oversight

Semiannual Report September 30, 2014

Published by the Farm Credit Administration, Office of Inspector General on 2014-09-30.

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

Farm Credit Administration	                                       Office of Inspector General
                                                                  1501 Farm Credit Drive
                                                                  McLean, Virginia 22102-5090




October 16, 2014

The Honorable Jill Long Thompson, Board Chair
The Honorable Kenneth A. Spearman, Board Member
The Honorable Leland A. Strom, Board Member
Farm Credit Administration
1501 Farm Credit Drive
McLean, VA 22102-5090

Dear Board Chair Long Thompson and FCA Board Members Spearman and 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, 2014 through September 30,
2014. This is the fifty-first report since the establishment of the OIG on January 22, 1989.
I submit 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.

This reporting period, the OIG has experienced additional transitions regarding our personnel.
We welcomed Sonya Cerne in May and Tori Kaufman in July, both auditors with prior Inspector
General experience. Our Administrative Assistant, Debra Miller, put in her notice to retire with
36 years of Federal government service. Her position will be filled as a Management/Program
Analyst.

This year the OIG changed independent public accounting firms to perform the audit of FCA’s
financial statements. Harper, Rains, Knight & Company, P.A. has the contract for Fiscal Year
2014. The audit is ongoing as of the end of the reporting period. We also began work on the
OIG’s annual evaluation of the Agency’s compliance with the Federal Information Security
Management Act.

We issued three audit reports during this reporting period on FCA’s training and conference
expenses, purchase card program, and travel card program. For the six-month period, there
were 15 agreed-upon actions implemented, with 12 closed as of September 30, 2014. Please
refer to pages 7-10 of the report for more information. We also initiated an audit on FCA’s
Examiner Commissioning Program. The objective of this audit is to determine whether FCA is
effectively managing the program. Please refer to page 11 of the report for further information.

The OIG continues to send surveys to the Farm Credit System institutions following regulatory
safety and soundness examinations and other interactions with the FCA Office of Examination
(OE). The results of the surveys, evaluating the quality of the examination work and OE
interactions, are summarized without attribution on a quarterly basis. The FCA Board and OE
find this to be a valuable measuring tool.

I would like to acknowledge the effective efforts of the OIG staff in diplomatically leading Agency
management to focus on significant program issues, as well as FCA management’s positive and
timely reaction and improvement. I look forward to continuing a positive and effective
relationship between the OIG and the FCA Board, a partnership striving continuously to
strengthen FCA operations.

If you have any questions, please call me at 703-883-4036 or 4030.

Sincerely,




Elizabeth M. Dean

Inspector General


Enclosure
 


	

                                                         Table of Contents


Message from the Inspector General............................................................................................ 1 

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

Strategic Goals ............................................................................................................................. 4 

Audits, Inspections, and Evaluations ............................................................................................ 7 

    REPORTS ISSUED ................................................................................................................... 7 

    AUDITS AND EVALUATIONS IN PROCESS .........................................................................11 

    STATUS OF AGREED-UPON ACTIONS AND RECOMMENDATIONS.................................12 

Other Reports ............................................................................................................................. 13 

Investigations .............................................................................................................................. 14 

Legislative and Regulatory Reviews ...........................................................................................15 

Congressional Interaction ........................................................................................................... 18 

Outreach ..................................................................................................................................... 19 

OIG Staff ..................................................................................................................................... 20 

Annex.......................................................................................................................................... 21 

Appendix A Index of Reporting Requirements ............................................................................22 

Appendix B Reports Issued ........................................................................................................ 23 

Appendix C Reports with Questioned Costs ...............................................................................24 

Appendix D Reports with Recommendations that Funds be Put to Better Use ..........................25 

Appendix E Peer Reviews Conducted of this Office ...................................................................26 

Appendix F Peer Reviews Conducted by this Office ..................................................................27 

Appendix G FCA Organizational Chart .......................................................................................28 

Appendix H Glossary of Terms ................................................................................................... 29 

 

 

                                                               

                                                               

                                                               



                                                                                                                                                 
 
                                                                                                                                                 
Message from the Inspector General
  Message from the Inspector General



               I am pleased to submit this Semiannual Report to the Congress. This report
       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, 2014. The OIG’s efforts were directed toward implementing the OIG’s Fiscal Year
       (FY) 2014 strategic and operating plan and budget; performing audits, inspections, and
       evaluations of FCA programs and operations; conducting investigations; reviewing
       existing and proposed legislation and regulations relating to Agency programs and the IG
       community; and providing objective, independent reporting and counsel to the FCA
       Board on FCA programs and operations.
               The OIG issued three audits during this reporting period. Additionally, the OIG
       issued surveys to FCS institutions, designed to review the quality of mission fulfillment,
       and provided a quarterly report to the Chief Examiner and FCA Board. The OIG also
       contracted with Harper, Rains, Knight & Company, P.A. to perform the audit of FCA’s
       financial statements for FY 2014, which is ongoing. We initiated the OIG’s annual
       evaluation of the Agency’s compliance with the Federal Information Security
       Management Act (FISMA) during this period. During this period, the OIG also updated
       and issued its Strategic and Operating Performance Plan for FYs 2015-2016, which
       includes the OIG’s audit plan covering FYs 2015-2016 and beyond. In reaction to
       concerns expressed in Congressional discussion draft legislation, the FCA OIG and 14
       additional OIGs formed a working group to analyze and make recommendations for
       Federal entities without IG oversight, including the Farm Credit System Insurance
       Corporation. Briefings with the Council of Inspectors General on Integrity and Efficiency
       and Congressional staff were held, and work is nearing completion.
               I would like to welcome our two senior auditors hired this period and acknowledge
       the effective efforts of the OIG staff in diplomatically leading Agency management to
       focus on significant program issues. In conjunction, FCA management was positive and
       timely in reacting and making improvements. This year marks the 25th anniversary of the
       OIG, and I look forward to continuing a positive and effective relationship
       between the OIG and the FCA Board, a partnership striving to continuously
       strengthen FCA operations.




                              FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                    APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                      1
Background




      FARM CREDIT ADMINISTRATION
      The Farm Credit Administration (FCA or Agency) is an independent Federal agency of the United
      States government responsible for the regulation and examination of Farm Credit System (FCS or
      System) institutions chartered under the Farm Credit Act of 1971, as amended (Farm Credit Act).

      As a non-appropriated agency, FCA funds its expenses primarily through assessments to the
      institutions it regulates. FCA’s Fiscal Year 2014 budget was $63,900,000. Assessments by FCA to
      FCS institutions are $50,000,000 with other sources of funding totaling $13,900,000.

      At the end of the prior semiannual reporting period, the Agency had 274 employees. At the end of
      this reporting period, FCA had 286 employees, about half of which are examiners located in five field
      offices.


                                                             Bloomington, MN




                                      Denver, CO
         Sacramento, CA
                                                                                     Headquarters McLean, VA




                                                        Dallas, TX



      FARM CREDIT SYSTEM
      The FCS is a Government-sponsored enterprise comprised of 3 Farm Credit banks, 1 Agricultural
      Credit Bank, and 78 lending associations in all 50 states and Puerto Rico that primarily make loans to
      agriculture. The System raises funds by selling securities in the national and international money
      markets through its special purpose entity, the Federal Farm Credit Banks Funding Corporation.
      These securities are not guaranteed by the U.S. Government.

      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.



                                FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                      APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                        2
Background



     OFFICE OF INSPECTOR GENERAL
     The mission of the Office of Inspector General (OIG) is to be an agent of positive change, striving for
     continual improvement in FCA’s management and program operations. The Inspector General Act
     of 1978, as amended, established the OIG in 1989.

     The Inspector General is appointed by the FCA Board
     without regard to political affiliation and solely based on
     integrity and demonstrated ability in accounting,
     auditing, financial analysis, management analysis,
     investigations, law, or public administration. The OIG’s
     FY 2014 budget was $1,264,912.

     While the OIG is under the general supervision of the
     FCA Board, it operates with independent personnel and
     contracting and budget authority. The Inspector
     General reports both to the FCA Board and to the
     Congress.

     The OIG has four major components: audits, inspections, and evaluations of programs and
     operations; investigations; legislative and regulatory reviews; and outreach.




                                            Office of Inspector General




              Audits,                                         Legislative and
           Inspections,            Investigations               Regulatory                Outreach
         and Evaluations                                         Reviews




                                 FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                       APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                         3
Strategic Goals




      To accomplish our mission, the OIG has eight strategic goals in place that are aligned to FCA’s
      mission, programs, and activities (see the OIG’s Strategic and Operating Performance Plan for
      additional information). The following list summarizes our eight strategic goals and related outcomes
      during this reporting period.


             Strategic Goal 1:

             Deliver quality audit, inspection, and evaluation products
             and services that are useful to the FCA Board,
             management, and the Congress.
             In pursuit of this goal, the OIG continues to provide quality reports to FCA
             management for improvement to programs. The OIG initiates a risk-based approach
             to FCA programs in determining the workload plan. During this reporting period, we
             issued three audit reports. The audit reports were issued timely and were
             constructive to improve Agency operations. As a result of our work, 15
             recommendations were made to FCA management. Of these recommendations, all
             15 were agreed-upon by FCA and 12 were closed during this reporting period. We
             also have three ongoing reviews to promote effectiveness and efficiency within FCA.



             Strategic Goal 2:

             Provide technical advice and assistance to Agency
             officials in developing sound management information and
             financial reporting systems and in streamlining programs
             and operations.
             The OIG provides technical advice to management in a variety of methods. For this
             reporting period, the OIG issued two management advisories to the FCA Board. One
             advisory report was issued regarding FCA’s Interest Reserve. Another advisory
             report was issued to address the need for IG oversight of the Farm Credit System
             Insurance Corporation. The Inspector General also communicates with the Board on
             a regular basis on issues facing FCA, which provides an opportunity for discussion of
             relevant topics.




                                FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
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                                                        4
Strategic Goals




          Strategic Goal 3:

          Continuous improvement of the OIG staff, products, and 

          internal office administration. Quality is highly valued. 

          The OIG continuously works to improve internal staff and processes. For this
          reporting period, our auditors attended the Federal Audit Executive Council’s (FAEC)
          training. All OIG staff maintain requirements for their related professional standards.
          We participate in a peer review every three years, and we received a pass rating
          during our last peer review in June 2013. During this reporting period, internal
          reviews were conducted on our audit and inspection functions and legislative and
          regulatory internal controls.

          Strategic Goal 4:

          Effectively investigate and report administrative and
          criminal violations relating to FCA programs and personnel
          to Agency officials, the Attorney General (when
          appropriate), and the Congress.
          The IG Counsel performs the investigative function for the OIG. For this reporting
          period, four investigations were initiated and one was closed with a report of
          investigation. Six preliminary investigations were opened with five completed. We
          received 16 allegations from the OIG Hotline during the April to September
          timeframe, which resulted in 4 being referred within FCA and 12 referred to other
          agencies, responded to directly, or closed administratively.

          Strategic Goal 5:

          Cause FCA employees and managers to recognize their
          responsibility and report observed or suspected
          wrongdoing to the OIG.
          The OIG recognizes the importance of employees and managers reporting, and the
          OIG reacting, to suspected or observed wrongdoing. During this reporting period, the
          OIG updated the FCA OIG brochure. We use these brochures as an outreach
          method, along with briefings when requested, to educate individuals on the role of the
          OIG. In addition, we are in the process of updating our hotline poster for distribution.



                             FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                   APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                     5
Strategic Goals




          Strategic Goal 6:

          Maintain an effective program for reviewing and
          commenting on proposed and existing legislation and
          regulations affecting the Agency and the IG community.

          Reviewing and commenting on proposed and existing legislation and regulations
          affecting FCA and the IG community remain an important area for the OIG.
          During this reporting period, we reviewed 28 items under the following
          categories: legislation, proposed rule, final rule, regulation, and informational
          memorandum. Thorough efforts were undertaken to lead a workgroup
          responsive to Congressional initiatives for IG oversight of Federal entities.

          Strategic Goal 7:

          Promote OIG’s role within the FCA and the community at
          large.

          Outreach and communication are essential to the OIG’s role. During this
          reporting period, the OIG presented a briefing to all new FCA employees on the
          OIG and employee responsibilities in reporting fraud, waste, and abuse. We also
          briefed a group of managers from the FCA’s Office of Examination on the OIG
          process, planning, and areas of concern found during OIG reviews. The IG also
          conducted a site visit with the Denver field office and, together with the FCA
          Designated Agency Ethics Official, briefed FCA’s Office of Regulatory Policy.


          Strategic Goal 8:

          Provide leadership to organizations directly contributing to
          the IG community, the Agency, and the Federal
          government.
          OIG staff participate in workgroups, conferences, and training related to the IG
          community, FCA, and the Federal government. The IG is involved with several
          committees and workgroups for the Council of Inspectors General on Integrity
          and Efficiency (CIGIE). The CIGIE Legislative Committee has engaged in
          several responses to legislative efforts and congressional hearings. The Counsel
          is a member of the CIGIE’s Council of Counsels. The auditors are involved with
          CIGIE and the FAEC.


                           FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                 APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                   6
Audits, Inspections, and Evaluations



      REPORTS ISSUED
      This reporting period, the OIG continued to provide FCA with high quality products. We issued three
      audit reports with 15 agreed-upon actions. We also have three in-process reviews that were initiated
      during this six-month period. The OIG issued 32 surveys to FCS institutions and issued one survey
      report to the Chief Examiner and FCA Board. The report summarizes stakeholder opinions on the
      quality and issues involved in mission execution. Lastly, two Management Advisories were issued to
      the FCA Board.




           3         Audit
                     Reports
                                           15          Agreed-Upon
                                                                                3        In-Process
                                                       Actions                           Reviews
                     Issued




         32          Surveys
                     Issued to
                                             1         Survey
                                                       Report
                                                                               2         Management
                     FCS                                                                 Advisories
                                                       Issued
                     Institutions




      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 our web site at www.fca.gov/home/inspector.html, or by
      contacting the OIG at (703) 883-4030, or by e-mail at ig_information@fca.gov.




                                FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                      APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                        7
Audits, Inspections, and Evaluations



       FCA’s Training and Conference Expenses

       FCA provides training opportunities to its employees to enhance the performance of their official
       duties. We performed this audit to determine the effectiveness of controls related to training,
       conference, and related travel expenses.

       Overall, we found FCA has effective controls over training and conference expenses. FCA
       issued policies and procedures that were in line with laws and regulations and training was
       consistent with job responsibilities and FCA’s mission. Additionally, FCA minimized expenses
       associated with agency sponsored conferences and training.

                                Training and Conference Expenses - Actual
                                700,000
                                600,000
                                500,000
                                400,000
                                300,000
                                200,000
                                100,000
                                     -
                                          FY 2010   FY 2011   FY 2012   FY 2013


       However, we found FCA’s Office of Management Services (OMS) needed to update policies
       and procedures and strengthen controls over the training program to ensure compliance with
       agency policies and procedures.

       As a result of our audit, OMS agreed to:

           •	 Determine appropriate thresholds for training approvals, update policies and
              procedures, and add increased controls in the approval process for higher cost training.

           •	 Implement additional controls to ensure:
                 o	 appropriate authorizations and supporting documentation are obtained and
                    maintained,
                 o	 training and consulting costs are appropriately allocated, and
                 o	 reporting requirements are met.

           •	 Update record retention policies and institute controls over the training database to
              ensure independent verification is required before purging documents.

       The final report was issued on September 22, 2014.



                                FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                      APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                        8
Audits, Inspections, and Evaluations




       FCA’s Purchase Card Program

       FCA participates in the government-wide
       General Services Administration’s (GSA)
       SmartPay Purchase Card Program. In
       accordance with the Government Charge Card
       Abuse Prevention Act of 2012 (Charge Card
       Act), the OIG assessed FCA’s charge card
       programs, including the purchase card
       program. We initiated this audit as part of our
       ongoing efforts in this area. The objective of
       this audit was to determine whether FCA’s
       oversight is effective. Overall, we found that
       FCA’s oversight is effective. FCA established and implemented controls over the purchase card
       program.

       We identified changes needed to improve the purchase card program. A limited number of
       cardholders had not consistently followed established policies and procedures and certain
       processes needed to be documented. We judgmentally sampled 471 transactions from Fiscal
       Year 2013 and October 1-May 15 of Fiscal Year 2014. From the judgmental sample, we
       identified nine transactions totaling $1,968 from four field office cardholders related to
       unauthorized food purchases. Cardholders had also not kept supporting documentation for 45
       transactions, as required. We also found OMS had not documented the reasoning behind three
       cardholders’ limits that were higher than the standard amount and certain activities deviated
       from policy in regard to approvals.

       As a result of our audit, OMS completed the following actions:

          •	 Provided education to cardholders and Approving Officials on purchase card policies and
             documentation requirements.

          •	 Distributed a template of an acceptable standard agency buy form.

          •	 Documented justification for cardholders with higher limits.

          •	 Documented exceptions to current processes with signatures from Approving Officials.

       The final report was issued on September 5, 2014.




                                FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                      APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                        9
Audits, Inspections, and Evaluations




      FCA’s Travel Card Program

      For travel, FCA participates in the GSA SmartPay
      Travel Card Program. The objective of this audit was
      to determine whether FCA’s oversight of the travel
      card program is effective. We found that the Agency’s
      oversight was generally effective; however, additional
      changes will improve the program.

      We found 48 of the 347 transactions reviewed
      contained unauthorized transactions that included:
      cash advances outside authorized timeframes,
      expenses charged outside of official travel, and improper hotel charges. We also identified one
      employee who had not used a government travel card for official travel, as required. In addition,
      two employees identified as having restricted accounts did not have lower limits on their travel
      cards. We noted 27 instances of delinquent accounts that went into presuspension status and 4
      accounts with a suspension status due to nonpayment. We also found two employees who left
      FCA and yet remained on the open status report for travel cards.

      Lastly, we found that FCA’s policies and procedures should be updated. FCA’s policies on
      travel cards and disciplinary and adverse actions did not identify consequences following an
      employee’s failure to comply with applicable travel charge card terms and conditions and
      applicable agency regulations. There were inconsistencies between the Charge Card
      Management Plan and other FCA policies and procedures.

      OMS completed the following actions as a result of the audit:

         •	 Provided education to cardholders regarding agency policies.

         •	 Determined a process to distribute quarterly transaction activity reports.

         •	 Documented procedures on placing or removing an account in restricted status and
            changes to travel card limits.

         •	 Incorporated a new process to reconcile open status accounts.

         •	 Documented check out procedures.

         •	 Updated FCA’s PPM 711, PPM 826, and the Charge Card Management Plan.

      The findings in the report were consistent with those identified throughout the Federal
      government according to the Office of Management and Budget’s (OMB) report to Congress on
      the implementation of the Charge Card Act. The final report was issued on August 19, 2014.


                                FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                      APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                       10
Audits, Inspections, and Evaluations





      AUDITS AND EVALUATIONS IN PROCESS

      FY 2014 Independent Financial Statement Audit of FCA

      The Accountability of Tax Dollars Act of 2002 requires FCA and certain other agencies to submit
      to the Congress and OMB an audited financial statement each fiscal year.

      In continuing to assist the Agency in meeting these requirements, the OIG contracted with
      Harper, Rains, Knight & Company, P.A. to perform the audit of FCA’s financial statements for
      FY 2014. The audit remained ongoing at the end of this reporting period. For FY 2013, the OIG
      contracted with the Bureau of Fiscal Service for Brown & Company to perform the audit. The
      audit resulted in an unmodified opinion, issued November 20, 2013.

      FY 2014 Federal Information Security Management Act Evaluation

      The evaluation of the Agency’s compliance with the Federal Information Security Management
      Act (FISMA) for FY 2014 is performed by the OIG’s Senior Information Technology Auditor
      using guidelines established by FISMA, OMB, and the National Institute of Standards and
      Technology. This evaluation was ongoing as of September 30, 2014.

      FCA’s Examiner Commissioning Program

      The Examiner Commissioning Program is designed to provide training to associate examiners
      in FCA’s Office of Examination through a segmented approach in developmental stages. The
      program certifies achievement of competencies and is a predominant mission-related function.
      The Commissioning Program is a multiple-year program, with commissioning achieved through
      successful performance on the commissioning test. The objective of this audit is to determine
      whether FCA is effectively managing the Examiner Commissioning Program. The audit began
      in September 2014.




                              FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                    APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                     11
Audits, Inspections, and Evaluations





       STATUS OF AGREED-UPON ACTIONS AND RECOMMENDATIONS
       In total, there were 15 agreed-upon actions added from our three issued audits for the reporting
       period. We did not have any recommendations open at the beginning of the period to carry over. As
       of September 30, 2014, three recommendations remain open.



                     Audit, Inspection, and Evaluation Agreed-Upon Actions and
                                          Recommendations

                  Report             Issued      Open During this       Final Management          Open on
                                                 6-Month Period     Actions During this Period   10/1/2014

            FCA’s Training and
                                    9/22/2014           3                       0                    3
           Conference Expenses


            FCA’s Purchase Card
                                    9/5/2014            4                       4                    0
                  Program


             FCA’s Travel Card
                                    8/19/2014           8                       8                    0
                 Program


                   Total                               15                      12                    3




                                  FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                        APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                         12
Other Reports




      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 the examiners performing the main mission functions. The
      OIG issues a quarterly report and, at the end of each fiscal year, a summary report on the surveys’
      results to the Chief Examiner and the FCA Board.

      Second Quarter Fiscal Year 2014 Farm Credit System Survey

      In April 2014, the OIG issued 21 surveys to FCS institutions relevant to the examination program
      during the second quarter of FY 2014. Of those issued the surveys, 18 responded. The OIG issued
      the summary report in June 2014 to the Chief Examiner and the FCA Board.

      In July 2014, 11 surveys were issued to FCS institutions relevant to the examination program during
      the third quarter of FY 2014. Third quarter results are currently being compiled.

      MANAGEMENT ADVISORY REPORTS
      The OIG Management Advisory Reports are designed to be a quick mechanism to offer the Agency
      head and management suggestions on ways to strengthen Agency operations.

      During this reporting period, the OIG issued two management advisories to the FCA Board:

         •	 Board members were advised of the need for independent, objective oversight of the Farm
            Credit System Insurance Corporation (FCSIC). FCSIC is currently not subjected to oversight
            by any IG, including FCA OIG. FCA and FCSIC are managed by the same three-member
            board of directors; however, the same member may not serve as Chairman of both entities.

         •	 The OIG advised the FCA Board on FCA’s Interest Reserve and the need to review the
            Interest Reserve Strategy to decide whether changes through a revised Board policy,
            delegations, or revisions to the current format are appropriate. The Agency revised its
            policy on budget formulation to include annual reserve approvals by the FCA Board.

      The OIG also continues to forward best practices, articles, and plans to the Social Media
      workgroup and FCA’s Office of Congressional and Public Affairs for consideration. This has
      been a practice since issuance of the OIG Management Advisory, Survey of FCA’s Use of
      Social Media, in 2012.




                                FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                      APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                       13
Investigations



      The OIG continued to provide quality investigative work during this period. The OIG investigates
      matters referred internally and externally, through the OIG Hotline, and other notification
      mechanisms.



           4      Investigations
                                      1      Report of
                                             Investigation
                                                                5      Preliminary
                                                                       investigations
                                                                                         16       Hotline
                                                                                                  complaints
                  opened
                                             issued                    completed                  addressed


      During this reporting period, the OIG opened four investigations, with one investigation completed
      and forwarded to management for administrative action. Three investigations are pending, including
      one being worked with other federal law enforcement agencies. Two matters were identified during
      the course of an OIG audit. One matter was referred to prosecutive authorities

      OIG also conducted preliminary investigations on five complaints and a sixth matter that was
      identified during the course of an OIG audit of the agency’s conference and training expenses. Five
      of these preliminary investigations were completed, and the allegations unsubstantiated. One
      remained open at the end of the reporting period. The allegations involved alleged unequal
      treatment in personnel matters, including promotions, and application of policies and procedures.

      HOTLINE
      During the reporting period, OIG also received calls and emails on the OIG Hotline. The OIG Hotline
      is available 24 hours a day, 7 days a week, to receive tips and complaints about fraud, waste, or
      abuse relating to FCA programs and operations. The Hotline allows individuals to report their
      allegations to the OIG directly and confidentially.

      Of the calls and emails the OIG received on its Hotline, 16 involved matters that were referred,
      responded to, or considered closed. The OIG conducted preliminary investigations and/or opened
      investigations on all matters within OIG’s jurisdiction. Four of the Hotline calls or emails were
      borrower complaints concerning FCS institutions, including allegations of loan fraud, improper loan
      processing, conflict of interest, and unfair treatment of institution employees. These four complaints
      were referred to the FCA office responsible for reviewing such matters.

      One of the hotline calls the OIG received involved a bankruptcy filing order. The OIG responded to
      the order by working with the cognizant bankruptcy trustee and FCS institution to ensure future
      orders were submitted to the associated Farm Credit institution. The remaining hotline calls and
      emails were closed or referred to other federal agencies as they involved matters outside OIG’s
      jurisdiction. These included a loan that involved property with alleged environmental issues that was
      referred to the Environmental Protection Agency and allegations that were referred to the U.S.
      Department of Homeland Security and the U.S. Department of Housing and Urban Development.



                                   FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                         APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                          14
Legislative and Regulatory Reviews



      In furtherance of the OIG’s mandate to review existing and proposed legislation and regulations,
      the IG attends joint briefings of the FCA Board on regulations at the proposed and final stages.
      During this reporting period, we reviewed:




         20         Legislative
                                            3       Proposed
                                                                            2          Final Rules
                    Items                           Rules




                           1          Regulation
                                                             2       Informational
                                                                     Memorandums




      The following were reviewed:

      Legislation
           1)   IG Oversight of Small Agencies (Discussion Draft, Senator McCaskill)

           2)   H.R. 1211, FOIA Oversight and Implementation Act of 2014

           3)   S. 994, Digital Accountability and Transparency Act of 2014

           4)   H.R.4487, Legislative Branch Appropriations Act

           5)   S. 1953, Oversight Workforce Improvement Act of 2014

           6)   Amendments to Legislation to Amend Improper Payments Elimination and Recovery
                Act of 2010 (IPERA)

           7)   H.R. 4245, Transparency in Government Act of 2014



                               FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                     APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                      15
Legislation and Regulations Review




          8)   H.R. 4312, Public Online Information Act of 2014


          9)   H.R. 3370, Homeowner Flood Insurance Affordability Act of 2014)


          10) H.R. 2548, Electrify Africa Act of 2014


          11) H.R. 4533, NSA Internal Watchdog Act


          12) S. 2263, Stop Wasteful Federal Bonuses Act of 2014


          13) S. 2381, Flood Insurance Market Parity and Modernization Act of 2014


          14) S. 1681, 2014 Intelligence Authorization Act


          15) H.R. 4934, Regulatory Agency De-militarization Act


          16) H.R. 4937, Protection Against Wasteful Spending Act of 2014


          17) S. 2439, NSA Internal Watchdog Act of 2014


          18) S. 2430, Special Inspector General for Monitoring the ACA Act of 2014


          19) S. 1347, Conference Accountability Act of 2013


          20) Inspector General Empowerment Act of 2014


      Proposed Rule
          21) Regulatory Capital Rules: Regulatory Capital, Implementation of Tier 1/Tier 2
               Framework, 12 CFR Parts 607, 614, 615, and 620

          22) RULE: 12 CFR Parts 611 and 615, Organization; Funding and Fiscal Affairs, Loan
               Policies and Operations, and Funding Operations; Investment Eligibility

          23) RULE: Margin and Capital Requirements for Covered Swap Entities

      Final Rule
          24) Final Rule Repealing Non-binding, Advisory Votes on Compensation for CEO and Senior
               officers of System banks or associations, 12 CFR Parts 611, 620, and 630

          25) Final Notice of Intent, Statement on Regulatory Burden




                              FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                    APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                     16
Legislation and Regulations Review




      Regulations
         26) To amend FCA’s Standards of Conduct and Referral of Known or Suspected Criminal
             Violations; Standards of Conduct (12 CFR part 612, subpart A)

      Informational Memorandum
         27)	 “Revised Guidelines on Submission of Proposals to Merge of Consolidate Farm Credit
              System Associations”

         28)	 “Informational Memorandum: Guidance for Investment Requests under § 615.5140(e) of
              Farm Credit Administration Regulations”




                            FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                  APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                   17
Congressional Interaction




      OIG Oversight

      During this reporting period, the Honorable Claire McCaskill, Chairman, Subcommittee on
      Financial and Contracting Oversight, held a hearing on April 10, 2014. In conjunction with the
      topic of enhanced oversight of entities without IGs, a discussion draft was developed. In it,
      various entities without IG oversight and nine small IGs were proposed to be consolidated with
      larger, existing IGs.

      Following the hearing, Senator McCaskill asked for a response from CIGIE, as well as entities
      impacted by the legislation. To that end, the FCA IG is on the CIGIE Legislation Committee and
      assisted in formulating a response to include an IG Council paper from 1986 when similar
      issues had arisen.

      In addition, the IG formed and co-chaired a work group of 15 OIGs who analyzed entities
      lacking oversight and made recommendations for risk-based oversight. There is also an
      offshoot workgroup focused on general enhancements for CIGIE.




                              FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                    APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                     18
Outreach





      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
      CIGIE.

      The Inspector General is a member of CIGIE, which provides a forum for IGs from various
      government agencies to discuss government-wide issues and shared concerns. Collectively, the
      members of CIGIE work toward improving government programs and operations. The IG also
      serves as a member of CIGIE’s Legislation Committee and participates as a member of CIGIE’s
      Inspection and Evaluation Committee, and is the Chair of the Small IG group.

      During this reporting period, the OIG joined the Small Agency Oversight Working Group, and the IG
      is serving as co-chair. The working group consists of both large and small OIGs, and has been
      focused on work to analyze and recommend best solutions for entities without IG oversight. The
      workgroup meets at least once each week, and has been drafting a proposal describing possible
      models for oversight.

      The Counsel to the Inspector General is active in the Council of Counsels, the CIGIE Records
      Management Working Group, and the quarterly meetings for Assistant Inspectors General for
      Investigations. The OIG Senior IT Auditor and Senior Auditors attend FAEC meetings and
      conferences. The IT Auditor is also actively involved in the IT Subcommittee of the FAEC and is
      currently developing a security program for CIGIE. The Senior IT Auditor attends local ISACA
      (formerly known as Information Security and Control Association) meetings.

      Staff Participation in Agency Organizations

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

      Organizational Briefings

      This reporting period, the OIG conducted several informational briefings. Each year, FCA holds an
      orientation for all new employees. In July 2014, OIG presented a briefing at the orientation. The
      briefing included OIG responsibilities, employee responsibilities, and a brochure on the FCA OIG.

      The OIG also periodically conducts site visits with FCA field offices. During this six-month period, the
      IG conducted a site visit with the Denver field office. The OIG also presented during a FCA Office of
      Examination managers meeting and, together with the Designated Agency Ethics Official, at the
      Office of Regulatory Policy staff meeting.



                                 FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                       APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                        19
OIG Staff




      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 toward enhancing
      individual skills in the performance of official duties and meeting the criteria needed to achieve OIG
      performance goals and objectives.

      Personnel Changes

      The OIG had numerous personnel changes this reporting period. We have filled two Senior Auditor
      positions. Both auditors bring prior Inspector General experience to the office. In addition, our
      Administrative Assistant will retire in October 2014. We have announced a new position to fill the
      vacancy as a Management/Program Analyst, and we will work to fill the vacancy as soon as possible.
      The following organizational chart shows the OIG as of September 30, 2014:




                                                Inspector General
                                                 Elizabeth Dean



                                    Administrative
                                      Assistant
                                     Debra Miller


           Counsel to the         Senior Information
                                                              Senior Auditor            Senior Auditor
         Inspector General        Technology Auditor
                                                               Sonya Cerne               Tori Kaufman
             Kathy Gallo             Tammy Rapp




                                FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                      APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                       20
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.




                                FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                      APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                       21
Appendix A




      Index of Reporting Requirements

      SECTION                                         TITLE                      Page

      4(a)(2)        Review of legislation and regulations                       15 - 17

      5(a)(1)        Significant problems, abuses, and deficiencies              None

      5(a)(2)        Recommendations for corrective action                         22

      5(a)(3)        Prior recommendations not yet implemented                   None

      5(a)(4)        Matters referred to prosecutive authorities                   14

      5(a)(5)        Information unreasonably refused or not provided            None

      5(a)(6)        List of reports issued                                       7-10

      5(a)(7)        Summaries of significant reports                             8-10

      5(a)(8)        Management decisions with questioned costs                    23

                     Management decisions on recommendations that funds be put
      5(a)(9)                                                                      23
                     to better use

      5(a)(10)       Prior audit reports unresolved                              None

      5(a)(11)       Significant revised management decisions                    None

                     Significant management decisions with which the Inspector
      5(a)(12)                                                                   None
                     General disagreed

      5(a)(13)       Compliance of Agency financial management system              11


      5(a)(14)(15)   Peer reviews conducted of this OIG                            25

      5(a)(16)       Peer reviews conducted by this OIG                            26

                     FY 2008 National Defense Authorization Act Citation and
      845                                                                          20
                     Requirement



                            FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                  APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                   22
Appendix B





                         Audit, Inspection, and Evaluation Reports Issued
                                                                                Recommendations
                                   Number of Agreed Upon
               Report                                       Questioned Costs   That Funds Be Put to
                                  Actions/Recommendations
                                                                                    Better Use
       Audit of FCA’s Training
       and Conference                        3                    $0                   $0
       Expenses
       Audit of FCA’s Purchase
                                             4                    $0                   $0
       Card Program

       Audit of FCA’s Travel
                                             8                    $0                   $0
       Card Program


                Total                       15                    $0                   $0




                                 FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                       APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                        23
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           0            0         $0              $0
       reporting period.

     B. Which were issued during the reporting
                                                      3            15        $0              $0
        period.

     Subtotals (A+B)                                  3            15        $0              $0

     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          0            0         $0              $0
       period.

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




                                 FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                       APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                        24
Appendix D





                           Reports with Recommendations that Funds

                                          be Put to Better Use

                                                          Number of      Number of      Dollar
                                                           Reports    Recommendations   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
                                                             3              15           $0
       period.

       Subtotals (A+B)                                       3              15           $0

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

         (i) dollar value of recommendations that were
                                                             0               0           $0
             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 were
                                                             0               0           $0
              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
                                                             0               0           $0
          made within six months of issuance.




                              FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                    APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                     25
Appendix E





                              Peer Reviews Conducted of this Office

                                                                     Function        Peer Review
             Peer Review Performed By             Date of Report
                                                                     Reviewed          Rating


      Architect of the Capitol                    June 26, 2013         Audit           Pass
      Office of Inspector General

      U.S. Securities and Exchange Commission   December 26, 2007   Investigations      Pass
      Office of Inspector General




                                FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                      APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                       26
Appendix F





                             Peer Reviews Conducted by this Office

                                                                  Function   Peer Review
                   Peer Review Of               Date of Report
                                                                  Reviewed     Rating

      Consumer Product Safety Commission
                                                May 23, 2011       Audit        Pass
      Office of Inspector General


      U.S. International Trade Commission
                                               January 16, 2013    Audit        Pass
      Office of Inspector General




                              FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                                    APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                     27
Appendix G



              FCA ORGANIZATIONAL CHART





             FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                   APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                    28
Appendix H





                                  Glossary of Terms


          Agency          – Farm Credit Administration
          BFS             – Bureau of Fiscal Service
          Brown & Co.     – Brown & Company CPAs, PLLC
          CIGIE           – Council of the Inspectors General on Integrity and Efficiency
          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 of Representatives
          IG              – Inspector General
          IG Act          – Inspector General Act of 1978, as amended
          ISACA           – Information Security and Control Association
          IT              – Information Technology
          NCUA            – National Credit Union Administration
          OE              – Office of Examination
          OIG             – Office of Inspector General
          OMB             – Office of Management and Budget
          Pub. L.         – Public Law
          S.              – Senate
          System          – Farm Credit System




                         FCA OIG SEMIANNUAL REPORT TO THE CONGRESS
                               APRIL 1, 2014 ─ SEPTEMBER 30, 2014
                                                29
           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