Audit Report

OIG-16-029

SAFETY AND SOUNDNESS

OCC Should Reconsider the Waiver of $4.9 Million in Underassessed Fees

January 15, 2016

Office of

Inspector General

Department of the Treasury

Contents

OCC Should Reconsider the Waiver of $4.9 Million in Under-assessed Fees

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Audit Report

Background ............................................................................................... 3

Results of Audit .......................................................................................... 4

OCC’s Waiver of Under-assessed Fees, While within Its Authority

Was a Windfall to Those Banks Whose Fees Were Waived........................... 4

Recommendations ....................................................................................... 7

Appendices

Appendix 1: Objectives, Scope, and Methodology ...................................... 10

Appendix 2: Management Comments........................................................ 12

Appendix 3: Major Contributors to This Report .......................................... 14

Appendix 4: Report Distribution ............................................................... 15

Abbreviations

OCC Office of the Comptroller of the Currency

IPA Independent Public Accountant
OCC Should Reconsider the Waiver of $4.9 Million in Under-assessed Fees

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OIG Audit

Report

The Department of the Treasury

Office of Inspector General

OCC Should Reconsider the Waiver of $4.9 Million in Under-Assessed Fees

(OIG-16-029)

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Audit Report

, 2015

January 15, 2016

Thomas J. Curry

Comptroller of the Currency

This report presents the results of our audit of the process used by 

the Office of the Comptroller of the Currency (OCC) to assess fees 

to independent trust banks.

We initiated the audit after OCC had informed our office of internal 

control weaknesses that led to the under-assessment of fees to 

certain banks, and subsequently waived (not collected). The 

independent public accountant (IPA) who audited OCC’s fiscal 

years 2013 and 2012 financial statements noted a matter of 

concern in internal control over the financial institution assessment 

process in a management letter dated November 20, 2013. The 

IPA reported that from March 2009 through March 2013, five 

financial institutions were under-assessed by a total of 

approximately $4.9 million. In September 2013, six financial 

institutions (including the five institutions above) were underassessed an additional $860,000. The IPA noted that the financial 

institutions were assessed as commercial banks instead of 

independent trust banks; independent trust banks are assessed a 

surcharge above the commercial bank assessment.1Furthermore, 

the IPA reported that the under-assessment of financial institutions 

occurred because OCC did not have policies and procedures for 

 

1 An independent trust bank is a national bank that has trust powers, does not primarily offer fullservice banking, and is not affiliated with a full-service national bank. An independent trust federal 

savings association is a federal savings association that has trust powers, does not primarily offer 

full-service banking, and is not affiliated with a full service federal savings association.
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periodically reevaluating banks to determine whether their current 

categorization and thus the assessment, was appropriate.2

Our objectives were to assess (1) OCC’s authority and decisionmaking process to waive the collection of fees erroneously underassessed and (2) the actions taken by OCC to identify and correct 

internal control deficiencies in the assessment process for 

independent trust banks. To accomplish these objectives, we 

reviewed documentation provided by OCC and interviewed OCC 

personnel who were knowledgeable about the financial institution 

assessment process and OCC’s authority and decision-making 

process for waiving the collection of fees. Appendix 1 contains a

more detailed description of our objectives, scope, and 

methodology.

In brief, we concluded OCC had the requisite authority to waive the 

collection of fees. However, the waiver of the fees effectively 

resulted in the inconsistent treatment of banks subject to the fees 

and a windfall for a few banks. We noted that OCC did not have a 

documented process to address the handling of this type of event. 

We also concluded that OCC did take appropriate action to 

strengthen its internal control over the assessment process for 

trust banks.

We recommend that the Comptroller of the Currency (1) reevaluate 

the decision to waive the $4,886,296 in under-assessments from 

the March 2009 through March 2013 period and as appropriate, 

take action to collect the under-assessments; and (2) implement 

policies and processes to govern the waiver of under-assessed 

fees.

In a written response, which is included as Appendix 2, OCC

provided its corrective actions. With respect to the first 

recommendation, OCC stated that it convened a panel of senior 

managers and staff to reconsider its initial decision to waive the 

under-assessments. The panel reviewed the factors OCC used to 

make the original decision in October 2013, as well as the 

information and considerations provided by our audit. OCC 

continues to believe collecting assessments for prior periods based 

on inadequate OCC procedures would be unnecessarily disruptive 

 

2 Treasury Office of Inspector General (OIG), Management Letter for the Audit of the Office of the 

Comptroller of the Currency’s Fiscal Years 2013 and 2012 Financial Statements (OIG-14-025; issued 

Feb. 4, 2014). The IPA performed that audit under contract with our office. 
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and an unfair burden to the limited number of affected community 

and midsize banks. With respect to the second recommendation, 

OCC implemented policies and processes to govern the waiver of 

under-assessed fees.

We acknowledge OCC’s corrective actions and consider our

recommendations closed. However, we are disappointed with 

OCC’s decision regarding the waived fees, as the waiver effectively 

resulted in the inconsistent treatment of banks subject to the fees 

and a windfall for a few banks. 

Background

12 U.S.C. §482, states: “The Comptroller of the Currency may 

impose and collect assessments, fees, or other charges as 

necessary or appropriate to carry out the responsibilities of the 

office of the Comptroller. Such assessments, fees, and other 

charges shall be set to meet the Comptroller’s expenses in carrying 

out authorized activities.” Accordingly, OCC assesses and charges 

national banks, federal savings associations, and federal branches 

and agencies of foreign banks fees to support the examination and 

supervision processes. Payment of a semiannual assessment fee to 

OCC is due by March 31 and September 30 of each year, for the 

six-month period beginning on January 1 and July 1 before each 

payment date.

Each semiannual assessment is based on the total assets shown in 

the bank’s or federal savings association’s most recent Call Report

or Thrift Financial Report, as appropriate. OCC calculates the 

amount due and provides a notice of assessments to each national 

bank, federal savings association, and federal branch or agency of 

a foreign bank, no later than 7 business days prior to collection on

March 31 and September 30 of each year.

Independent trust banks pay an additional assessment fee in 

addition to the general assessment fee. The additional assessment 

for an independent trust bank includes a fiduciary and related asset 

component comprised of a minimum fee determined by the OCC.
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Results of Audit

OCC’s Waiver of Under-assessed Fees, While within Its 

Authority, Was a Windfall to Those Banks Whose Fees 

Were Waived

OCC conducted an internal legal review to determine whether it 

had an obligation to collect an unpaid, independent trust bank 

assessment, specifically where OCC failed to bill for that

assessment over a period of several years. OCC concluded that it 

may waive or collect the unpaid trust bank assessments under the 

Comptroller’s implied authority in 12 U.S.C. §481, “Appointment 

of examiners; examination of member banks, State banks, and 

trust companies; reports,” and §482, “Employees of Office of 

Comptroller of the Currency; appointment; compensation and 

benefits.” The legal review concluded that §481 authorizes the 

Comptroller to prescribe regulations governing the computation and 

collection of assessments and that §482 provides the Comptroller 

with broad discretion to set assessments to meet OCC expenses.

We reviewed OCC’s legal opinion and the applicable statutes and 

regulations. We agree that there is discretion in the language 

allowing OCC to waive or collect the unpaid trust assessments. We 

also reviewed OCC policies, procedures, and guidance to determine 

whether there was a documented process to address the handling 

of this type of event. We found there was none. Accordingly, we 

believe that, consistent with government-wide internal control 

standards,

3 OCC should implement policies and processes to 

govern how to decide whether or not to waive the collection of 

under-assessments.

In September 2013, OCC initiated an internal review of its process 

for assessing financial institutions. The objectives of the review

included assessing the root cause of under-assessments, 

determining the extent of under-assessments due from prior

periods, and reviewing OCC’s responsibility for addressing the 

uncollected assessments. To accomplish these objectives, OCC

 

3 As defined in the Government Accountability Office’s Standards for Internal Control in the Federal 

Government (GAO-14-704G; issued Sep. 2014), internal control is a process effected by an entity’s 

oversight body, management, and other personnel that provides reasonable assurance that the 

objectives of an entity will be achieved. Management documents in policies the internal control 

responsibilities of the organization.
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reviewed its practices, policies and procedures, and controls for 

identifying and assessing trust banks; asked for written 

documentation of the process; and conducted interviews with 

responsible employees.

In October 2013, OCC completed the review of its financial 

institution assessment process and concluded there was a 

substantial breakdown in internal controls that permitted the underassessment of approximately $5.75 million during March 2009 

through September 2013. OCC identified the following internal 

control weaknesses:

 The process for assessing trust banks was not documented.

 The roles and responsibilities of OCC personnel who were 

provided the list of institutions to verify the institutions’ status 

as trust banks were not clearly defined.

 The coordinating office was not clear on the requirements or 

criteria for assessing trust banks.

Table 1 provides a list of the amounts under-assessed by OCC 

during March 2009 through March 2013.

Table 1. OCC Under-assessments, 

March 2009–March 2013

Financial 

Institution

Under-assessed

Amount

Bank A $3,342,949

Bank B $1,075,281

Bank C $179,675

Bank D $167,054

Bank E $121,337

Total $4,886,296

Table 2 shows the amounts under-assessed for September 2013.

OCC identified a sixth trust bank (Bank F) that had been underassessed during this period.
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Table 2. OCC Under-assessments, 

September 2013

Financial 

Institution

Under-assessed

Amount

Bank A $483,127

Bank B $167,733

Bank C $26,724

Bank D $86,347

Bank E $22,486

Bank F $77,468

Total $863,885

During its review of the financial institution assessment process, 

OCC found that another bank was incorrectly charged the 

independent trust bank assessment fee.

OCC took the following actions to remedy the under- and overassessments and the internal control deficiencies:

 waived the collection of the under-assessments from March 

2009 through March 2013. Approval to waive the collection of 

the under-assessments was attributed to (1) OCC’s legal 

counsel opinion that the Comptroller has the authority to waive 

unpaid trust bank assessments and (2) discussions with external 

consultants who considered the dollar amount immaterial and 

inconsequential to a reader of OCC’s financial statements;

 collected the under-assessed fees for the September 2013 

period;

 refunded the over-assessed amount ($67,083) to the one bank;

 established a process improvement team to lead management of 

the process for assessing financial institutions and to more 

clearly define, streamline, and automate the process. According 

to OCC officials, as a result, 90 percent of OCC’s validation of 

bank classifications is now automated. The classification of the 

bank determines what fees it is assessed. The other 10 percent 

of OCC’s validation of banks’ classification remains a manual 
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process conducted by the Chief National Bank Examiner 

business unit;

 updated policies and procedures (Financial Policies and

Procedures 2032-14, “Bank Assessment Calculation Process,”

revised October 28, 2014) to document the assessment 

process and assessment cycle and to provide criteria for 

assessing trust bank assessments; and

 developed an internal review program for the financial institution 

assessment process, including all key internal controls, to 

ensure accurate and consistent accounting for assessment 

collections and revenue recognition. The review is meant to

ensure that established quality assurance procedures are 

performed and timely.

OCC took appropriate action by collecting the under-assessments 

for the September 2013 period and strengthening internal control.

However, we believe that the waiver of the fees from March 2009 

through March 2013 effectively resulted in the inconsistent 

treatment of banks subject to the fees and a windfall for a few 

banks.

We do note that the approximately $4.9 million in waived trust 

bank assessments amounted to 0.1 percent of the total 

assessments collected during fiscal years 2009 through 2013, and 

agree that a reader of OCC’s financial statements would likely 

perceive the amount waived as immaterial to those financial 

statements. The issue at hand, however, is not a matter of 

materiality with respect to financial reporting. We also note that

the waived assessments were 10 percent of OCC’s total trust bank 

assessments collected during the same period so the waived 

amount was not inconsequential to this fee category. Additionally, 

we believe that the internal control deficiency that led to the underassessment of the trust banks does not absolve those banks from 

their obligations.

Recommendations

We recommend that the Comptroller of the Currency:

1. Re-evaluate the decision to waive the $4,886,296 in underassessments from the March 2009 through March 2013 period
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and, as appropriate, take action to collect the underassessments.

Management Response

OCC convened a panel of senior managers and staff to 

reconsider its initial decision to waive the under-assessments. 

That group reviewed the factors OCC used to make the original 

decision in October 2013, as well as the information and 

considerations provided by the Office of Inspector General. 

They also considered that OCC took corrective actions as soon 

as OCC learned that unclear and inadequate trust assessment 

procedures caused the assessment errors. OCC reassessed the 

affected banks for the period ending September 2013, the thencurrent assessment period, charged the affected institutions the 

correct assessment rate, and refunded an over-assessed amount 

to one bank. In addition, they considered the additional burden 

it would create for these community and midsize banks to restate their records to account for OCC’s delayed collection of 

under-assessments for the March 2009 through March 2013 

periods. In at least one occasion, a reassessment would require 

the institution to restate its earnings. Banks rely on the OCC to 

provide accurate fee assessments. As a result, OCC continues

to believe collecting assessments for prior periods based on 

inadequate OCC procedures would be unnecessarily disruptive 

and an unfair burden to the limited number of affected 

community and midsize banks.

OIG Comment

We acknowledge that OCC took corrective action on this 

recommendation by reassessing its decision to waive the underassessed fees. While not explicitly said in the written response, 

OCC has no plans to collect the under-assessed amounts in 

question, which is within its authority. Accordingly, we consider 

the recommendation closed.

That said, we are disappointed with OCC’s decision not to 

collect the under-assessments, as we believe that the waiver of 

the fees effectively resulted in the inconsistent treatment of 

banks subject to the fees and a windfall for a few banks.
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2. Implement policies and processes to govern how decisions are 

made with regard to the waiver of collection for under-assessed 

fees.

Management Response

Management agreed with the recommendation. OCC 

implemented policies and processes to govern the waiver of 

under-assessed fees. Further, the Comptroller of the Currency 

directed that OCC formalize the process whereby a panel of 

senior staff representing OCC’s supervision, legal, and 

governance units be convened to provide the Comptroller with 

additional perspective on potential waivers before the 

Comptroller makes those decisions.

OIG Comment

Management’s corrective action is responsive to our 

recommendation.

* * * * *

We appreciate the courtesies and cooperation provided to our staff 

during the audit. If you wish to discuss the report, you may 

contact me at (202) 927-0384 or Andrew Morgan, Audit Manager, 

at (202) 927-8121. Major contributors to this report are listed in

Appendix 3.

Jeffrey Dye /s/

Audit Director
Appendix 1

Objectives, Scope, and Methodology

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Appendix 1: Objectives, Scope, and Methodology

Our objectives were to assess (1) the Office of the Comptroller of 

the Currency’s (OCC) authority and decision-making process to 

waive the collection of fees erroneously under-assessed and (2) the 

actions taken by OCC to identify and correct internal control 

deficiencies in the assessment process for independent trust banks.

We took the following actions to accomplish these objectives:

 interviewed OCC personnel knowledgeable about the financial 

institution assessment process and OCC’s authority and 

decision-making process for waiving the collection of fees

erroneously under-assessed

 reviewed OCC documentation related to OCC’s authority and 

decision-making process to waive the under-assessments. The 

documentation included a question-and-answer memorandum on 

OCC trust assessments, a legal opinion on disputed semiannual 

assessments, and a memorandum on waiving unpaid trust bank 

assessments approved by the Comptroller. We also consulted 

with the Counsel to Office of Inspector General on the legal 

opinion.

 reviewed OCC’s internal Trust Assessment Memorandum and 

the supporting work papers and determined:

a) actions taken by OCC to identify internal control 

deficiencies in the financial institution assessment process

b) internal control deficiencies identified by OCC that 

contributed to the under-assessment

c) actions and status of measures taken by OCC to correct the 

identified internal control deficiencies

We did not perform, as part of the scope of this audit, a validation 

of the under-assessed amounts for the trust banks shown on the 

internal trust-assessment review memorandum.

We performed our audit fieldwork from January 2014 through 

February 2015. 

We conducted this performance audit in accordance with generally 

accepted government auditing standards. Those standards require 

that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and 
Appendix 1

Objectives, Scope, and Methodology

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conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix 2

Management Response

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Appendix 2: Management Comments
Appendix 2

Management Response

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13
Appendix 3

Major Contributors to This Report

______________________________________________________________________________________________

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Appendix 3: Major Contributors to This Report

Andrew Morgan, Audit Manager

Adelia Gonzales, Auditor-in-Charge

Virginia Shirley, Auditor

Khuyen Tran, Referencer
Appendix 4

Report Distribution

_____________________________________________________________________________________________

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Appendix 4: Report Distribution

Department of the Treasury

Deputy Secretary

Office of Strategic Planning and Performance Management

Office of the Deputy Chief Financial Officer, Risk and Control

Group

Office of the Comptroller of the Currency

Comptroller of the Currency

Liaison Officer

Office of Management and Budget

OIG Budget Examiner
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