Office of 

Inspector General 

Loan Account Reporting System 

03-01 

 August 2003
August 28, 2003 

The Honorable Michael M. Reyna 

Chairman of the Board and 

 Chief Executive Officer 

Farm Credit Administration 

1501 Farm Credit Drive 

McLean, Virginia 22102-5090 

Dear Mr. Reyna: 

The Office of the Inspector General completed an audit of the Loan Account Reporting System 

(LARS). The overall objective of this audit was to determine whether LARS is effectively 

utilized. Specific audit objectives included (1) determining the adequacy of LARS data; (2) 

determining whether information provided is duplicative; and (3) assessing LARS future data 

use. 

We found that LARS is not providing sufficient and efficient loan data to support the Agency’s 

mission. Specifically LARS data is deficient, the system is outmoded and system improvements 

is challenging. As a result LARS is under-utilized and without significant reengineering we 

question whether the system is effective in realizing Agency goals and mission. 

 

 We conducted the audit in accordance with Government Auditing Standards issued by the 

Comptroller General for audits of Federal organizations, program, activities, and functions. We 

conducted fieldwork from February 2003 through May 2003. We provided a draft report to 

management on July 22, 2003. We conducted an exit conference and discussed the draft report 

with the Office of Policy and Analysis on July 23, 2003. The management response to the report 

indicated general agreement and is included. Where actions were presented to the Office of 

Inspector General that would resolve audit findings, the recommendation was changed to agreed 

upon action. 

If you have any questions about this audit, I would be pleased to meet with you at your 

convenience. 

Respectfully, 

Stephen G. Smith 

Inspector General
 TABLE OF CONTENTS 

BACKGROUND_________________________________________________________________________1

OBJECTIVES AND SCOPE _______________________________________________________________1

FINDINGS AND RECOMMENDATIONS______________________________________________________2 

Information System Investment ___________________________________________________________ 2 

Loan Account Reporting System Data ______________________________________________________ 2 

Directing Resources ___________________________________________________________________ 4 

Roles and Responsibilities _______________________________________________________________ 5 

Appendix 1: LARS Survey Results _________________________________________________________7 

MANAGEMENT'S RESPONSE 
 

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BACKGROUND 

In 1986 the Loan Account Reporting System (LARS) became operational with the quarterly collection of 

detailed borrower data from the Farm Credit System (FCS) institutions. The LARS objective was to 

provide the Farm Credit Administration (Agency) with accurate loan information needed to successfully 

carry out its responsibilities in examining, regulating and supervising FCS institutions. Historically, 

LARS provided information that helped in the statistical selection of loans during on-site examinations 

and in the institution’s loan loss evaluation. In April 1987, after an Office of Examination (OE) review, 

LARS was revised. The modified system reduced the data elements to 30 common variables. These 

30 variables were identified as critical to OE review responsibilities. In March 1993, LARS was further 

revised to 29 data elements. Since 1993 LARS has not been revised. In January 1998, the Office of 

Policy and Analysis (OPA) began managing LARS. LARS is primarily used for monitoring, analyzing 

policy, reporting purposes, and responding to Congressional and public inquiries. 

In Fiscal Year (FY)’03 the LARS redesign project began. According to the Information Resource 

Management (IRM) Project data the estimated redesign project cost is $99,000 for FY’03-04. The 

overall project objective is to provide FCS institution loan level data needed in conducting 

examinations, monitoring portfolio risk, modeling loan performance relationships and conducting risk 

analysis. According to the IRM Project data specific objectives include: 

• Converting the existing LARS data collection process into a more useful and easy-to-use 

electronic data source. 

• Providing continuous access to loan level trend data on a consistent basis. 

• Coordinating and working with the OE to develop a loan level data collection system that 

meets the needs for examination purposes including integrating this effort with the OE 

modernization project. 

• Reducing the reporting burden on FCS institutions by coordinating the Agency’s collection 

of loan level data. 

The project will span over two years. OPA has established a work group that includes OPA, OE, 

Office of the Chief Information Officer and Office of the General Counsel representatives. The 

work group’s first objective is to publish a notice to the public, with request for comments on how 

best to modify the existing LARS requirement (i.e., data elements). The work group plans to have 

the notice published in 2003. 

OBJECTIVES AND SCOPE 

The objective of this audit is to determine whether LARS is effectively utilized. Specific audit 

objectives include (1) determining the adequacy of LARS data; (2) determining whether information 

provided is duplicative; and (3) assessing LARS data future use. We reviewed LARS 

documentation dating from July 1990 through May 2003 including background information, 

feasibility studies, mission and operational needs and budget documents. We conducted 

interviews with Agency personnel responsible for maintaining LARS data and key personnel who 

use LARS data. In addition, we conducted a survey to assess satisfaction with the LARS 
 

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program. We reviewed 37 survey responses from Agency users. We also discussed the loan data 

collection system with another federal government regulatory agency. 

FINDINGS AND RECOMMENDATIONS 

LARS is not providing sufficient and efficient loan data to support the Agency’s mission. 

Specifically LARS data is deficient, the system is outmoded and system improvement is 

challenging. As a result, LARS is under-utilized and without significant reengineering, we question 

whether the system is effective in realizing Agency goals and mission. 

Information System Investment

LARS is rooted in the past, aimed at earlier needs. Thus, LARS is poorly positioned to meet 

the Agency’s current and future goals. The LARS redesign project is focused on improving the 

Agency’s loan-level data collection process. According to the project manager, efforts will be 

focused on designing a process that is the greatest benefit to the Agency and its customers. 

The drive for realizing dramatic improvements should focus on fundamentally rethinking how 

the Agency works as a whole. The Agency must begin managing LARS as an information 

management system investment. By looking at LARS as an information management system 

investment, attention is placed on assessing and managing risks between LARS continued 

funding or focusing resources on other potential loan data collection systems. The decision 

should be based on an explicit set of criteria that answer questions such as: 

• Is LARS providing the Agency with essential loan data? 

• Are resources directed toward improvement that will achieve the greatest benefit? 

• Are the right people involved in the decision making process? 

By answering these types of questions the Agency can better assess which core processes 

need improvement to fulfill mission goals, satisfy customers and stakeholders’ needs, reduce 

costs and provide high quality products and services. 

Loan Account Reporting System Data 

LARS is an under-utilized loan data system. Most staff feel the system is no longer an effective 

tool in providing them with pertinent loan data information. Specifically, LARS data is not 

comprehensive, data accuracy is questionable and ease of use could be improved. To assess 

LARS we sent a survey to 87 employees who had access to the system. The survey received a 

43% response rate. Based on survey results, users expressed dissatisfaction with the 

completeness, usefulness, relevance, accuracy, and ease of use. 
 

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 More detailed survey results are in Appendix 1. 

Comprehensive Data. LARS does not provide comprehensive loan data information needed to 

meet the Agency’s current and future goals and mission. LARS has not been revised since 1993 

therefore much of the information provided is based on past loan data needs. According to LARS 

users, the data collected needs a reassessment to improve comprehensiveness and relevance. 

Currently, LARS collects data on most FCS loans but not all. LARS excludes information on 

cooperative loans, participations and syndications. Participation and syndications are among the 

fastest growing areas in the FCS. 

According to users, to be effective LARS should collect data on all FCS loans. In addition, 

information should be pertinent to Agency needs. Most examiners dismiss LARS as a key 

information source because they believe LARS data is not useful. A senior manager stated that 

only 50% of LARS information is useful in making important management decisions. Economists 

and analysts also stated more basic borrower information would be helpful. Finally, a redesign 

should include useful information in future regulatory requirements. For example, LARS data 

needs to include useful Basel Capital Accord requirements information. 

The OPA is trying to improve LARS loan data information. The LARS redesign project includes an 

objective to determine the Agency’s loan data needs. As part of that objective emphasis will be 

placed on capturing all loans. We commend the OPA for taking actions to determine loan data 

needs as part of the redesign project. However, to ensure loan data information remains relevant 

in the future, OPA should perform annual reviews on LARS data. 

Accurate Data. To be an effective information management system, LARS must provide the 

Agency with accurate loan information. Without accurate information, data analysis could result in 

erroneous decisions and improper conclusions. LARS users believe the data definitions are 

sometimes interpreted differently resulting in discrepancies in reported data. In addition, some 

FCS institutions expressed concerns that they understood LARS definitions and requirements 

differently and therefore discrepancies may appear in data reported. For example, some FCS 

institutions have used various commodity codes to report the same commodity. This can result in 

0%

10%

20%

30%

40%

50%

60%

70%

Completeness

Usefulness

Relevance

Accuracy

Ease of Use

Dissatisified

Some Dissatisifcation

LARS Survey Results 
 

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masking high commodity concentrations. These types of discrepancies undermine the data 

creditability and can result in misrepresented and interpreted information. 

LARS system managers have taken steps to improve data accuracy. For example, systematic 

checks are performed to ensure various data elements meet the definitions. In addition, quarterly 

comparison checks are run at the district levels comparing various results with current quarter 

results. If the comparison check indicates a significant change from previous quarters, a follow-up 

is conducted to determine if the change was accurate. However, because LARS data is used in 

significant Agency services such as responses to Congressional requests and Board briefings, 

FCS institutions should certify data accuracy and LARS data should be reviewed during on-site 

examinations. These checks will require the Agency to view LARS as a cross-functional process 

requiring resources from the OPA and OE. 

Ease of Use. Improvements are needed in the LARS program to make it user-friendly. Because 

of the large volume of information contained within LARS, users find it difficult to abstract data and 

time consuming to find specific information. For example, one district has approximately 274,000 

records. Very few FCA staff are knowledgeable about how to write queries to produce reports from 

these records. In addition, without knowing where to look for information, searching and 

determining where data is can be time consuming. Users suggest that standard reports be 

available without writing queries and a user guide should be on-line. In addition, splitting LARS 

information into more usable tables, possibly by institution, could facilitate finding data. 

Also, LARS does not maintain historical data. Therefore, comparisons across time periods cannot 

be easily made. Because of the data volume maintained each quarter, the feasibility of storing 

more than one quarter of information on-line is limited. Alternatives to providing historical 

information must be considered. For example, summary reports that include pertinent historical 

information could be posted on the Plans and Reports database. 

Agreed Upon Actions

1. The Office of Policy and Analysis should establish a process to ensure LARS 

information remains relevant and useful. 

2. The Office of Policy and Analysis should require FCS institutions to certify LARS data 

accuracy. 

3. The Office of Policy and Analysis should coordinate with the Office of Examination to 

validate LARS data during on-site institution examinations. 

4. The Office of Policy and Analysis should include in the redesign project the 

development of standard reports. LARS users should provide input on reports that 

would be useful. 

5. The Office of Policy and Analysis should develop a LARS users’ manual and place the 

manual on-line. 

Directing Resources 

Agency resources should focus on projects that maximize technology potential to improve 

performance. Within the past 10 years, FCS institutions’ accounting systems have changed 

dramatically allowing examiners to have direct access to institutions’ loan data. Building on the 
 

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LARS concept, various offices within the OE have developed their own loan databases that are 

used during examinations of institutions in their districts. Over time these databases have become 

an integral part of the examination process because they are more comprehensive and accurate 

than LARS. However, the type of data collected and the way it is presented can vary from office to 

office. Because each institutions system varies, information is not standardized and system-wide 

loan analysis can be difficult. In addition, data security cannot be assured on loan information 

collected by examiners. 

FCS institutions report loan data in a consistent standardized format in LARS thereby making 

system-wide analysis easier. However, given LARS weaknesses, system-wide analysis using the 

data can be incomplete and questionable. Therefore, as part of the LARS redesign effort, the 

Agency should have a comprehensive understanding of whom its customers are and their needs 

and expectations. This is essential for improving the loan data collection process. Resources 

should be expended in system development that will have the greatest Agency impact. Before 

investing significant funds in redesigning LARS, consideration should be given to leveraging off 

existing loan databases to obtain necessary data. In addition, more emphasis needs to be placed 

on trying to integrate the Agency’s various loan data collection processes. According to the LARS 

system managers, the redesign project will include reviewing various loan level data collection 

processes to assess the risks, costs and benefits of each. Given this, prior to expending significant 

funds on redesigning LARS, Board members should be provided information on the various 

processes reviewed and the Chief Executive Officer should decide on the system that best meets 

the Agency goals and mission. 

Agreed Upon Actions

6. The Office of Policy and Analysis should report to the Farm Credit Administration Board 

on the risks, costs and benefits of possible loan data collection systems reviewed during 

the redesign project. The Chief Executive Officer should decide on the system that best 

meets the Agency goals and mission. 

7. The Office of Policy and Analysis should demonstrate through performance measures 

how LARS is improving Agency operations and mission effectiveness. 

Roles and Responsibilities 

If the Agency decides to continue with the LARS redesign project, the chief executive officer needs 

to understand the various organizational changes involved. LARS system managers are working 

diligently to develop a project plan, however, given LARS decreased use and high user 

dissatisfaction, Agency staff may not be fully committed to a redesign project. Reengineering 

projects need support with the right roles, responsibility and skills. Historically, efforts to improve 

LARS have produced minimal results. For example, a LARS Feasibility Study conducted in 1991 

addressed some of the same issues that remain today such as data accuracy and ease of use. 

Further, in 1994 a review was conducted to produce standard reports from LARS without much 

success. A significant amount of resources were wasted on these projects because they lacked 

the necessary Agency commitment to ensure their success. 

Roles. For a project to be a success the Agency must create ownership. Studies have 

shown that chief executives who played a strong leadership role in improving information 

technology programs have resulted in successful projects. Chief executives’ involvement helps 

reinforce information management decisions, accountability and focuses system development on 

activities that promote measurable mission outcomes. Without such accountability, it is easy for 

the project to become delayed and fail to reach the initial goal. 
 

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Responsibility. It is critical that the LARS redesign project incorporate the right staff into the 

planning process. Given the various offices involved in the Agency loan data collection process, 

work group members should include staff representation to facilitate communication and maintain 

momentum during project development. In addition, because the redesign project will require 

work process innovation, cutting across program and functional lines; accountability must also be 

aligned with a decision-making authority that is able to raise issues above existing stovepipes. 

Therefore, the LARS project oversight should be at a level that can eliminate bottlenecks and 

resolve thorny operational issues that can easily stall improvement initiatives. By aligning project 

responsibility with Agency authority, staff will work effectively to change processes. 

Technical skills. Because of the project intricacy, the work group needs to include Agency 

staff that has the technical skill and informational knowledge to assist with project development. 

Work group members need to include Agency staff knowledgeable in the various loan database 

systems already developed within the Agency. For example, work group members should include 

examiners who have developed the various OE loan database systems. In addition, the work 

group should include a member who is knowledgeable in institutions’ loan accounting systems. 

Further, the Office of the Chief Information Officer should be involved in the process early on to 

facilitate future development plans. If the Agency feels it lacks the necessary resources to carry 

out the project, consideration should be given to involving a consultant to help guide the Agency’s 

effort. However, before pursuing a consultant, the Agency should have a strong business case 

that the redesigning effort is the best alternative to meeting the Agency needs. In addition, the 

Agency should have enough of a skill base so it can retain leadership and control over the project. 

Agreed Upon Actions 

8. The Office of Policy and Analysis should provide periodic reports on the LARS redesign 

effort to the Farm Credit Administration Board members. 

9. As part of the LARS redesign project, the Office of Policy and Analysis should conduct 

an assessment to determine whether the Agency has adequate resources to support the 

project. The assessment should identify the necessary skills and knowledge needed to 

develop the project. In addition, a determination should be made on whether the Agency 

employees that possess those skills and knowledge will be available to assist with system 

development. 
 

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 Appendix 1: LAR SURVEY RESULTS

The chart below shows users’ responses to survey questions concerning LARS information and 

content. The survey was sent to 87 users who had access to LARS. We received 37 responses 

(43% response rate). Ten users who responded to the survey did not express an opinion on the 

issues listed below because they use other sources for loan-level data. The majority of those who 

did not express an opinion were examiners. 

 

Very 

Satisfied Satisfied 

Some 

Dissatisfaction Dissatisfied 

Completeness 0 5 10 12 

Usefulness 0 6 12 9 

Relevance 0 10 11 6 

Accuracy 0 10 10 7 

Ease of Use 0 12 11 4 
Management Response
Farm Credit Administration 1501 Farm Credit Drive 

 McLean, Virginia 22102-5090 

 (703) 883-4000 

August 26, 2003 

Mr. Stephen Smith, Inspector General 

Office of the Inspector General 

Farm Credit Administration 

1501 Farm Credit Drive 

McLean, VA 22102-5090 

Dear Mr. Smith 

We appreciate the opportunity to comment on the Office of The Inspector General's (GIG) 

audit report on LARS. Overall, the report is a reasonable discussion of the Farm Credit 

Administration's (agency) current use of LARS and the data it provides for policy analysis 

and supervisory monitoring purposes. We agree with the nine recommendations contained 

in the draft report, and will implement corrective actions as soon as possible. We also expect 

the report to add value to our work on the LARS Redesign effort already underway in the 

agency. 

We agree with the report's conclusions about the comprehensiveness of LARS data in 

providing detailed loan level information. The data limits of the current LARS are 

understood and recognized. For instance, the current LARS specification of loan level 

data excludes participations and loans made by CoBank, ACB. We also acknowledge 

the need to follow a comprehensive and inclusive approach to identifying changes to 

loan level data requirements of the agency as we move to re-engineer LARS. 

We also concur with the report's conclusion that LARS data needs to be accurate and 

that users currently believe the data is inaccurate. We also want to thank you for noting 

that we have taken steps to improve data accuracy. CPA will continue to work to 

implement cost- effective and efficient approaches to strengthening the accuracy and 

quality of LARS data. 

The report also cited concerns with LARS' ease of use and the need for standardized 

and historical reports. While we agree in general that such changes are needed to 

reach a broader user population, we wish to point out that users can easily access 

LARS data and download information for analysis and monitoring needs. LARS is fully 

integrated in the agency's information systems. However, we acknowledge that we can 

improve in this area. We plan to focus our LARS Redesign project on improving 

substantially the ease of accessing and using loan level information in summary and 
 

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other reports. Meanwhile, we are considering simpler ways in making the LARS loan 

level information available to a broader user group. 

We agree with the report's conclusion that we need to review how we collect loan level 

data from Farm Credit System (System) institutions and collaborate closely with OE on 

their needs, including how they collect loan level data for examination purposes. OPA is 

committed to developing a loan level data collection system that is cost-effective and 

efficient. 

Fundamental to this commitment is reducing the reporting burden on the System and 

meeting the information needs of critical user groups. As we move forward with the 

LARS Redesign project, we are focused on re-engineering the current collection system 

by considering new approaches and possible avenues to coordinate loan level data 

collection agencywide. 

Throughout the LARS audit, OIG staff was courteous and responsive to OPA's 

questions and suggestions. We appreciate their efforts and look forward to working 

together as we move forward in implementing the recommendations contained in the 

report. 

Thank you and your staff for this valuable insight. I believe it will help us develop a more 

viable and useful LARS and contribute to the overall efficiency and effectiveness of the 

agency. 

Sincerely, 

/signed/

Michael V. Dunn, Director 

Office of Policy and Analysis 
REPORT

FRAUD

WASTE 

ABUSE

MISMANAGEMENT

FARM CREDIT ADMINISTRATION

INSPECTOR GENERAL OFFICE

TOLL FREE 1-800/437-7322

Washington , DC Area 703/883-4316

E-Mail fca-ig-hotline@starpower.net

1501 Farm Credit Drive McLean, Virginia 22102-5090