Office of 

Inspector General 

Committees Established by the 

Farm Credit Administration Board 

06-01

Veronica McCain 

Auditor-in-Charge 

March 5, 2008 
Farm Credit Administration Office of Inspector General

1501 Farm Credit Drive 

 McLean, Virginia 22102-5090

 

March 5, 2008 

The Honorable Nancy C. Pellett 

Chairman of the Board and 

 Chief Executive Officer 

Farm Credit Administration 

1501 Farm Credit Drive 

McLean, Virginia 22102-5090 

Dear Chairman Pellett: 

The Office of Inspector General completed an audit of the Regulation and Policy Development, Risk, 

and Strategic Planning committees established by the Farm Credit Administration Board. The 

objectives of the audit were to evaluate whether the committees’ operations reflect sound business 

practices and determine if the work of the committees is helping FCA Board members with their 

oversight responsibilities. 

 

We found that the establishment of the committees by the FCA Board has improved communication 

between FCA Board members and Agency staff. Also, the committees have assisted FCA Board 

members in their oversight responsibilities. To ensure the committees continue to be an integral part 

of the Agency’s structure and functioning, and to refine and strengthen their operations, steps should 

be taken to fully incorporate or institutionalize the committees within the Agency. Further, the 

committees should adhere to Federal and Agency guidance on recordkeeping. 

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

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

conducted fieldwork from June to December 2006. The OIG held an exit conference and discussed 

the draft report with you, your Executive Assistant, and the Chief of Staff on December 13, 2006. 

Based on that meeting, we provided a final draft report to you on January 9, 2007. Subsequently, 

your office presented planned actions to the OIG to address the report’s recommendations. As a 

result, all recommendations have been changed to agreed upon actions. 

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

Respectfully, 

Carl A. Clinefelter 

Inspector General 
Table of Contents 

BACKGROUND __________________________________________________________ 1 

OBJECTIVE AND SCOPE _________________________________________________ 1

FINDINGS AND RECOMMENDATIONS _______________________________________ 2

Communication Improvements ____________________________________________________2 

Committee Functioning __________________________________________________________2 

Recordkeeping Practices_________________________________________________________4 

Farm Credit Administration Organizational Structure____________________Appendix
BACKGROUND 

The Farm Credit Administration (FCA or Agency) completed phased strategic studies on the 

Agency’s operations in early 2005. The studies resulted in numerous recommendations regarding 

the Agency’s structure and processes. One substantive recommendation was to establish a 

communications group that would meet regularly and serve as a conduit between FCA Board 

members and Agency staff with respect to regulation and policy development. Group members 

would include the executive assistant of each FCA Board member and individuals representing the 

Offices of Regulatory Policy, General Counsel, Examination, and Secondary Market Oversight. 

According to the recommendation, the communications group’s purpose would be to facilitate 

communication and information flow between the FCA Board and Agency staff, but would have no 

decision-making authority. 

Another strategic study recommendation was that FCA comply with the concepts of the SarbanesOxley Act of 2002 to improve FCA Board governance by forming a collaborative, but non-directive 

group, to: 

• Periodically scan for potential emerging risks, 

• Study their likelihood and impact, 

• Plan the appropriate regulatory response, and 

• Provide input to the policy process. 

In response to these recommendations, the FCA Board revised its major operational policy, Policy 

Statement 64, effective June 27, 2005, and established three committees: Regulation and Policy 

Development, Risk, and Strategic Planning. The committees became a part of the Agency’s 

published organization structure in January 2006. [See Appendix A for the Agency’s Organizational 

Chart.] 

The committees are intended to assist the FCA Board in exercising its responsibility for Agency 

oversight, approval of regulations and policy, the monitoring and assessment of risk, and the 

formulation of the Strategic Plan. Each committee is comprised of the FCA Board members’ 

executive assistants and such other Agency staff as determined by the chair of each committee. 

Each committee chair is designated by the FCA Board Chairman. Each committee chair is to 

designate a coordinator with expertise in, or significant accountability for, the activities of the 

committee. 

OBJECTIVE AND SCOPE 

The objectives of this audit were to evaluate whether the committees’ operations reflect sound 

business practices and determine if the committees’ work is helping FCA Board members with their 

oversight responsibilities. 

The scope of our audit work included the following: 

1. Interviews with FCA Board members and their executive assistants, 

2. Interviews with each committee chair and coordinator, 
3. The review of products generated by the committees, 

4. The review of the strategic studies entitled Organizational Needs for the Office of 

Examination, Office of Policy and Analysis, and Office of Secondary Market Oversight 

dated March 31, 2005. 

5. The review of Policy Statement 64 as it pertains to the committees’ objectives, 

6. The review of law and internal guidance on records management and how committees 

should function, and 

7. The review of best practice documents and external guidance on how committees should 

function. 

FINDINGS AND RECOMMENDATIONS 

The establishment of the committees by the FCA Board has improved communication between 

FCA Board members and Agency staff. The committees are seen as a valuable mechanism to 

assist FCA Board members in their oversight responsibilities. To ensure the committees continue 

to be an integral part of the Agency’s structure and functioning, and to refine and strengthen their 

contributions, steps should be taken to fully incorporate or institutionalize the committees within the 

Agency. Further, the committees should adhere to Federal and Agency guidance on 

recordkeeping. 

Communication Improvements 

Based on our discussions with FCA Board members and Agency staff, the committees have been 

an effective conduit for two-way communication between the FCA Board and staff. FCA Board 

members see the committees as a focal point where issues may be surfaced and discussed, and 

consensus achieved. According to FCA Board members, since the establishment of the 

committees, particularly Regulation and Policy Development, FCA Board members are learning 

about rule-making issues in the developmental stages and, with the opportunity to provide FCA 

Board comment early on, avoiding or reducing delays in the rule-making process. In addition, FCA 

Board members indicated they are now more involved in the rule-making process and are able to 

make better decisions based on their more comprehensive involvement. FCA Board members 

have been pleased with the work of the Regulation and Policy Development Committee and were 

able to cite specific regulations where this committee’s output has directly and positively impacted 

the FCA Board’s ability to better carry out its responsibilities. Two FCA Board members also 

expressed their desire that all the committees remain as a permanent part of the Agency’s 

organizational structure. 

Committee Functioning 

Considering the significant role the Regulation and Policy Development Committee has played in 

assisting FCA Board members’ decisions on regulation and policy development, and the potential 

the other committees have to assist the FCA Board in the areas of risk management and strategic 

planning, steps should be taken to ensure the committees’ intended functions and operations are 

fully delineated and documented. 

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The objectives for each committee outlined in Policy Statement 64 are as follows: 

• Regulation and Policy Development Committee - To provide a forum to (1) obtain FCA 

Board input throughout the entire process of developing, modifying, or eliminating 

individual regulations, (2) discuss changes in processes and procedures that will improve 

the Agency’s regulation and policy development process, and (3) foster open discussion 

during the development and periodic update of the Agency’s regulatory agenda. 

• Risk Committee - To provide a forum to (1) facilitate FCA Board awareness of risks to the 

ongoing mission fulfillment and safety and soundness of the System and Farmer Mac, 

(2) ensure an integrated and coordinated Agency risk analysis process that effectively 

uses information from a wide variety of internal and external sources, and (3) foster open 

discussion about risks to the System and Farmer Mac and the implications of such risks 

for future Agency operations. 

• Strategic Planning Committee - To provide a forum for FCA Board input on (1) the 

development of, and periodic updates to, the Strategic Plan, and (2) changes in processes 

and procedures that will improve the quality of this key Agency document. 

These objectives are the only reference point for understanding the purpose of the committees. 

However, given the major role intended by the FCA Board for the committees and the envisioned 

permanence of the committees, documentation on the role and functioning of the committees 

should be further developed. 

According to the FCA Examination Manual, Farm Credit System institutions’ board committees 

should have clear written statements of their mission, authorities, responsibilities, and duration. 

While the structure of the committees established by the FCA Board is not directly parallel to 

committees of System institutions’ boards, the former are Agency committees and should adhere 

to the same standards of committee establishment and operations to which System institution 

board committees are held. 

Additionally, our audit did not find evidence of FCA Board expectations by which committee 

performance could be measured. To ensure that the committees function as envisioned by the 

FCA Board, performance expectations should be developed for each committee. Performance 

expectations would enable the performance of the committees to be assessed and redirected as 

necessary. 

An Agency document expanding the purpose and expectation of the committees would provide a 

better Agency-wide understanding of the committees. In addition, such a document could help 

ensure the committees are fully incorporated into the Agency’s communication and decisionmaking processes between the FCA Board and Agency staff. Based on our research of effective 

committee establishment and functioning, this document could include the following for each 

committee: 

• Mission 

• Scope of Responsibilities 

• Performance Expectations 

• Authorities 

• Structure 

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• Meeting Schedule 

• Operating Processes 

• Record Keeping Guidelines 

Agreed Upon Action

1. The Chief Executive Officer should formally document the mission, authorities, 

responsibilities, performance expectations, and duration of the Regulation and Policy 

Development, Risk, and Strategic Planning Committees. 

Recordkeeping Practices 

A record of committee meetings should be made to ensure Agency business transactions are 

documented and maintained. According to Federal guidance, the head of each Federal agency 

shall make and preserve records containing adequate and proper documentation of the 

organization, functions, policies, decisions, procedures, and essential transactions of the agency. 1

 

The Agency’s guidance on records management states that employees must ensure minutes are 

taken at important FCA Board, committee, and staff meetings at which Agency business is 

transacted or discussed. 2

 For example, minutes must be taken and maintained when there is a 

meeting of a group that makes recommendations to a person(s) in a decision- or policy-making 

position. The minutes must be maintained within the Agency’s system of records and include a 

copy of the agenda and all documents that were considered at or resulted from such meetings. 

During committee meetings there is open discussion between senior-level Agency staff and FCA 

Board members’ executive assistants. Discussions include issues that affect FCA Board 

members’ decisions in areas such as regulation and policy development, risk management, 

strategic planning, and governance. According to committee members, while participants have 

taken notes during committee meetings, there are no formal minutes taken and maintained to 

record what was discussed at the meetings. Considering that committee discussions assist FCA 

Board members in making decisions, a record of committee meetings should be documented and 

maintained in official Agency files. In addition, documents generated for committee meetings are 

also considered Agency records and should also be maintained in official Agency files. A 

centralized database system would be an effective tool for storing, organizing, and sharing 

committee meeting records. 

Agreed Upon Action

2. The Chief Executive Officer should require that the Regulation and Policy Development, 

Risk, and Strategic Planning Committees make a record of committee meetings and 

ensure these records are maintained in official Agency files. 

 

1

 44 U.S.C. 31 § 3101, Records Management by Agency Heads. 

2

 Agency Administrative Policy 903, Records Management June 7, 1998. 

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Appendix 

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REPORT 

Fraud | Waste | Abuse | Mismanagement 

FARM CREDIT ADMINISTRATION 

OFFICE OF INSPECTOR GENERAL 

• Phone: Toll Free (800) 437-7322; (703) 883-4316 

• Fax: (703) 883-4059 

• E-mail: fca-ig-hotline@starpower.net

• Mail: Farm Credit Administration 

Office of Inspector General Hotline 

1501 Farm Credit Drive 

McLean, VA 22102-5090 

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