Comptroller of the Currency 

Administrator of National Banks 

FISC AL YEAR 2002 

Performance and 

Accountability Report 
Message from the Comptroller 

I am pleased to present the Office of the Comptroller of the Currency’s (OCC) 

“Performance and Accountability Report” for Fiscal Year (FY) 2002. ance 

and financial data presented in this report are fundamentally complete and reliable, as 

outlined in the guidance provided by the Office of Management and Budget (OMB). The 

report is based on data contained in the OCC’s management information systems 

and is presented in accordance with accounting principles generally accepted in the 

United States of America (GAAP). 

Figure 1: John D. Hawke, Jr. 

The perform

The OCC is responsible for the licensing, regulation, and supervision of all of the nation’s federally chartered 

(national) banks. The OCC promotes a safe and sound banking system by requiring that national banks adhere 

to sound banking and management principles and that they comply with laws and regulations. Under the OCC’s 

jurisdiction are approximately 2,100 national banks and 52 federal branches and agencies of foreign banks, 

representing more than 58 percent ($3.8 trillion) of the total assets of all United States (U.S.) banks. 

One of our significant accomplishments during 2002 was the more complete integration of risk-based supervision 

into supervisory activities and resource allocations. Our supervision process is organized along two lines of 

business: large banks and mid-size/community banks. We have taken this approach to supervision realizing that 

institutions of varying sizes and complexity present different risks and require unique supervision philosophies. 

Risk-based supervision consists of activities to identify, analyze, and respond to emerging systemic risks and 

trends that could affect an individual national bank or the entire national banking system. As part of this process, 

analytical tools and models are designed and developed to tailor examination procedures based on risk profiles 

and to allocate resources accordingly. 

The OCC undertook a number of initiatives to respond to the USA PATRIOT Act requirements and the threat of 

terrorist financing through the national banking system. These initiatives included special reviews of selected 

banks to evaluate anti-money-laundering (AML) systems, including terrorist financing controls and USA PATRIOT 

Act compliance. In addition, the OCC updated its AML training to include USA PATRIOT Act requirements and 

delivered the course to the OCC examiners and foreign bank supervisors. The OCC provided speakers for 

industry conferences on the subject of AML and the USA PATRIOT Act and participated in U.S. government antiterrorist financing or AML initiatives involving other countries. 

I remain committed to reforming the funding for bank supervision. The current funding arrangement, under 

which state banks are subsidized by their federal supervisors, is unfair to national banks, which are forced to 

contribute to the subsidization of their state-chartered competitors while bearing the full cost of their own 

supervision. It also disrupts the constructive competition between state and federal bank regulators that has 

been the hallmark of our dual banking system for more than a century. The current arrangement potentially 

compromises the safety and soundness of all banks. With reform of the deposit insurance system high on the 

nation’s legislative agenda, it is an ideal time to also correct the inequities of funding bank supervision. 

In September 2002, we announced a realignment of our district office structure to ensure that our operations are 

appropriately aligned for the future. We undertook a study to evaluate whether the locations from which, and 

the means by which, our district office functions are being performed are optimal and best aligned with our longterm supervisory strategy. We expect significant benefits to be realized from this restructuring. 

I am fortunate to have the resources of approximately 2,800 dedicated, and extremely professional employees to 

assist in our mission of supervising, regulating, and chartering national banks. Our accomplishments during the 

fiscal year were due to their extraordinary efforts. We will continue to find innovative ways to meet our mission 

using our resources efficiently and effectively. We are ready to meet the challenges that lie ahead in making sure 

our national banking system is safe, sound, and fully competitive. 

John D. Hawke, Jr. 

November 15, 2002 

Table of Contents

OCC-at-a-Glance ............................................................................................. 1

Part I Management’s Discussion and Analysis........................................ 3

Organizational Profile and Structure .................................................... 5

Mission and Vision ............................................................................. 6

Strategic Goals and Performance Measures.......................................... 6 

Program Highlights ............................................................................ 8 

Supervise Program ..................................................................... 9 

Charter Program ........................................................................15 

Regulate Program ......................................................................16 

Analyze Risk Program .................................................................18 

Management of the OCC.............................................................20 

Program Evaluations...................................................................24 

Management Challenges and High-Risk Areas............................... 25 

Partnership and Outreach ........................................................... 27 

OCC’s Next Steps ....................................................................... 30 

Part II Financial Discussion and Analysis .................................................31

Letter from the Chief Financial Officer .................................................33

Financial Management Discussion ....................................................... 35 

Systems, Controls, and Legal Compliance ............................................ 44 

Annual Assurance Statement .............................................................. 48 

Part III Independent Auditors’ Report ...................................................... 49 

Part IV Financial Statements and Notes ................................................... 61 

Balance Sheet ................................................................................... 63 

Statement of Net Cost........................................................................ 64 

Statement of Changes in Net Position.................................................. 65 

Statement of Budgetary Resources ..................................................... 66 

Statement of Financing ...................................................................... 67 

Notes to the Financial Statements....................................................... 68 

Appendix A: FY 2002 Performance Measures and Results........................... 81

Appendix B: Glossary .....................................................................................85 

O Performance and Accountability Report – Fiscal Year 2002 

OCC-at-a-Glance

Mission: 

The OCC charters, regulates, and supervises national banks to ensure a safe, sound, 

and competitive national banking system that supports the citizens, communities, and 

economy of the U.S. 

Strategic Goals: 

 A safe and sound national banking system, 

 A flexible legal and regulatory framework that enables the national banking 

system to provide a full competitive array of financial services, 

 Fair access to financial services and fair treatment of bank customers, and 

 An expert, highly motivated and diverse workforce that makes effective use of 

OCC resources. 

Key Components: 

 Approximately 2,100 national banks and 52 federal branches of foreign banks 

 Approximately 2,800 employees at headquarters, district, and field offices 

 Major programs: ter, regulate, and analyze risk 

Condition of National Banks: 

National banks registered record earnings in both the first and second quarters of 

2002, as low short-term interest rates and wide spreads between short- and longterm rates boosted net interest income. Return on equity continued to rise, 

approaching the all-time highs recorded in the early 1990s. th noncurrent loans 

and provisions for loan losses rose over the previous year, as asset quality continued 

to drift lower, with most of the deterioration concentrated in the larger banks. 

Program Results: 

 3,100 examinations conducted 

 150 formal appeals and inquiries processed 

 330 enforcement actions completed on banks and against individuals 

 170 community development consultations held with bankers 

 75,000 consumer inquiries and complaints opened 

 3,500 corporate applications received 

 30 new national charters approved 

 12 final rules issued 

 115 supervisory issuances and booklets published 

supervise, char

Bo

O Performance and Accountability Report – Fiscal Year 2002 1
OCC-at-a-Glance

Significant Program Accomplishments: 

 Assigned dedicated examiners-in-charge for each mid-size bank 

 Implemented minimum core examination procedures for low-risk, stable 

community banks and expanded procedures for institutions exhibiting higher 

risk 

 Responded to the USA PATRIOT Act, by: 

⇒ Evaluating AML systems, including terrorist financial controls and USA 

PATRIOT Act compliance, in selected banks 

⇒ Issuing regulations implementing the Act 

⇒ Conducting AML training for examiners and foreign bank supervisors 

⇒ Providing speakers on AML and the USA PATRIOT Act for industry 

conferences 

⇒ Participating in U.S. Government anti-terrorist financing or AML 

initiatives involving other countries 

 Provided more centralized oversight to problem banks 

 Litigated court cases involving preemption of state law by federal law 

 Enhanced risk assessment models and tools 

Significant Financial Management Accomplishments: 

 Implemented a Joint Financial Management Improvement Program (JFMIP) 

certified financial and acquisitions management system ($MART) on October 1, 

2001 

 Received an unqualified opinion on the FY 2002 financial statements 

 Met Treasury’s goal for timely, accurate monthly financial reporting 

 Achieved 86 percent of targeted level for reserved funds 

Performance Measures: 

 Completed quarterly risk assessments on 100 percent of large and mid-size 

banks 

 Issued reports of examination to 97 percent of large and mid-size banks 

 Achieved 98 percent compliance with the Federal Deposit Insurance 

Corporation Improvement Act (FDICIA) mandated examination schedule for 

community banks, 4 percent more than FY 2001 

 Processed 96 percent of corporate applications within timeframes 

 Closed customer complaints and consumer inquiries in an average of 44 

calendar days 

 Improved to “reasonable assurance” on the Federal Managers’ Financial 

Integrity Act (FMFIA) Section 4 and “substantial compliance” on the Federal 

Financial Management Improvement Act (FFMIA) from previous years 

 Exceeded targets for all 10 customer service standards for examinations and 

licensing services 

2 O Performance and Accountability Report – Fiscal Year 2002 
PART I 

MANAGEMENT’S DISCUSSION 

AND ANALYSIS 

Part I – Management’s Discussion and Analysis

ORGANIZATIONAL PROFILE 

AND STRUCTURE 

Profile 

The OCC was established in 1863, as a 

bureau of the U.S. Department of the 

Treasury. The OCC is responsible for 

licensing, regulating, and supervising 

the nation’s federally chartered banks. 

Today, the OCC regulates and 

supervises approximately 2,100 national 

banks and 52 federal branches of 

foreign banks in the United States. 

National banks account for more than 

58 percent of the total assets of all U.S. 

commercial banks. 

The OCC’s operations are primarily 

funded by semiannual assessments 

levied on national banks and from 

various licensing fees. The OCC also 

receives interest revenue from its 

investments in U.S. Treasury securities. 

Figure 2: OCC Organization Chart 

Structure 

During FY 2002, there were 

approximately 2,800 OCC employees. 

The OCC is headquartered in 

Washington, D.C., operates a data 

center in Maryland, and currently 

maintains six district offices in Atlanta, 

Chicago, Dallas, Kansas City, New York, 

and San Francisco. In addition, the OCC 

has 72 field offices in cities throughout 

the United States, resident examiner 

teams in the 23 largest banking 

companies supervised, and an 

examining office in London, England. 

The OCC is headed by the Comptroller 

of the Currency, who is appointed by 

the President, with the advice and 

consent of the Senate, for a five-year 

term. An executive committee 

comprised of the senior executives of 

the major operating units advises the 

Comptroller on policy and operational 

issues. The OCC’s organizational 

structure is depicted in Figure 2. 

First Senior Deputy 

Comptroller & 

Chief Counsel 

Senior Deputy 

Comptroller & 

Chief National 

Bank Examiner 

Senior Deputy 

Comptroller 

Large 

Bank Supervision 

Senior Deputy 

Comptroller 

Mid-size/Community 

Bank Supervision 

Senior Deputy 

Comptroller 

International & 

Economic Affairs 

Chief of Staff & 

Senior Deputy 

Comptroller 

Public Affairs (Acting) 

Ombudsman Information Technology 

Services & 

Chief Information 

Officer 

Senior Deputy 

Comptroller 

Office of Management & 

Chief Financial Officer 

Comptroller 

of the 

Currency 

O Performance and Accountability Report – Fiscal Year 2002 5 
Part I – Management’s Discussion and Analysis

MISSION AND VISION 

Mission 

The OCC charters, regulates, and 

supervises national banks to ensure a 

safe, sound, and competitive national 

banking system that supports the 

citizens, communities, and economy of 

the United States. 

Vision 

The OCC helps ensure that national 

banks soundly manage their risks, 

comply with applicable laws, compete 

effectively with other providers of 

financial services, offer products and 

services that meet the needs of 

customers, and provide fair access to 

financial services and fair treatment of 

their customers. 

STRATEGIC GOALS AND 

PERFORMANCE MEASURES 

Strategic Goals 

The OCC supports the Department of 

the Treasury’s strategic goals of: 

 Promoting domestic economic 

growth, 

 Improving customer satisfaction, and 

 Improving employee satisfaction. 

The OCC has established four strategic 

goals for achieving its mission. These 

goals are defined in the OCC’s 2000– 

2005 Strategic Plan, as: 

 A safe and sound national banking 

system, 

 A flexible legal and regulatory 

framework that enables the national 

banking system to provide a full 

competitive array of financial 

services, 

 Fair access to financial services and 

fair treatment of bank customers, 

and 

 An expert, highly motivated and 

diverse workforce that makes 

effective use of OCC resources. 

Performance Measures 

As required by the Government 

Performance Results Act, the OCC issues 

an annual performance plan outlining 

the performance measures for the year. 

The OCC’s performance measures help 

to demonstrate its progress in achieving 

its long-term strategic goals. 

The OCC’s performance data presented 

in this report is both reliable and 

complete. The performance data meets 

the OMB criteria that there is neither 

refusal nor marked reluctance by agency 

managers or government decisionmakers to use the data in carrying out 

their responsibilities. 

6 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

Performance data is tracked using 

management information systems (MIS) 

that have sufficient systemic and 

management controls. The OCC 

managers certify that their systems of 

controls are adequate and operating 

effectively through the annual FMFIA 

process. The OCC’s FMFIA process is 

discussed in more detail under Systems, 

Controls, and Legal Compliance 

beginning on page 44. 

A complete list of the OCC’s 

performance measures and the results 

achieved during FY 2002 are presented 

in Appendix A (page 81). The OCC’s 

accomplishments on some key annual 

performance measures are incorporated 

in the Program Highlights beginning on 

page 8. 

O Performance and Accountability Report – Fiscal Year 2002 7 
Part I – Management’s Discussion and Analysis

PROGRAM HIGHLIGHTS 

To achieve its strategic goals and 

accomplish its mission, the OCC aligns 

its activities into four major program 

areas: supervise, charter, regulate, and 

analyze risk. Three program areas are 

further divided into subprograms, as 

depicted in Figure 3. 

Figure 3: OCC Programs and Subprograms 

The OCC’s budget is formulated and 

expenditures are tracked by program 

area, as shown in Note 9 to the financial 

statements (page 79). 

During FY 2002, the OCC faced 

significant challenges as a result of the 

nation’s uncertain economy and the 

post-September 11 environment. The 

OCC’s accomplishments amid these 

challenges are presented by program 

area. 

Examining 

Enforcing 

Ensuring Fair Access 

& Fair Treatment 

Supervise 

Organizing 

Licensing 

Charter 

Establishing Policy/ 

Rulemaking 

Representing/Defending 

OCC's Authority 

Regulate Analyze Risk 

8 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

Supervise Program 

Figure 4: Supervise 

Subprograms 

This program 

Examining 

Enforcing 

Ensuring Fair Access 

& Fair Treatment 

Supervise encompasses the 

on-going 

supervision of 

national banks or 

their subsidiaries, 

federal branches 

and agencies of 

foreign banks, 

national trust 

companies, bank data software vendors, 

and data processing service providers. 

The OCC’s Committee on Bank 

Supervision establishes and oversees 

areas of emphasis for the OCC’s 

supervisory activities. The Committee is 

comprised of the Chief National Bank 

Examiner and the Senior Deputy 

Comptrollers for Large Bank Supervision 

and Mid-size/Community Bank 

Supervision. 

The supervise program is by far the 

largest program and is the core for 

accomplishing the OCC’s mission. For 

FY 2002, the OCC devoted 2,372 fulltime equivalents1

 (FTEs) or 85 percent 

of total FTEs, to the supervise program. 

The cost of the supervise program was 

$360.4 million in FY 2002. The 

supervise program is further divided into 

three subprograms: examining, 

1 Full-time equivalent is the number of paid hours 

accumulated during an entire fiscal year by a full-time 

position (40 hours per week). Generally, this is 

between 2,080 and 2,096 hours depending on the 

number of paid days that fall within a given fiscal 

year. 

enforcing, and ensuring fair access and 

fair treatment. The OCC’s most 

significant supervision accomplishments 

are discussed by subprogram. 

Examining 

Examining activities include conducting 

regularly scheduled or targeted 

examinations and off-site analysis. 

During FY 2002, the OCC conducted 

over 3,100 bank examinations to ensure 

a strong national banking system that 

helps to sustain the U.S. economy. The 

distribution of the types of examinations 

conducted by the OCC is presented in 

Figure 5. 

Figure 5: Type and Number of Bank Examinations 

Type of Examination Number 

of Exams 

Safety and Soundness 1,508 

Compliance 

Community Reinvestment Act 384 

Asset Management 313 

Data Processing Servicers, Data 

Software Vendors, and Information 

Systems Operations 

247 

700 

Examining also includes outreach 

meetings and presentations and 

appellate reviews for individual national 

banks through the ombudsman's office. 

O Performance and Accountability Report – Fiscal Year 2002 9 
Part I – Management’s Discussion and Analysis

There are two business lines within this 

program, large banks and midsize/community banks. The business 

line approach recognizes that 

institutions of varying sizes and 

complexity present different risks and 

require unique supervision philosophies. 

The OCC’s large bank program 

supervises the 23 largest national 

banking companies, using teams of 

dedicated on-site examiners. During FY 

2002, areas of supervisory emphasis for 

the large bank program included credit 

underwriting, allowance for loan and 

lease loss reserve adequacy, operational 

and technology-related vulnerabilities, 

and internal controls. 

Approximately 26 banking companies 

are in the OCC’s mid-size bank program. 

During FY 2002, the OCC assigned 

dedicated examiners-in-charge for each 

of these companies and increased the 

resources devoted to their supervision. 

The OCC’s community bank program 

generally covers national banks with less 

than $1 billion in total assets. Banks are 

assigned to an OCC portfolio manager 

who oversees the supervisory strategies 

for the banks. These strategies 

combine on-site examinations and offsite analysis to monitor bank 

performance. 

In community banks, the OCC also 

continued to refine its supervision-byrisk program that tailors examination 

strategies, resources, and activities to 

the risk profile of individual institutions. 

During FY 2002, the OCC implemented 

minimum core examination procedures 

for low-risk, stable community banks. 

These procedures establish the OCC’s 

baseline level of testing and validation 

that are performed in every community 

bank. Expanded procedures are used in 

those institutions exhibiting higher risk. 

Other activities in FY 2002 included antiterrorist financing initiatives and special 

focused examinations. 

Anti-Terrorist Financing Initiatives 

The OCC completed a number of 

initiatives to respond to the USA 

PATRIOT Act requirements and the 

threat of terrorist financing in the 

national banking system. These 

initiatives included special reviews of 

selected banks to evaluate AML 

systems, including terrorist financing 

controls and USA PATRIOT Act 

compliance. 

In addition, the OCC updated its AML 

training to include USA PATRIOT Act 

requirements and delivered the course 

to the OCC examiners and foreign bank 

supervisors. The OCC provided 

speakers for industry conferences on 

the subject of AML and the USA 

PATRIOT Act and participated in U.S. 

government anti-terrorist financing or 

AML initiatives involving other countries. 

10 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

Special Focused Examinations 

Several focused supervisory activities 

were also conducted during FY 2002. 

The most significant of these activities 

were the examination of the OCC’s 

credit card bank portfolio and the 

examination of national bank merchant 

processing activities. 

The weak economy negatively affected 

the credit card industry during 2001 and 

2002, particularly the subprime, monoline credit card issuers that 

predominantly lend to high-risk 

consumers. Banks with high 

concentrations of these lines of business 

were a focus of the OCC’s supervision 

activities in FY 2002. To systematically 

address the issues facing these banks, 

the OCC concurrently reviewed the 

operations of these banks and 

conducted additional training for the 

OCC’s examiners and portfolio managers 

in various risk management, accounting, 

and capital issues associated with these 

activities. 

The OCC also took additional steps to 

improve its supervision of merchant 

processing activities in mid-size and 

community banks. Banks with high-risk 

merchant processing businesses were 

identified, and examiners with 

specialized training in this subject were 

deployed to conduct examinations 

targeted at controlling this risk. These 

efforts resulted in the development and 

issuance of a comprehensive set of 

examination procedures for merchant 

processing activities. 

National Bank Appeals 

The national bank appeals process 

includes resolution of individual appeals 

and inquiries from national banks. With 

the consent of the Comptroller, the 

ombudsman has the discretion to stay 

any agency decision or action during the 

resolution of an appealable matter. 

During FY 2002, the ombudsman’s office 

processed over 150 substantive actions 

including formal appeals and inquiries. 

Enforcing 

Enforcing ensures that the laws, 

regulations, and policies are followed by 

individual national banks. Activities 

include the OCC’s formal enforcement 

actions, as well as more informal actions 

to support prompt detection and 

mitigation of problems before they 

affect a bank’s viability. 

During FY 2002, the OCC took various 

formal and informal enforcement 

actions, including entering into formal 

agreements and consent cease-anddesist orders with national banks 

engaging in violations of laws and 

regulations and/or unsafe or unsound 

banking practices; obtaining consent 

removal and/or prohibition orders; and 

ordering civil monetary penalties. 

O Performance and Accountability Report – Fiscal Year 2002 11 
Part I – Management’s Discussion and Analysis

Special Supervision 

Special supervision involves activities 

related to managing problem banks. 

The OCC is implementing actions to 

strengthen the program for identifying 

and managing the current caseload of 

troubled institutions, facilitate earlier 

intervention in problem banks, and 

establish a mechanism for managing a 

potential increase in the caseload of 

problem banks. Actions completed 

during FY 2002, include: 

 Restructuring the special supervision 

unit into a separate division with a 

deputy comptroller, effective 

November 2001, to bring more 

centralized oversight to problem 

banks; 

 Training supervision management on 

the importance of prompt corrective 

action, the tools available to facilitate 

prompt corrective actions to issues 

identified during the supervisory 

process, and the importance of a 

sound supervision record to prevent 

failures and/or losses to the bank 

insurance fund; 

 Requiring a rehabilitation/action plan 

on all 3-, 4-, and 5-rated institutions 

focusing on the long-term 

supervisory strategy for the bank, 

including assessments of the root 

causes of the problems, the viability 

of the bank’s business plan, and the 

critical assumptions, or milestones 

for success; and 

 Developing a new MIS focusing on 

predictors of future troubled banks, 

trends in the troubled institution 

population, and information needs 

focusing on individual troubled 

banks. 

Ensuring Fair Access and Fair 

Treatment 

Activities in this subprogram include: 

reviewing issues related to fair access to 

financial services and fair treatment of 

bank customers; educating community 

and consumer organizations and 

facilitating their interactions with the 

OCC; conducting outreach to national 

banks to assist them in meeting their 

obligations under the Community 

Reinvestment Act (CRA) rules; meeting 

with individuals and groups protesting 

banks' corporate applications; reviewing 

or approving individual bank community 

development activities; and conducting 

targeted fair lending examinations. The 

OCC’s efforts to ensure fair access and 

fair treatment focused on fully 

integrating compliance risk supervision 

into the on-going supervision activities 

of national banks. 

12 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

Community Affairs 

The OCC’s community affairs staff 

conducted over 170 bank consultations 

during FY 2002. In addition, the OCC 

met with community and consumer 

organizations on policy matters related 

to predatory lending, payday lending, 

consumer protection, CRA changes, 

financial literacy, and other issues. 

These meetings provided the OCC 

information about the challenges and 

solutions to increased access to financial 

services for consumers in disadvantaged 

communities. Other activities are 

discussed under Partnership and 

Outreach (page 27). 

Consumer Complaints 

The OCC’s Customer Assistance Group 

(CAG) reviews and processes complaints 

received from customers of national 

banks. The OCC maintains a call center 

with trained compliance professionals to 

deliver responsive customer service. 

The OCC’s philosophy is to resolve cases 

on the first contact when possible. 

During FY 2002, the OCC received more 

than 80,000 calls and opened over 

75,000 cases. 

In addition, the OCC fully implemented 

CAGNet, a component of National 

BankNet. CAGNet, a web-based 

"business-to-business" application, was 

developed to help speed complaint 

resolution time and increase efficiency 

for both the banks and the CAG. 

Through the CAGNet application, the 

consumer's complaint data is 

electronically delivered from the CAG to 

bank management for response. 

Likewise, bank management 

electronically submits a documented 

response to the CAG for review. 

Additionally, bank management has 

access to their current and historical 

complaint data through a standard set 

of reports. Currently, 30 banking 

companies are using this business-tobusiness application to respond to 

written customer complaints. 

By facilitating communications between 

national banks and their customers, the 

CAG supports industry efforts to sustain 

a broad and satisfied customer base in a 

highly competitive financial services 

market. The group’s constituents not 

only include customers of national 

banks, but also the national banks and 

the OCC’s bank supervision divisions. 

Performance Measures 

The OCC established six performance 

measures for the supervise program and 

the results achieved are depicted in 

Figure 6. 

O Performance and Accountability Report – Fiscal Year 2002 13 
Part I – Management’s Discussion and Analysis

Performance 

Measure 

FY 2002 

Target Actual 

Percent of large and 

mid-size banks where 

quarterly risk 

assessments are 

completed 

100% 

Performance 

100% 

Percent of large and 

mid-size banks that 

received an annual 

report of examination 

100% 97% 

Percent of community 

bank examinations 

conducted in 

accordance with the 

FDICIA-mandated 

schedule, exclusive of 

approved exceptions 

100% 98% 

Percent of community 

bank examinations 

that are approved 

exceptions to the 

FDICIA-mandated 

schedule 

< 10% 3% 

Average calendar 

days past due on 

community bank 

examinations that do 

not meet the 

approved exception 

criteria 

< 15 17 

Average days to 

process customer 

complaints and 

consumer inquiries 

50 44 

Figure 6: Target and Actual Performance of Supervise 

Performance Measures 

The OCC achieved 97 percent of its 

target for reports of examination (ROE) 

issued to large and mid-size banks. An 

ROE is required for each individual 

charter so there can be multiple ROEs 

issued to any one banking company. An 

ROE for 152 of the 157 large and midsize bank charters was issued during the 

fiscal year. The OCC waived ROEs for 

the remaining five charters due to 

mergers that were in process or other 

overriding circumstances. 

The OCC achieved 98 percent 

compliance with the FDICIA-mandated 

examination schedule for community 

banks. Mitigating circumstances 

prevent the OCC from achieving full 

compliance. For example, the 

prioritization of resources to higher risk 

institutions and scheduling anomalies 

preclude strict compliance with the 

FDICIA schedule. 

The OCC limited approved exceptions to 

the FDICIA examination schedule to 

three percent, exceeding the target of 

no more than ten percent. Delays in 

examinations that did not meet the 

approved exception criteria averaged 17 

days. The OCC’s managers will continue 

to monitor and manage the initiation of 

examinations and limit the length of 

delays when resources are diverted to 

problem banks whenever possible. 

In addition to the performance 

measures, the OCC exceeded its five 

customer service standards related to 

the examination of national banks (page 

81). The customer service results were 

based on 874 examination 

questionnaires completed by banks 

during the year, which was a 49 percent 

response rate. 

14 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

Charter Program 

Figure 7: Charter 

Subprograms 

Organizing 

Licensing 

Charter 

This program 

comprises the 

activities that result 

in the chartering of 

national banks and 

the evaluation of the 

permissibility of 

structures and 

activities of national 

banks and their subsidiaries. These 

activities include review and approval 

for new national bank charters, 

mergers, acquisitions, conversions, 

business combinations, corporate 

reorganizations, changes in control, 

operating subsidiaries, branches, 

relocations, and subordinated debt 

issues. The OCC devoted 79 FTEs to 

the charter program at a cost of $11.3 

million during FY 2002. 

The organizing subprogram includes the 

activities that relate to bringing new 

banks into the national banking system 

or approving new federal branches or 

agencies. During FY 2002, a total of 

3,496 corporate applications were 

received by the OCC. The OCC made 

1,554 decisions, 30 of these were for 

new national charters. 

Electronic Filing of Licensing 

Applications 

The OCC is developing e-Corp, a 

component of the National BankNet, to 

provide banks the ability to file 

applications electronically. Initially, 

electronic filing will be limited to branch 

and relocation applications. 

In FY 2002, development efforts 

focused on ensuring that the branch and 

relocation applications are in compliance 

with Section 508 of the Rehabilitation 

Act of 1973, as amended (29 USC 

794(d)), giving disabled employees and 

members of the public access to 

information that is comparable to the 

access available to others. 

Developmental efforts also focused on 

implementing an electronic signature for 

e-Corp applications. At year-end, 

branch and relocation applications had 

been tested internally and bank testing 

had begun. 

Performance Measures 

The OCC exceeded its target by 

processing 96 percent of corporate 

applications in accordance with its 

published timeframes. The OCC also 

exceeded its five customer service 

standards for providing timely and 

quality licensing services (page 82). 

These results were based on 594 

licensing surveys received from 

applicants during the year, which was a 

52 percent response rate. 

O Performance and Accountability Report – Fiscal Year 2002 15 
Part I – Management’s Discussion and Analysis

Regulate Program 

Figure 8: Regulate 

Subprograms 

This program 

Establishing Policy/ 

Rulemaking 

Representing/Defending 

OCC's Authority 

Regulate comprises the 

activities that 

establish regulations, 

policies, and 

procedures that 

apply to all national 

banks and the 

supervision of those 

banks or activities that defend the OCC’s 

supervisory authority over the national 

banking system. 

The OCC devoted 173 FTEs at a total 

cost of $25 million to the regulate 

program during FY 2002. The 

establishing policy/rulemaking 

subprogram includes activities to 

establish or interpret national banking 

regulations, policies, procedures, and 

operating guidance. The 

representing/defending the OCC’s 

authority subprogram includes activities 

that develop the OCC’s positions or 

defend national bank powers through 

interpretation or litigation. 

Regulations 

The OCC issued 12 final rules in FY 

2002. Rulemaking efforts included USA 

PATRIOT Act implementation, capital 

issues, and codifications of permissible 

electronic banking activities. Significant 

rules included: 

 Capital Treatment of Recourse 

Arrangements and Direct Credit 

Substitutes. 66 Fed. Reg. 59614 

(November 29, 2001). 

 Capital Treatment of Nonfinancial 

Equity Investments. 67 Fed. Reg. 

3784 (January 25, 2002). 

 Electronic Activities. 67 Fed. Reg. 

34992 (May 17, 2002). 

 International Banking Activities: 

Capital Equivalency Deposit. 67 Fed. 

Reg. 41619 (June 19, 2002). 

 Customer Identification Program. 67 

Fed. Reg. 48290 (July 23, 2002). 

Interpretations and Opinions 

The OCC issued several significant legal 

opinions during FY 2002 pertaining to 

the applicability of state law to national 

banks in the areas of insurance and 

national bank operating subsidiaries. 

Several legal opinions addressed specific 

circumstances in the securities area. 

The OCC continues to publish 

information on significant interpretations 

and actions on its Web site. 

The OCC also issued guidance on the 

ability of national banks to hedge risks 

arising from bank-permissible, equity 

derivative transactions; the fiduciary 

activities of national banks; and smallbank compliance with the privacy 

regulations mandated by the GrammLeach-Bliley Act (GLBA). 

16 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

In support of the OCC’s operations, legal 

interpretations and advice were issued 

in the following areas: community bank 

lending limits for an OCC pilot program, 

inappropriate use of the national bank 

charter in certain payday lending 

arrangements, predatory lending issues 

in general, and structured early 

intervention and resolutions of problem 

banks. 

Policies and Procedures 

The OCC issued policies and procedures 

during FY 2002 to address a variety of 

supervisory and licensing issues. The 

Comptroller’s Handbook series was 

updated with new booklets providing 

expanded examination procedures in the 

areas of personal fiduciary services, 

custody services, insurance activities, 

and merchant processing. 

Supervisory bulletins were issued to 

bankers and examiners on various risk 

and risk management issues, including: 

unsafe and unsound investment 

portfolio practices, the use and 

management of third-party service 

providers and vendors, credit risk arising 

from certain investment portfolio 

safekeeping arrangements, and the risks 

associated with automated clearing 

house transactions conducted through 

the Internet. 

As noted in the Partnership and 

Outreach section on page 27, the OCC 

in conjunction with the other federal 

financial regulators also issued guidance 

on technical capital, accounting, 

operational, and supervisory issues 

associated with the sale and 

securitization of bank assets; country 

risk management; and the risks and 

supervisory treatment of parallel-owned 

banking organizations. 

With regard to licensing and chartering 

activities, the Comptroller’s Licensing 

Manual was reconfigured in a primarily 

electronic format, enabling the OCC to 

make regular updates more efficiently. 

The OCC also prepared to re-issue 

guidance on tribal ownership of national 

banks, developed policy for expedited 

corporate reorganizations, and 

developed policy on extended 

safeguards in the form of conditions and 

agreements to address safety and 

soundness concerns in licensing 

application approvals. 

Representation of the OCC in Court 

The OCC is a party in court cases, or 

files as amicus, to protect national 

banks’ exercise of their powers (e.g., to 

sell insurance or to charge reasonable 

fees for their services), and to protect 

the authority of the OCC to enforce 

applicable state laws against national 

banks. 

Litigation includes defending the OCC’s 

regulations from judicial challenges and 

the OCC’s enforcement actions and 

decisions to place banks into 

receivership. Notable court cases in FY 

2002 include several matters related to 

preemption of state law by federal law. 

O Performance and Accountability Report – Fiscal Year 2002 17 
Part I – Management’s Discussion and Analysis

Analyze Risk Program 

This program consists of activities to 

identify, analyze, and respond to 

emerging systemic risks and trends that 

could affect an individual national bank 

or the entire national banking system. 

During FY 2002, the OCC devoted 168 

FTEs at a total cost of $25.7 million to 

the analyze risk program. 

The program’s key objectives are the 

early identification of higher-risk 

institutions, activities, and trends and 

potential shocks to the system. Areas of 

analysis include: bank lending and 

credit risk; economics, finance, and core 

banking; industry studies; international 

bank supervision and regulations; 

emerging risks; evolving business 

practices and financial market issues; 

capital markets activities; and asset 

securitization. 

Under this program, analytical tools and 

models were developed to assist 

supervision in tailoring examination 

procedures based on risk profiles and 

allocating resources accordingly. The 

OCC has developed two tools that 

enhance the identification of and 

supervisory responses to emerging 

risks; one is focused on community 

banks and one is focused on large 

banks. 

Community Bank Canary 

The “Community Bank Canary” tool 

provides a menu of financial risk 

measures and benchmarks, predictive 

models, market barometers, and 

research tools that are used to identify 

community banks with potentially high 

or complex amounts of financial risk, as 

well as banks that have low and stable 

financial risk. 

During FY 2002, the financial risk 

measures were enhanced by 

incorporating rates of change in a 

bank’s risk profile. This enhancement 

allows examiners to monitor current risk 

levels and trends in risk levels for a 

bank or group of banks. 

Large Bank Canary 

The OCC implemented the “Large Bank 

Canary” tool in FY 2002. It captures 

static benchmarks for five financial risks 

(credit, interest rate, liquidity, price, and 

foreign currency), strategic risk, asset 

management activities, and 

securitization activities. A separate 

historical data page contains balance 

sheet and income statement figures and 

ratios. Summary Canary reports were 

created, and include a cover page with 

summary information from markets, 

models, and internal sources for all 

large banks along with a financial 

snapshot with summary balance sheet 

and income statement items for each 

large bank. 

18 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

The OCC has several additional tools quality, and rate-of-change information 

and models that assist in the for 52 standard industry groupings. 

identification and analysis of systemic During FY 2002, the number of 

risks, including a “Credit Risk Analytics” exposures captured was expanded to 

tool that combines bank portfolio data approximately 60 percent of commercial 

with a number of pre-established risk credit exposures in the national banking 

metrics to provide exposure size, system. 

O Performance and Accountability Report – Fiscal Year 2002 19 
Part I – Management’s Discussion and Analysis

Management of the OCC 

In accomplishing its mission, the OCC is 

committed to the effective, efficient, and 

economical management of its 

resources. Some of the OCC’s 

management initiatives during FY 2002, 

including the President’s Management 

Agenda (PMA), are discussed below. 

President’s Management Agenda 

The basic tenets underlying the OCC’s 

fourth strategic goal embody many of 

the same issues included in the PMA. 

During FY 2002, the OCC developed 

plans to achieve the goals of each PMA 

initiative. A brief discussion of the 

OCC’s PMA accomplishments follows. 

Budget and Performance Integration 

In FY 2002, the OCC developed 

strategic, outcome-oriented 

performance measures to better 

demonstrate the effect of the OCC’s 

regulatory activities on the national 

banking system. The new performance 

measures are linked to the OCC’s 

strategic goals and program areas, and 

are included in the FY 2003 Annual 

Performance Plan. 

The OCC also implemented an 

integrated planning, budgeting, and 

evaluation process for the development 

of the FY 2003 budget and performance 

plan. The results of program reviews 

and execution of the FY 2002 budget 

were used in the budget deliberations 

for FY 2003. Additionally, organizational 

operating plans identified planned 

activities and anticipated performance to 

support the budget requests. 

The OCC began an initiative to develop 

staffing models to better substantiate 

budget requests and to modify the 

project/activity structure for tracking 

labor hours. These efforts will lay the 

foundation to capture useful cost 

accounting and unit cost information for 

more informed decision-making in the 

future. 

Competitive Sourcing 

The OMB established a FY 2002 goal 

requiring agencies to cost compare or 

commercially compete five percent of 

the FTE positions listed on their 

Calendar Year (CY) 2000 Federal 

Activities Inventory Reform Act 

inventory. For the OCC’s inventory, the 

five percent equated to 14 positions for 

cost comparison. During FY 2002, the 

OCC cost compared a total of 20 

positions, exceeding the goal 

established by OMB. All 20 positions 

were retained in-house because it was 

more cost effective than obtaining these 

services commercially. 

Expanded E-Government 

As a result of working with the 

Department of the Treasury and OMB 

this year, the OCC's business cases for 

its FY 2003 information technology 

investments improved and better met 

20 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

the intent of the OMB's guidance and 

the goals of the PMA. 

The OCC’s Investment Review Board 

reviewed the FY 2003 proposed 

technology projects and recommended 

investment decisions to the executive 

committee and the Comptroller. 

The OCC is within 95 percent of planned 

cost, schedule, and performance targets 

for its FY 2002 technology investments. 

The OCC also will evaluate completed 

projects one year after implementation 

to ensure that the system is meeting the 

needs of the users and supporting its 

mission, using appropriate technology. 

The OCC is in the preliminary stage of 

data gathering for its technical and 

business architectures, as well as the 

Technical Reference Model. A 

Framework and Enterprise Architecture 

(EA) Roadmap that support the 

Department of the Treasury and Federal 

EA Framework have been developed. It 

is being reviewed for alignment with the 

OCC's strategic plan and the potential 

targeted architecture. 

Improving Financial Management 

On October 1, 2001, the OCC 

implemented a JFMIP certified financial 

and acquisitions management system 

that provides timely and accurate 

financial data to manage operations. 

This system is discussed in more detail 

under the Financial Management 

Discussion beginning on page 35. 

Additionally, the OCC closed its 

accounting records for month-end 

financial reporting in both a timely and 

accurate manner. 

Human Capital 

In December 2001, the OCC began to 

implement its Strategic Plan for Active 

Recruitment, Retention, and Career 

Development, which outlines the OCC’s 

five-year plan for achieving its strategic 

human capital objectives. 

In FY 2002, all managers and 

employees had performance plans that 

included performance accountability 

measures linked to achievement of the 

OCC’s strategic priorities. The OCC’s 

performance management program is 

used in concert with a performance 

based compensation program. 

The OCC has defined mission-critical 

competencies and identified skill gaps. 

The OCC established the Examiner 

Specialized Skills program to ensure a 

sufficient pipeline of qualified candidates 

for positions in the following areas of 

expertise: bank technology, capital 

markets, retail credit risk, asset 

management, and compliance. In 

addition, training plans were 

implemented to increase expertise in 

asset management, bank information 

technology, and capital markets. 

To ensure the OCC is adequately 

prepared for the future, a management 

succession planning process was 

approved and management succession 

plans for all functional areas will be 

developed. 

O Performance and Accountability Report – Fiscal Year 2002 21 
Part I – Management’s Discussion and Analysis

The OCC expanded its work-life 

programs by offering a maxi flex 

alternative in addition to the 

compressed work schedule program and 

broader opportunities for work-at-home. 

The OCC also expanded its Alternative 

Dispute Resolution program to maximize 

dispute prevention strategies and 

potentially avert EEO complaints. 

Real Estate Strategic Study 

To realign the OCC’s real estate portfolio 

in direct support of its mission, a real 

estate strategic study was completed. 

Recommendations to positively affect 

operational, fiscal, technological, 

personnel, and program goals were 

implemented. The OCC has realized 

savings of approximately $1.8 million on 

leases negotiated during FY 2002. 

District Restructuring Study 

During FY 2002, the OCC completed an 

internal study to examine the various 

functions and services provided by its 

district offices. The purpose of this 

study was to evaluate whether the 

locations from which, and the means by 

which, district office functions are being 

performed are optimal and best aligned 

with the OCC’s long-term supervisory 

strategy. The results indicated that 

change is needed to ensure the district 

office operations are appropriately 

aligned for the future. 

The geographical footprint and size of 

the district offices have remained 

essentially unchanged since 1983, when 

the OCC reduced from 12 regional 

offices to six district offices. Since then, 

there has been significant consolidation 

within the banking industry, as well as 

material changes in the nature and 

functions of the OCC’s district offices. 

The cumulative effect of these trends 

over the past 20 years changes the 

distribution needs of the OCC’s district 

resources. 

Consequently, the OCC decided to 

restructure the current six district offices 

into four locations. By January 2004, 

the OCC will combine the San Francisco 

and Kansas City district offices into a 

new district office in Denver, and will 

consolidate the Atlanta and Dallas 

offices in Dallas. The OCC will retain 

field offices in San Francisco, Kansas 

City, and Atlanta. 

Learning Management System 

The OCC selected a software package 

and began implementation of a Learning 

Management System (LMS). The LMS 

will allow the OCC to deliver a portion of 

its internal training curricula to 

employees through an on-line “Elearning.” E-learning is one alternative 

delivery method that can be more 

effective, less costly, and less disruptive 

for training the workforce, especially 

one like the OCC’s that is geographically 

22 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

dispersed. E-learning is considered an 

industry best practice. The LMS also 

updates and replaces the OCC’s 

obsolete Training Administration 

System. 

Windows 2000 Upgrade 

The OCC modernized personal computer 

software for all employees, overhauled 

the Microsoft network infrastructure 

nation-wide to support future 

applications, and revamped remote 

access services with a single sign-on 

solution. 

Information Technology Infrastructure 

Upgrades 

The OCC completed a major upgrade to 

the data center electrical system. The 

new equipment improves power 

reliability and provides additional 

electrical capacity for future growth. 

The OCC also upgraded 22 data circuits 

to full T-1 speeds to improve network 

performance for large offices that were 

experiencing congestion on the slower 

lines. 

O Performance and Accountability Report – Fiscal Year 2002 23 
Part I – Management’s Discussion and Analysis

Program Evaluations 

The OCC has several programs designed 

to evaluate the effectiveness and 

efficiency of programs and operations. 

The results of internal program reviews 

are used to improve the management of 

the OCC. During FY 2002, numerous 

internal reviews were conducted. 

Program Analysis Unit Reviews 

The Program Analysis unit (PAU) 

conducted reviews supporting the 

Comptroller’s expectation for a credible 

and effective resource management 

process. The PAU completed an 

information technology infrastructure 

study, evaluated the London Office, 

prepared an analysis of alternative work 

locations, completed an evaluation of 

supervision operations, evaluated 

resource requests made by the 

Information Technology office and the 

CAG, and completed various analysis of 

policy, programs, budgetary, and 

management issues related to the OCC’s 

programs. 

Supervision Quality Reviews 

Quality assurance reviews conducted in 

FY 2002 were used to provide internal 

feedback on the effectiveness of the 

OCC’s bank supervision activities. These 

reviews covered community bank 

supervision; federal branch and agency 

supervision; problem bank lessonslearned; Financial Institutions Reform, 

Recovery and Enforcement Act Section 

914; and follow-up reviews. 

Licensing Quality Reviews 

Several aspects of the OCC’s licensing 

activities were reviewed during FY 2002. 

The OCC conducted quality reviews of 

licensing in two districts with the highest 

volume of charters to determine 

adherence to policies and procedures. 

The OCC also reviewed chartering 

processes through a charter renovation 

project. As a result, the OCC identified 

best practices, implemented 

enhancements to the charter process, 

and improved written policies and 

procedures. 

24 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

Management Challenges and 

High-Risk Areas 

The OCC believes a major challenge and 

risk to maintaining a strong banking 

industry is ensuring adequate and 

equitable funding for bank supervision. 

The OCC will continue its efforts to bring 

attention and focus to this issue. 

The current funding arrangement, under 

which state banks are subsidized by 

their federal supervisors, is unfair to 

national banks, which are forced to 

contribute to the subsidization of their 

state-chartered competitors while 

bearing the full cost of their own 

supervision. It also disrupts the 

constructive competition between state 

and federal bank regulators that is a 

cornerstone of the dual banking system. 

Additionally, it compromises the safety 

and soundness of all U.S. banks. 

National banks pay the full costs of their 

supervision through assessments to the 

OCC. Conversely, state banks pay only 

the portion of their supervision costs 

that is provided by state supervisory 

agencies. In 2001, for example, 

national banks paid 100 percent of their 

supervision costs while state banks paid 

just 22 percent of their supervision 

costs. 

This inequity is compounded because 

the FDIC uses a substantial portion of 

the income generated from national 

banks’ accumulated deposit insurance 

premiums to supervise state 

nonmember banks. The Federal 

Reserve System’s supervision costs are 

borne by all taxpayers because 

operating expenses are subtracted from 

earnings on government securities 

before paying the remainder to the U.S. 

Treasury for the benefit of taxpayers. 

Historically, the choice between a 

national or state charter centered on 

such things as supervisory philosophy 

and responsiveness, examination 

quality, and the scope of permissible 

activities. Today, the cost of 

supervision has become an increasingly 

more important factor in a bank’s choice 

of charter, rather than those factors that 

enhance the overall quality of bank 

supervision. 

The most serious concern is that the 

current funding system works to reduce 

supervisory resources when they are 

most likely to be needed. During times 

of widespread stress in the banking 

system, healthy national banks are 

asked to pay higher assessments so that 

the OCC can deal with a rising number 

of problem banks. As a result, the 

financial incentive for healthy national 

banks to convert to a state charter 

increases, depleting the revenue needed 

to protect safety and soundness. 

Inspector General 

In 2002, the Treasury’s Office of the 

Inspector General (OIG) did not cite any 

management challenges or high-risk 

areas specific to the OCC. The 

Inspector General’s memorandum to the 

Secretary of the Treasury cited five 

overarching challenges for the 

Department. The OCC has focused on 

four of these challenges at the bureau 

O Performance and Accountability Report – Fiscal Year 2002 25 
Part I – Management’s Discussion and Analysis

level. Two challenges, Linking 

Resources to Results and Financial 

Management Systems, were previously 

discussed under the PMA on page 20 

and are elaborated on in the Financial 

Management Discussion on page 35. 

The third challenge, information 

security, is discussed in the Government 

Information Security Reform Act of 2000 

(GISRA) section on page 45. 

The fourth challenge is prompt 

corrective action to audit findings. In FY 

2002, the OCC developed a quarterly 

report on the status of open corrective 

actions to audit recommendations. The 

purpose of the report is to bring more 

executive-level attention and 

involvement in establishing realistic 

completion dates for planned corrective 

actions and the timely implementation 

of those actions. 

The fifth challenge identified by the OIG 

related to duplicate, wasteful practices 

for similar activities performed across 

bureaus is more appropriately addressed 

at the Department level. 

26 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

Partnership and Outreach 

The OCC works with other regulators, 

industry, and community and consumer 

organizations to further the OCC’s 

mission and to accomplish its strategic 

goals and objectives in an effective and 

efficient manner. 

Federal Financial Regulators 

Primarily through the Federal Financial 

Institutions Examination Council 

(FFIEC), the OCC works closely with the 

other federal financial regulators (Board 

of Governors of the Federal Reserve 

System, FDIC, Office of Thrift 

Supervision, and National Credit Union 

Administration) to coordinate 

supervisory policies, regulations and 

regulatory reporting requirements, and 

examiner training on issues that cut 

across the banking system. These 

efforts reduce regulatory burden by 

promoting greater uniformity, 

consistency, and efficiency in the 

supervision of insured depository 

institutions. 

During FY 2002, the FFIEC regulators 

completed numerous initiatives to 

address emerging risks and issues 

facing the industry, including: 

 Amendments to their risk-based 

capital guidelines to better align the 

level of capital that banks must hold 

with the risks that they undertake. 

The changes addressed recourse, 

direct credit substitutes, and residual 

interests in asset securitizations; 

merchant banking activities; and 

claims on securities firms. 

 Supervisory guidance to bankers on 

risks posed by bank activities, 

methods banks can use to manage 

those risks, and factors examiners 

will use to evaluate the adequacy of 

a bank’s risk management practices. 

Interagency guidance was issued on: 

1) Technical capital, accounting, 

operational, and supervisory 

issues associated with the sale 

and securitization of bank assets; 

2) Risk management principles for 

economic, social, and political 

conditions and events in a foreign 

country that may affect a U.S. 

bank’s financial condition; and 

3) The characteristics of, and 

potential risks associated with, 

certain types of bank organization 

structures, known as parallelowned banking organizations, 

that arise when a U.S. depository 

institution and foreign bank are 

controlled directly or indirectly by 

the same person or group of 

persons. 

 Implementing regulations for the 

USA PATRIOT Act. 

 Updated communications protocols 

for emergency situations in response 

to the events of September 11th. 

 On-going joint, supervisory programs 

such as the shared examination 

O Performance and Accountability Report – Fiscal Year 2002 27 
Part I – Management’s Discussion and Analysis

programs, including the Shared 

National Credit (SNC) program, the 

Interagency Country Exposure 

Review Committee, and the 

interagency examination program for 

multi-regional data processing 

servicers. Through the 2002 SNC 

program, examiners collectively 

reviewed approximately 10,000 

credit facilities representing over 

$1.9 trillion in credit exposures. 

Other Domestic and International 

Regulators 

The OCC also works with other state, 

federal, and international regulators and 

supervisors on matters of mutual 

interest. 

Consistent with the GLBA, the OCC has 

entered into information-sharing 

agreements with 37 state insurance 

departments and meets regularly with 

the National Association of Insurance 

Commissioners. 

The OCC works closely with the 

Securities and Exchange Commission on 

various securities, brokerage, and 

accounting and disclosure issues and 

with the Federal Trade Commission on 

various consumer protection and privacy 

issues. 

The OCC is a member of the 

Administration’s Financial and Banking 

Infrastructure Information Committee 

and is working actively with the 

Department of the Treasury to 

implement the President’s anti-terrorist 

initiatives. 

On the international front, the OCC is 

actively involved in the Basel Committee 

on Banking Supervision’s efforts to 

update and revise the Basel Capital 

Accord to make the capital standards 

required of internationally active banks 

more comprehensive, risk sensitive, and 

reflective of advances in banks’ risk 

measurement and management 

practices. 

The Comptroller chairs the Basel 

Committee’s Electronic Bank Working 

Group. 

Industry and Community Outreach 

The OCC maintains an active dialog with 

key constituents that are affected by 

and interested in the OCC’s mission. 

The Comptroller and senior 

management seek input and feedback 

on issues facing the banking industry 

through outreach meetings with industry 

and trade associations. During FY 2002, 

the OCC participated in or conducted 

217 outreach activities. Highlights of 

these activities include: 

 Co-sponsoring the Hispanic Banking 

Forum and the National Community 

and Economic Development 

Conference to share success stories 

and strategies for expanding 

financial access to underserved 

markets and populations. 

28 O Performance and Accountability Report – Fiscal Year 2002 
Part I – Management’s Discussion and Analysis

 Conducting outreach meetings 

targeted for the mid-size bank 

portfolio, including a Chief Executive 

Officer Roundtable, a Chief Credit 

Officer Forum, and a Retail Credit 

Forum. 

 Conducting telephone seminars for 

bankers. These seminars allowed 

bankers to listen to agency experts 

discuss their experiences and policy 

imperatives and interact with them 

during a question-and-answer 

session. The topics were: (1) Audit 

Roundtable on Risk Assessment and 

Internal Controls, (2) Audit 

Roundtable on Work Papers and 

Audit Committee Reporting, 

(3) Outsourcing Your Audit Function, 

and (4) Risk Management Principles 

for Third-Party Relationships. 

 Conducting workshops on 

Understanding OCC's Risk 

Assessment Process, for 

approximately 350 community bank 

directors. The goal was to enhance 

their understanding of risk-based 

supervision; increase familiarity with 

major risks in commercial banking; 

learn the types of questions to ask 

managers, auditors, and examiners; 

and review common ways to 

identify, measure, monitor, and 

control risk. 

 Providing bankers access to 

Comparative Analysis Reporting that 

has selected financial data/ratios for 

over 8,700 institutions, including all 

commercial banks and FDIC-insured 

savings banks. National banks use 

this information to analyze and 

compare their performance with peer 

banks or other banks in the same 

city, county, or state. Additionally 

this information may be used when a 

bank is considering acquiring or 

merging with another bank. 

O Performance and Accountability Report – Fiscal Year 2002 29 
Part I – Management’s Discussion and Analysis

OCC’s Next Steps 

The OCC will continue to monitor and 

evaluate risks to individual national 

banks and the national banking system 

and incorporate the results of these risk 

analyses into its supervision strategies. 

Key issues to be addressed by the OCC’s 

supervision activities include: credit 

quality; adequacy of allowance for loan 

and lease losses; scrutiny of accounting 

practices; integrity of management 

information systems; off-balance sheet 

activities; funding issues; preparation 

for implementation of the revised Basel 

Capital Accord; and risks associated with 

managing third-party service providers. 

Bank Secrecy Act/anti-money-laundering 

issues in the post-September 11th 

environment, security of customer 

information, and business continuity 

also will be prominent supervision 

issues. Early resolution of problem bank 

situations will be pursued to minimize 

losses to the bank insurance fund and 

interagency collaboration and 

coordination remain important in 

resolving critical issues impacting the 

banking industry. 

In addition, the OCC will enhance and 

improve its technology solutions for 

responding to and dealing with the 

public and the population of national 

banks in the most efficient manner. The 

OCC will activate e-Corp for the filing of 

branch and relocations applications in 

CY 2003. The OCC also will develop 

electronic filing capabilities for other 

types of corporate applications. In 

addition, the OCC will initiate efforts to 

more effectively use the data from the 

e-Corp applications to develop a pilot or 

proof of concept repository for critical 

application and institution information. 

30 O Performance and Accountability Report – Fiscal Year 2002 
PART II 

FINANCIAL DISCUSSION 

AND ANALYSIS 

Letter from the Chief Financial Officer

I am pleased to present the OCC’s financial statements as an integral part of the “Performance and 

Accountability Report” for FY 2002. For FY 2002, our independent auditors rendered an unqualified 

opinion with no material weaknesses. 

Consistent with the PMA, the OCC continues to make great strides in improving financial management and 

budget and performance integration. Highlights of some of our significant accomplishments during the past 

year, include: 

 The OCC received a “green” rating under the PMA from the Department of the Treasury for financial 

management by providing accurate and timely interim financial information; having financial 

management systems that meet federal requirements; having appropriate controls over erroneous 

payments; and receiving an unqualified and timely audit opinion on our annual financial statements. 

 The OCC successfully implemented an integrated, JFMIP certified, financial and acquisitions 

management system (called “$MART”). Many of our business processes related to processing 

financial transactions, from procurement through disbursement, were re-engineered. As a result, the 

Comptroller issued a certification of reasonable assurance for FMFIA Section 4 and substantial 

compliance with FFMIA. 

 The OCC integrated its planning, budgeting, and program evaluation processes. Significant 

improvements were made to our performance measures to better capture the effect of our activities 

on the national banking system. Our deliberative process in finalizing the FY 2003 budget and 

performance plan was a more informed process using the results of program reviews, data on actual 

expenditures, and operating plans. These efforts, combined with the capabilities provided by the 

$MART system, move the OCC forward in the integration of budget and performance. 

 During FY 2002, the OCC made advancements in the implementation of its reserve policy whereby 

funds are earmarked for rare events that could disrupt on-going operations. By fiscal year-end, the 

reserved funds had reached 86 percent of the targeted reserve level of $225 million to help ensure 

the OCC’s mission is accomplished. 

 The OCC implemented corrective actions to address two reportable conditions from last year’s audit. 

These reportable conditions have been downgraded to management letter comments in the current 

fiscal year’s report. 

I am proud that the OCC now has a record of accurate and reliable financial reporting, and I am 

particularly proud of the important improvements we made to financial management during the past 

fiscal year. Our goals for FY 2003 and beyond include upgrading our $MART system, implementing a 

new travel and time entry system, and continuing our progress on the PMA initiatives. 

This report has been posted to our Web site at http://www.occ.treas.gov. 

Edward J. Hanley 

November 15, 2002 

O Performance and Accountability Report – Fiscal Year 2002 33 

Part II – Financial Discussion and Analysis

FINANCIAL MANAGEMENT 

DISCUSSION 

Major Accomplishments 

During FY 2002, the OCC’s financial 

management initiatives focused on 

improving financial accountability, 

enhancing financial systems, reengineering the planning, budgeting and 

program evaluation process, 

strengthening internal controls over time 

entry and travel programs, and 

documenting financial policies and 

procedures. A more detailed discussion 

of these initiatives follows. 

Financial Accountability 

The OCC continues to give a high 

priority to providing accurate and 

reliable financial data to its customers. 

Towards that end, the OCC met the 

Secretary of the Treasury’s challenge of 

achieving a 3-day close for producing 

the OCC’s monthly and quarterly 

financial statements for FY 2002, 

receiving a “green” rating for data 

quality. The OCC met the Secretary’s 

accelerated schedule for preparing 

audited financial statements for FY 

2002. By meeting this deadline the 

OCC, along with other Treasury 

bureaus, will enable the Department to 

prepare its audited financial statements 

by the OMB’s November 15 deadline, 

two years before the mandate takes 

place. 

The OCC received an unqualified opinion 

on its FY 2002 financial statements with 

no material weaknesses. Throughout 

the fiscal year, the OCC focused on 

correcting all prior year audit and 

financial management issues, thereby 

strengthening the integrity of its 

financial data and operations. As a 

result, two reportable conditions from 

the previous fiscal year were 

downgraded to management letter 

comments and all other issues were 

resolved. 

Financial Systems 

On October 1, 2001, the OCC 

implemented $MART, its new 

Management and Accountability 

Reporting Tools system. This fully 

integrated system, which complies with 

federal financial management system 

requirements, provides the OCC’s 

executives with real-time financial 

information on demand with a variety of 

reporting and query tools that foster 

successful program management. 

During FY 2002, the OCC proceeded 

with a number of initiatives to improve 

the functionality of the system. The 

OCC tested an upgrade of the system’s 

software to be implemented in FY 2003, 

expanded the system’s reporting 

capabilities, and refined the design and 

controls for all automated interfaces. 

O Performance and Accountability Report – Fiscal Year 2002 35 
Part II – Financial Discussion and Analysis

The OCC also implemented a new Asset 

Management module to improve the 

process for tracking accountable 

property. 

Over the next two fiscal years, the OCC 

plans to move to an intranet-based 

platform for its core financial functions, 

implement new time entry and travel 

management systems, and develop a 

method to improve program costing. 

Planning, Budgeting, and Program 

Evaluation Process 

As discussed under the PMA (page 20), 

the OCC has made great strides in reengineering its planning, budgeting, and 

program evaluation processes into an 

integrated program. This new process 

was designed to: 

 Set strategic goals, objectives, and 

annual performance plans and link 

them to the budget through a 

program and project structure to 

promote programmatic, 

organizational, and budget objectclass formulation; 

 Measure performance and link 

performance measurement with the 

budget; 

 Improve the internal management of 

the OCC’s human and capital 

resources by providing more 

objective information for decisionmaking; and 

 Improve the budget formulation 

process through the enhancement of 

analytic review of budget 

submissions. 

Time Entry and Travel Program 

In recognizing the need to improve 

controls over its time entry and travel 

reporting systems, the OCC 

implemented two nation-wide audit 

programs focused on the random 

selection and evaluation of time entry 

documents and travel vouchers. In a 

separate audit program of sensitive 

payments, the OCC conducted a 100 

percent review of travel vouchers for all 

senior executives on a bi-weekly basis. 

The OCC also enhanced its controls over 

infrequent traveler accounts and 

strengthened its oversight of both 

individually- and centrally-billed charge 

card accounts. These efforts helped to 

minimize unauthorized purchases, 

delinquent accounts, and erroneous 

payments. 

Policies and Procedures 

The OCC completed its documentation 

of financial policies and procedures for a 

variety of processes, including sensitive 

payments, debt collection, assessment 

fee waivers, and revenue recognition 

and updated the Comptroller’s 

Handbook for Travel. 

36 O Performance and Accountability Report – Fiscal Year 2002 
Part II – Financial Discussion and Analysis

Funding Sources 

The OCC does not receive congressional 

appropriations. Operations are primarily 

funded by assessments collected from 

national banks and income on 

investments in U.S. Treasury Securities. 

Figures 9 and 10 depict the sources of 

the OCC’s funding for FYs 2002 and 

2001. 

Figure 9: FY 2002 Funding Sources 

Total $442.7 Million 

Assessments 

$425.8M 

96.2% 

Interest 

Income 

$12.8M 

2.9% 

Other 

$4.1M 

0.9% 

Figure 10: FY 2001 Funding Sources 

Total $415.9 Million 

Other 

$3.6M 

0.9% 

Interest 

Income 

$16.8M 

4.0% 

Assessments 

$395.5M 

95.1% 

The OCC’s funding sources increased by 

nearly $26.8 million principally resulting 

from a rise in assessments collected in 

FY 2002. National bank asset growth 

and the movement of assets into the 

national banking system were the 

impetus for higher assessments received 

in FY 2002. 

Figures 11 and 12 show the composition 

of national bank assets and assessments 

collected from large banks, mid-size 

banks, community banks, and federal 

branches for FY 2002. 

Figure 11: FY 2002 Composition of National Bank Assets 

Mid-size 

Federal 9% 

Branches 

2% 

Community

8% 

Large 

81% 

Figure 12: FY 2002 Assessment Revenue by Bank 

Large 

59% 

Community 

26% 

Federal 

Branches 

3% 

Mid-size 

12% 

O Performance and Accountability Report – Fiscal Year 2002 37 
Part II – Financial Discussion and Analysis

Funding Uses 

In FY 2002, the OCC’s total expenses 

were $422.4 million, an increase of .5 

percent over their level in FY 2001. The 

OCC’s operations are personnelintensive. In FY 2002, personnel 

compensation and benefits, travel, 

education and relocation expenses were 

$336.9 million or 79.8 percent of total 

expenses as compared to $325.5 or 

77.5 percent of total expenses in FY 

2001. In addition, the OCC experienced 

a $9.1 million or 9.6 percent decrease in 

non-personnel related expenses. 

Figures 13 and 14 depict the uses of the 

OCC’s funding for FYs 2002 and 2001. 

Figure 13: FY 2002 Funding Uses 

Total $422.4 Million 

Contractual

Services

$37.7M

8.9%

Rent and 

Communication 

$33.4M

7.9%

NonCapitalized 

Equipment

$7.8M

1.9%

Personnel

Related

$336.9M

79.8%

Other

$6.6M

1.5%

Figure 14: FY 2001 Funding Uses 

Total $420.1 Million 

Contractual 

Services

$40.9M

Rent and 9.7%

Communication 

$36.5M

8.7%

NonCapitalized 

Equipment

$11.4M

2.7%

Personnel 

Related

$325.5M

77.5%

Other

$5.8M

1.4%

38 O Performance and Accountability Report – Fiscal Year 2002 
Part II – Financial Discussion and Analysis

Financial Review 

The OCC received an unqualified opinion 

on its FY 2002 and 2001 financial 

statements. The financial statements 

include a Balance Sheet and Statements 

of Net Cost, Changes in Net Position, 

Budgetary Resources, and Financing. 

The financial statements and notes are 

presented on a comparative basis 

providing financial information for FYs 

2002 and 2001. These financial 

statements summarize the OCC’s 

financial activity and position. 

Highlights of information presented on 

the financial statements are provided 

below.2 

Balance Sheet 

The Balance Sheet, as of September 30, 

2002 and 2001, presents the amounts 

that are owned by the OCC and 

available for use (assets), the amounts 

due to others or held for future 

recognition (liabilities), and the amounts 

that comprise the residual (net 

position). For clarity in presentation, 

assets and liabilities are differentiated 

between those resulting from 

transactions between the OCC and other 

federal entities (intragovernmental) and 

transactions between the OCC and nonfederal entities. 

2

 All figures are rounded to the highest number or 

percent. 

Composition of and Trends 

in OCC Assets 

The Balance Sheet shows that total 

assets as of September 30, 2002, 

increased by $45.2 million from their 

level at September 30, 2001. The 

increase of $38.0 million in Investments 

and Related Interest was due to a rise 

in assessment collections during FY 

2002. The increase of $6.2 million in 

Property and Equipment was due 

primarily to software purchases. The 

composition of the OCC’s assets is 

shown in Figures 15 and 16. 

Figure 15: Composition of FY 2002 Assets 

Total $417.1 Million 

Investments 

and 

Interest 

$387.9M 

93.0% 

Property 

and 

Equipment 

$25.1M 

6.0% 

Other 

$4.1M

1.0% 

Figure 16: Composition of FY 2001 Assets 

Total $371.9 Million 

Investments

and 

Interest

$349.9M

94.1%

Property

and 

Equipment

$18.9M

5.1%

Other

$3.1M

.8%

O Performance and Accountability Report – Fiscal Year 2002 39 
Part II – Financial Discussion and Analysis

Composition of and Trends 

in OCC Liabilities 

Total liabilities as of September 30, 

2002, increased by a net of $7.3 million 

over their level at September 30, 2001. 

The increase of $9.5 million in Deferred 

Revenue was due to a rise in 

assessment collections during FY 2002. 

The decrease of $2.8 million in Accounts 

Payable and Accruals was due to a 

variance in the accrual period between 

FYs 2002 and 2001. The composition of 

the OCC’s liabilities is shown in Figures 

17 and 18. 

Figure 17: Composition of FY 2002 Liabilities 

Total $165.4 Million 

Deferred 

Revenue 

$109.7M 

66.3% 

Accounts 

Payable 

and 

Accruals 

$47.5M 

28.7% 

Other 

$8.2M 

5.0% 

Figure 18: Composition of FY 2001 Liabilities 

Total $158.1 Million 

Deferred 

Revenue 

$100.2M 

63.4% 

Accounts 

Payable 

and 

Accruals 

$50.3M 

31.8% 

Other 

$7.6M 

4.8% 

Composition of and Trends 

in OCC Net Position 

The OCC’s Net Position at $251.7 million 

as of September 30, 2002, and $213.8 

million as of September 30, 2001, 

represents the cumulative net excess of 

the OCC’s revenues over its cost of 

operations. The OCC reserves the 

majority of Net Position to supplement 

resources made available to fund the 

OCC’s annual budget and to cover 

unforeseeable events. The composition 

of the OCC’s net position is shown in 

Figures 19 and 20. 

Figure 19: Composition of FY 2002 Net Position 

Total $251.7 Million 

On-going 

Operations 

$58.1M 

22.7% 

Contingency 

Reserve

$178.6M

71.3%

Special 

Reserve

$15M

6.0%

Figure 20: Composition of FY 2001 Net Position 

Total $213.8 Million 

On-going 

Operations 

$32.6M 

15.2% 

Contingency 

Reserve

$166.2M

77.7%

Special 

Reserve

$15M

7.1%

40 O Performance and Accountability Report – Fiscal Year 2002 
Part II – Financial Discussion and Analysis

Reserves 

The Special Reserve serves to reduce 

the impact of unforecasted shortfalls or 

unbudgeted and unanticipated 

requirements. The Contingency Reserve 

funds foreseeable but rare events, such 

as a fire, flood, or impairment to the 

OCC’s information technology network 

that may interfere with the OCC’s ability 

to accomplish its mission. Both reserves 

are to be used at the discretion of the 

Comptroller. The OCC has also 

earmarked funds for on-going 

operations to cover undelivered orders, 

the consumption of assets, capital 

investments and district offices 

restructuring. Since the OCC does not 

receive congressional appropriations, 

the establishment of reserves is integral 

to the effective stewardship of its 

resources. 

Statement of Net Cost 

The Statement of Net Cost presents the 

full cost of operating the OCC’s 

programs for the years ended 

September 30, 2002 and 2001. Costs 

are differentiated between those 

resulting from transactions between the 

OCC and other federal entities 

(intragovernmental) and transactions 

between the OCC and non-federal 

entities (with the public). The full cost 

includes an Imputed Cost of $17.7 

million in FY 2002 and $15.4 million in 

FY 2001, the cost of the OCC’s Federal 

Employees Retirement System (FERS) 

and Civil Service Retirement System 

(CSRS) plans, paid by the Office of 

Personnel Management (OPM). The 

most significant line item is Earned 

Revenues, which increased by $26.8 

million or 6.4 percent. As discussed 

under Funding Sources (page 37), this 

increase was primarily due to a rise in 

assessments collected during FY 2002. 

Statement of Changes in Net Position 

The Statement of Changes in Net 

Position presents the change in the 

OCC’s net position resulting from the net 

cost of the OCC’s operations and 

financing sources other than exchange 

revenues for the years ended 

September 30, 2002 and 2001. The 

most significant line item on the 

statement is the Imputed financing from 

costs absorbed by others, which 

increased by $2.3 million or 14.9 

percent. The OCC’s financing source 

resulted from a contribution of $15.4 

million in FY 2001, and $17.7 million in 

FY 2002, by the OPM towards the OCC’s 

FERS and CSRS retirement plans. 

Statement of Budgetary Resources 

The Statement of Budgetary Resources 

presents the budgetary resources 

available to the OCC, the status of these 

resources, and the net outlay of 

budgetary resources. The OCC 

obligated 57.2 percent of its available 

budgetary resources for the year. The 

remaining 42.8 percent was available 

primarily to cover the OCC’s reserves. 

O Performance and Accountability Report – Fiscal Year 2002 41 
Part II – Financial Discussion and Analysis

Statement of Financing 

The Statement of Financing reconciles 

the resources available to the OCC to 

finance its operations with the net cost 

of operating its programs. A significant 

change in the statement from FY 2001 

to FY 2002 was the $5.4 million 

difference in the Change in Deferred 

Revenue. The change in this line item 

was due to the increase in assessments 

collected during FY 2002. 

Prompt Payment 

The Prompt Payment Act and the OMB 

Circular A-125 require agencies to make 

payments on time, pay interest penalties 

when payments are late, and take 

discounts only when payments are 

made on or before the discount date. 

Figure 21 summarizes the OCC’s prompt 

payment performance for FYs 2002 and 

2001. 

Figure 21: Prompt Payment Performance3 

Electronic Funds Transfer 

Using electronic funds transfer (EFT) for 

payments provides greater control over 

the timing of payments and reduces 

payment cost compared with paper 

checks. The Debt Collection 

Improvement Act of 1996 requires 

government agencies to issue all 

contractual and employee payments 

using EFT. Figure 22 summarizes EFT 

usage for FYs 2001 and 2002. 

Figure 22: Electronic Funds Transfer Performance 

FY 2002 FY 2001 

Vendor payments 99% 80% 

Employee payments 100% 99.9% 

FY 2002 FY 2001 

Invoices 

paid 

20,341 29,037 

$61,101,069 $93,465,199 

Invoices 

paid late 

484 587 

$4,683,467 $2,004,515 

Interest 

penalties 

paid 

238 104 

$7,403 $3,530 

3

 Number and dollar amount 

42 O Performance and Accountability Report – Fiscal Year 2002 
Part II – Financial Discussion and Analysis

Limitations to the Financial 

Statements 

The financial statements have been 

prepared to report the assets, liabilities, 

and net position of the OCC and its net 

costs, changes in net position, 

budgetary resources, and reconciliation 

of net costs to budgetary obligations, 

pursuant to the requirements 

31 USC 3515(b). 

While the statements have been 

prepared from the books and records of 

the OCC in accordance with GAAP for 

federal entities and the formats 

prescribed by the OMB, the statements 

are in addition to the financial reports 

used to monitor and control budgetary 

resources that are prepared from the 

same books and records. The 

statements should be read with the 

realization that they are for a 

component of the U.S. Government, a 

sovereign entity. 

O Performance and Accountability Report – Fiscal Year 2002 43 
Part II – Financial Discussion and Analysis

SYSTEMS, CONTROLS, AND 

LEGAL COMPLIANCE 

The Comptroller is required annually to 

provide a statement of assurance 

regarding the effectiveness of 

management, administrative, and 

accounting controls, and financial 

management systems. The FY 2002 

Assurance Statement is exhibited on 

page 48. 

In assessing the adequacy of 

management controls, the Comptroller 

relies on the judgment of senior 

executives, reports provided by the 

General Accounting Office (GAO), 

Treasury’s OIG, the independent 

auditors, and internal quality assurance 

and program analyses conducted by the 

OCC’s Program and Management 

Accountability Division. These sources 

provide a thorough and conscientious 

evaluation of the OCC's management 

control systems. 

This section of the report provides the 

analytical basis of the Comptroller’s 

assurance statement along with other 

information concerning the OCC’s 

compliance with: 

 Federal Managers’ Financial Integrity 

Act, 

 Federal Financial Management 

Improvement Act, and 

 Other key legal and regulatory 

requirements. 

Federal Managers’ Financial 

Integrity Act of 1982 

As discussed previously, the OCC 

implemented a financial and acquisitions 

management system that substantially 

complied with federal financial 

management systems requirements 

published by the JFMIP. 

Implementation of the system has 

remedied the limitations that caused last 

year’s qualified assurance regarding 

FMFIA Section 4. 

The OCC's management controls, as a 

whole, provide reasonable assurance 

that necessary management controls 

are in place and operating effectively, 

except that the OCC has not performed 

annual risk assessments as required by 

GISRA. The OCC is working to resolve 

the deficiency. 

Federal Financial Management 

Improvement Act of 1995 

Prior to FY 2002, the OCC’s financial 

applications were composed of legacy 

systems, which were mainframe 

oriented and non-relational. This 

system was comprised of a mismatch of 

operating systems, databases, and 

interfaces, which were difficult to 

maintain and often impossible to 

modify. 

With the implementation of the new 

financial and acquisitions management 

system, the OCC is in substantial 

compliance with FFMIA, because the 

new system: 

44 O Performance and Accountability Report – Fiscal Year 2002 
Part II – Financial Discussion and Analysis

 Supports management's fiduciary 

role without requiring the adoption 

of extensive manual processes; 

 Integrates the budget execution 

function in the core financial system 

with accounts payable, accounts 

receivable, and general ledger; 

 Provides the users with on-line 

access to or daily reports on the 

status of funds to support the 

management and delivery of the 

OCC's programs and program 

decision-making; and 

 Provides security over financial 

information in accordance with 

Circular A-130, Appendix 3 and 

supports internal controls over the 

financial system that are designed 

properly and operating effectively. 

Government Information Security 

Reform Act of 2000 

The OCC has not complied with the 

GISRA requirement to complete annual 

risk assessments for general support 

systems and applications. Several of 

the OCC’s information systems subject 

to the GISRA were not evaluated in FY 

2002. A formal corrective action plan 

with milestone dates is in place. 

Required risk assessments will be 

completed for general support systems 

before the end of CY 2002, and major 

applications in FY 2003. 

Management Accountability 

Program 

The OCC's management accountability 

program is managed independently of 

other programs to ensure that: 

 Programs meet mission 

requirements, 

 Resources are protected from waste, 

fraud, and mismanagement, and 

 Activities comply with applicable laws 

and regulations. 

The Program and Management 

Accountability Division reports directly to 

the Comptroller. Program objectives are 

accomplished through activities of the 

quality management, program analysis, 

and the OIG/GAO liaison functions. 

 Quality Management ensures 

management accountability for 

establishing and maintaining costeffective management controls and 

encourages organizational excellence 

through regular program reviews 

and other special studies to foster 

continuous organizational 

improvement. 

 Program Analysis ensures strategic 

alignment of the OCC’s programs 

and evaluates program efficiency 

and effectiveness. 

 OIG/GAO Liaison facilitates audits, 

evaluations, and investigations and 

ensures managers take corrective 

action to recommendations. 

O Performance and Accountability Report – Fiscal Year 2002 45 
Part II – Financial Discussion and Analysis

Management Control Review 

Program 

The management control review 

program consists of an annual selfassessment for managers (SAM). The 

2001 SAM revealed opportunities to 

improve controls in several areas. 

Senior management and the 

independent auditors determined, 

however, that none of the issues 

represent material weaknesses in the 

OCC’s internal controls. Action plans are 

nonetheless in place for each area and 

implementation of proposed corrective 

actions is tracked. 

In FY 2002, the SAM was administered 

to 192 managers representing five 

senior deputy comptroller areas. The 

2002 SAM expanded on previous 

content to include assessments of 

planning, budgeting, and business 

resumption controls. The SAM results 

will be analyzed and corrective actions, 

as needed, will be tracked. 

Continuity of Operations 

The OCC’s continuity of operations 

planning is sufficient to reduce risk to 

reasonable levels. In FY 2002, a review 

of the contingency plans was conducted 

to ensure the OCC is prepared to protect 

the workforce and maintain critical 

functions in the event of an emergency. 

The OCC established an Oversight 

Committee on Contingency Planning to 

direct revisions of the Continuity of 

Operations Plan (COOP). The revised 

COOP was submitted to the Department 

of the Treasury on April 26, 2002. 

An independent analysis of the COOP by 

Treasury consultants found the OCC's 

plan to be satisfactory in all material 

aspects. The COOP formalizes and 

integrates information technology 

recovery plans, relocation scenarios, 

alternative site logistics, emergency 

communication procedures, lines of 

succession, and delegations of authority 

into a comprehensive emergency 

management plan. 

Significant testing has been completed 

and continues on a regular basis for the 

various elements of the OCC’s 

Information Technology Recovery Plan. 

All OCC managers received Emergency 

Preparedness and COOP Awareness 

training in FY 2002. In addition, the 

remaining employees will receive on-line 

training by the end of the calendar year. 

Erroneous Payments 

The prevention of erroneous payments 

is a key aspect of the OCC’s financial 

management system and controls. The 

implementation of the new financial and 

acquisitions management system 

provides necessary discipline throughout 

all financial transaction processing. 

46 O Performance and Accountability Report – Fiscal Year 2002 
Part II – Financial Discussion and Analysis

System implementation centralizes the payments. In addition, an internal audit 

disbursement function and results in by the Financial Management Division of 

stronger purchase controls. These 100 percent of the vendor file was 

controls allow the Comptroller to provide completed in June 2002. This effort 

reasonable assurance that the OCC has revealed no unauthorized vendors or 

sufficient controls to prevent erroneous improper payments. 

O Performance and Accountability Report – Fiscal Year 2002 47 
Part II – Financial Discussion and Analysis

Department of the Treasury 

Office of the Comptroller of the Currency 

Annual Assurance Statement 

2002 

The Office of the Comptroller of the Currency, as a whole, has 

made a conscientious effort during FY 2002 to meet the internal 

control requirements of the Federal Managers’ Financial Integrity 

Act and the Federal Financial Management Information Act. 

the Comptroller of the Currency, I recognize the importance of 

management controls and have taken the necessary measures to 

ensure a thorough evaluation of OCC's management control 

systems was completed during FY 2002. 

analysis indicate that the OCC's system of internal management, 

accounting and administrative control, taken as a whole, is 

sufficient and effective except that we have not completed the 

testing required to demonstrate compliance with the Government 

Information Security Reform Act of 2000. ith this exception, I 

can provide reasonable assurance that FMFIA Section 2 and 

Section 4 objectives have been met. pleased to report 

substantial compliance with FFMIA resulting from implementation 

of OCC's new financial management system, which went live on 

October 1, 2001. 

John D. Hawke, Jr. 

Comptroller of the Currency 

As 

The results of this 

W

I am

48 O Performance and Accountability Report – Fiscal Year 2002 
PART III 

INDEPENDENT 

AUDITORS’ REPORT 

2001 M Street, N.W. 

Washington, D.C. 20036 

Independent Auditors’ Report on Financial Statements 

The Comptroller of the Currency: 

We have audited the accompanying balance sheets of the Office of the Comptroller of 

the Currency (OCC) as of September 30, 2002 and 2001, and the related statements of 

net cost, changes in net position, budgetary resources, and financing, for the years 

then ended. These financial statements are the responsibility of the OCC’s 

management. Our responsibility is to express an opinion on these financial statements 

based on our audits. 

We conducted our audits in accordance with auditing standards generally accepted in 

the United States of America; the standards applicable to financial audits contained in 

Government Auditing Standards, issued by the Comptroller General of the United 

States; and Office of Management and Budget (OMB) Bulletin No. 01-02, Audit 

Requirements for Federal Financial Statements. Those standards and OMB Bulletin No. 

01-02 require that we plan and perform the audits to obtain reasonable assurance 

about whether the financial statements are free of material misstatement. An audit 

includes examining, on a test basis, evidence supporting the amounts and disclosures in 

the financial statements. An audit also includes assessing the accounting principles 

used and significant estimates made by management, as well as evaluating the overall 

financial statement presentation. We believe that our audits provide a reasonable basis 

for our opinion. 

In our opinion, the financial statements referred to above present fairly, in all material 

respects, the financial position of the OCC, as of September 30, 2002 and 2001, and its 

net costs, changes in net position, budgetary resources, and reconciliation of net costs 

to budgetary obligations for the years then ended, in conformity with accounting 

principles generally accepted in the United States of America. 

The information in Management’s Discussion and Analysis is not a required part of the 

financial statements but is supplementary information required by accounting principles 

generally accepted in the United States of America. We have applied certain limited 

procedures, which consisted principally of inquiries of management regarding the 

methods of measurement and presentation of this information. However, we did not 

audit this information and, accordingly, we express no opinion on it. 

KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is 51 a member of KPMG International, a Swiss association. 
Our audit was conducted for the purpose of forming an opinion on the financial 

statements taken as a whole. The supplementary information included in Appendices 

A and B is presented for purposes of additional analysis and is not a required part of the 

financial statements. We did not audit this information and, accordingly, we express no 

opinion on it. 

In accordance with Government Auditing Standards, we have also issued reports dated 

November 1, 2002, on our consideration of the OCC’s internal control over financial 

reporting and its compliance with certain provisions of laws and regulations. Those 

reports are an integral part of an audit performed in accordance with Government 

Auditing Standards, and should be read in conjunction with this report in considering 

the results of our audits. 

November 1, 2002 

52 
2001 M Street, N.W. 

Washington, D.C. 20036 

Independent Auditors’ Report on Internal Control over Financial Reporting 

The Comptroller of the Currency: 

We have audited the balance sheets of the Office of the Comptroller of the Currency 

(OCC) as of September 30, 2002 and 2001, and the related statements of net cost, 

changes in net position, budgetary resources, and financing, for the years then ended, 

and have issued our report thereon dated November 1, 2002. We conducted our audits 

in accordance with auditing standards generally accepted in the United States of 

America; the standards applicable to financial audits contained in Government Auditing 

Standards, issued by the Comptroller General of the United States; and Office of 

Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal 

Financial Statements. 

In planning and performing our fiscal year 2002 audit, we considered the OCC’s internal 

control over financial reporting by obtaining an understanding of the OCC’s internal 

control, determining whether internal controls had been placed in operation, assessing 

control risk, and performing tests of controls in order to determine our auditing 

procedures for the purpose of expressing our opinion on the financial statements. We 

limited our internal control testing to those controls necessary to achieve the objectives 

described in OMB Bulletin No. 01-02 and Government Auditing Standards. We did not 

test all internal controls relevant to operating objectives as broadly defined by the 

Federal Managers’ Financial Integrity Act of 1982. The objective of our audit was not to 

provide assurance on the OCC’s internal control over financial reporting. Consequently, 

we do not provide an opinion thereon. 

Our consideration of internal control over financial reporting would not necessarily 

disclose all matters in the internal control over financial reporting that might be 

reportable conditions. Under standards issued by the American Institute of Certified 

Public Accountants, reportable conditions are matters coming to our attention relating 

to significant deficiencies in the design or operation of the internal control over financial 

reporting that, in our judgment, could adversely affect the OCC’s ability to record, 

process, summarize, and report financial data consistent with the assertions by 

management in the financial statements. Material weaknesses are reportable 

conditions in which the design or operation of one or more of the internal control 

components does not reduce to a relatively low level the risk that misstatements, in 

amounts that would be material in relation to the financial statements being audited, 

KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is 53 a member of KPMG International, a Swiss association. 
may occur and not be detected within a timely period by employees in the normal 

course of performing their assigned functions. Because of inherent limitations in any

internal control, misstatements due to error or fraud may occur and not be detected. 

In our fiscal year 2002 audit, we noted one matter, discussed in Exhibit I, involving the

internal control over financial reporting and its operation that we consider to be a 

reportable condition. However, this reportable condition is not believed to be a material

weakness. Exhibit II presents the status of prior year reportable conditions. 

Additional Required Procedures

As required by OMB Bulletin No. 01-02, with respect to internal control related to

performance measures determined by management to be key and reported in the 

Management’s Discussion and Analysis section of the OCC’s Annual Report, we obtained 

an understanding of the design of significant internal controls relating to the existence 

and completeness assertions. Our procedures were not designed to provide assurance 

on internal control over reported performance measures, and, accordingly, we do not 

provide an opinion thereon.

______________________________ 

We also noted other matters involving internal control and its operation that we have 

reported to the management of the OCC in a separate letter dated November 1, 2002. 

This report is intended solely for the information and use of the OCC’s management, 

the Department of the Treasury Office of Inspector General, OMB, and Congress and is 

not intended to be and should not be used by anyone other than these specified 

parties. 

November 1, 2002 

54 
Exhibit I 

Office of the Comptroller of the Currency 

Reportable Condition 

For the Fiscal Year Ended September 30, 2002 Audit 

1. $MART System Controls Should be Strengthened 

IT Audit Area Condition Recommendation 

Application 

Security Controls 

Administrator and user access 

privileges for the $MART Core 

Financial Management System 

(CFMS) are not assigned in 

accordance with the “Least 

Privilege” principle. 

Establish procedures for the administration of 

$MART user accounts, including the establishment 

of new accounts, the edits/updates made to 

existing accounts, and the deletion of accounts. 

These procedures should include the requirement 

that the issuance of access privileges, both new 

and updated, be justified by job function and 

approved by an authorized individual. 

Create a database log that accurately depicts the 

current class assignments for $MART users, and 

establish procedures for the review of this log by 

Security Administrators for the maintenance of user 

accounts and the detection of changes made to 

access privileges. 

Restrict the number of individuals assigned to highlevel privilege classes for security administration of 

the $MART system. 

Delete or disable default ID. 

Since we brought these issues to OCC 

management’s attention, corrective action has been 

taken. 

Infrastructure 

Security 

Entity-wide security program 

documentation is incomplete. 

Specifically, risk assessments 

for general support systems 

and major applications have 

not been completed and the 

$MART security plan contains 

inaccurate control descriptions. 

The OCC’s management should continue its efforts 

in implementing an entity-wide security program by 

performing system based risk assessments using 

NIST Special Publication 800-26 for each mission 

critical/major system, developing and/or updating 

security plans based on these risk assessments, 

and performing the necessary system certifications 

and accreditations in accordance with OMB A-130. 

Due to competing priorities, the OCC’s 

management was not able to complete the risk 

assessments in fiscal year 2002. However, the 

OCC plans to complete the risk assessments during 

fiscal year 2003. 

55 
Exhibit I (continued) 

Office of the Comptroller of the Currency 

Reportable Condition 

For the Fiscal Year Ended September 30, 2002 Audit 

1. $MART System Controls Should be Strengthened (continued) 

IT Audit Area Condition Recommendation 

IT Operational 

Controls 

Documentation supporting 

requests, program changes, 

testing, and acceptance for the 

$MART system needs to be 

improved. Specifically, 

information should be recorded 

to provide evidence for 

authorization of the change 

request, testing of the program 

change, and approval of the 

change for migration into 

production. 

The OCC’s management should ensure that a 

process exists to document each program change 

user authorization, developer and user testing, and 

user approval to migrate the program change into 

production. In addition, roles should be established 

as part of a change control environment, whereby 

developers, administrators migrating source code, 

and users are properly segregated. 

The OCC’s management is taking steps to address 

this issue and should have it resolved during fiscal 

year 2003. 

IT Operational 

Controls 

Disaster recovery capabilities 

for the $MART system have 

not been tested. 

The OCC’s management should ensure that 

recovery capabilities for the $MART system are 

clearly established within the Information 

Technology Recovery Plan and the Continuity of 

Operations Plan, and that tests of these capabilities 

are performed to ensure that they are effective. 

The results of these tests should be used to 

generate planning improvements that will increase 

the OCC’s ability to recover. 

The OCC’s management plans to address this issue 

in fiscal year 2003. 

56 
Exhibit II 

Office of the Comptroller of the Currency 

Status of Prior Year Reportable Conditions 

2001 Reportable Conditions 2002 Status 

Adequate controls over Time and Travel 

Reports (TTRS) disbursements were not 

in place. 

(OCC did not consistently follow procedures 

related to TTRS disbursements.) 

Improvements noted and downgraded to a management 

letter comment. Prior year exceptions included missing 

supervisory approvals and TTRS disbursements prior to 

authorization for payment. Current year exceptions 

related to disbursements prior to authorization; however, 

they occurred less frequently, were related to remotely 

located personnel, and occurred prior to the OCC policy 

change facilitating the authorization process. 

Internal controls over timekeeping were 

not adequate 

(OCC did not consistently follow timekeeping 

procedures.) 

Improvements noted and downgraded to a management 

letter comment. The nature of the prior year errors 

included inadequate and untimely leave slip and 

certifying roster approvals, and inaccurate certifying 

rosters. Current year exceptions related to untimely 

leave slip approvals by individuals charging annual leave 

when sick leave is not available and one instance of 

inadequate certifying roster approval. 

57 
2001 M Street, N.W. 

Washington, D.C. 20036 

Independent Auditors’ Report on Compliance with Laws and Regulations 

The Comptroller of the Currency: 

We have audited the balance sheets of the Office of the Comptroller of the Currency 

(OCC) as of September 30, 2002 and 2001, and the related statements of net cost, 

changes in net position, budgetary resources, and financing, for the years then ended, 

and have issued our report thereon dated November 1, 2002. We conducted our audits 

in accordance with auditing standards generally accepted in the United States of 

America; the standards applicable to financial audits contained in Government Auditing 

Standards, issued by the Comptroller General of the United States; and Office of 

Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal 

Financial Statements. 

The management of the OCC is responsible for complying with laws and regulations 

applicable to the OCC. As part of obtaining reasonable assurance about whether the 

OCC’s financial statements are free of material misstatement, we performed tests of the 

OCC’s compliance with certain provisions of laws and regulations, noncompliance with 

which could have a direct and material effect on the determination of the financial 

statement amounts, and certain provisions of other laws and regulations specified in 

OMB Bulletin No. 01-02, including certain requirements referred to in the Federal 

Financial Management Improvement Act (FFMIA) of 1996. We limited our tests of 

compliance to the provisions described in the preceding sentence, and we did not test 

compliance with all laws and regulations applicable to the OCC. However, providing an 

opinion on compliance with laws and regulations was not an objective of our audit, and, 

accordingly, we do not express such an opinion. 

The results of our tests of compliance with certain provisions of laws and regulations 

described in the preceding paragraph, exclusive of FFMIA, disclosed no instances of 

noncompliance that are required to be reported under Government Auditing Standards 

and OMB Bulletin No. 01-02. 

Under FFMIA, we are required to report whether the OCC’s financial management 

systems substantially comply with (1) Federal financial management systems 

requirements, (2) applicable Federal accounting standards, and (3) the United States 

Government Standard General Ledger at the transaction level. To meet this 

58 

KPMG LLP, KPMG LLP, a U.S. limited liability partnership, is 

a member of KPMG International, a Swiss association. 
requirement, we performed tests of compliance with FFMIA Section 803(a) 

requirements. 

The results of our tests disclosed no instances in which the OCC’s financial management 

systems did not substantially comply with the three requirements discussed in the 

preceding paragraph. 

This report is intended solely for the information and use of the OCC’s management, 

the Department of the Treasury Office of Inspector General, OMB, and Congress and is 

not intended to be and should not be used by anyone other than these specified 

parties. 

November 1, 2002 

59 

PART IV 

FINANCIAL STATEMENTS 

AND NOTES 

Part IV – Financial Statements and Notes

Office of the Comptroller of the Currency 

Balance Sheets 

As of September 30, 2002 and 2001

FY 2002 FY 2001 

Assets: 

Intragovernmental: 

Fund balance with Treasury $ 2,102,0 24 $ 546,160 

Investments and related interest (Note 3) 387,918,5 77 349,923,315 

Advances and prepayments 11,475 256,185 

Total intragovernmental 390,032,0 76 350,725,6 60 

Cash 26,092 26,092 

Accounts receivable, net 347,191 293,127 

Property and equipment, net (Note 4) 25,056,2 25 18,860,3 98 

Advances and prepayments 1,610,2 44 1,971,5 73 

Total Assets $ 417,071,828 $ 371,876,850 

Liabilities: 

Intragovernmental: 

Accounts payable $ 825,485 $ 1,905,5 91 

Total intragovernmental 825,485 1,905,591 

Accounts payable 13,699,4 36 7,544,6 02 

Accrued payroll and employee benefits 10,986,038 19,993,1 42 

Deferred revenue (Note 5) 109,745,7 35 100,244,7 84 

Accrued annual leave 21,954,0 61 20,855,5 76 

Post retirement benefit (Note 7) 8,183,0 25 7,563,9 45 

Total liabilities 165,393,780 158,107,640 

Net position (Note 8) $ 251,678,048 $ 213,769,210 

Total Liabilities and Net Position $ 417,071,828 $ 371,876,850 

The accompanying notes are an integral part of these financial statements. 

O Performance and Accountability Report – Fiscal Year 2002 63 
Part IV – Financial Statements and Notes

Office of the Comptroller of the Currency 

Statements of Net Cost

For the Years Ended September 30, 2002 and 2001

FY 2002 FY 2001 

Program Costs: 

Intragovernmental $ 58,768,603 $ 58,011,797 

With the public 363,651,090 362,107,646 

Total program costs (Note 9) 422,419,693 420,119,443 

Less: Earned revenues (442,655,111) (415,875,984) 

Net Cost of Operations $ (20,235,418) $ 4,243,459 

The accompanying notes are an integral part of these financial statements. 

64 O Performance and Accountability Report – Fiscal Year 2002 
Part IV – Financial Statements and Notes

Office of the Comptroller of the Currency 

Statements of Changes in Net Position 

For the Years Ended September 30, 2002 and 2001

FY 2002 FY 2001 

Beginning Balances $ 213,769,2 10 $ 213,992,8 12 

Prior Period Adjustment (Note 4) - (11,419,7 31) 

Beginning balances, as adjusted 213,769,2 10 202,573,0 81 

Other Financing Sources: 

Imputed financing from costs absorbed by others (Note 7) 17,673,4 20 15,439,588 

Net Cost of Operations 20,235,4 18 (4,243,4 59) 

Ending Balances $ 251,678,048 $ 213,769,210 

The accompanying notes are an integral part of these financial statements. 

O Performance and Accountability Report – Fiscal Year 2002 65 
Part IV – Financial Statements and Notes

Office of the Comptroller of the Currency 

Statements of Budgetary Resources 

For the Years Ended September 30, 2002 and 2001

FY 2002 FY 2001 

Budgetary Resources: 

Unobligated balance: 

Beginning of Period $ 281,479,2 30 $ 268,658,850 

Spending Authority from offsetting collections: 

Earned 

Collected 448,885,2 71 417,011,484 

Receivable from Federal Sources (204,323) 2,142,917 

Subtotal 448,680,9 48 419,154,401 

Total Budgetary Resources $ 730,160,178 $ 687,813,251 

Status of Budgetary Resources: 

Obligations incurred 417,402,5 29 406,334,021 

Unobligated balance available 312,757,6 49 281,479,230 

Total Status of Budgetary Resources 730,160,178 687,813,251 

Relationship of Obligations to Outlays: 

Obligated Balance, net, beginning of period 63,078,8 83 59,749,3 22 

Obligated Balance, net, end of period: 

Interest Receivable (4,891,4 58) (5,095,7 81) 

Undelivered Orders 17,378,2 78 10,311,8 09 

Accounts Payable and Accruals, net of assessment 

refunds 54,828,2 10 57,862,8 55 

Outlays: 

Disbursements 413,370,7 06 400,861,543 

Collections (448,885,2 71) (417,011,4 84) 

Net Collections in Excess of Disbursements $ (35,514,565) $ (16,149,941) 

The accompanying notes are an integral part of these financial statements. 

66 O Performance and Accountability Report – Fiscal Year 2002 
Part IV – Financial Statements and Notes

Office of the Comptroller of the Currency 

Statements of Financing 

For the Years Ended September 30, 2002 and 2001

FY 2002 FY 2001 

Resources Used to Finance Activities: 

Budgetary Resources Obligated 

Obligations Incurred $ 417,402,5 29 $ 406,334,021 

Less: Spending authority from offsetting collections (448,680,948) (419,154,401) 

Net obligations (31,278,41 9) (12,820,380) 

Other Resources 

Imputed financing from costs absorbed by others (Note 7) 17,673,42 0 15,439,58 8 

Total resources used to finance activities (13,604,999) 2,619,208 

Resources Used to Finance Items not Part of the 

Net Cost of Operations 

Change in budgetary resources obligated for goods, services and 

benefits ordered but not yet provided (6,460,430) 397,749 

Resources that finance the acquisition of assets (11,474,51 7) (6,045,75 3) 

Other resources or adjustments to net obligated resources that 

do not affect net cost of operations (54,064) (169,054) 

Total resources used to finance items not part of the 

net cost of operations (17,989,011) (5,817,058) 

Total resources used to finance the net cost of 

operations (31,594,010) (3,197,850) 

Components of the Net Cost of Operations that will not 

Require or Generate Resources in the Current Period: 

Components Requiring or Generating Resources in Future Periods: 

Change in Deferred Revenue 9,500,95 1 4,094,78 4 

Assessment Refunds 819,836 -

Total components of net cost of operations that will 

require or generate resources in future periods 10,320,78 7 4,094,78 4 

Components not Requiring or Generating Resources: 

Decrease in Accumulated Depreciation 5,209,4 02 3,948,48 1 

Net Increase in Bond Premium (4,240,8 84) (662,637) 

Other 69,287 60,681 

Total components of Net Cost of Operations that will not 

require or generate resources 1,037,80 5 3,346,52 5 

Total components of Net Cost of Operations that will not 

require or generate resources in the current period 11,358,592 7,441,309 

Net Cost of Operations $ (20,235,418) $ 4,243,459 

The accompanying notes are an integral part of these financial statements. 

O Performance and Accountability Report – Fiscal Year 2002 67 
Part IV – Financial Statements and Notes

Note 1 - Organization 

The OCC was created as a bureau within the U.S. Department of the Treasury by 

an act of Congress in 1863. The OCC was created for the purpose of 

establishing and regulating a system of federally chartered national banks. The 

National Currency Act of 1863, rewritten and reenacted as the National Bank Act 

of 1864, authorized the OCC to supervise national banks and to regulate the 

lending and investment activities of federally chartered institutions. 

The OCC’s revenue is derived primarily from assessments and fees paid by 

national banks and income on investments in U.S. Government securities. The 

OCC does not receive Congressional appropriations to fund any of its operations. 

Therefore, the OCC does not have any unexpended appropriations. 

By federal statute 12 USC § 481, the OCC’s funds are maintained in a U.S. 

Government trust revolving fund. The funds remain available to cover the 

annual costs of the OCC’s operations in accordance with policies established by 

the Comptroller. 

The OCC collects Civil Monetary Penalties (CMP) due to the federal government 

that are assessed through court enforced legal actions against a national bank 

and/or its officers. CMP collections transferred to the Department’s General Fund 

amounted to $10,175,092 in FY 2002, and $159,016 in FY 2001. The increase 

was primarily due to a one-time penalty assessment. Outstanding CMPs at 

September 30, 2002 and 2001, amounted to $1,218,534 and $785,258, 

respectively. 

The Departmental Offices (DO), another entity of the U.S. Department of the 

Treasury, provides certain administrative services to the OCC. The OCC pays the 

DO for services rendered pursuant to established interagency agreements. 

Administrative services provided by the DO totaled $2,081,306 in FY 2002, and 

$2,765,467 in FY 2001. 

68 O Performance and Accountability Report – Fiscal Year 2002 
Part IV – Financial Statements and Notes

Note 2 - Significant Accounting Policies 

Basis of Accounting 

The OCC’s financial statements have been prepared from the OCC’s accounting 

records in conformity with accounting principles generally accepted in the United 

States of America (GAAP). The financial statements consist of a balance sheet, 

and the statements of net cost, changes in net position, budgetary resources, 

and financing. These financial statements are presented on a comparative basis 

providing information for FYs 2002 and 2001. 

The financial statements reflect both the accrual and budgetary bases of 

accounting. Under the accrual method, revenues are recognized when earned 

and expenses are recognized when a liability is incurred, without regard to cash 

receipt or payment. The budgetary method recognizes the obligation of funds 

according to legal requirements, which, in many cases, is made prior to the 

occurrence of an accrual-based transaction. Budgetary accounting is essential 

for compliance with legal constraints and controls over the use of federal funds. 

Fund Balance with Treasury 

The OCC’s cash receipts and disbursements are processed by the U.S. Treasury. 

Sufficient funds are maintained in a U.S. Government trust revolving fund and 

are available to pay current liabilities. The OCC invests all the funds that are not 

immediately needed in U.S. Government securities (Note 3). 

Accounts Receivable, net 

Accounts receivable represent monies owed to the OCC for services and goods 

provided. Accounts receivable are reduced to their net realizable value by an 

Allowance for Doubtful Accounts. The OCC reserves an allowance equal to 100 

percent of accounts with outstanding balances exceeding one year, and 50 

percent of accounts with balances exceeding six months but less than one year. 

At September 30, 2002 and 2001, accounts receivable amounted to $366,215 

less an allowance of $19,024, and $312,171 less and allowance of $19,044, 

respectively. 

O Performance and Accountability Report – Fiscal Year 2002 69 
Part IV – Financial Statements and Notes

Advances and Prepayments 

Advances and prepayments to other government agencies represent amounts 

paid to the DO prior to the receipt of goods and services. Advances and 

prepayments to the public consist of rent and insurance paid. The amounts are 

recorded as prepaid expenses at the time of payment and are expensed when 

related goods and services are received. 

Liabilities 

Liabilities represent the amounts owing or accruing under contractual or other 

arrangements governing the transactions, including operating expenses incurred 

but not yet paid. Payments are made in a timely manner in accordance with the 

Prompt Payment Act. Interest penalties are paid when payments are late. 

Discounts are taken when cost effective and the invoice is paid by the discount 

date. 

Annual, Sick, and Other Leave 

Annual leave is accrued and funded by the OCC as it is earned, and the accrual is 

reduced as leave is taken or paid. Each year, the balance in the accrued annual 

leave account is adjusted to reflect current pay rates. Sick leave and other types 

of leave are expended as taken. 

Use of Estimates 

The preparation of financial statements, in accordance with GAAP, requires 

management to make estimates and assumptions that affect the reported 

amounts of assets and liabilities, the disclosure of contingent assets and liabilities 

at the date of the financial statements, and the reported amounts of revenue 

and expenses during the reporting period. Such estimates and assumptions 

could change in the future as more information becomes known, which could 

impact the amounts reported and disclosed herein. 

70 O Performance and Accountability Report – Fiscal Year 2002 
Part IV – Financial Statements and Notes

Note 3 - Investments and Related Interest 

Investments are U.S. Treasury securities stated at amortized cost and the related 

accrued interest. The OCC plans to hold these investments to maturity. 

Premiums and discounts are amortized over the term of the investment using the 

straight-line method, which approximates the effective yield method. The fair 

market value of investment securities was $392,537,740 at September 30, 2002, 

and $350,441,058 at September 30, 2001. 

Investments and Related Interest Receivable 

FY 2002 FY 2001 

Cost $378,468,000 $344,722,000 

Net Unamortized Premium 4,559,119 105,534 

Net Amortized Value 383,027,1 19 344,827,5 34 

Interest Receivable 4,891,458 5,095,781 

Total $387,918,577 $349,923,315 

FY 2002 Investment Portfolio 

Maturity Par Value 

Coupon 

Rate 

Overnight $134,468,000 1.900% 

During 2002 80,000,000 5.750% 

During 2003 55,000,000 4.250% 

During 2004 55,000,000 5.875% 

During 2005 29,000,000 5.750% 

During 2006 25,000,000 6.875% 

Total $378,468,000 

FY 2001 Investment Portfolio 

Maturity Par Value 

Coupon 

Rate 

Overnight $ 90,722,000 3.180%4 

During 2001 149,000,000 5.875% 

During 2002 80,000,000 5.750% 

During 2006 25,000,000 6.875% 

Total $344,722,000 

4 The coupon rate for the FY 2001 overnight investments was updated from the prior year. 

O Performance and Accountability Report – Fiscal Year 2002 71 
Part IV – Financial Statements and Notes

Note 4 - Property and Equipment, net 

Property and equipment purchased at a cost greater than or equal to the noted 

thresholds below with useful lives of five years or more are capitalized at cost and 

depreciated or amortized, as applicable. 

Leasehold improvements are amortized on a straight-line basis over the lesser of the 

terms of the related leases or their estimated useful lives. All other property and 

equipment are depreciated or amortized, as applicable, on a straight-line basis over 

their estimated useful lives. The tables presented below summarize property and 

equipment balances as of September 30, 2002, and 2001. 

FY 2002 Property and Equipment, net 

Class of Assets 

Capitalization 

Threshold/ 

Useful Life Cost 

Accumulated 

Depreciation 

Net Book 

Value 

Leasehold Improvements $50,000 5-20 $23,283,734 $(14,357,099) $8,926,63 5 

Equipment 50,000 5-10 6,414,633 (4,193,900) 2,220,733 

Furniture and Fixtures 50,000 5-10 1,035,514 (723,252) 312,262 

Internal Use Software 500,000 5-10 13,248,076 (3,357,885) 9,890,191 

Internal Use Software-Dev 500,000 5-10 3,706,404 - 3,706,404 

Total $47,688,361 $(22,632,136) $25,056,225 

FY 2001 Property and Equipment, net 

Class of Assets 

Capitalization 

Threshold/ 

Useful Life Cost 

Accumulated 

Depreciation 

Net Book 

Value 

Leasehold Improvements $50,000 5-20 $22,164,561 $(11,776,363) $10,388,198 

Equipment 50,000 5-10 11,369,857 (8,331,805) 3,038,052 

Furniture and Fixtures 50,000 5-10 1,723,156 (1,230,193) 492,963 

Internal Use Software 500,000 5-10 5,059,129 (2,021,763) 3,037,366 

Internal Use Software-Dev 500,000 5-10 1,903,819 - 1,903,819 

Total $42,220,522 $(23,360,124) $18,860,398 

The OCC adopted the provisions of Statement of Federal Financial Accounting 

Standards No. 10, Accounting for Internal Use Software, effective October 1, 

2000, which represented a change in accounting principle. The OCC followed 

the U.S. Department of Treasury’s guidance for the implementation of the 

standard. The effect of the change in FY 2001 was a write-off of $11,419,731 of 

costs capitalized in prior years. 

72 O Performance and Accountability Report – Fiscal Year 2002 
Part IV – Financial Statements and Notes

Note 5 - Deferred Revenue 

The OCC’s activities are primarily financed by assessments on assets held by 

national banks and the federal branches of foreign banks. These assessments 

are due January 31 and July 31 of each year based on asset balances as of call 

dates on December 31 and June 30, respectively. Assessments are paid in 

advance and are recognized as earned revenue on a straight-line basis over the 

six months following the call date. The unearned portions are reduced 

accordingly. 

O Performance and Accountability Report – Fiscal Year 2002 73 
Part IV – Financial Statements and Notes

Note 6 - Leases 

The OCC leases office space for headquarters operations in Washington, D.C., 

and for district and field operations through the General Services Administration 

of the U.S. Government. The lease agreements expire at various dates through 

2009. These leases are treated as operating leases. In FY 2002, operating lease 

payments decreased due to office consolidations. 

FY 2002 Future Lease Payments 

Year Amount 

2003 $22,333,59 9 

2004 19,126,85 0 

2005 17,131,33 2 

2006 11,491,19 1 

2007 2,408,77 7 

2008 and beyond 6,850,75 4 

Total $79,342,503 

FY 2001 Future Lease Payments 

Year Amount 

2002 $23,425,45 4 

2003 20,417,63 5 

2004 17,245,98 5 

2005 15,178,77 6 

2006 9,541,73 6 

2007 and beyond 932,790 

Total $86,742,376 

74 O Performance and Accountability Report – Fiscal Year 2002 
Part IV – Financial Statements and Notes

Note 7 - Retirement Plans and Other Benefits 

Retirement 

The OCC’s employees are eligible to participate in one of two retirement plans. 

Employees hired prior to January 1, 1984, are covered by the CSRS unless they 

elected to join the FERS and Social Security during the election period. 

Employees hired after December 31, 1983, are automatically covered by FERS 

and Social Security. For employees covered by CSRS, the OCC contributes 8.51 

percent of their adjusted base pay to the plan. For employees covered by FERS, 

the OCC contributes 10.7 percent of their adjusted base salary. The OCC’s 

contributions totaled $13,490,210 in FY 2002, and $20,551,397 in FY 2001. 

Furthermore, the OPM contributed an additional $17,673,420 towards these 

retirement plans during FY 2002, and $15,439,588 in FY 2001. The OCC 

recognized these contributions as “Imputed Costs Absorbed by Others” and an 

offset in equal amount to “Imputed Financing from Costs Absorbed by Others” as 

a result of not having to reimburse the OPM. 

The OCC does not report in its financial statements information pertaining to the 

retirement plans covering its employees. Reporting amounts such as plan 

assets, accumulated plan benefits, or unfunded liabilities, if any, are presently 

the responsibility of the OPM. 

Other Benefits 

The OCC’s employees are eligible to participate in the Federal Thrift Savings Plan 

(TSP). For those employees under FERS, a TSP account is automatically 

established, and the OCC contributes a mandatory one percent of adjusted base 

pay to this account. In addition, the OCC matches employee contributions up to 

an additional four percent of pay, for a maximum OCC contribution amounting to 

five percent of adjusted base pay. Employees under CSRS may participate in the 

TSP, but do not receive the OCC automatic (one percent) and matching 

employer contributions. The OCC’s contributions for the TSP totaled $5,749,904 

in FY 2002, and $5,304,214 in FY 2001. The OCC also contributed a total of 

$11,045,830 for Social Security and Medicare benefits for all eligible employees 

in FY 2002, and $10,558,496 in FY 2001. 

Employees can elect to contribute up to 10 percent of their adjusted base salary 

in the OCC 401(K) Plan, subject to Internal Revenue regulations. Prudential 

Securities Incorporated currently administers the plan. The OCC contributes a 

fixed one percent of the adjusted base salary to the Plan for all participating 

employees. Approximately 2,400 employees are currently enrolled in the plan, 

O Performance and Accountability Report – Fiscal Year 2002 75 
Part IV – Financial Statements and Notes

which represents a participation rate exceeding 85 percent. The total cost of the 

OCC’s one percent matching contribution plus associated administration fees 

amounted to $2,079,283 during FY 2002, and $1,863,769 in FY 2001. 

The OCC sponsors a life insurance benefit plan for current and former 

employees. This plan is a defined benefit plan. Premium payments made during 

FY 2002 totaled $110,524, and $110,595 in FY 2001. 

Accrued Post-Retirement Benefit Cost and Net Periodic Post-Retirement Benefit Cost 

Component FY 2002 FY 2001 

Accumulated Post-Retirement Benefit Obligation $(9,094,14 9) $(7,303,739) 

Unrecognized Transition Obligation 1,728,3 82 1,901,21 9 

Unrecognized Net Gain (817,258) (2,161,42 5) 

Total $(8,183,025) $(7,563,945) 

Service Cost $311,064 $294,498 

Interest Cost 527,384 496,830 

Amortization of Gain (136,536) (139,829) 

Amortization of Transition Obligation 172,837 172,837 

Total $874,749 $824,336 

The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.5 percent. Gains or losses due to changes in 

actuarial assumptions are amortized over the service life of the plan. 

Employees and retirees of the OCC are eligible to participate in Federal 

Employees Health Benefits (FEHB) and Federal Employees Group Life Insurance 

(FEGLI) plans that involve a cost sharing of bi-weekly coverage premiums by 

employee and employer. Both of these employee benefit plans are administered 

by the OPM. Total OCC contributions for active employees who participate in the 

FEHB plans were $11,319,414 for FY 2002, and $10,103,674 for FY 2001. The 

OCC’s contributions for active employees who participate in the FEGLI plan were 

$196,516 for FY 2002, and $184,792 for FY 2001. 

The Federal Employees’ Compensation Act (FECA) provides income and medical 

cost protection to covered federal civilian employees injured on the job, 

employees who have incurred a work-related occupational disease, and 

beneficiaries of employees whose death is attributable to a job-related injury or 

occupational disease. Claims incurred for benefits for the OCC’s employees 

76 O Performance and Accountability Report – Fiscal Year 2002 
Part IV – Financial Statements and Notes

under FECA are administered by the U.S. Department of Labor (DOL) and later 

billed to the OCC. The OCC accrued $4,390,674 of workers’ compensation costs 

as of September 30, 2002, and $4,111,801 as of September 30, 2001. This 

amount includes unpaid costs and an actuarial estimated liability for unbilled 

costs incurred as of year-end calculated by the DOL. 

O Performance and Accountability Report – Fiscal Year 2002 77 
Part IV – Financial Statements and Notes

Note 8 - Net Position 

The OCC sets aside a portion of its Net Position as Special and Contingency 

Reserves to be used at the discretion of the Comptroller. In addition, funds are 

set aside to cover on-going cost of operations. 

The Special Reserve supplements revenue from assessments and other sources 

that are made available to fund the OCC's annual budget. The Special Reserve 

serves to reduce the impact on operations of unforecasted revenue shortfalls or 

unbudgeted and unanticipated requirements or opportunities. 

The Contingency Reserve supports the OCC's ability to accomplish its mission in 

the case of unforeseeable but rare events. Unforeseeable but rare events are 

beyond the control of the OCC, such as a major change in the national banking 

system or a disaster such as a fire, flood, or significant impairment of its 

information technology systems. 

Net Position Availability 

Component FY 2002 FY 2001 

Contingency Reserve $178,554,013 $166,234,445 

Special Reserve 15,000,000 15,000,000 

Earmarked for On-going Operations: 

Undelivered Orders 17,378,278 10,311,809 

Consumpti on of Assets 32,107,691 22,222,956 

Capital Investments 6,138,066 -

District Offi ces Restructuring 2,500,000 -

Net Position $251,678,048 $213,769,210 

78 O Performance and Accountability Report – Fiscal Year 2002 
Part IV – Financial Statements and Notes

Note 9 - Program Costs 

The implementation of $MART in FY 2002 enabled the OCC to capture costs by 

program. The following table differentiates program costs resulting from 

transactions between the OCC and other federal entities (intragovernmental) and 

transactions between the OCC and non-federal entities (with the public). 

Program Costs FY 2002 

Supervise Program 

Intragovernmental $50,142,410 

With the public 310,273,531 

Total Program Costs 360,415,941 

Charter Program 

Intragovernmental 1,574,820 

With the public 9,744,747 

Total Program Costs 11,319,567 

Regulate Program 

Intragovernmental 3,472,050 

With the public 21,484,513 

Total Program Costs 24,956,563 

Analyze Risk Program 

Intragovernmental 3,579,323 

With the public 22,148,299 

Total Program Costs 25,727,622 

Total 422,419,693 

Less: Earned revenues (442,655,111) 

Net Cost of Operations $(20,235,418) 

O Performance and Accountability Report – Fiscal Year 2002 79 
Part IV – Financial Statements and Notes

Note 10 - Expenses by Budget Object Classification 

The following table illustrates the OCC’s costs by major budget object class for FYs 

2002 and 2001. 

Budget Object Class FY 2002 FY 2001 

Personnel Compensation $232,359,148 $ 223,923,416 

Personnel Benefits 60,160,137 58,352,700 

Benefits to Former Employees 520,099 2,112,678 

Travel and Transportation of Persons 25,393,310 24,741,781 

Travel and Transportation of Things 830,647 1,019,015 

Rent, Communication, and Utilities 33,449,836 36,484,468 

Printing and Reproduction 929,212 1,074,570 

Other Contractual Services 37,708,589 40,858,089 

Supplies and Materials 2,253,706 3,528,000 

Equipment 5,548,567 7,830,554 

Land and Structures 349,433 608,371 

Insurance Claims and Indemnities 34,187 197,731 

Depreciation 5,209,402 3,948,482 

Imputed Costs 17,673,420 15,439,588 

Total $422,419,693 $420,119,443 

Note 11 - Contingencies 

The OCC is reviewing potential contingencies, which may result from the effect of 

certain policies and procedures currently in place. In the opinion of the OCC's 

management and legal counsel, the ultimate results of these potential contingencies will 

not materially affect the financial statements of the OCC. 

80 O Performance and Accountability Report – Fiscal Year 2002 
Appendix A – FY 2002 Performance Measures and Results 

The OCC’s FY 2002 performance measures, customer service standards, and results are presented bel

FY 2002 OCC 

Program 

Performance Measure 

Customer Service Standard 

CY 1999 

Performance 

CY 2000 

Performance 

FY 2001 

Performance Target Perform

Strategic Goal 1: e and sound national banking system 

Percent of large and mid-size banks where quarterly risk assessments are completed 

Not Applicable Not Applicable Not Applicable 100% 100% 

Percent of large and mid-size 

banks that received an annual report of examination 

Not Applicable Not Applicable Not Applicable 100% 97%

Percent of community bank examinations conducted in accordance with the FDICIAmandated schedule, exclusive of approved exceptions 

92% 100% 98%

Percent of community bank examinations that are approved exceptions to the FDICIAmandated schedule Not Applicable Not Applicable Not Applicable < 10% 3% Average calendar days past due on community bank examinations that do not meet 

the approved exception criteria 

Not Applicable Not Applicable Not Applicable < 15 173 

Supervise 

The examiner’s requests for 

information before and during 

the examination were reasonable and justified by the examination 

scope. (Note B) 

Not Applicable 1.36 1.36 < 1.75 1.36 

A saf

98% 94% 

O Performance and Accountability Report – FY 2002 
Appendix A – FY 2002 Performance Measures and Results 

FY 2002 OCC 

Program 

Performance Measure 

Customer Service Standard 

CY 1999 

Performance 

CY 2000 

Performance 

FY 2001 

Performance Target Perform

The examination team conducted the examination in a 

professional manner. (Note B) 

Not Applicable 1.22 1.21 < 1.75 1.21 

During exit and board meetings, the examiner-in-charge and 

examination team clearly and effectively communicated their findings and concerns. (Note B) 

Not Applicable 1.30 1.33 < 1.75 1.32 

The report of examination clearly 

communicated examination findings, significant issues and 

the corrective actions (including timeframes) management and/or 

the board needed to take. 

(Note B) 

Not Applicable 1.32 1.31 < 1.75 1.30 

Supervise 

On-going communication by the 

examiner-in-charge with senior 

management and/or the board was appropriate. (Note B) 

Not Applicable 1.29 1.29 < 1.75 1.29 

Strategic Goal 2: ble legal and regulatory framework that enables 

the national banking system to provide a full competitive array of financial services 

Percent of corporate applications 

processed on-time > 95% 96% 96% 95% 96% 

Average rating of timeliness of decisions (Note C) 1.26 < 1.5 1.19 Average rating of knowledge of 

OCC staff (Note C) 1.20 < 1.5 1.19 

Charter 

Average rating of 

professionalism of OCC staff 

(Note C) 

1.12 < 1.5 1.12 

A flexi

1.22 1.15 1.16 1.17 1.11 1.10 

O Performance and Accountability Report – FY 2002 
Appendix A – FY 2002 Performance Measures and Results 

FY 2002 OCC 

Program 

Performance Measure 

Customer Service Standard 

CY 1999 

Performance 

CY 2000 

Performance 

FY 2001 

Performance Target Perform

Average rating of appropriateness of filing location and contact person (Note C) 

1.21 < 1.5 1.28 

Charter 

Average rating of overall 

licensing service (Note C) 1.21 < 1.5 1.17 

Regulate 

Percent of regulations that 

incorporated plain language criteria 

Not Applicable Not Applicable 100% 100% 100% 

Strategic Goal 3: ancial services and fair treatment of bank customers 

Supervise 

Average days to process 

customer complaints and consumer inquiries 

45 50 44 

Strategic Goal 4: motivated and diverse workforce that makes effective use of OCC res

Percent of planned training completed Not Applicable Not Applicable 90% 90% 96% Statement of Reasonable 

Assurance under Federal Managers’ Financial Integrity Act and Substantial Compliance under the Federal Financial Management Improvement Act is issued 

Not Applicable Not Met Not Met Met Met 

Agency-wide 

Percent of selected capital projects that meet funding, 

schedule and performance targets 

Not Applicable Not Applicable 100% 100% 100% 

1.20 1.20 1.17 1.16 

Fair access to fin

51 46 

An expert, highly 

O Performance and Accountability Report – FY 2002 
Appendix A – FY 2002 Performance Measures and Results 

NOTES: A – During FY 2002, the OCC conducted a comprehensive review of its performance measures to ensure they are aligned w

strategic goals and reflect the effect of the OCC’s regulatory activities on the national banking system. As a result, many o

performance measures have been discontinued and new performance measures were implemented for FY 2003. 

B – The examination survey used for the customer service standards is based on a rating scale of one through five, with oagreement and five indicating complete disagreement with the statement about the quality of the examination. 

C – The licensing survey used for the customer service standards is based on a scale of one through five, with one represe

three is neutral, and five represents significantly deficient in rating the licensing services provided by the OCC. 

SHORTFALL EXPLANATIONS: 1 The OCC establishes its annual target for this goal based on the statutory requirement. The OCC achieved 97 percent of 

issued to large and mid-size banks. An ROE for 152 of the 157 large and mid-size bank charters was issued during the fisc

waived ROEs for the remaining five charters due to mergers that were in process or other overriding circumstances. 

2 The OCC establishes its annual target for this goal based on the statutory requirement. The OCC achieved 98 percent co

FDICIA-mandated examination schedule for community banks. Mitigating circumstances prevent the OCC from achieving f

example, the prioritization of resources to higher risk institutions and scheduling anomalies preclude strict compliance with 

3 Delays in examinations that did not meet the approved exception criteria averaged 17 days. The OCC’s managers will co

manage the initiation of examinations and limit the length of delays when resources are diverted to problem banks whenev

O Performance and Accountability Report – FY 2002 
Appendix B – Glossary

Acronym Definition 

AML Anti-money-Laundering 

CAG Customer Assistance Group 

CMP Civil Monetary Penalty 

COOP Continuity of Operations Plan 

CRA Community Reinvestment Act 

CSRS Civil Service Retirement System 

CY Calendar Year 

DO Departmental Offices 

DOL Department of Labor 

EA Enterprise Architecture 

EFT Electronic Funds Transfer 

FDIC Federal Deposit Insurance Corporation 

FDICIA Federal Deposit Insurance Corporation Improvement Act 

FECA Federal Employees’ Compensation Act 

Fed. Reg. Federal Register 

FEGLI Federal Employees Group Life Insurance 

FEHB Federal Employees Health Benefits 

FERS Federal Employees Retirement System 

FFIEC Federal Financial Institutions Examination Council 

FFMIA Federal Financial Management Improvement Act 

FMFIA Federal Managers’ Financial Integrity Act 

FTE Full-Time Equivalent 

FY Fiscal Year 

GAAP Generally Accepted Accounting Principles 

GAO General Accounting Office 

GISRA Government Information Security Reform Act 

GLBA Gramm-Leach-Bliley Act 

JFMIP Joint Financial Management Improvement Program 

LMS Learning Management System 

M Million 

MIS Management Information System 

OCC Office of the Comptroller of the Currency 

OIG Office of the Inspector General 

OMB Office of Management and Budget 

OPM Office of Personnel Management

PAU Program Analysis Unit 

PMA President’s Management Agenda 

O Performance and Accountability Report – FY 2002 85 
Appendix B – Glossary 

Acronym Definition 

SAM Self-assessment for Managers 

SNC Shared National Credit 

TSP Thrift Savings Plan 

U.S. United States 

86 O Performance and Accountability Report – FY 2002