal
        information security and audit meetings.

Staff Participation in Agency Organizations

        Staff is active on several Agency workgroups and task forces. During this reporting
        period, the OIG was represented on the Administrative Burden Reduction
        Workgroup, Combined Federal Campaign, and the FCA Employees’ Council.

Staff Development

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




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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
        add 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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     APPENDIX A – INDEX OF REPORTING REQUIREMENTS


INSPECTOR GENERAL ACT CITATION AND REQUIREMENT                                                            PAGE

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

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

Section 5(a)(2)    Recommendations for Corrective Action .....................................................5-8

Section 5(a)(3)    Prior Recommendations Not Yet Implemented .............................................. 8

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

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

Section 5(a)(6)    List of OIG Audit/Inspection Reports Issued During the Period ..................5-7

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

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

Section 5(a)(9)    Statistical Table on Management Decisions on ........................................... 16
                   Recommendations that Funds be put to Better Use

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

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

Section 5(a)(12)   Significant Management Decisions with Which........................................none
                   the Inspector General Disagreed

Section 5(a)(13)   Compliance of Agency Financial Management System ................................ 7




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                                                        FCA SEMIANNUAL REPORT TO THE CONGRESS
                                                                     APRIL 1 – SEPTEMBER 30, 2008



                                                                              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

Efficiencies Realized Through
                                            0                $0                    $0
     Outsourcing
IT Infrastructure Project
                                            1                $0                    $0
     Management
FISMA                                       3                $0                    $0

                             Total          4                $0                    $0




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                                                                     FCA SEMIANNUAL REPORT TO THE CONGRESS
                                                                                  APRIL 1 – SEPTEMBER 30, 2008



                                                                                              APPENDIX C




                                  Reports with Questioned Costs

                                                        Number                          Dollar Value

                                                           Recom-             Questioned      Unsupported
                                                Reports
                                                          mendations            Costs            Costs


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

B. Which were issued during the reporting
   period                                         0              0                 $0               $0

Subtotals (A+B)                                   0              0                 $0               $0

C. For which a management decision was
   made during the reporting period               0              0                 $0               $0

    (i) dollar value of disallowed costs          0              0                 $0               $0

    (ii) dollar value of costs not disallowed     0              0                 $0               $0

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

E. For which no management decision was
                                                  0              0                 $0               $0
   made within six months of issuance




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                                                               FCA SEMIANNUAL REPORT TO THE CONGRESS
                                                                            APRIL 1 – SEPTEMBER 30, 2008




                                                                                   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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                                          FCA SEMIANNUAL REPORT TO THE CONGRESS
                                                       APRIL 1 – SEPTEMBER 30, 2008




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




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                                                           FCA SEMIANNUAL REPORT TO THE CONGRESS
                                                                        APRIL 1 – SEPTEMBER 30, 2008




     APPENDIX F – Office of Inspector General Organizational Chart




                                    Inspector General
                                     Carl A. Clinefelter



                  Administrative
                    Assistant
                  Debra M. Miller




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




                                                                    September 4, 2008
                             _________________________________________________________
Carl Ca                      Carl A. Clinefelter, Inspector General Date




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                                   FCA SEMIANNUAL REPORT TO THE CONGRESS
                                                APRIL 1 – SEPTEMBER 30, 2008




        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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