OFFICE OF 

INSPECTOR GENERAL 

Office of Examination 

Travel Expense Budgeting, 

Usage and Control 

A-09-02 

Report of Audit 

FARM CREDIT ADMINISTRATION 

July 23, 2009 

Veronica McCain 

Auditor-in-Charge 
 

 

 

 

 

 

 

 

 

 

Farm Credit Administration	 Office of Inspector General 

1501 Farm Credit Drive 

McLean, Virginia 22102-5090 

July 23, 2009 

The Honorable Leland A. Strom 

Chairman of the Board 

Farm Credit Administration 

1501 Farm Credit Drive 

McLean, Virginia 22102-5090 

Dear Chairman Strom: 

The Office of Inspector General completed an audit of the Office of Examination’s (OE) Travel 

Expense Budgeting, Usage and Control. 

We found OE’s travel expense budgeting process, usage and control to be satisfactory. The 

travel budget is well defined and supported, and travel expenditures are appropriately tracked 

by functions performed by the OE. Our analysis of travel usage shows that organizational 

changes and examination methodology have primarily contributed to travel costs increasing, 

but not inappropriately. OE continuously monitors travel expenditures to ensure they do not 

exceed budgeted amounts. In addition, technology is being used as an alternative to travel. 

OE and the Agency as a whole can achieve additional travel expenditure savings through the 

increased use of technology. 

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 January 2009 through June 2009, provided a discussion draft report 

to management on June 24, 2009, and held an exit conference regarding the discussion draft 

report with the Chief Examiner on July 21, 2009. 

We appreciate the courtesies and professionalism extended to the audit staff. If you have any 

questions about this audit, I would be pleased to meet with you at your convenience. 

Respectfully, 

Carl A. Clinefelter 

Carl A. Clinefelter 

Inspector General 
 

 

 

Table of Contents 

BACKGROUND_______________________________________________________ 1
 

OBJECTIVE AND SCOPE_______________________________________________ 1
 

CONCLUSIONS_______________________________________________________ 2
 

AUDIT RESULTS
 

Travel Budgeting Process _________________________________________________ 3
 

Travel Budget Usage _____________________________________________________ 4
 

Travel Expenditure Control _________________________________________________ 5
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BACKGROUND 

The Office of Examination (OE) is the largest organizational unit in the Farm Credit 

Administration (FCA or Agency) and responsible for the Agency’s ongoing examination and 

supervision of Farm Credit System (FCS or System) institutions. Over the past several years, 

OE has undergone significant organizational change. This was based in large part on 

recommendations made from a 2005 strategic study of OE and other Agency operations that 

was completed by an outside firm. Prior to FY 2006, OE’s organizational structure consisted of 

five field offices that conducted examinations primarily within their geographic territory. In FY 

2006, while there remained five field offices, OE changed its organizational methodology from a 

geographical to a functional structure. That is, each of the field offices contributes staff to the 

examination and supervision functions on a national versus regional basis. Put another way, the 

functional organizational structure is intended to allow OE to bring to examinations the needed 

skills and resources regardless of their geographic location. 

The new organizational structure does require OE staff to travel to locations outside their 

geographic location; however, OE feels it makes all efforts to accomplish its mission by using its 

human resources as efficiently as possible. 

OBJECTIVE AND SCOPE 

The objective of this audit was to evaluate OE’s budgeting process, usage and control regarding 

travel expenses. 

The scope of the audit work included the following: 

•	 Interviews with the Chief Operating Officer, Chief Examiner, Chief Information Officer 

and OE budget staff. 

•	 Review of the Agency’s strategic study entitled Organizational Needs for the Office of 

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

dated March 31, 2005, conducted by KPMG. 

•	 Review of OE’s organizational charts, travel information, operational plans, staffing data, 

bank examination information and time recording system data. 

•	 Review of various OE travel budget/expenditure data provided by the Office of
 

Management Services for FYs 2004-2009.
 

The audit was performed at FCA headquarters in McLean, Virginia, from January 2009 through 

June 2009, in accordance with generally accepted auditing standards for Federal audits. 

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CONCLUSIONS 

OE’s travel budgeting process, usage and control are satisfactory. 

Travel Budgeting Process. We found OE’s process for determining its travel budget was 

satisfactory. OE’s travel budget process is a detailed systematic assessment of 

projected travel costs for the various functions performed by the office. The travel 

budget is well defined and supported. 

Travel Budget Usage. Travel expenditures are appropriately tracked by functions 

performed by OE. This process provides a clear perspective on how travel funds are 

being used. Our analysis of travel usage shows that organizational changes and 

examination methodology has primarily contributed to travel costs increasing but not 

inappropriately. 

Travel Expenditure Control . OE has implemented processes to control travel costs. 

Travel expenditures are continuously monitored to ensure expenditures do not exceed 

budgeted amounts. Examination schedules are coordinated so that travel is conducted 

economically and efficiently. In addition, technology is being used as an alternative to 

travel. 

While OE has made strides in its use of technology to reduce travel costs, OE and the 

Agency as a whole can achieve additional travel expenditure savings through the 

increased use of technology. 

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AUDIT RESULTS 

Travel Budgeting Process 

OE’s travel budget is well defined and supported. OE uses a functions/activities matrix approach for 

generating its travel budget. This matrix process breaks travel into manageable areas for estimating travel 

costs. The diagram below shows how the process works. This diagram is for illustrative purposes only. 

OE’s travel budget is broken out into six main 

areas of responsibilities. 

Within each of the main areas are function 

activity line items which account for all the work 

performed by OE. 

Each function activity line item has a sponsor 

within OE who is responsible for initially 

developing that portion of the travel budget. 

The sponsors determine the number of days and 

costs for travel planned for their specific function 

activity line item. Travel budget estimates are 

based on historical information and projected 

travel needs. 

The sponsor forwards their budget estimates 

with supporting documentation to the 

responsible Division Director. The Division 

Director reviews the information and discusses 

the data with the sponsor, as needed. 

The Division Directors forward their information 

to OE budget personnel. Budget personnel 

review budget information for reasonableness 

and support. and consolidates the data into the 

overall OE travel budget spreadsheet. 

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The consolidated spreadsheets are forwarded to the OE Executive Management Team and 

Chief Examiner for review and discussion, and are adjusted as needed. The consolidated 

spreadsheets are then forwarded to Agency senior management for review. The Chief Examiner 

discusses the proposed budget with Agency senior management and makes revisions as 

needed. The budget is then submitted for FCA Board approval. 

Travel Budget Usage 

The chart below shows a break-down of actual travel expenses in OE’s six main categories of 

operations from FYs 2005-2008. 

0 

500,000 

1,000,000 

1,500,000 

2,000,000 

2,500,000 

2005 2006 2007 2008 

Policy & Guidance 

Management & Administrative 

Support 

Planning, Reporting & Controls 

Human Capital Administration & 

Development 

General Examination Support 

Risk Identification & Supervision 

The chart shows travel expenditures are mainly in the areas of risk identification and 

supervision, general examination support, and human capital administration and development. It 

also shows the level of travel funds used in each of these areas has varied over the years. 

Based on discussions with the Chief Examiner and budget staff, travel cost increases in these 

areas can mainly be attributed to the following organizational and examination methodology 

changes. 

•	 Risk Identification and Supervision - Decreased travel costs from FY 2005-2006 were 

due to OE reorganizing and changing its examination philosophy to a more risk-based 

approach1

. The risk-based examination approach resulted in nearly half of the FCS 

institutions not receiving the examination related travel they had experienced in prior 

years. Also examination staff was reduced by 13 employees from FY 2005 -2006. 

1 An examination approach that seeks to stay abreast of risk in an individual FCS institution and focus examination efforts and 

resources in areas that could materially impact the safety and soundness of the FCS institutions. 

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The increase in cost in FY 2007 was due to 14 new associate examiners traveling to 

FCS institutions for on-the-job training. In addition, OE implemented its National 

Examination Program which included onsite examinations in the areas of call reporting, 

information technology and compliance, and shared assets. Also, due to risk at FCS 

institutions toward the end of FY 2007, OE managers began to increase onsite 

examination activity. 

•	 General Examination Support - Prior to FY 2005, Agency senior management decided 

to limit the executive management meetings and there was no OE annual conference. 

This resulted in little travel funds being expended on general examination support and a 

smaller baseline for measuring growth in this area in future years. 

In FY 2006, there was increased work and meetings at various field offices to orient the 

staff to the new organizational structure and risk-based examination process. In 

addition, improvements were made with the way travel expenditures were being 

recorded in the travel system resulting in a more accurate assessment of general 

examination support travel costs. 

Overall, the reorganization that began in FY 2006 has resulted in about two years of 

adjustments with additional travel funds being expended on examination support activity. 

•	 Human Capital Development - Human capital development and training increased in 

FY 2006 due to increase travel for recruiting new examiners. 

In FY 2007 and FY 2008, there were further increases in training-related travel due to 

the revamping of the commissioning program and placing greater emphasis on formal 

training for the new associate examiners hired in FY 2006-2008. 

OE is taking steps to control travel costs in these areas. This includes placing greater emphasis 

on technology to reduce travel between field offices and FCS bank examination travel. 

Travel Expenditure Control 

OE’s travel expenditures are monitored throughout the year to ensure costs remain under 

budget. In addition, technology is being used to reduce travel costs. 

Monitoring Costs - OE’s actual travel costs are continuously monitored by OE and other 

Agency staff. 

OE Travel Budget Staff - OE has a staff member who is responsible for overseeing the 

travel budget. The Office of Management Services Finance Team (OMS/FT) provides 

this person the following reports to assist with monitoring travel costs: 

•	 Detailed monthly reports on all travel vouchers filed and authorized 

outstanding, with a summary of days and dollars expended for travel in the 

six broad area budget categories, 

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•	 Quarterly reports on total nights traveled by each examiner, and 

•	 OE and OMS/FT then work together to complete various analyses on OE’s 

travel data. 

Field Office Directors and Supervisors - On a quarterly basis, OE budget staff provide 

field office directors and supervisors a summary of the travel expenses used to date 

compared with the budgeted amounts. 

As part of their operating plan, field office directors review their examination schedule 

and coordinate examinations to minimize staff travel time and ensure that the most 

economical and efficient way of conducting examinations is utilized. 

Agency Senior Management - As part of OE’s quarterly operation report to the Chief 

Operating Officer and Board members’ Executive Assistants, OE provides year-to-date 

actual travel cost expenditures by functional activities compared to budgeted amounts. 

Actual versus Budget Travel Costs - The continuous monitoring of travel costs has 

contributed to OE not exceeding their travel budget. 

Fiscal Years Approved Travel Budget Actual Travel Costs 

2005 $1,839,323 $1,414,939 

2006 $2,082,213 $1,800,629 

2007 $2,130,900 $2,038,798 

2008 $2,394,000 $2,258,985 

Leveraging Technology - OE is using technology to reduce travel costs. For example, 

recently OE used Live Meeting2 to conduct a training session on the new financial institution 

rating system oversight template. The Live Meeting was hosted by the McLean office and each 

of the field offices were connected on-line. The training was presented using a PowerPoint 

presentation. Field office staff was able to follow the PowerPoint presentation and ask 

questions using the whiteboard tool. The Agency plans on purchasing additional webcams 

which can be used with Live Meeting and is also in the process of upgrading the infrastructure in 

the field offices to increase bandwidths. 

Technology development is also being incorporated to assist with reducing travel costs for bank 

examinations. For example, five of the largest FCS institutions have signed an interconnect 

agreement with the Agency which allows FCA direct access to their financial information. Also 

the Agency has been working on the loan database to improve the sources of data to help with 

2 Live meeting is an online meeting space that allows you to collaborate in real-time even over long distances. Meeting attendees 

can deliver presentations, kick off a project, brainstorm ideas and collaborate on white boards from their personal computer without 

raveling. 

FARM CREDIT ADMINISTRATION - OFFICE OF INSPECTOR GENERAL 6 
 

 

 

 

off-site oversight. The Agency’s Chief Information Officer stated in the future the Agency will 

encourage more FCS institutions to take part in the interconnect agreement, but 

hardware/software compatibility and security concerns must be carefully considered. 

Agencywide Technology Advancement 

The Agency has also made investments in other technology such as Microsoft Communicator, a 

tool that enables users to communicate better when using instant messaging, voice, desktop 

sharing and video. It is used more for smaller group communication such as discussions and 

chats. In addition, the Agency has upgraded its videoconferencing to High Definition 

videoconferencing. The videoconferencing picture is better, much clearer and does not have 

as many problems with connections as in the past. 

Technology investments such as Live Meeting, Microsoft Communicator and High Definition 

videoconferencing are Agencywide initiatives that can help FCA work more efficiently. As the 

Agency continues to invest in technology to improve operations, measures need to be in place 

to ensure these investments are being fully utilized and projected benefits realized. 

FARM CREDIT ADMINISTRATION - OFFICE OF INSPECTOR GENERAL 7 
 

 

 

 

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@rcn.com 

•	 Mail: Farm Credit Administration
 

Office of Inspector General
 

1501 Farm Credit Drive
 

McLean, VA 22102-5090
 

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