Performance and Accountability Report

Fiscal Year 2016
Statement of the Board Chairman and CEO.............................................................................................................................1

Management’s Discussion and Analysis ....................................................................................................................... Page 2

FCA at a Glance................................................................................................................................................................3

Mission.........................................................................................................................................................................4

FCA Offices .................................................................................................................................................................4

Organization................................................................................................................................................................7

Highlights of FCA’s Performance Goals and Results................................................................................................8

Analyses and Highlights of FCA’s Financial Statements .......................................................................................10

Financial Highlights ................................................................................................................................................10

Program Costs and Revenues ...............................................................................................................................12

Limitations of the Financial Statements ..............................................................................................................15

Systems, Controls, and Legal Compliance.................................................................................................................16

Statement of Assurance..................................................................................................................................................20

Program Performance...................................................................................................................................................... Page 21

FCA Performance Report ..............................................................................................................................................22

Performance Measures and Results .....................................................................................................................33

Financial Section.............................................................................................................................................................. Page 35

Statement of the Chief Financial Officer....................................................................................................................36

Transmittal Letter of Auditor’s Report ......................................................................................................................37

Independent Auditor’s Report......................................................................................................................................39

Financial Statements .......................................................................................................................................................42

Balance Sheets...........................................................................................................................................................43

Statements of Net Cost...........................................................................................................................................44

Statements of Changes in Net Position...............................................................................................................45

Statements of Budgetary Resources .....................................................................................................................46

Notes to the Financial Statements........................................................................................................................47

Other Information............................................................................................................................................................ Page 60

Letter from the Inspector General on FCA’s Management Challenges...............................................................61

Management’s Response to the Inspector General ..................................................................................................68

Summary of Financial Statement Audit and Management Assurances...............................................................73

Improper Payments Elimination and Recovery Improvement Act.......................................................................74

Additional Information..................................................................................................................................................77

Contents
List of Tables Appearing in Report

1. Composition of Assets .........................................................................................................................................................10

2. Composition of Liabilities ...................................................................................................................................................11

3. Agency Budget......................................................................................................................................................................11

4. Funds Used by Major Budget Category ..........................................................................................................................12

5. Performance Measures and Results ..................................................................................................................................33

6. Summary of Financial Statement Audit...........................................................................................................................73

7. Summary of Management Assurances .............................................................................................................................73

8. Overpayment Payment Recaptures Without Recapture Audit Programs .................................................................75

9. Results of the Do Not Pay Initiative in Preventing Improper Payments .................................................................76

List of Figures Appearing in Report

1. Organization of the Farm Credit Administration ............................................................................................................7

2. FY 2016 Gross Costs by Agency Goal..............................................................................................................................13

3. FY 2016 Gross Revenue by Agency Goal ........................................................................................................................14

List of Acronyms Appearing in Report

CEO chief executive officer

Farmer Mac Federal Agricultural Mortgage Corporation

FCA Farm Credit Administration

FCS Farm Credit System

FCSIC Farm Credit System Insurance Corporation

FMFIA Federal Managers’ Financial Integrity Act

FIRS Financial Institution Rating System

FY fiscal year

GAAP generally accepted accounting principles

GAO Government Accountability Office

GSE government-sponsored enterprise

IT information technology

NCB National Consumer Cooperative Bank

OE Office of Examination

OIG Office of Inspector General

OMB Office of Management and Budget

OPM Office of Personnel Management

OSMO Office of Secondary Market Oversight

SFFAS Statements of Federal Financial Accounting Standards

USDA United States Department of Agriculture

YBS young, beginning, and small (farmers and ranchers)
FCA Performance and Accountability Report FY 2016 1

Statement of the Board Chairman and CEO

November 14, 2016

As Board Chairman and Chief Executive Officer of the Farm Credit Administration, I invite you to review this Performance and Accountability Report. It details our accomplishments and program and financial performance for fiscal year 

(FY) 2016. I am pleased to report that we achieved the goals outlined in our Strategic Plan and achieved or exceeded all 

targets for which there are data to measure performance.

I am also pleased to report that our FY 2016 financial statements have received an unmodified opinion from an independent auditor. These financial statements provide a fair representation of our accounting practices and demonstrate our 

commitment to sound fiscal management.

FCA is the arm’s length regulator of the Farm Credit System (System), including the Federal Agricultural Mortgage Corporation (Farmer Mac). Our mission is to ensure a safe, sound, and dependable source of credit and related services for 

agriculture and rural America.

In FY 2017, our examiners will focus on the following major risk topics:

• Intensifying credit risk

• Implementing the new capital regulations

In addition, we will continue to focus on an effective internal controls environment for all institutions. Some of the most

significant controls include board oversight, up-to-date policies and procedures, risk parameters, and internal audit coverage.

One of our greatest concerns this year is the downturn in the agricultural economy. Because of lower prices for most crop

and livestock products, net cash farm income is expected to fall in 2016 for a fourth consecutive year. In 2015, it fell an

estimated 18 percent; USDA expects it to fall another 13 percent in 2016. The decline in commodity prices is driven in 

part by high production levels, and USDA expects corn and soybean producers to have record harvests in 2016.

As a result of the drop in farm income, U.S. farmers carrying large amounts of debt are likely to experience some cash 

flow problems. Since those earnings problems may cause more loan delinquencies and other credit quality issues for 

System borrowers, our examiners will pay close attention to credit quality when assessing the loan portfolios of System 

institutions.

Also, when farm incomes decline, farmland values are usually not far behind. Because of consecutive years of lower farm 

income, U.S. cropland values softened in 2015, particularly in the Midwest. And according to a survey by the Federal Reserve Banks, most agricultural bankers expect farmland values to decline in 2016 between 5 percent and 10 percent.

Fortunately, the FCS remains financially sound and is well-positioned to withstand these challenges. For the first six 

months of 2016, the System reported moderate growth, favorable earnings, and higher capital levels. And although we are 

seeing some increase in credit risk, the System’s portfolio loan quality continues to remain stable.

To be able to continue to fulfill their mission during economic downturns like this, System institutions must have enough 

capital to withstand intensifying credit risk. In March 2016, we completed an ambitious rulemaking project to modernize 

our capital regulations and to make sure System institutions maintain adequate capital. We will provide guidance to help 

System institutions comply with these regulations in FY 2017, and our examiners will assess their compliance.

As we face the challenges ahead, we at the Farm Credit Administration remain committed to our mission, and we are 

proud to do our part to keep agriculture and rural America strong.

Kenneth A. Spearman

Board Chairman and CEO
2 FCA Performance and Accountability Report FY 2016

Management’s Discussion 

and Analysis
FCA Performance and Accountability Report FY 2016 3

FCA at a Glance 

The Farm Credit Administration is an independent agency in the executive branch of the U.S. 

government. We are responsible for regulating 

and supervising the banks, associations, and 

related entities in the Farm Credit System (FCS 

or System), including the Federal Agricultural 

Mortgage Corporation (Farmer Mac).

The FCS is a nationwide network of borrowerowned financial institutions that provide credit to 

farmers, ranchers, residents of rural communities, 

agricultural and rural utility cooperatives, and 

other eligible borrowers.

The agency was created by a 1933 executive order of President Franklin D. Roosevelt. FCA now 

derives its powers and authorities from the Farm 

Credit Act of 1971, as amended (12 U.S.C. 2001- 

2279cc). The U.S. Senate Committee on Agriculture, Nutrition, and Forestry and the U.S. House 

of Representatives Committee on Agriculture 

oversee FCA and the FCS.

FCA is responsible for ensuring that the System 

remains a dependable source of credit for agriculture and rural America. We do this in two 

specific ways: 

• We ensure that FCS institutions, including

Farmer Mac, operate safely and soundly and

comply with applicable laws and regulations.

Our examinations and oversight strategies focus on an institution’s financial condition and

any material existing or potential risk, as well

as on the ability of its board of directors and

management to direct its operations. We also

evaluate each institution’s compliance with

laws and regulations to serve eligible borrowers, including young, beginning, and small

farmers and ranchers. If a System institution

violates a law or regulation or operates in

an unsafe or unsound manner, we use our

supervisory and enforcement authorities to

ensure appropriate corrective action.

• We develop policies and regulations that

govern how System institutions conduct their

business and interact with customers. Our

policy and regulation development focuses

on protecting System safety and soundness;

implementing the Farm Credit Act; providing

minimum requirements for lending, related

services, investments, capital, and mission;

and ensuring adequate financial disclosure

and governance. We also approve corporate

charter changes, System debt issuance, and

other financial and operational matters.

We have our headquarters and a field office in 

McLean, Virginia. We also have field offices in 

Bloomington, Minnesota; Dallas, Texas; Denver, 

Colorado; and Sacramento, California.

We do not receive a federal appropriation. We 

are funded through assessments paid by System 

institutions and by reimbursable activities.

Our policy, regulatory agenda, and supervisory 

and examination activities are established by a 

full-time, three-person board whose members are 

appointed by the president of the United States 

with the advice and consent of the Senate. Board 

members serve a six-year term and may not be 

reappointed after serving a full term or more 

than three years of a previous member’s term 

but may remain on the board until a successor 

is nominated by the president and confirmed by 

the Senate. The president designates one member as chairman of the board, who serves in that 

capacity until the end of his or her own term. 

The chairman also serves as our chief executive 

officer.

FCA board members also serve as members of 

the Farm Credit System Insurance Corporation 

board of directors.
4 FCA Performance and Accountability Report FY 2016

FCA OFFICES

As of Sept. 30, 2016, FCA had 315 full- and parttime employees. These employees are divided 

among the following offices, with the majority 

serving in the Office of Examination. 

The FCA Board manages, administers, and establishes policies for FCA. The board approves the 

policies, regulations, charters, and examination 

and enforcement activities that ensure a strong 

FCS. The board also provides for the examination 

and supervision of the FCS, including Farmer 

Mac, and oversees the activities of the FCS 

Building Association, which acquires, manages, 

and maintains FCA headquarters and field office 

facilities.

The Chairman of the FCA Board serves as the 

chief executive officer (CEO). The CEO enforces 

the rules, regulations, and orders of the FCA 

board. He or she directs the implementation of 

policies and regulations adopted by the FCA 

board. The Office of the Chief Executive Officer 

plans, organizes, directs, coordinates, and controls FCA’s day-to-day operations and leads the 

agency’s efforts to achieve and manage a diverse 

workforce. 

The Chief Operating Officer has broad responsibility for planning, directing, and controlling 

the operations of the Offices of Agency Services, 

Examination, Regulatory Policy, and General 

Counsel in accordance with the operating philosophy and policies of the FCA board. He or 

she supervises and provides policy direction to 

the executive staff responsible for managing these 

offices. The COO oversees and coordinates the 

development and implementation of the agencywide strategic, operating, and budget plans and 

activities. The COO also coordinates the resolution of internal policy, personnel, and program 

issues with agency executive leadership and the 

FCA board. 

The Office of Agency Services, which was created in April 2016, manages human capital and administrative services for the agency. This includes 

providing the following services to the agency: 

staffing and placement, job evaluation, compensation and benefits, payroll administration, 

performance management and awards, employee 

relations, employee training and development, 

contracting, acquisitions, records and property 

management, supply services, agency purchase 

cards, photography, video, graphic design and 

publication services, and mail service. 

The Office of the Chief Financial Officer, which 

was created in April 2016, manages and delivers 

timely, accurate, and reliable financial services to 

the agency. The office establishes financial policies and procedures and oversees the formulation 

and execution of the agency’s budget. The office 

reports periodically on the status of the agency’s 

financial position, results of operations, and 

budgetary resources. It also oversees the agency’s 

travel management, internal controls, and personnel security programs. 

The Office of Congressional and Public Affairs 

(OCPA) serves as the agency’s principal point of 

contact for Congress, the media, other government agencies, FCS institutions, employees, System borrowers, and the public. OCPA develops 

and monitors legislation pertinent to FCA and 

the FCS, serves as the agency’s congressional liaison, facilitates intergovernmental relations, and 

prepares testimony for the chairman and other 

board members. The office also provides information to external audiences through news releases, 

fact sheets, reports, and other publications. It 

cultivates relationships with media representatives who report on matters related to agriculture 

and rural credit, and it manages the content of 

the FCA website. OCPA also organizes special 

meetings, briefings for international visitors, and 

field hearings. 

Mission

The Farm Credit Administration ensures that System 

institutions and Farmer Mac are safe, sound, and dependable 

sources of credit and related services for all creditworthy and 

eligible persons in agriculture and rural America.
FCA Performance and Accountability Report FY 2016 5

The Office of Examination is responsible for 

examining and supervising each FCS institution 

in accordance with the Farm Credit Act and applicable regulations. The office develops oversight 

plans; conducts examinations; monitors the System’s condition and current and emerging risks 

to the System; and develops supervisory strategies to ensure that the FCS operates in a safe 

and sound manner, complies with the law and 

regulations, and fulfills its public policy purpose. 

For more information about the role of the Office 

of Examination, go to www.fca.gov/law/guidance. 

html and click View Board Policy Statements to 

read “Examination Policy” (FCA-PS-53).

The Office of General Counsel (OGC) provides 

the FCA board and staff with legal counsel as 

well as guidance on the Farm Credit Act and 

general corporate, personnel, ethics, and administrative matters. OGC supports the agency’s 

development and promulgation of regulations, 

enforcement of applicable laws and regulations, 

and implementation of conservatorships and 

receiverships. The office represents and advises 

the agency on civil litigation. It also serves as the 

liaison to the Federal Register, administers the 

agency’s ethics program, and handles Freedom of 

Information Act requests. 

The Office of Information Technology (OIT), 

which was created in June 2015, manages and 

delivers the agency’s information technology, 

data analysis infrastructure, and the security supporting agency technology resources. The office 

is responsible for the planning and control of 

information technology investments and leading 

change to improve the efficiency and effectiveness of agency operations. OIT is responsible for 

continuing to leverage FCA’s investment in technology by collaborating across agency offices to 

identify and re-engineer business processes. OIT 

provides strategies to collaborate across offices 

on business intelligence tools to develop analysis 

models to meet the strategic needs of the agency. 

The Office of Inspector General provides independent and objective oversight of agency 

programs and operations through audits, inspections, investigations, and the review of proposed 

legislation and regulations. The office promotes 

economy and efficiency within FCA and seeks 

to prevent and detect fraud, waste, abuse, and 

mismanagement in the agency’s programs and 

operations. 

The Office of Regulatory Policy (ORP) manages 

policy and regulation development activities that 

ensure the safety and soundness of the FCS and 

support the System’s mission. Policy and regulation development activities include the analysis 

of policy and strategic risks to the System on the 

basis of economic trends and other risk factors. 

ORP also evaluates all regulatory and statutory 

prior approvals for System institutions on behalf 

of the FCA board, including chartering and other 

corporate approvals, as well as funding approvals. 

The Office of Secondary Market Oversight 

(OSMO) provides for the examination, regulation, and supervision of Farmer Mac to ensure 

its safety and soundness and the accomplishment 

of its public policy purpose as authorized by 

Congress. OSMO also ensures that Farmer Mac 

complies with applicable laws and regulations, 

and it manages FCA’s enforcement activities with 

respect to Farmer Mac. 

The Secretary to the Board serves as the parliamentarian for the board and keeps permanent 

and complete records of the acts and proceedings 

of the board. He or she ensures that the board 

complies with statutory, regulatory, and internal 

operation reporting requirements. The secretary 

to the FCA board also serves as secretary to 

the Farm Credit System Insurance Corporation 

board. In addition, he or she serves as the Sunshine Act official for the FCA board. 
6 FCA Performance and Accountability Report FY 2016

The Office of Equal Employment Opportunity 

and Inclusion manages and directs the agencywide Diversity, Inclusion, and Equal Employment 

Opportunity Program for FCA and FCSIC. The 

office serves as the chief liaison with the Equal 

Employment Opportunity Commission and the 

Office of Personnel Management on all EEO, diversity, and inclusion issues. The office provides 

counsel and leadership to agency management to 

carry out its continuing policy and program of 

nondiscrimination, affirmative action, and diversity. 

The Designated Agency Ethics Official is designated by the FCA chairman to administer the 

provisions of title I of the Ethics in Government 

Act of 1978, as amended, to coordinate and manage FCA’s ethics program and to provide liaison 

to the Office of Government Ethics with regard 

to all aspects of FCA’s ethics program.
FCA Performance and Accountability Report FY 2016

7

Figure 1 

Organization

Farm Credit Administration

As of September 30, 2016
8 FCA Performance and Accountability Report FY 2016

Highlights of FCA’s Performance 

Goals and Results

FCA’s mission as stated in the FCA Strategic 

Plan for Fiscal Years 2013–20181 is to ensure a 

safe, sound, and dependable source of credit and 

related services for all creditworthy and eligible 

persons in agriculture and rural America. In the 

Strategic Plan, we identify two goals we must 

meet to fulfill our mission. For each goal, we 

have identified strategies and actions to achieve 

the goal, as well as a set of performance measures to measure our success in meeting the goal.

Our Performance Report shows that we achieved 

the goals identified in our Strategic Plan and 

achieved or exceeded all performance measures 

for which there are data to measure performance. 

The following is a summary analysis of our performance in reaching our goals.

Goal 1 Highlights—Public Mission: Ensure 

that the FCS and Farmer Mac fulfill their 

public missions for agriculture and rural 

areas. 

There are nine strategies and six performance 

measures established for goal 1 in the Strategic 

Plan (see table 5a). The six performance measures 

are as follows:

1. Percentage of FCS institutions with satisfactory operating and strategic plans for providing products and services to all creditworthy 

and eligible persons. (Target: ≥90 percent)

2. Whether Farmer Mac’s business plan contains strategies to promote and encourage 

the inclusion of all qualified loans, including 

loans to small farms and family farmers, in 

its secondary market programs, and whether 

its business activities further its mission to 

provide a source of long-term credit and 

liquidity for qualifying loans. (Target: Yes)

3. Percentage of direct-lender institutions with 

satisfactory consumer and borrower-rights 

compliance. (Target: ≥90 percent)

4. Percentage of direct-lender institutions with 

YBS programs that are in compliance with 

the YBS regulations. (Target: ≥90 percent)

5. Whether institutions meet the objectives of 

our mission-related regulations and whether 

institutions have made observable progress in 

meeting the objectives of any new missionrelated regulations that have been in effect 

for at least one year. (Target: Yes)

6. Whether FCA reached out to nontraditional 

commenters to request input on GSE mission-related rulemaking actions. (Target: Yes)

The agency achieved or exceeded its targets for 

five of the six measures associated with goal 1. 

We have no results to report for performance 

measure 6 because we did not approve any 

proposed rules during the reporting period that 

were related to the GSE mission.

Goal 2 Highlights—Safety and Soundness: 

Evaluate risk and provide timely and 

proactive oversight to ensure the safety and 

soundness of the System and Farmer Mac.

There are eight strategies and six performance 

measures for goal 2 (see table 5b). The performance measures are as follows:

1. Percentage of System assets in institutions 

with composite CAMELS ratings of 1 or 2. 

(Target: ≥90 percent)

 1 In April 2016, FCA adopted a new strategic plan covering the years 2016 to 2021. However, since the previous strategic plan 

was in effect for most of the reporting period, we used the measures from the earlier plan to assess the agency’s performance 

in FY 2016. Beginning next year, we will use the measures published in the Strategic Plan for FYs 2016–2021.
FCA Performance and Accountability Report FY 2016 9

2. Percentage of requirements in supervisory

agreements with which FCS institutions have

at least substantially complied within 18

months of execution of the agreements. (Target: ≥80 percent)

3. Percentage of institutions complying with

regulatory capital ratio requirements (permanent capital ratio, total surplus ratio, core

surplus ratio, net collateral ratio). (Target: ≥90

percent)

4. Whether the Office of Secondary Market

Oversight’s examination and oversight plan

and activities effectively identify emerging

risks, and whether appropriate supervisory

and corrective actions have been taken to effect change when needed. (Target: Yes)

5. Percentage of institutions with satisfactory

audit and review programs, including institutions with acceptable corrective action plans

(Target: 100 percent)

6. Percentage of FCS institutions providing FCA

with consolidated loan data. (Target: 100 percent)

We achieved or exceeded the targets for five of 

the six measures associated with goal 2. We have 

no results to report for performance measure 2 

because no supervisory agreements were in place 

at the end of the reporting period.

For more information about our performance results, see the Performance Results tables on pages 

33 and 34.
10 FCA Performance and Accountability Report FY 2016

Analyses and Highlights of 

FCA’s Financial Statements

Table 1. Composition of Assets

Fiscal 

Year

Fund Balance 

with Treasure Investments

Accounts 

Receivable and 

Prepayments

Property and 

Equipment Total

2016 $ 546,292 $ 29,756,481 $ 461,249 $ 1,277,101 $ 32,041,123

2015 $ 798,165 $ 30,409,961 $ 334,754 $ 390,163 $ 31,933,043

FINANCIAL HIGHLIGHTS

Financial operation of FCA

At FCA, we pay for planned administrative 

expenses from a revolving fund, which is funded 

primarily by assessments received from Farm 

Credit System institutions, including the Federal 

Agricultural Mortgage Corporation (Farmer Mac) 

and the System’s service corporations.

We calculate the assessments using a formula 

established by FCA regulation. The FCA board 

approves our budget, and Congress usually imposes a limitation on the amount of obligations 

that we may incur in a given fiscal year.

In addition to assessments, we receive funds 

from two other sources:

• Reimbursable services: We are reimbursed 

for examining the National Consumer Cooperative Bank and for performing services for 

the Farm Credit System Insurance Corporation and the U.S. Department of Agriculture 

(USDA).

• Interest earned: We earn interest on investments with the U.S. Department of the Treasury. We use interest earned on investments 

to build and maintain an agency reserve. The 

reserve ensures that we can effectively and 

efficiently respond to unanticipated, one-time, 

mission-related issues without needing to 

increase assessments.

Using information from the financial statements 

beginning on page 42, this section highlights key 

points about FCA’s financial condition for fiscal 

years 2016 and 2015.

FCA’s assets, liabilities, and net position 

The balance sheets on page 43 presents our financial condition as of fiscal year-end 2016 and 2015. 

It shows the value of our assets (the resources we 

own) and the amount of our liabilities (what we 

owe to the public and other government agencies). The difference between the total assets and 

total liabilities represents our net position.

As shown in table 1, our total assets for FY 2016 

are composed of the following: 

• Our fund balance with Treasury (1.7 percent) 

• Investments (92.9 percent) 

• Accounts receivable and prepayments (1.4 

percent) 

• Property and equipment (4.0 percent). 

During FY 2016, total assets increased by 

$108,080, or 0.3 percent, from amounts reported 

in FY 2015. 

Property and equipment balances reflected the 

largest increase in FY 2016 because we purchased 

new laptops for all employees. We made this 

purchase in accordance with our scheduled laptop replacement program. The old laptops were 

fully depreciated prior to the purchase of the 

new laptops.
FCA Performance and Accountability Report FY 2016 11

Table 3. Agency Budget 

2016 2015

Assessments (current year) $58,300,000 $54,500,000

Assessments (carryover from prior years) 4,400,000 10,600,000

Reserve 2,900,000 0

Reimbursable activity 600,000 500,000

Total $66,200,000 $65,600,000

* FY 2015 assessments were reduced by $3 million during FY 2015.

Table 2. Composition of Liabilities

Fiscal Year

Accounts 

Payable

Accrued 

Liabilities 

(Payroll and 

Benefits)

Employer 

Contributions 

and Taxes 

Payable

Workers’ 

Compensation 

(Funded and 

Unfunded)

Deferred 

Revenue Total

2016 $ 349,342 $ 6,232,550 $ 512,345 $ 1,293,434 $ 4,676,787 $ 13,064,458

2015 $ 678,967 $ 5,534,975 $ 441,269 $ 1,293,166 $ 2,141,460 $ 10,089,837

Our investment portfolio, which accounts for 

the largest portion of our total assets, decreased 

by $653,480 in FY 2016. As in prior years, we 

have worked to reduce our assessment carryover 

balances by offsetting assessment increases to 

System institutions and funding portions of our 

budget each year with the assessment carryover. 

A reduced assessment carryover balance translates into reduced investment holdings because 

there is less cash available to invest in Treasuries.

We purchased $11,002,989 in U.S. Treasuries during fiscal year 2016, using an investment strategy 

that enables us to both maintain a steady cash 

flow for agency operations and to earn interest 

to build the agency reserve. We hold the reserve 

funds in contingency to address specific, onetime, unforeseen events.

As of Sept. 30, 2016, the agency held $546,292 in 

cash. We prefer to keep our cash balances lower 

than this by investing all excess cash in U.S. 

Treasury securities; however, we received funds 

from a number of FCS institutions on Sept. 30—

after the cutoff time for investing.

Our liabilities, as shown in table 2, consist of the 

following:

• Accounts payable (2.7 percent)

• Payroll and benefits (47.7 percent)

• Employer contributions and taxes payable

(3.9 percent)

• Workers’ compensation (9.9 percent)

• Deferred revenue (35.8 percent)

Like total assets, our total liabilities increased 

from 2015 to 2016. Driven primarily by the 

increase in deferred revenue, overall liabilities 

increased by 29.5 percent.

Deferred revenue represents assessments received 

from FCS institutions that are not yet due. In FY 

2016, it increased by 118.4 percent from 2015 to 

$4,676,787. Deferred revenue increased for two 

reasons: assessments were higher in FY 2017, and 

some of the System’s larger institutions prepaid 

their assessments for 2017 this year. At the beginning of each fiscal year, we reclassify any prepaid 

assessments as revenue earned in October of the 

new year.

The net position, which represents the cumulative 

results of operations since the agency began, decreased by $2,866,542, or 13.1 percent, during FY 

2016. The net position declined in part because 

of the increase in the net cost of operations (see 

the Program Costs and Revenues section) but 

also because of an increase in imputed financing sources (that is, rent and federal employee 

benefits). For a breakdown of the net position, 

see the Statements of Changes in Net Position on 

page 45.

FCA’s status of funds

Our budget represents our plan for achieving our 

mission and strategic goals while operating as effectively and efficiently as possible. Table 3 shows 

our board-approved budget amounts for FYs 2016 

and 2015. The overall FY 2016 budget increased 

by 0.9 percent over the 2015 budget.
12 FCA Performance and Accountability Report FY 2016

Table 4. Funds Used by Major Budget Category

Percentage Percentage

Budget Category FY 2016 of Total FY 2015 of Total

Personnel compensation and benefits $53,610,277 83.8% $49,371,359 82.9%

Travel and transportation 3,103,579 4.8% 3,069,502 5.2%

Contractual services 4,574,559 7.1% 3,759,942 6.3%

Property and equipment 1,387,830 2.2% 1,800,058 3.0%

Other 1,375,337 2.1% 1,520,657 2.6%

Total $64,051,582 100.0% $59,521,518 100.0%

In FY 2016, we continued to carry out our mission, program goals, and objectives within the 

available budget. While our board-approved budget for FY 2016 was $66.2 million, the congressional limitation on our spending was $65.6 million. 

The FY 2015 limitation was $60.5 million.

As table 4 shows, we used $64,051,582 of the 

funds available in 2016, (or 97.6 percent of 

our congressional limitation), compared with 

$59,521,518 of the funds available in 2015 (or 98.4 

percent of our limitation in 2015). The increase 

in personnel compensation, driven by salary and 

benefit increases, accounts for the largest increase 

in funds used from 2015 to 2016.

Personnel compensation and benefits continue 

to account for the most significant use of funds 

at FCA, representing 83.8 percent of total funds 

used in 2016. Funds used for property and 

equipment decreased by 22.9 percent. During FY 

2016, we expended funds for updated technology 

to enhance communication, increase efficiency, 

and better identify and respond to emerging 

risks.

PROGRAM COSTS AND REVENUES

This section describes our program costs and 

revenues for the fiscal years ended Sept. 30, 

2016, and Sept. 30, 2015. Please read this section 

in conjunction with the Statement of Net Cost. 

Because this section focuses on the cost of operations, some of the data provided here may differ 

from data provided in sections of this report that 

cover budgetary obligations.

Our board and management regularly review 

and update the agency’s five-year strategic plan 

to ensure that we can address challenges as they 

arise. As part of our strategic planning, we have 

developed human capital, information resource, 

and program plans to promote efficiency and effectiveness. We have also managed costs through 

sound business planning and effective resource 

management.

The net cost of our programs totaled $8,878,366 

for the 12 months ended Sept. 30, 2016, compared with $10,225,756 for the same period the 

previous year. Because gross revenue increased 

more than gross cost, net costs decreased in FY 

2016.
FCA Performance and Accountability Report FY 2016 13

Figure 2. FY 2016 Gross Costs by Agency Goal

The total cost of FCA’s programs for FY 2016 is 

$68,124,668, compared with $62,554,232 for FY 

2015. This represents an increase of $5,570,436, 

or 8.9 percent, from 2015. Figure 2 shows the 

breakdown of FY 2016 gross costs for each of the 

agency’s goals. Virtually all costs support our 

mission and program goals. The increase in total 

costs is primarily due to increases in staff and 

employee compensation. Increases in costs for 

information technology also contributed to the 

total cost increase.

Employee salaries and benefits represent our 

greatest overall cost. For 2016, employee compensation totaled $53,425,930, or 78.4 percent of total 

cost. This cost increased by $3,960,639, or 8.0 

percent, from 2015 because of staff growth, payfor-performance and employee benefit increases, 

career ladder promotions, and funded leave.

We plan to maintain competitive employee 

compensation by periodically performing compensation studies. To comply with the Financial 

Institution Reform, Recovery, and Enforcement 

Act of 1989, we must keep FCA salaries and 

benefits comparable with the salaries and benefits 

of other federal financial institution regulators. 

Keeping compensation competitive will help us 

continue to fulfill our mission to provide the 

FCS, including Farmer Mac, with effective regulation and oversight.

Figure 3 shows the breakdown of FY 2016 gross 

revenue for each of our goals. Earned revenue 

for 2016 totaled $59,246,302, up $6,917,826, or 

13.2 percent, from 2015. Overall earned revenue 

increased because of the increases in assessments 

of the FCS, reimbursable work, and interest 

earned on investments. 

Public Mission Program

We invest significant resources in our policymaking, regulatory, and corporate activity functions 

to ensure that the FCS, including Farmer Mac, 

fulfills its public mission as mandated by ConSafety and 

Soundness, 

74.0%

Public 

Mission, 

24.8%

Other, 1.2%
14 FCA Performance and Accountability Report FY 2016

Safety and 

Soundness, 

74.0% Public 

Mission, 

24.9%

Other, 1.1%

Figure 3. FY 2016 Gross Revenue by Agency Goal

gress. During FY 2016, we continued to ensure 

the safe and sound flow of funds to U.S. agriculture and rural areas by providing regulation, 

policy, and guidance for the FCS and Farmer 

Mac. We assessed the programs of FCS institutions and Farmer Mac to ensure that credit and 

services are extended to all eligible and creditworthy persons, including young, beginning, and 

small farmers and ranchers. 

Our costs for the Public Mission program include 

the review of borrower complaints. In accordance 

with the Farm Credit Act, we also review and 

approve FCS institutions’ mergers to enable institutions to structure themselves to best serve their 

customers.

For the fiscal year ended Sept. 30, 2016, program 

cost for public mission was $16,908,302, representing an increase of $3,400,838, or 25.2 percent, 

from the same period the previous year. The cost 

for the public mission program represents 24.8 

percent of our total costs for 2016.

Safety and Soundness Program

The examination and supervision of the FCS 

account for the largest portion of our costs at 

the program level. In 2016, cost of the safety 

and soundness program increased because of 

increases in staff and higher costs for employee 

compensation. The examination staff increased 

to meet human capital demands for institution 

examination and oversight to address growth in 

the FCS and rising risk in the U.S. agricultural 

and rural economies. 

We met oversight and supervisory challenges in 

2016 by leveraging technologies and providing 

guidance to institutions on rising risks. 

To maintain the quality of our service, we invest 

heavily in the recruitment and training of staff 

through our Examiner Commissioning Program. 

These recruiting and training efforts are necessary to meet human resource needs and to offset 

the impact of the large number of retirements 

that are expected within the next few years.
FCA Performance and Accountability Report FY 2016 15

During FY 2016, we met our goals and performance targets to ensure the safety and soundness 

of FCS institutions and Farmer Mac. Program 

cost for the examination and supervision of the 

FCS increased $1,955,106 to $50,375,754, which 

represents 74.0 percent of our total costs in 2016.

Other Activity

Other activity includes examining and overseeing the National Consumer Cooperative Bank 

and performing reimbursable services for USDA 

and the Farm Credit System Insurance Corporation. Actual costs incurred for these activities 

increased by $214,492 to $840,612 in 2016. The 

demand for reimbursable services for USDA, 

FCSIC, and the NCB increased from 2015 to 2016. 

The costs for providing reimbursable services 

represented approximately 1.2 percent of our 

total costs in 2016, an increase from 1.0 percent 

of total costs in 2015. Earned revenue for other 

activity totaled $652,420 for 2016, compared with 

$551,276 for 2015. Since the level of revenue is 

based on the level of reimbursable work completed, revenue increased by about the same rate 

as expenses.

LIMITATIONS OF THE FINANCIAL 

STATEMENTS

We have prepared the principal financial statements to report the financial position and results 

of our operations, pursuant to the requirements 

of 31 U.S.C. 3515(b). We have prepared these 

statements from our books and records in accordance with U.S. generally accepted accounting 

principles for federal entities and the formats 

prescribed by the Office of Management and 

Budget; however, the statements are in addition to the financial reports used to monitor and 

control budgetary resources, which are prepared 

from the same books and records.

As you read these statements, please keep in 

mind that they are for a component of the U.S. 

government, a sovereign entity. 
16 FCA Performance and Accountability Report FY 2016

Systems, Controls, 

and Legal Compliance 

Federal agencies are required to comply with a 

wide range of laws and regulations; to develop 

and maintain effective internal controls; and to 

maintain systems that generate timely, accurate, 

and useful information with which to make informed decisions. This section provides information on our financial management system strategy and our compliance with the following acts:

• Inspector General Act

• Federal Managers’ Financial Integrity Act

• Federal Financial Management Improvement 

Act

• Prompt Payment Act

• Debt Collection Improvement Act

• Improper Payments Elimination and Recovery Improvement Act

• Digital Accountability and Transparency Act

Financial management system strategy

We partner with the Bureau of the Fiscal Service’s Administrative Resource Center (ARC) 

to provide the agency with several financial 

management services. This partnership helps us 

maximize efficiency while maintaining a high 

standard of financial management and accountability. The partnership has also improved our 

data reliability, which helps us comply with 

OMB M-15-12, Increasing Transparency of Federal Spending by Making Federal Spending Data 

Accessible, Searchable, and Reliable.

Through our partnership with ARC, we use 

Oracle Federal Financials as our financial system 

of record. Oracle Federal Financials is a commercial, off-the-shelf software package, which is 

certified under the Joint Financial Management 

Improvement Program to meet federal government accounting requirements. This web-based 

software integrates our key activities, such as 

e-payroll, e-travel, purchase card activity, and 

federal investments.

Although we perform all procurement activities 

in-house, we partner with ARC for procurement 

system services and support. The procurement 

system is fully integrated with Oracle Federal Financials. This integration enables us to check our 

funds in real time and to commit and obligate 

funds as transactions are approved.

By working with ARC, we comply with the OMB 

Financial Management Line of Business initiative, 

which encourages agencies to improve the cost, 

quality, and performance of financial management systems by using shared services as required by two OMB Memorandums: 

• M-13-08, Improving Financial Systems 

Through Shared Services 

• M-10-26, Immediate Review of Financial Systems IT Projects 

In addition, our financial management system 

complies with the guidance outlined in OMB 

Circular A-123, Appendix D, Compliance with 

the Federal Financial Management Improvement 

Act of 1996.

Inspector General Act

The Inspector General Act of 1978, as amended, 

requires Inspectors General to report semiannually to their agency heads and to Congress. The 

semiannual reports prepared by the FCA Office 

of Inspector General (OIG) describe its audits, inspections, evaluations, and related activities, and 

the agency’s follow-up to its recommendations.

The OIG’s two semiannual reports covering FY 

2016 are available on FCA’s OIG website. Below 

is a summary of the recommendations or agreedupon actions in these reports, as well as our 

progress in taking corrective action.
FCA Performance and Accountability Report FY 2016 17

The OIG continues to report recommendations 

to correct audit, inspection, or evaluation findings as “agreed-upon actions” whenever we and 

the OIG have agreed on an acceptable way to 

resolve a recommendation. The OIG’s objective is 

to recognize our preferred method of correcting 

problems whenever possible.

Summary of OIG audit, inspection, and 

evaluation activities

The OIG issued 10 audit, inspection, or evaluation reports during FY 2016, resulting in 36 

agreed-upon actions. Thirty-two agreed-upon 

actions have been closed (including 11 of 14 

agreed-upon actions from the prior fiscal year); 

therefore, 18 actions remain open this fiscal year. 

The reports are available on FCA’s OIG website 

at www.fca.gov/home/inspector.html.

• On Nov. 9, 2015, the OIG issued the audit

report on FCA’s financial statements, internal

controls over financial reporting, and compliance with certain provisions of laws and

regulations for FY 2015. The auditors issued

an unmodified opinion on our financial statements. In the auditor’s opinion, our principal

financial statements presented fairly, in all

material respects, our financial position as

of the fiscal year ended Sept. 30, 2015, in

conformity with generally accepted accounting principles. Although the auditor did

not express an opinion on the effectiveness

of our internal controls, it did not identify

any deficiencies considered to be a material

weakness. The auditor also did not identify

any instances of noncompliance with selected

laws or regulations that could have a direct

and material effect on the financial statements. Finally, the audit produced no recommendations or agreed-upon actions.

• On Nov. 13, 2015, the OIG issued a final

report on an evaluation of FCA’s compliance

with the Federal Information Security Modernization Act for FY 2015. This evaluation

indicated that FCA has an information security program that continues to mature, and

the report contained no recommendations.

• On Feb. 29, 2016, the OIG issued the final

audit report “Human Capital Planning at the

FCA.” This audit resulted in 11 agreed-upon

actions that addressed succession planning,

coordination on Special Emphasis Programs,

FCA’s exit interview process, potential biases

and barriers to employment, and other human capital issues. All 11 agreed-upon actions were closed as of Sept. 30, 2016.

• On March 31, 2016, the OIG issued the final

audit report “The FCA’s Risk Project.” The

audit resulted in five agreed-upon actions.

The agreed-upon action regarding evaluation

of risk project software licenses was closed,

and four remain open as of Sept. 30, 2016.

• On March 31, 2016, the OIG issued the final

inspection report “FCA’s Process in Developing and Updating Policies and Procedures.”

The report included three agreed-upon actions, one of which addressed evaluation of

an automated review and approvals process.

All three agreed-upon actions were closed as

of Sept. 30, 2016.

• On April 21, 2016, the OIG issued the final

audit report “The FCA’s Controls Over the

Electronic Official Personnel Folder.” The

audit resulted in four agreed-upon actions,

which addressed internal procedures, monitoring, and finalizing results from a contractor’s review of Electronic Official Personnel
18 FCA Performance and Accountability Report FY 2016

Folders. All of these actions were closed as of 

Sept. 30, 2016.

• On June 1, 2016, the OIG issued the final audit report “Examination of Business Continuity at Farm Credit System Institutions.” The

audit resulted in two agreed-upon actions addressing workpaper templates and documentation requirements. Both actions were closed

as of Sept. 30, 2016.

• On Aug. 31, 2016, the OIG issued the final inspection report “Elimination of Unnecessary

Use of Social Security Numbers at FCA.” The

report identified safeguards implemented by

FCA and offered no recommendations.

• On Sept. 23, 2016, the OIG issued the final

audit report “FCA’s Position Management

and Job Evaluation Program.” The report

included six agreed-upon actions that addressed various matters, including transparency of the job evaluation system, documenting the promotion process in the Office of

Examination career ladder, and revisions to

items in the Policy and Procedures Manual.

All of these recommendations were open as

of Sept. 30, 2016.

• On Sept. 28, 2016, the OIG issued the final

audit report “FCA’s Oversight of Young,

Beginning, and Small Farmer Programs.” The

report included five agreed-upon actions regarding policies and procedures for oversight

activities and internal control planning. All

agreed-upon actions were open as of Sept.

30, 2016.

Summary of OIG audit, inspection, and 

evaluation recommendations

Recommendations or agreed-upon actions 

uncorrected as of Oct. 1, 2015: 14

New agreed-upon actions 

during FY 2016: 36

Agreed-upon actions closed 

during FY 2016: 32

Open agreed-upon actions 

as of Sept. 30, 2016: 18

Recommendations or agreed-upon 

actions open more than one year: 3

OIG survey of FCS institutions regarding the 

agency’s examination function

The OIG conducts a quarterly survey of FCS 

institutions regarding our examination function 

and examiners. The OIG issues quarterly reports 

and a fiscal year summary report to the FCA 

chief examiner and the FCA board. Average numerical ratings remained high for FY 2016, and 

anonymous comments provided by institutions 

generally reflected favorably on the examination 

process and examiners. However, the comments 

of survey respondents often provide constructive 

information that we can use to strengthen our 

examination processes.

Federal Managers’ Financial Integrity Act

In accordance with the Federal Managers’ Financial Integrity Act, we have established management controls to protect our programs and financial systems. We use management controls to 

hold managers accountable for the performance 

of their programs. Managers evaluate management controls annually to make sure the controls 
FCA Performance and Accountability Report FY 2016 19

conform to the principles and standards established by the Office of Management and Budget 

and the Government Accountability Office. We 

use the results of these evaluations to determine 

whether we have any material weaknesses.

The FCA Senior Assessment Team assesses our 

internal controls every two years. To conduct the 

assessment, the team uses the internal control 

management and evaluation tool of the Government Accountability Office. At its last assessment 

in FY 2016, the team concluded that our system 

of internal control is effective.

As a result of this biennial assessment and 

management’s annual internal control reviews, 

the FCA board chairman and CEO can provide 

reasonable assurance that we have no material 

weakness or financial system nonconformance 

that would place our overall control system at 

risk.

Federal Financial Management Improvement 

Act

The Federal Financial Management Improvement 

Act requires certain executive branch departments and agencies to report on their compliance 

with federal financial management system requirements, federal accounting standards, and the 

U.S. Standard General Ledger. Although we are 

not required to report under this act, we were in 

compliance with these system requirements for 

FY 2016.

Prompt Payment Act

We follow the Prompt Payment Act guidelines, 

which call for vendors generally to be paid 30 

days after receipt of a valid invoice for goods 

and services ordered and delivered. During FY 

2016, we paid on time 99.0 percent of the 3,694 

invoices subject to the Prompt Payment Act. 

Payments are made by electronic funds transfer 

through the Secure Payment System.

Debt Collection Improvement Act

The Debt Collection Improvement Act of 1996 

prescribes standards for carrying out federal 

agency collection actions and for referring an 

agency’s uncollectible debts to the proper federal agency for collection and litigation. The act 

has no material effect on us because we operate with virtually no delinquent debt. This act 

was amended by the Digital Accountability and 

Transparency Act of 2014 to require that debts 

outstanding for more than 120 days be transferred to the Treasury Department for collection 

under the Treasury Offset Program. If we have 

any debt that exceeds the 120-day threshold, we 

will transfer the debt accordingly.

Improper Payments Elimination and Recovery 

Improvement Act

The Improper Payments Elimination and Recovery Improvement Act of 2012 requires agencies to review their programs and activities to 

identify those susceptible to significant improper 

payments. Improper payments do not present a 

significant risk to FCA and therefore we are not 

subject to all of the reporting requirements of 

this act. However, in partnership with our service 

provider, we do have internal control procedures 

to ensure that payments are made properly. 

Please see page 74 for additional information on 

our efforts to comply with this regulation.

Digital Accountability and Transparency Act

The Digital Accountability and Transparency 

Act of 2014 (DATA Act) was enacted to increase 

accountability and transparency in federal spending and expand the requirements of the Federal 

Funding Accountability and Transparency Act of 

2006. The act requires that agencies post expenditure information, including contracts, loans, and 

grants, on the USASpending.gov website for each 

appropriations account. Our Office of General 

Counsel has determined that the requirements of 

the DATA Act do not apply to FCA because we 

are not funded by taxpayer dollars.
20 FCA Performance and Accountability Report FY 2016

The Farm Credit Administration’s (FCA) management is responsible for establishing and maintaining 

effective internal controls and financial management systems that meet the objectives of the Federal 

Managers’ Financial Integrity Act (FMFIA).

We conducted an assessment of the effectiveness of our internal control over the effectiveness and efficiency of operations and compliance with applicable laws and regulations in accordance with OMB 

Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control. 

Based on the results of this evaluation, we can provide reasonable assurance that our internal control 

over the effectiveness and efficiency of operations and compliance with applicable laws and regulations, as of Sept. 30, 2016, was operating effectively, and no material weaknesses were found in the 

design or operation of the internal controls.

In addition, in accordance with M-13-21, Implementation of the Government Charge Card Abuse Prevention Act of 2012, appropriate policies and controls are in place to mitigate the risk of fraud and 

inappropriate charge card practices.

We also conducted our assessment of the effectiveness of internal control over financial reporting, 

which includes safeguarding assets and complying with applicable laws and regulations, in accordance with the requirements of Appendix A of OMB Circular A-123. Based on the results of this 

evaluation, we can provide reasonable assurance that our internal control over financial reporting as 

of June 30, 2016, was operating effectively, and no material weaknesses were found in the design or 

operation of the internal control over financial reporting.

In accordance with the requirements of the FMFIA, our financial management systems are substantially in compliance with the requirements for Federal financial management systems as presented in 

A-127, Financial Management Systems, as of Sept. 30, 2016. Our financial management systems also

comply with applicable Federal accounting standards and the U.S. Standard General Ledger at the

transaction level.

Statement of Assurance

Kenneth A. Spearman

Chairman and Chief Executive Officer

FARM CREDIT ADMINISTRATION

September 30, 2016
FCA Performance and Accountability Report FY 2016 21

Program Performance
22 FCA Performance and Accountability Report FY 2016

FCA Performance Report

FCA is an independent federal agency responsible for regulating and examining the Farm Credit 

System and the Federal Agricultural Mortgage 

Corporation (Farmer Mac). Both of these organizations are government-sponsored enterprises 

(GSEs) that serve agriculture and rural America.

FCA’s mission is to ensure a safe, sound, and 

dependable source of credit and related services 

for all creditworthy and eligible persons in agriculture and rural America.

We fulfill our mission (1) by issuing regulations 

and implementing public policy, and (2) by identifying risk and taking corrective action. The FCA 

board has adopted two strategic goals:

• Ensure that the FCS and Farmer Mac fulfill

their public missions for agriculture and rural

areas.

• Evaluate risk and provide timely and proactive oversight to ensure the safety and

soundness of the System and Farmer Mac.

Our Strategic Plan for Fiscal Years 2013–2018 

contains a desired outcome for each goal, as well 

as 17 strategies we will use to meet these goals. 

In addition, we have 12 performance measures 

with associated targets to measure our success in 

meeting our goals.1 

The Strategic Plan addresses the changing environment facing agriculture: commodity and input 

price volatility; sustainability, environmental, 

food safety, and animal welfare issues; fluctuating interest rates and land values; diversity; and 

pressure to reduce subsidies and support payments in the Farm Bill.

The plan focuses on helping the agency operate 

effectively and efficiently; minimizing costs for 

FCS borrowers and Farmer Mac customers; and 

helping ensure a safe, sound, and dependable 

source of credit and financially related services 

for agriculture and rural America.

As our performance results show, we succeeded 

in meeting both strategic goals described below.

Goal 1—Ensure that the FCS and 

Farmer Mac fulfill their public 

missions for agriculture and rural 

areas.

The purpose of goal 1 is to maximize the ability of the FCS and Farmer Mac to fulfill their 

purposes and meet their public missions as 

defined by Congress in the Farm Credit Act of 

1971, as amended. We established nine strategies to accomplish this goal, and we defined six 

performance measures to evaluate our progress 

and success.

Strategy #1: Develop regulatory capital rules 

within FCA’s regulatory framework for the 

System and Farmer Mac that are clearly 

defined, easily understood, and consistent 

with industry standards.

The FCA board adopted a final rule that revised 

our capital rules for FCS banks and associations 

and provides clearly defined capital standards 

that are both consistent with Basel III and appropriate for the farmer-owned cooperative Farm 

Credit System. 

 1 In April 2016, FCA adopted a new strategic plan covering the years 2016 to 2021. However, since the previous strategic plan 

was in effect for most of the reporting period, we used the measures from the earlier plan to assess the agency’s performance 

in FY 2016. Beginning next year, we will use the measures published in the Strategic Plan for FYs 2016–2021.
FCA Performance and Accountability Report FY 2016 23

In FY 2016, we issued a final rule related to 

Farmer Mac’s corporate governance. The final 

rule covers essential safety and soundness matters, including regulation, examination and enforcement authorities, required board committees, 

risk management, internal controls and reporting, 

and disclosure requirements. Also in FY 2016 we 

issued a proposed rule for Farmer Mac governing the eligibility of nonprogram investments. 

The board is scheduled to act on the proposed 

rule in FY 2017.

Strategy #2: Within the framework of the 

Farm Credit Act, continuously update policies 

and regulations to provide an operating 

environment for the System and Farmer Mac 

that meets the changing needs of agriculture 

and rural America.

The following actions are examples of ways we 

have used this strategy in FY 2016:

• Issued a final rule on tier 1/tier 2 regulatory

capital framework.

• Issued a final rule on mergers, consolidations, and charter amendments of banks and

associations.

• Issued a final rule and an interim final rule

on margin and capital requirements for covered swap entities.

• Continued to study the loan syndication market.

• Issued a final rule on Farmer Mac’s corporate

governance and standards of conduct.

• Issued a proposed rule for Farmer Mac governing the eligibility of nonprogram investments.

• Provided guidance to the System on servicing

loans to borrowers in distressed industries.

• Issued guidance to the System describing the

policy, procedures, and internal controls that

System institutions need when lending to

similar entities.

As part of every rulemaking project, we consider 

ways to reduce the burden of existing rules and 

to minimize the regulatory burden of the rule 

being proposed. Also, we regularly solicit public 

comments on regulations that are unnecessary, 

unduly burdensome, or not based on law; our 

most recent solicitation was in July 2013.

We routinely provide guidance to System institutions to protect their safety and soundness and to 

help them manage risk. This guidance facilitates 

the flow of funds to agriculture and rural areas 

by providing System institutions with sound 

practices to follow in developing and implementing lending programs. We also provide guidance 

related to internal controls and information technology. Ultimately, our guidance helps institutions manage loan and funding programs more 

efficiently.

Farmer Mac continues to enhance its relationships with its loan sellers and servicers by holding informational forums, providing updates to 

its formal servicing guidelines, and performing 

internal credit reviews. And our Office of Secondary Market Oversight evaluates Farmer Mac’s 

efforts to enhance these relationships.

We support advances in Farmer Mac’s product 

offerings within the bounds of safety and soundness and the provisions of the Farm Credit Act. 

Our communication, examination reports, and 

off-site monitoring of Farmer Mac provide timely 

guidance to management on the possible risks 

associated with new products and policies. Over 

the reporting period, we provided Farmer Mac 

with guidance on regulatory compliance issues, 

policy direction, and questions regarding new 

products.

In addition, we continue to advance regulatory 

rulemaking projects related to investment eligibility and creditworthiness and to update other 

areas of supervision. 
24 FCA Performance and Accountability Report FY 2016

Strategy #3: Emphasize the public purpose 

and mission-related responsibilities of the 

agricultural GSEs to serve all of agriculture 

and rural America, including the use 

of innovative programs for serving the 

credit and related service needs of young, 

beginning, and small (YBS) farmers, ranchers, 

and producers or harvesters of aquatic 

products.

FCA examiners evaluated the operating and 

strategic plans and the credit delivery programs 

of System institutions. Our examiners also evaluated YBS farmer and rancher programs relative 

to the demographics of chartered territories. 

These evaluations help examiners identify trends 

in lending to YBS farmers and ranchers and to 

assess the System’s efforts to provide financial or 

business management assistance and outreach to 

YBS farmers and ranchers. All of the YBS programs we evaluated during the reporting period 

were in compliance with YBS regulations.

Each year, we survey FCS associations regarding 

their YBS programs. With the information received, we prepare a YBS annual report that we 

publish in our Annual Report on the Farm Credit 

System.

FCA regulations require each direct-lender System institution to include in its operating and 

strategic business plan a marketing plan with 

strategies for providing the institution’s products and services to all creditworthy and eligible 

persons. In addition, each institution must report 

annually to its board of directors on the progress 

it has made. We are reviewing these reports and 

evaluating the System’s progress in meeting this 

requirement.

We also evaluate Farmer Mac’s mission accomplishment. Farmer Mac’s customer base includes 

financial institutions and other lenders that seek 

a secondary market for their agricultural, rural 

housing, and rural utility cooperative loans. We 

evaluate Farmer Mac’s performance in reaching 

out to all potential customers and in creating 

easy access to its services.

Farmer Mac submits an annual mission report to 

FCA. This report includes data on Farmer Mac’s 

participation in federal guarantee programs, the 

geographic distribution of Farmer Mac’s program 

business, the proportion of fixed- versus variablerate loan volume, and activity related to rural 

utilities. In addition, the report highlights activity 

related to small and family farms, which Farmer 

Mac is required by statute to promote and encourage.

These reporting requirements also encourage 

Farmer Mac to motivate its business development staff to focus on the credit needs of small 

and family farms when working with its lendercustomers.

Strategy #4: Encourage System institutions 

to evaluate their YBS programs to ensure 

that the programs also meet the credit and 

financial service needs of producers seeking 

to enter urban agriculture, to produce local 

foods, or to use direct-to-consumer marketing 

channels.

FCA Bookletter “Providing Credit to Farmers 

and Ranchers Operating in Local/Regional Food 

Systems” (BL066) encourages System associations to meet the credit and related service needs 

of farmers who market their agricultural products through local and regional food systems. It 

explains that System associations have authority 

to finance local-food farmers and certain farmrelated businesses under existing statutes and 

regulations and under prior FCA guidance. The 

Bookletter also provides guidance on how the 

regulations on System strategic business planning 
FCA Performance and Accountability Report FY 2016 25

and senior officer compensation apply to financing local-food farmers (including those operating 

in urban areas).

Strategy #5: Encourage the System and 

Farmer Mac to find and develop both public 

and private partnerships and alliances with 

other financial service providers to address 

the changes in agriculture through new and 

existing programs.

We encourage FCS institutions that have adequate capital resources to prudently use participations and similar-entity lending authorities to 

help them manage risk. These authorities allow 

lenders to diversify risk and to more fully meet 

agricultural credit needs.

In our evaluation of YBS programs, we continue 

to assess the extent to which FCS institutions use 

loan guarantee programs. We encourage System 

institutions to work with federal and state agencies that offer such programs. For example, we 

encourage institutions to meet the requirements 

to qualify for the USDA Farm Service Agency’s 

“preferred lender” status.

Not only can loan guarantees help institutions 

manage risk, they also help borrowers obtain the 

funding they need. We encourage System institutions to use loan guarantees to make loans to 

YBS borrowers with limited financial capacity 

and to existing borrowers with temporary financial difficulties.

We also encourage partnerships between Farmer 

Mac and System and non-System lenders. Farmer 

Mac has partnership initiatives with various System lenders and with community banks through 

the American Bankers Association and the Independent Community Bankers of America.

Further, Farmer Mac continues to provide financing to non-System lenders by purchasing or guaranteeing obligations through its “cash window,” 

as well as through its AgVantage bond program. 

It also provides non-System financing through its 

rural utility financing programs. Both AgVantage 

and rural utility transactions help Farmer Mac 

diversify its book of business while increasing 

the flow of funds to rural areas. Farmer Mac also 

provides secondary market liquidity through its 

USDA guarantee program in which it holds the 

largest secondary market share.

Also, as noted under strategy 2, Farmer Mac continues to enhance its relationships with its loan 

sellers and servicers, and FCA evaluates Farmer 

Mac’s efforts to increase and strengthen these 

relationships.

Strategy #6: Promote System business 

practices, including outreach activities to 

all creditworthy eligible potential customers, 

emphasizing minority and socially 

disadvantaged farmers and ranchers and 

minority-owned entities.

Our examinations assess the System’s efforts to 

provide financial or business management assistance and outreach to YBS farmers and ranchers. 

The System continues to implement programs to 

meet the needs of YBS producers and other borrowers.

The business plan of each direct-lender institution must include strategies and actions to market the institution’s products and services to all 

eligible and creditworthy persons, with specific 

outreach toward diversity and inclusion within 

each market segment. We evaluate the System’s 

progress in meeting this requirement.
26 FCA Performance and Accountability Report FY 2016

In addition, we review borrower inquiries and 

complaints about the lending process and investigate any allegations of discrimination. During the 

reporting period from July 1, 2015, through June 

30, 2016, we responded to 37 borrower inquiries.

Our investigations did not discover any pattern 

or practice of deliberate discrimination, or an 

unwillingness of FCS institutions to serve eligible 

customers within their chartered territories. However, our examinations did find some technical 

violations of applicants’ rights. Those violations 

were promptly corrected or addressed in followup plans by System institutions. We also found 

that System institutions continue to comply with 

equal credit opportunity and equal housing laws.

We are also concerned about the needs of disabled farmers and farmer veterans. In previous years, we have held presentations on these 

topics to raise awareness among our staff about 

the challenges they face. In 2016, members of 

our staff met with the USDA under secretary to 

discuss ways to better meet the credit needs of 

farmer veterans.

To ensure that Farmer Mac meets its responsibility to promote and encourage the inclusion of 

small and family farms in its programs, we have 

developed certain reporting requirements. We 

also provide Farmer Mac with feedback on various issues, including loan eligibility on prospective new lines of business.

Farmer Mac continues to work to make its 

programs accessible to all market participants, 

including those involved in rural utilities and 

federal agricultural loan guarantee programs. 

It seeks to ensure equitable treatment of all 

potential borrowers and the lenders that serve 

them. However, ensuring equitable treatment of 

borrowers within the operations of its primary 

lenders presents a challenge for Farmer Mac, as 

it would for any secondary market entity.

During examinations, we review loans presented 

to Farmer Mac to ensure that their underwriting 

and loan-approval standards are appropriate and 

consistent. Further, Farmer Mac’s annual mission 

report includes a section covering its financing 

of rural utility cooperatives and small and family 

farmers.

Strategy #7: Promote public trust in FCA’s 

regulatory framework for the System and 

Farmer Mac by developing policy guidance 

that supports mission achievement, financial 

stability, and transparency.

We promote public trust and investor confidence 

by helping ensure that the System and Farmer 

Mac meet their missions to serve agriculture and 

rural America. See strategies 2 and 3 for a discussion of some of the ways we have helped them 

achieve their missions.

We provide guidance to System institutions 

to help them better understand their lending 

authorities and, therefore, to more appropriately 

market their products and services to prospective 

eligible customers. We also publish our semiannual Regulatory Projects Plan on our website to 

notify the public of upcoming regulatory actions 

so that the public may participate in the regulatory process. Our e-government program allows 

the public to make comments in electronic format 

and to review comments from others on our 

website.

We further support public trust and investor 

confidence by reviewing borrower inquiries and 

complaints about the loan-granting process and 

by investigating any allegations of discrimination. 

See strategy 6 above for more information about 

borrower inquiries and complaints.
FCA Performance and Accountability Report FY 2016 27

Farmer Mac, too, has increased its focus on its 

public mission. Its year-end annual report and 

Form 10-K filing now include numerous references to its public mission, including a discussion of how pursuing its mission may contribute 

to lower returns to stockholders. Farmer Mac 

actively oversees its sellers/servicers, ensuring 

that loans sold into the secondary market meet 

its underwriting standards and that processes are 

in place to detect fraud and operational errors.

The guidance we have provided has had a positive impact on Farmer Mac’s public disclosures 

related to mission, and we will continue to 

encourage Farmer Mac to regularly disclose its 

mission accomplishments.

Strategy #8: Consistent with cooperative 

principles and the Farm Credit Act, enable the 

agricultural GSEs to structure themselves to 

best serve their customers and rural America.

During the year, FCA approved mergers and 

other corporate activities. On Nov. 1, 2015, two 

associations affiliated with CoBank, ACB, merged 

and became one association. On Jan. 1, 2016, two 

associations affiliated with CoBank merged to 

become one association, bringing the total number of System associations to 74 (72 Agricultural 

Credit Associations and 2 Federal Land Credit 

Associations), compared with 76 associations a 

year earlier. The other corporate activities included an association name change.

There is one merger in progress, which is scheduled to take effect on or before Jan. 1, 2017. 

Several System institutions are having discussions that would lead to three additional merger 

requests during 2017. 

Strategy #9: Encourage full participation of 

stakeholders in the development and review 

of regulatory proposals as appropriate. 

We reach out to stakeholders to encourage their 

input on regulatory proposals before we issue 

rules. We publish our semiannual Regulatory 

Projects Plan on our website to notify the public 

of upcoming regulatory actions. In addition, our 

e-government program allows the public to make

comments in electronic format and to review

comments from others on our website.

Where practicable, we solicit input from stakeholders before we publish rules for comment. In 

some cases, we use advance notices of proposed 

rulemaking to obtain input. In almost all cases, 

we publish our proposed rules with comment periods of at least 60 days. For regulatory proposals 

that relate to the System’s GSE mission, we also 

reach out to nontraditional commenters for their 

input.

Goal 2—Evaluate risk and provide 

timely and proactive oversight to 

ensure the safety and soundness of 

the System and Farmer Mac.

We accomplish goal 2 by examining and supervising each System institution and Farmer Mac. 

We have eight strategies to accomplish this goal 

and six performance measures to evaluate our 

success.

Strategy #1: Ensure that staff provides 

prompt and comprehensive information to 

the FCA board and remains flexible and 

responsive to the board’s priorities so that 

the board will be better able to make fully 

informed, arm’s length decisions.
28 FCA Performance and Accountability Report FY 2016

The Office of Examination and the Office of Secondary Market Oversight report important issues 

at least monthly or as needed to the FCA board, 

and they deliver reports to the board each quarter on the condition of the System and Farmer 

Mac.

Strategy #2: Recruit and retain a diverse 

and highly skilled workforce to meet FCA’s 

current and future risk analysis, examination, 

and oversight needs.

Our success as an agency depends largely on our 

people, talent, and technology. We will continue 

to invest in hiring, developing, and retaining a 

talented, diverse workforce and to provide employees with the tools they need to be effective. 

We strive to keep our work environment positive, innovative, diverse, and family-friendly, and 

we encourage teamwork and high productivity.

The Office of Personnel Management has formally recognized our agency for fostering accountability in diversity and inclusion. We have 

emphasized diversity in our recruiting, training, 

policies and procedures, and management/employee performance standards. As a result, the 

diversity of our workforce is growing.

By continually assessing human capital needs, we 

have established appropriate human capital requirements, and we have used our human capital 

assessments to develop, enhance, and redirect 

training and development programs. We have 

upgraded our information technology infrastructure to improve our ability to work, collaborate, 

gather information, review, approve, and store 

work products. As a result, our workforce has 

become more effective and efficient.

To address workforce gaps and challenges, we 

have established the following initiatives:

• Identify positions in which risk of key-person

dependency exists and ensure that plans are

sufficient to build bench strength and manage succession for these positions.

• Meet projected staffing needs through aggressive hiring.

• Continue training programs and strategies to

increase technical competencies of employees,

with greater emphasis on technology skills.

• Continue to create opportunities for employees to become more engaged with their work.

• Continue increasing workplace diversity and

promoting inclusion.

Through our Examiner Commissioning Program, 

we are building the next generation of diverse 

and highly motivated examiners, ensuring they 

have the knowledge, skills, and talents necessary 

to accomplish the agency’s mission. The program 

helps examiners develop their skills in FCA’s 

primary areas of oversight—credit, finance, and 

operations.

We also invest in the development of our commissioned examiners through human capital 

planning, career path development, and specialty 

programs. The specialty programs enable examiners to gain technical expertise and encourage 

them to pursue professional development and 

certification.

Strategy #3: Continue proactive oversight of 

institution-specific and systemic risks.

Through examinations, we routinely evaluate 

the operations and risk management practices of 

System institutions, and we share our conclusions 

and recommendations with System boards of 

directors. We determine whether FCS institutions 
FCA Performance and Accountability Report FY 2016 29

have internal control systems and processes to 

manage their operations and loan portfolios and 

whether direct-lender institutions maintain systems that allow them to properly assess the loans 

and resulting risk exposures in their portfolios. 

We consider the following elements when we 

examine loan portfolios:

• Management of risk concentrations

• Loan underwriting

• Collateral risk management

• Portfolio planning and analysis

• Credit administration

• Risk identification

Overall, we have found that FCS institutions 

have adequate lending systems in place and that 

they continue to enhance these systems. The FCS 

uses a two-dimensional risk rating system, consisting of a 14-point scale to measure each borrower’s probability of default and a set of ratings 

to measure the borrower’s loss given default. 

The FCS enhances this system through periodic 

refinements, and we closely evaluate those refinements. The System also performs database querying and stress testing.

We also evaluate Farmer Mac’s risk management 

practices through examinations and oversight 

reviews. During 2016, Farmer Mac continued to 

focus on strengthening its capital position and 

broadening its customer base. Farmer Mac issued 

tier 1-eligible preferred stock to strengthen its 

capital position and retired $242 million in capital that was not tier 1-eligible. Farmer Mac has 

adopted the same 14-point loan risk rating scale 

applied by the FCS. Its use of the scale helps it 

monitor risk, as well as to market its products 

and services to System institutions.

Strategy #4: Promote a vibrant program of 

Systemwide risk supervision that uses stress 

testing, research, and analyses to identify 

emerging systemic risks, and provides 

proactive examination direction and policy 

guidance for use internally and externally.

We use the following tools and methods to help 

identify emerging risks in a timely manner.

• Financial Institution Rating System to evaluate changes in the financial condition of FCS 

institutions each quarter.

• Quarterly presentations on System risk to the 

FCA board. These presentations also provide 

supporting information from the Federal 

Farm Credit Banks Funding Corporation.

• Presentation of emerging risk issues to the 

agency’s risk committee.

• An oversight program for each institution 

that allows for a more proactive and forward-looking perspective of risk.

In addition to conducting examinations, we maintain commodity price databases, farm income 

and trade data, lending data, and other economic 

databases for the use of our examiners and others in the agency. These databases, as well as 

periodic presentations on economic and collateral 

risks and industry trends, enable examiners and 

others in FCA to stay current on the changing 

agricultural and financial sectors.

We routinely research and analyze emerging 

risks and related issues and incorporate our findings into examination and oversight programs 

and guidance to System institutions. The Office of Examination’s Risk Supervision Division 

directs the National Oversight Plan, and the Risk 

Council provides input into the development of 

the plan. The council also recommends the strategies and level of monitoring or analysis for each 

risk and assigns staff members to monitor it.
30 FCA Performance and Accountability Report FY 2016

We have established several periodic reporting requirements for Farmer Mac that help us 

identify emerging risks across all of Farmer 

Mac’s functional areas. This monitoring provides 

significant detail on debt spreads and term structure, derivative contracts, liquidity, nonprogram 

investments, and capital planning with stress 

testing analysis.

We also review information about the legal and 

financial structure of Farmer Mac’s new products; 

this review is critical to our oversight of Farmer 

Mac activities. In addition, we continue to research potential enhancements to the Risk-Based 

Capital Stress Test.

Strategy #5: Use agency supervisory and 

enforcement authorities effectively to 

remediate weakened institutions.

We use a risk-based supervisory and enforcement 

program to differentially respond to the risks and 

particular oversight needs of FCS institutions. If 

we discover unacceptable risks, we take action to 

ensure that the identified risks are appropriately 

mitigated. Corrective actions include reducing 

risk exposures; increasing capital and enhancing 

earnings, which improves an institution’s ability 

to bear risk; and strengthening risk management.

We use a three-tiered supervision program: normal supervision, special supervision, and enforcement actions. Institutions under normal supervision are performing in a safe and sound manner 

and operating in compliance with applicable 

laws and regulations. These institutions are able 

to correct identified weaknesses in the normal 

course of business.

For those institutions displaying more serious 

or protracted weaknesses, we shift from normal to special supervision, and our examination 

oversight increases accordingly. Under special 

supervision, we give an institution clear and 

firm regulatory guidance to address weaknesses, 

and we allow the institution time to correct the 

problems.

If informal supervisory approaches have not been 

or are not likely to be successful, we will use our 

formal enforcement authorities. We may take an 

enforcement action for a number of reasons:

• A situation threatens an institution’s financial 

stability.

• An institution has a safety and soundness 

problem or has violated a law or regulation.

• An institution’s board is unable or unwilling 

to correct problems we have identified.

Our enforcement authorities include the following powers:

• To enter into formal agreements

• To issue cease-and-desist orders

• To levy civil money penalties

• To suspend or remove officers, directors, and 

other persons

If we take an enforcement action, the FCS institution must operate under, and report back to, our 

agency. Our examiners oversee the institution’s 

performance to ensure compliance with the enforcement action. As of June 30, 2016, there were 

no formal enforcement actions in place.

Strategy #6: Promote the continued 

importance of, and improvement in, the 

quality of System loan data for use by 

both the agency and the System in risk 

management and business planning.

Through the FCS Loans Database Project, we 

built an enterprise system for the dependable 

collection and storage of data for examination 

activities and systemic risk analysis. In addi-
FCA Performance and Accountability Report FY 2016 31

tion, we established uniform instructions for the 

timely and reliable reporting of accounts and 

exposures. In 2014, the System improved its 

ability to identify shared assets by implementing the System shared asset and customer numbers. Then, in December 2015, the System began 

reporting exposures caused by “systemically 

significant customers.” And we continue to work 

with the System to improve data completeness 

and reliability.

In FY 2016, we continued to support the existing 

tools and work papers that our examiners use 

to analyze loan data and evaluate loan assets. In 

addition, we worked with the FCA Risk Project 

to explore business intelligence tools that our 

examiners can use in analyzing risk and reviewing loans.

Strategy #7: Develop regulatory guidance 

and examination procedures that keep pace 

with evolving strategies and new programs 

in meeting the changing needs of agriculture 

and rural America.

Our staff continues to develop regulations and 

examination guidance to provide timely and 

proactive oversight of the System. The goal is to 

maintain the safety and soundness of the FCS 

and Farmer Mac while keeping pace with their 

changing needs. See strategy 2 under goal 1 for 

examples of guidance we issued during the current reporting period to strengthen safety and 

soundness.

We form our examination teams according to the 

types of System institutions that exist, and we 

define these types by certain common characteristics and potential risks. The examination teams 

coordinate closely with the Risk Supervision 

Division on enforcement and special supervision 

activities. The Risk Supervision Division also provides risk analysis and develops and coordinates 

the Office of Examination’s National Oversight 

Plan, which describes strategies for addressing 

critical risk topics and other areas of focus for 

the System.

We provide proactive guidance to System institutions through Informational Memorandums, and 

we provide guidance for our examiners through 

the Examination Manual and ongoing communications. We continue to update the Examination 

Manual with new and improved content. These 

forms of guidance are designed to keep pace 

with evolving business models used by System 

institutions and to support the agency’s riskbased supervisory approach.

With respect to Farmer Mac, we encourage innovations in its product development within 

the bounds of safety and soundness and the 

provisions of the Farm Credit Act. Our ongoing 

communication, examination reports, and off-site 

monitoring of Farmer Mac provide timely guidance to management on the risk implications of 

new products.

Our regulations pertaining to Farmer Mac’s 

capital planning and liquidity management refer 

directly to evolving international regulatory standards and benchmarks for measuring the quality 

and adequacy of capital and liquidity reserves. 

We are working closely with Farmer Mac to 

develop a database to help us analyze and monitor enterprise-wide operations. The database will 

enhance our ability to ensure timely and multidimensional analysis of Farmer Mac; it will also 

enable Farmer Mac to fulfill its reporting obligations to FCA more efficiently.
32 FCA Performance and Accountability Report FY 2016

Strategy #8: Continue to integrate standardsof-conduct rules and codes of ethical 

behavior into the organizational culture 

that are consistent with government ethics 

guidelines, universally understood, and 

consistently applied.

FCA Board Policy 81 reinforces our commitment 

to our ethics program by stating the following:

• FCA is committed to fulfilling its mission 

faithfully and ensuring that its employees 

conduct themselves with integrity.

• The FCA board will continue to hold itself 

to the highest standards of ethical conduct in 

recognition that its commitment and adherence to the agency ethics program sets the 

standard for the commitment and conduct of 

agency staff.

• As the arm’s length regulator of the Farm 

Credit System, FCA is committed to carrying 

out its work without any undue influence, 

favoritism, or special access.

Our ethics program contains the following elements:

• Financial disclosure reporting (public, confidential, and certification forms)

• Ethics counseling to FCA and FCSIC personnel

• Orientation and annual training of FCA and 

FCSIC personnel

• Intragovernmental liaison

• Regulation and policy development
FCA Performance and Accountability Report FY 2016 33

≥90%

Yes

≥90%

≥90%

Yes

Yes

100%

Yes

95%

100%

Yes

N/A

1. Percentage of FCS institutions with satisfactory operating and strategic plans

for providing products and

services to all creditworthy

and eligible persons.

2. Whether Farmer Mac’s

business plan contains strategies to promote and encourage the inclusion of all

qualified loans, including

loans to small farms and

family farmers, in its secondary market programs,

and whether its business

activities further its mission

to provide a source of longterm credit and liquidity for

qualifying loans.

3. Percentage of direct-lender

institutions with satisfactory

consumer and borrowerrights compliance.

4. Percentage of direct-lender

institutions with YBS programs that are in compliance with the YBS regulations.

5. Whether institutions meet

the objectives of our mission-related regulations and

whether institutions have

made observable progress

in meeting the objectives

of any new mission-related

regulations that have been

in effect for at least one

year.

6. Whether FCA reached out

to nontraditional commenters to request input on

GSE mission-related rulemaking actions.

All FCS institutions had satisfactory operating and strategic 

plans for providing products 

and services to all creditworthy 

and eligible persons.

Farmer Mac’s business plan 

contains adequate strategies 

to promote and encourage the 

inclusion of all qualified loans, 

including small and family 

farm loans, in its secondary 

market programs. Its business 

activities further its mission to 

provide a source of long-term 

credit and liquidity.

Ninety-nine percent of directlender institutions have satisfactory consumer and borrowerrights compliance.

All direct-lender institutions 

with YBS programs are in compliance with the YBS regulations.

System institutions are meeting 

the objectives of mission-related 

regulations, including the 

amended “planning” regulation, which requires operational 

and strategic business plans to 

include strategies and actions 

for outreach toward diversity 

and inclusion.

The agency did not approve 

any proposed rules during the 

reporting period that were related to the GSE mission.

Table 5a

Goal 1—Public Mission

Performance Measures and Results

July 1, 2015, to June 30, 2016 Results

2015 2015 2016 2016 vs.

Measure Results Target Results Target Results Target

≥90%

Yes

≥90%

≥90%

Yes

Yes

100%

Yes

99%

100%

Yes

N/A
34 FCA Performance and Accountability Report FY 2016

99 percent of System assets 

have composite CAMELS ratings of 1 or 2.

The agency does not have any 

supervisory agreements in place 

with FCS institutions.

All institutions complied with 

regulatory capital ratio requirements.

OSMO activities effectively 

identify emerging risks, and appropriate supervisory and corrective actions have been taken.

All institutions have satisfactory 

audit and review programs, 

including institutions with acceptable corrective action plans.

All FCS institutions provided 

FCA with consolidated loan 

data.

1. Percentage of System assets

in institutions with composite

CAMELS ratings of 1 or 2.

2. Percentage of requirements in

supervisory agreements with

which FCS institutions have

at least substantially complied

within 18 months of execution

of the agreements.

3. Percentage of institutions complying with regulatory capital

ratio requirements (permanent

capital ratio, total surplus ratio,

core surplus ratio, net collateral

ratio).

4. Whether the Office of Secondary Market Oversight’s examination and oversight plan and

activities effectively identify

emerging risks, and whether

appropriate supervisory and

corrective actions have been

taken to effect change when

needed.

5. Percentage of institutions with

satisfactory audit and review

programs, including institutions with acceptable corrective

action plans.

6. Percentage of FCS institutions

providing FCA with consolidated loan data.

99.7%

91%

100%

Yes

100%

100%

≥90%

≥80%

≥90%

Yes

100%

100%

Table 5b

Goal 2—Safety and Soundness

Performance Measures and Results

July 1, 2015, to June 30, 2016

Notes: The measures in tables 5a and 5b were adopted in May 2011 when FCA published its Strategic Plan for FYs 2011–2016. The measures were 

revised in early 2013 for clarity. The revised measures were published in the Strategic Plan for FYs 2013–2018. One performance measure was 

removed from Goal 2 because it did not materially evaluate the agency’s effectiveness in meeting its strategic goals. Also, in April 2016, FCA 

adopted a new strategic plan covering the years 2016 to 2021. However, since the previous strategic plan was in effect for most of the reporting 

period, we used the measures from the earlier plan to assess the agency’s performance in FY 2016. Beginning next year, we will use the measures 

published in the Strategic Plan for FYs 2016–2021.

The following defines the symbols and abbreviations used to describe targets in the Performance Measures and Results tables: > is greater than; ≥ 

is greater than or equal to; N/A indicates either that the measure is not applicable or that FCA’s performance could not be measured; indicates 

FCA’s performance exceeded the FY 2016 target; indicates FCA achieved the FY 2016 target.

≥90%

≥80%

≥90%

Yes

100%

100%

99%

N/A

100%

Yes

100%

100%

Results

2015 2015 2016 2016 vs.

Measure Results Target Results Target Results Target
FCA Performance and Accountability Report FY 2016 35

Financial Section
36 FCA Performance and Accountability Report FY 2016

Stephen G. Smith

Chief Financial Officer

Statement of the Chief Financial Officer

November 14, 2016

I am pleased to present the Farm Credit Administration’s 2016 financial s tatements. In 2 016, FCA 

once again received an unmodified, or “clean,” audit opinion from our i ndependent auditors. This is 

the 23rd consecutive year that we have received an unmodified audit, and this achievement underscores our commitment to fiscal stewardship.

This accomplishment also reflects the s trong internal control e nvironment that the FCA b oard and 

senior managers have established within the organization. Strong internal controls allow us to efficiently e xecute sound financial management, to provide re liable financial dat a, and to ide ntify and 

respond to financial risks that may e merge. I am extremely proud to r eport that once again, we had 

no findings in our independent auditors’ r eports on compliance and internal control over financial 

reporting.

Taken together, the auditors’ reports and accompanying financial s tatements r eflect our commitment 

to promoting efficient spending and ac countability. They al so reflect our commitment to complying 

with all applicable laws, such as the Federal Managers’ Financial Integrity Act, the Prompt Payment 

Act, the Debt Collection and Improvement Act, and the Federal Information Security Modernization 

Act. We have reduced, and will continue to reduce, administrative costs as part of our continued efforts to operate effectively and efficiently.

FCA is the arm’s length regulator of the Farm Credit System. We are fully funded by the institutions 

we regulate. Our employees understand the importance of strong financial management and accountability, and we conduct FCA’s operations with transparency and accountability. 

Looking ahead, we will focus our attention on developing t he e nterprise risk management f unction to 

assess and mitigate risk. In doing so, the agency will optimize its allocation of resources to achieve 

its mission and reduce risk. We will continue to provide strong financial management and effective 

internal controls. And we will seek creative opportunities to reduce costs through process and program improvements.

Because of our talented and committed s taff, we ar e we ll positioned to face another ye ar of challenges. I offer my s incere thanks to the FCA b oard and staff.

Sincerely,
FCA Performance and Accountability Report FY 2016 37
38 FCA Performance and Accountability Report FY 2016
FCA Performance and Accountability Report FY 2016 39
40 FCA Performance and Accountability Report FY 2016
FCA Performance and Accountability Report FY 2016 41
42 FCA Performance and Accountability Report FY 2016

Financial Statements

We have prepared the accompanying financial 

statements in accordance with U.S. generally 

accepted accounting principles and with the 

Office of Management and Budget Circular No. 

A-136, as amended. For comparison purposes,

we present our financial statements and notes for

FY 2016 and FY 2015. All amounts are in whole

dollars. The financial statements include the following:

• Balance Sheet, which shows our assets, our

liabilities, and our net position (assets minus

liabilities).

• Statement of Net Cost, which shows our net

cost of operations. We calculate our net costs

by subtracting from our gross costs any revenue we earn. We break the Statement of Net

Cost into three program components: Public

Mission, Safety and Soundness, and Other

Activity.

• Statement of Changes in Net Position,

which shows the change in our net position

over the two-year period ending September

30, 2015.

• Statement of Budgetary Resources, which

shows our resources, the status of our resources, and the outlay of resources during

the fiscal year.

• Notes to the Financial Statements, which

clarify and provide additional detail regarding the amounts in the financial statements.

Not all of the statements mentioned in Circular 

A-136 apply to our agency. For this reason, we

do not include a Statement of Custodial Activity, a Statement of Social Insurance, a Statement

of Changes in Social Insurance Amounts, and a

Schedule of Spending.
FCA Performance and Accountability Report FY 2016 43

BALANCE SHEETS

As of September 30, 2016 and 2015

(In Dollars)

2016 2015

Assets 

Intragovernmental

Fund balance with Treasury (Note 2) $ 546,292 $ 798,165

Investments (Note 3) 29,756,481 30,409,961

Accounts receivable (Note 4) 45,567 3,335

Total intragovernmental 30,348,340 31,211,461

Accounts receivable (Note 4) 190,264 121,674 

General property, equipment, and software, net (Note 5) 1,277,101 390,163

Prepaid expenses 225,418 209,745

Total assets $ 32,041,123 $ 31,933,043

Liabilities

Intragovernmental

Accounts payable $ 18,444 $ 22,732

Accrued post-employment compensation 35,282 32,469

Employer contributions and payroll taxes payable 404,578 293,205

 Other 33 4

Total intragovernmental 458,337 348,410

Accounts payable 330,865 656,231

Actuarial workers’ compensation liability (Note 6) 1,258,152 1,260,697

Accrued payroll and benefits 6,232,550 5,534,975

Employer contributions and payroll taxes payable 107,768 148,064

Deferred revenue 4,676,787 2,141,460

Total liabilities $ 13,064,459 $ 10,089,837

Net Position

Cumulative results of operations $ 18,976,664 $ 21,843,206

Total net position $ 18,976,664 $ 21,843,206

Total liabilities and net position $ 32,041,123 $ 31,933,043

The accompanying notes are an integral part of these statements.
44 FCA Performance and Accountability Report FY 2016

STATEMENTS OF NET COST

For the Years Ended September 30, 2016 and 2015

(In Dollars)

2016 2015

Program Costs

Public Mission

Gross costs $ 16,908,302 $ 13,507,464

Less: Earned revenue (14,727,123) (11,315,984)

Net program costs $ 2,181,179 $ 2,191,480

Safety and Soundness

Gross costs $ 50,375,754 $ 48,420,648

Less: Earned revenue (43,866,759) (40,461,216)

Net program costs $ 6,508,995 $ 7,959,432

Other Activity

Gross costs $ 840,612 $ 626,120

Less: Earned revenue (652,420) (551,276)

Net program costs $ 188,192 $ 74,844

Net cost of operations (Notes 7 and 8) $ 8,878,366 $ 10,225,756

The accompanying notes are an integral part of these statements.
FCA Performance and Accountability Report FY 2016 45

The accompanying notes are an integral part of these statements.

STATEMENTS OF CHANGES IN NET POSITION

For the Years Ended September 30, 2016 and 2015

(In Dollars)

2016 2015

Cumulative Results of Operations

Beginning balances $ 21,843,206 $ 26,730,246 

Other Financing Sources (Non-Exchange)

Imputed financing sources

Federal employee benefits (Note 9) 2,611,824 2,388,716 

Rent (Note 10) 3,400,000 2,950,000 

Total financing sources 6,011,824 5,338,716 

Net cost of operations (8,878,366) (10,225,756) 

Net change (2,866,542) (4,887,040) 

Cumulative results of operations $ 18,976,664 $ 21,843,206 

Net position $ 18,976,664 $ 21,843,206 
46 FCA Performance and Accountability Report FY 2016

The accompanying notes are an integral part of these statements.

STATEMENTS OF BUDGETARY RESOURCES

For the Years Ended September 30, 2016 and 2015

(In Dollars)

Budgetary Resources

Unobligated balance brought forward, Oct. 1 $ 20,746,358 $ 28,344,042

Spending authority from offsetting collections 61,678,681 51,422,219 

Total budgetary resources (Note 11) $ 82,425,039 $ 79,766,261

 

Status of Budgetary Resources

New obligations and upward adjustments $ 63,217,157 $ 59,019,903

Unobligated balance, end of year:

Exempt from apportionment 14,531,095 18,604,898 

Not available 4,676,787 2,141,460 

Total unobligated balance, end of year 19,207,882 20,746,358 

Total budgetary resources (Note 11) $ 82,425,039 $ 79,766,261

Change in Obligated Balance

Unpaid obligations

Unpaid obligations, brought forward, Oct. 1 $ 10,890,646 $ 8,949,235

New obligations and upward adjustments 63,217,157 59,019,903 

Outlays (gross) (62,609,147) (57,078,492)

Unpaid obligations, end of year 11,498,656 10,890,646

Uncollected payments 

Uncollected customer payments from federal sources, brought forward, Oct. 1 (690,666) (347,882) 

Change in uncollected customer payments from federal sources 36,817 (342,784)

Uncollected customer payments from federal sources, end of year (653,849) (690,666) 

Memorandum Entries 

Obligated balance, start of year $ 10,199,980 $ 8,601,353

Obligated balance, end of year $ 10,844,807 $ 10,199,980

 

Budget Authority and Outlays, Net

Budget authority, gross $ 61,678,681 $ 51,422,219

Actual offsetting collections (61,715,498) (51,079,435)

Change in uncollected customer payments from federal sources 36,817 (342,784) 

Budget authority, net $ - $ -

Outlays, gross $ 62,609,147 $ 57,078,492 

Actual offsetting collections (61,715,498) (51,079,435)

Agency outlays, net $ 893,649 $ 5,999,057

 

2016 2015
FCA Performance and Accountability Report FY 2016 47

NOTES TO THE FINANCIAL STATEMENTS

Note 1. Significant Accounting Policies

A. Reporting Entity—The Farm Credit Administration is an independent agency in the executive

branch of the U.S. government. We are responsible for the regulation and examination of the banks,

associations, and related entities that compose the Farm Credit System (FCS or System), including the

Federal Agricultural Mortgage Corporation (Farmer Mac). Specifically, we are empowered to ensure

safe and sound operations of all System institutions. Initially created by an Executive order of the

President in 1933, FCA now derives its power and authority from the Farm Credit Act of 1971, as

amended. The act requires us to periodically examine System institutions. Policymaking for FCA is

vested in a full-time, three-person Board whose members are appointed by the President with the

advice and consent of the Senate.

B. Basis of Accounting and Presentation—The financial statements have been prepared in accordance

with OMB Circular No. A-136, as amended. In addition, the financial statements have been prepared

on an accrual basis from our books and records in accordance with GAAP and the Statements of

Federal Financial Accounting Standards prescribed by the Federal Accounting Standards Advisory

Board, the official body for setting accounting standards for the federal government. Under the accrual method, revenues are recognized when earned, and expenses are recognized when goods or

services are received, without regard to receipt of funds or payment of cash. FCA is not subject to

apportionment. Budgetary accounting has been applied to facilitate compliance with legal constraints

and control over the use of funds.

C. Fund Balance with Treasury—We maintain a revolving, no-year account with the U.S. Treasury

through which cash receipts and disbursements are processed. The funds that are available are obtained primarily from assessments and reimbursable activities. We do not receive appropriated funds.

See Note 2.

D. Investments—The Farm Credit Act gives us the authority to invest in public debt securities with

maturities suitable to our needs. We invest solely in U.S. Treasury securities, which are normally held

to maturity and carried at cost. Investments are adjusted for unamortized premiums or discounts.

Premiums and discounts are amortized and interest is accrued using the level-yield, scientific method

of effective interest amortization over the term of the respective issues. We use interest earned on

investments to build and maintain an agency reserve for the purpose of being able to respond effectively and efficiently to unanticipated, one-time, mission-related issues without increasing assessments. See Note 3.
48 FCA Performance and Accountability Report FY 2016

E. Accounts Receivable—Accounts receivable are composed of

1. reimbursements for FCA administrative expenses according to agreements with other federal

entities,

2. assessments from institutions in accordance with the Farm Credit Act and FCA regulations,

and

3. amounts owed FCA that are generated through the normal course of business with employees

and vendors.

Amounts due from federal agencies are considered fully collectible. An allowance for uncollectible 

amounts receivable from the public is established when either

1. on the basis of a review of outstanding accounts and the failure of all collection efforts, management determines that collection is unlikely to occur after considering the debtor’s ability to

pay, or

2. an account for which no allowance has been established is submitted to the Department of the

Treasury for collection, which takes place when it becomes 120 days delinquent.

The Office of the Chief Financial Officer (OCFO), in conjunction with the agency’s accounting service provider, the Bureau of the Fiscal Service, reviews the agency’s accounts receivable on a regular 

basis. We have determined that all accounts receivable as of Sept. 30, 2016, are fully collectible. See 

Note 4.

F. Advances and Prepaid Expenses—Advance payments are generally prohibited by law. There are

some exceptions, such as reimbursable agreements, subscriptions, and certain payments to contractors

and employees. Payments made before the receipt of goods and services are recorded as advances or

prepaid expenses at the time of prepayment and are recognized as expenses when the related goods

and services are received. This process helps to minimize large dollar fluctuations in cost and provides for the recognition of cost based on use. When the prepayment amount has minimal impact on

cost, it is more cost-effective to expense the advance or prepayment at the time of payment. Therefore, FCA recognizes dollar thresholds in the recording of advances and prepayments.

G. General Property, Equipment, and Software—Property (including vehicles), equipment, and

software are recorded at cost, net of an allowance for accumulated depreciation. Repairs and maintenance costs are expensed as incurred. We capitalize all property, equipment, and software with itemized costs of $50,000 or more and a useful life of two years or more. We also capitalize groups of

items that individually are under $50,000 but together meet the bulk purchase criteria of $500,000 or

more. We use the straight-line method of depreciation with half-year convention to allocate the cost

of capitalized property, equipment, and software over their estimated useful lives. See Note 5.
FCA Performance and Accountability Report FY 2016 49

H. Accounts Payable—Accounts payable consist of amounts owed to other federal agencies and the

public. We strive to make payments in a timely manner in accordance with the Prompt Payment Act.

If payments are late, we pay interest penalties.

I. Liabilities—Liabilities may or may not be covered by budgetary or other resources. All of our liabilities are covered by budgetary resources with the exception of the Actuarial Workers’ Compensation Liability (see Note 6). Intragovernmental liabilities are claims against us by other federal agencies.

J. Federal Employee Benefits—Federal employee benefits include benefits earned by employees for

pension, post-retirement health insurance, and life insurance. For reporting purposes, each employing

federal agency is required to recognize its share of the federal government’s cost and imputed financing for these benefits. To meet this requirement, the Office of Personnel Management (OPM) provides

to each agency the cost factors used in the calculation of these federal employee benefit expenses. See

Note 9.

K. Rent—The Farm Credit Act allows us to occupy buildings and to use land owned and leased by

the FCS Building Association, an entity owned by the System banks. The FCA Board oversees the

Building Association activities on behalf of its owners. We are not charged for the use of the buildings or land, nor do we pay for maintenance and repair of buildings and land improvements. Rent is

reflected on our books as an imputed cost and an imputed financing source. See Note 10.

L. Annual, Sick, and Other Leave—Annual leave, compensatory leave, credit hours, and some other

types of leave are accrued as a funded liability when earned, with an offsetting reduction for leave

taken. The accrued leave liability for each of these types of leave is calculated using current pay

rates. Sick leave and other types of non-vested leave are expensed as the leave is taken.

M. Assessments—A substantial portion of our revenues is based on direct assessments billed to the

System institutions we regulate or examine. We also recognize revenues based on examination services provided by the Office of Examination. We use a formula established in our regulations to calculate assessments. We base each institution’s assessment, in part, on its average risk-adjusted assets

and its overall financial health.

N. Deferred Revenue—Before each new fiscal year begins, we determine the amount of funding

required from assessments for the subsequent fiscal year and the amount of the assessment to be

apportioned to each System institution, including Farmer Mac. According to the Farm Credit Act,

these estimates are provided to the System institutions during September. Any funds received before

the beginning of the new fiscal year are considered unearned revenue and are reported as deferred

revenue on the Balance Sheet. These amounts are also reported as Unobligated Balance Not Available

on the Statement of Budgetary Resources.

O. Use of Estimates—We have made certain estimates and assumptions when reporting assets, liabilities, revenue, and expenses; we have also made estimates and assumptions in the note disclosures. Actual results could differ from these estimates. Some estimates include year-end accruals and

accrued workers’ compensation.
50 FCA Performance and Accountability Report FY 2016

Note 2. Fund Balance with Treasury

2016 2015 

Fund balance with Treasury

Revolving fund $ 546,292 $ 798,165

Total fund balance with Treasury $ 546,292 $ 798,165

Status of fund balance with Treasury

Unobligated balance

Available $ 14,531,095 $ 18,604,898

Unavailable 4,676,787 2,141,460

Obligated balance not yet disbursed 10,844,807 10,199,980

Subtotal—Status of fund balance 30,052,689 30,946,338

Funds invested with Treasury

Net of unamortized discount (29,506,397) (30,148,173)

Total fund balance with Treasury $ 546,292 $ 798,165

The status of our fund balance with Treasury may be classified as unobligated available, unobligated 

unavailable, or obligated. Unobligated available amounts represent funds available for incurring new 

obligations. The unobligated unavailable amounts include funds not yet available for use and represent the amount of new fiscal year assessments received prior to Oct. 1. These unavailable amounts 

are also classified as deferred revenue on the Balance Sheet. Amounts noted as “obligated balance not 

yet disbursed” represent amounts designated for payment of goods and services received and not yet 

paid.

Obligated and unobligated balances listed under “status of fund balance with Treasury” agree with 

obligated and unobligated balances reported on the Statement of Budgetary Resources. 

All of our funds invested with Treasury are in U.S. Treasury securities. 
FCA Performance and Accountability Report FY 2016 51

Note 3. Investments

Intragovernmental Securities

Amounts for 2016 Balance Sheet Reporting

Amortized 09/30/16 Market

(Premium) Investments Interest Investment Value

Cost Discount Net Receivable Balance Disclosure

Nonmarketable

 Market-based $29,821,788 $ (129,301) $29,692,487 $63,994 $ 29,756,481 $29,743,397

Amounts for 2015 Balance Sheet Reporting

Amortized 09/30/15 Market

(Premium) Investments Interest Investment Value

Cost Discount Net Receivable Balance Disclosure

Nonmarketable

 Market-based $30,677,452 $ (346,639) $30,330,813 $ 79,148 $30,409,961 $30,411,034 

Premiums and discounts are amortized and interest is accrued using the level-yield, scientific method 

of effective interest amortization over the term of the respective issues. Interest revenue on investments was $248,331 and $231,498 for FYs 2016 and 2015, respectively.

Note 4. Accounts Receivable

2016 2015

Intragovernmental

Reimbursements for services provided $ 45,567 $ 3,335

Subtotal 45,567 3,335

With the public

Reimbursements for services provided 140,798 105,396

Expenditure refunds 49,466 16,278

Subtotal 190,264 121,674

Total accounts receivable $ 235,831 $125,009

The intragovernmental receivables represent reimbursable services provided to USDA and FCSIC but 

unbilled as of Sept. 30.
52 FCA Performance and Accountability Report FY 2016

Note 5. General Property, Equipment, and Software

As of September 30, 2016

Estimated Accumulated/

Useful Depreciation Acquisition Amortized Book

Life Method Value Depreciation Value

Equipment 3 years Straight line $723,580 $(120,597) $602,983

Equipment 5 years Straight line 167,703 (16,770) 150,933

Equipment 10 years Straight line 305,304 (45,319) 259,985

Software in 

 development 263,200 0 263,200

Total $1,459,787 $(182,686) $1,277,101

As of September 30, 2015

Estimated Accumulated/

Useful Depreciation Acquisition Amortized Book

Life Method Value Depreciation Value

Equipment 3 years Straight line $805,805 $(805,805) $0

Equipment 10 years Straight line 295,770 (14,789) 280,981

Construction in 

 progress 109,182 0 109,182

Total $1,210,757 $(820,594) $390,163
FCA Performance and Accountability Report FY 2016 53

Note 6. Liabilities Not Covered by Budgetary Resources (Actuarial Workers’ 

Compensation Liability)

We record an unfunded liability for the actuarial liability under the Federal Employees’ Compensation Act (FECA). The Department of Labor estimates future workers’ compensation liability for 

specified entities that are preparing statements under the Chief Financial Officers Act and the Government Management Reform Act. The actuarial liability estimates for benefits under FECA include the 

expected liability for death, disability, medical, and miscellaneous costs for approved compensation 

cases, plus a component for incurred but unreported claims. Because we are not one of the entities 

for which the Labor Department provides individual estimates on a routine basis, we calculated our 

estimated FECA actuarial liability amount by using the Labor Department’s FY 2016 model to estimate FECA actuarial liability.

FECA Actuarial Liability

2016 2015

Actuarial FECA Liability $1,258,152 $1,260,697

Total liabilities not covered by budgetary resources 1,258,152 1,260,697

Total liabilities covered by budgetary resources 11,806,307 8,829,140

Total liabilities $13,064,459 $10,089,837
54 FCA Performance and Accountability Report FY 2016

Note 7. Intragovernmental Costs and Exchange Revenue

For the Years Ended 

September 30, 2016 and 2015

2016 2015

Public Mission

Intragovernmental costs $ 3,249,440 $ 3,001,370

Public costs 13,658,862 10,506,094

Total costs—Public mission 16,908,302 13,507,464

Intragovernmental earned revenue (62,405) (50,493)

Public earned revenue (14,664,718) (11,265,491)

Total revenue—Public mission (14,727,123) (11,315,984)

Net program costs—Public mission 2,181,179 2,191,480

Safety and Soundness

Intragovernmental costs 10,717,624 10,534,299

Public costs 39,658,130 37,886,349

Total costs—Safety and soundness 50,375,754 48,420,648

Intragovernmental earned revenue (185,926) (181,005)

Public earned revenue (43,680,833) (40,280,211)

Total revenue—Safety and soundness (43,866,759) (40,461,216)

Net program costs—Safety and soundness 6,508,995 7,959,432

Other Activity

Intragovernmental costs 119,158 76,165

Public costs 721,454 549,955

Total costs—Other activity 840,612 626,120

Intragovernmental earned revenue (511,622) (446,081)

Public earned revenue (140,798) (105,195)

Total revenue—Other activity (652,420) (551,276)

Net program costs—Other activity 188,192 74,844

Net cost of operations (+/-) $ 8,878,366 $ 10,225,756

We have classified our costs and revenues in this way to enable the federal government to provide 

consolidated financial statements. The intragovernmental costs relate to the source of goods and services we purchased and not to the classification of related revenue.
FCA Performance and Accountability Report FY 2016 55

Note 8. Suborganization Program Costs/Program Costs by Segment

For the Year Ended 

September 30, 2016

Office

Secondary

Regulatory Market Other

Examination Policy Oversight Organizations Total

Public Mission

Gross costs $ 459,242 $ 4,863,675 $ 391,997 $ 11,193,388 $16,908,302

Less: Earned revenue (397,223) (4,207,183) (387,359) (9,735,358) (14,727,123)

Net program cost 62,019 656,492 4,638 1,458,030 2,181,179

Safety and Soundness

Gross costs 34,451,776 1,546,784 1,059,045 13,318,149 50,375,754

Less: Earned revenue (29,886,288) (1,337,895) (1,041,844) (11,600,732) (43,866,759)

Net program cost 4,565,488 208,889 17,201 1,717,417 6,508,995

Other Activity

Gross costs 306,583 88,458 926 444,645 840,612

Less: Earned revenue (237,947) (68,654) (719) (345,100) (652,420)

Net program cost 68,636 19,804 207 99,545 188,192

Net cost of operations $ 4,696,143 $ 885,185 $ 22,046 $ 3,274,992 $ 8,878,366

The following tables provide a detailed breakout of the Statement of Net Cost for each of the fiscal years 

ended 2016 and 2015. We display our cost and earned revenue amounts by office within each program. 
56 FCA Performance and Accountability Report FY 2016

Note 8. Suborganization Program Costs/Program Costs by Segment (continued)

For the Year Ended 

September 30, 2015

Office

Secondary

Regulatory Market Other

Examination Policy Oversight Organizations Total

Public Mission

Gross costs $ 427,788 $ 4,315,001 $ 445,341 $ 8,319,334 $13,507,464

Less: Earned revenue (355,822) (3,589,174) (401,462) (6,969,526) (11,315,984)

Net program cost 71,966 725,827 43,879 1,349,808 2,191,480

Safety and Soundness

Gross costs 31,968,071 1,247,552 969,577 14,235,448 48,420,648

Less: Earned revenue (26,642,203) (1,037,677) (852,801) (11,928,535) (40,461,216)

Net program cost 5,325,868 209,875 116,776 2,306,913 7,959,432

Other Activity

Gross costs 290,291 49,044 814 285,971 626,120

Less: Earned revenue (255,591) (43,181) (717) (251,787) (551,276)

Net program cost 34,700 5,863 97 34,184 74,844

Net cost of operations $ 5,432,534 $ 941,565 $ 160,752 $ 3,690,905 $ 10,225,756
FCA Performance and Accountability Report FY 2016 57

Note 9. Federal Employee Benefits

2016 2015

Imputed pension cost $ 787,888 $ 915,417

Other imputed retirement benefits 1,823,936 1,473,299

Total $ 2,611,824 $ 2,388,716

Retirement—Our employees are covered under the Civil Service Retirement System (CSRS) and the 

Federal Employees Retirement System (FERS) to which we make contributions according to plan 

requirements. CSRS and FERS are multiemployer plans. We do not maintain or report information 

about the assets of the plan, nor do we report actuarial data for accumulated plan benefits. The reporting of such amounts is the responsibility of OPM. We report the amount of our pension expense 

for employees in accordance with SFFAS No. 5, Accounting for Liabilities of the Federal Government. 

When the amount of the payment expense remitted to OPM is less than the full cost to the Government, an imputed cost is recognized. The above imputed costs represent the amounts we recognize 

for FYs 2016 and 2015. Corresponding amounts of imputed revenue are recorded to offset the imputed cost.

Other Retirement Benefit Expenses—SFFAS No. 5 requires employing federal agencies to recognize 

an expense for the cost of providing health benefits and life insurance to its employees after they 

retire. OPM provided the factors used to calculate these costs. As with pension payments, imputed 

costs are recognized when amounts remitted for health benefits and life insurance are less than the 

full cost to the government. We record corresponding amounts of imputed revenue to offset the imputed cost.

Note 10. Rent

 2016 2015

Leased field offices $ 1,226,614 $ 1,221,193

FCA headquarters 2,173,386 1,728,807

Total $ 3,400,000 $ 2,950,000

In accordance with the Farm Credit Act, we occupy buildings owned and leased by the FCSBA. 

Our administrative headquarters building and land are located in McLean, Virginia. In addition, the 

FCSBA leases office space for field offices on our behalf at various locations throughout the United 

States. Rent is provided at no cost to us. The above imputed rent expense is an estimate based on the 

Building Association’s estimated budget for 2016. In accordance with SFFAS No. 4, Managerial Cost 

Accounting Concepts and Standards for the Federal Government, the rent expense and the associated 

imputed revenue are recorded as a nonmonetary transaction.
58 FCA Performance and Accountability Report FY 2016

Note 11. Explanation of Differences Between the Statement of Budgetary 

Resources and the Budget of the United States Government

FY 2016

The 2018 Budget of the United States Government, with the Actual Column completed for FY 2016, 

had not been published as of the date of these financial statements. The budget is expected to be 

published and delivered to Congress in early February 2017. It will be available on our Web site at 

www.fca.gov/reports/publications.html.

FY 2015

The 2017 Budget of the United States Government, with the Actual Column completed for FY 2015, 

has been reconciled to the amounts reported in the Statement of Budgetary Resources, and there are 

no significant differences.

Note 12. Undelivered Orders at the End of the Period

SFFAS No. 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling 

Budgetary and Financial Accounting, states that the amount of budgetary resources obligated for 

undelivered orders at the end of the period should be disclosed. For the periods ended Sept. 30, 2016, 

and 2015, undelivered orders that were unpaid amounted to $4,369,169 and $4,202,970 respectively.

Note 13. Incidental Custodial Collections

Our custodial collections include receipts to cover the costs of fulfilling Freedom of Information Act 

requests; they also include other receipts, such as interest and penalties. During the fiscal year, we include these collections in the Fund Balance with Treasury. However, these collections are immaterial 

to the financial statements and incidental to our mission, we do not provide a Statement of Custodial 

Activity. Custodial collections totaled $299 for the period ended Sept. 30, 2016, and $88 for Sept. 30, 

2015. The funds collected in FY 2016 were transferred to the Department of the Treasury at the end 

of FY 2016.
FCA Performance and Accountability Report FY 2016 59

2016 2015

Resources Used to Finance Activities

Budgetary resources obligated

Obligations incurred $ 63,217,157 $ 59,019,903

Spending authority from offsetting collections and recoveries (61,678,681) (51,422,219)

Net obligations 1,538,476 7,597,684

Other resources

Imputed financing from costs absorbed by others 6,011,824 5,338,716

Other resources 2,535,327 (1,611,017)

Net other resources used to finance activities 8,547,151 3,727,699

Total resources used to finance activities 10,085,627 11,325,383

Resources used to finance items not part of net cost of operations (1,089,260) (1,186,364)

Total resources used to finance net cost of operations 10,139,019

Components of the net cost of operations that

will not require or generate resources in current period (118,001) 86,737

Net cost of operations $ 8,878,366 $ 10,225,756

Note 14. Reconciliation of the Net Cost of Operations to the Budget

Reconciliation of Net Cost of Operations to Budget

for the Years Ended September 30, 2016 and 2015

(In Dollars)

As prescribed by SFFAS No. 7, this note reconciles our Resources Used to Finance Activities (budgetary basis of accounting) to the Net Cost of Operations (proprietary basis of accounting). The reconciling items are added in or reversed out based on whether the item has a budgetary or proprietary 

impact on the statements.
60 FCA Performance and Accountability Report FY 2016

Other Information
FCA Performance and Accountability Report FY 2016 61

Letter from the Inspector General on FCA’s Management Challenges 
62 FCA Performance and Accountability Report FY 2016
FCA Performance and Accountability Report FY 2016 63
64 FCA Performance and Accountability Report FY 2016
FCA Performance and Accountability Report FY 2016 65
66 FCA Performance and Accountability Report FY 2016
FCA Performance and Accountability Report FY 2016 67
68 FCA Performance and Accountability Report FY 2016
FCA Performance and Accountability Report FY 2016 69
70 FCA Performance and Accountability Report FY 2016
FCA Performance and Accountability Report FY 2016 71
72 FCA Performance and Accountability Report FY 2016
FCA Performance and Accountability Report FY 2016 73

Table 6. Summary of Financial Statement Audit

Audit Opinion: Unmodified

Restatement: No

Material Beginning Ending

Weaknesses Balance New Resolved Consolidated Balance

(Not applicable)

Table 7. Summary of Management Assurances

Effectiveness of Internal Control over Financial Reporting (FMFIA § 2)

Statement of Assurance: Unmodified

Material Beginning Ending

Weaknesses Balance New Resolved Consolidated Reassessed Balance

(Not applicable)

 

Effectiveness of Internal Control over Operations (FMFIA § 2)

Statement of Assurance: Unmodified

Material Beginning Ending

Weaknesses Balance New Resolved Consolidated Reassessed Balance

(Not applicable)

 

Conformance with Federal Financial Management System Requirements (FMFIA § 4)

Statement of Assurance: Federal systems conform

Non- Beginning Ending

Conformances Balance New Resolved Consolidated Reassessed Balance

(Not applicable)

 

Compliance with Section 803(a) of the Federal Financial Management Improvement Act (FFMIA)

Agency Auditor

1. System Requirements No lack of compliance noted No lack of compliance noted

2. Accounting Standards No lack of compliance noted No lack of compliance noted

3. USSGL at Transaction Level No lack of compliance noted No lack of compliance noted

Summary of Financial Statement 

Audit and Management Assurances
74 FCA Performance and Accountability Report FY 2016

Improper Payments Elimination 

and Recovery Improvement Act

Background

The Improper Payments Information Act of 2002, 

as amended by the Improper Payments Elimination and Recovery Act of 2010 and the Improper 

Payments Elimination and Recovery Improvement Act of 2012 (IPERIA), requires agencies 

to annually report information on improper 

payments to the President and Congress. OMB 

Circular A-123, Appendix C, Requirements for Effective Estimation and Remediation of Improper 

Payments outlines the requirements for complying with IPERIA. OMB Circular A-136 provides 

the guidance for reporting on IPERIA in the 

Performance and Accountability Report. As noted 

in OMB A-136, section II.5.8, there are twelve sections outlining the various reporting details for 

IPERIA compliance. Of the twelve sections, only 

three are applicable to FCA:

• Section I – Risk Assessment

• Section X – Recapture of improper payments 

reporting

• Section XII – Agency reduction of improper 

payments with the Do Not Pay Initiative.

Risk assessment

All agencies are required to assess the improper 

payment risk level at least once every three 

years. Our last IPERIA assessment was completed 

in FY 2014. We reviewed five payment processes: 

contract payments, purchase card, travel card, 

claims and vouchers, and payroll. Each payment process has its own set of internal control 

processes. Our risk assessment did not find any 

programs or activities that were susceptible to 

significant improper payments. We have assessed 

our risk as low for all of these processes.

IPERIA defines significant improper payments 

as gross annual improper payments in a given 

program. Payments are considered improper and 

significant if they meet one of two criteria:

• they exceed both 1.5 percent of program 

outlays and $10 million of all program or 

activity payments made during the fiscal year 

reported, or

• they exceed $100 million (regardless of the 

improper payment percentage of total program outlays).

In addition, OMB has designated the threshold 

for high-priority programs as programs with 

$750 million in estimated improper payments as 

reported in the Annual Financial Report or in the 

Performance and Accountability Report. FCA’s 

entire budget for FY 2016 was $66.2 million, 

which was well under this threshold; therefore, 

we do not have any high-priority programs.

Since our risk of improper payments is considered low, we are not required to perform any 

statistically valid estimates of improper payments 

or to report on any corrective actions or root 

causes. We are, however, required to reassess our 

risk for improper payments every three years. 

Our next assessment will be in FY 2017.

Recapture of improper payments reporting

Given the low risk for all of our programs, we 

have determined that a payment recapture audit 

is not cost-effective. The benefits of any recaptured amounts would not exceed the cost of a 

payment recapture audit program. As required 

by OMB A-123, Appendix C, we have notified 

both OMB and our Inspector General of our determination that a payment recapture audit is not 

cost-effective for FCA. OMB concurred with our 

assessment.

Our service provider, BFS, has internal control 
FCA Performance and Accountability Report FY 2016 75

Table 8 (IPERIA Table 4)*

Overpayment Payment Recaptures Without Recapture Audit Programs

($ in millions)

Overpayments Recaptured Outside of Payment Recapture Audits

Program Amount Identified Amount Recaptured

Contract Payments $.0365M $.0365M

Purchase Card $0 $0

Travel Card $0 $0

Claims and Vouchers $0 $0

Payroll $0 $0

*OMB circular A-136 requires agencies to use the same table numbers that are used in the circular. 

See section II.5.8.

procedures to ensure that payments are made 

properly. One such procedure is the postpayment audit in which BFS reviews a random 

sample of 10 percent of all invoices processed 

each month.

In addition to the internal control procedures of 

BFS, our agency invoice approvers also provide 

an additional layer of review and approval to 

the payment process to ensure that approved 

payments are appropriate before they are made. 

Generally, BFS reviews invoices before our own 

invoice approvers review them. We also work 

with BFS to ensure that payroll and charge card 

payments are reviewed and monitored to ensure 

proper payments are being made.

We also perform routine operational reviews and 

oversight to help identify improper payments. 

For FY 2016, we identified three improper payments amounting to $36,533, or 0.06 percent of 

total outlays for the year. In all instances, the 

amounts were fully recovered.

Agency reduction of improper payments with 

the Do Not Pay Initiative

We work closely with our service provider to 

ensure that all payments are proper and paid to 

valid vendors. Our service provider continually 

monitors the vendor file in the financial system 

and cross-checks it against the various Do Not 

Pay databases. This process serves both the prepayment and the pre-award review requirement 

to ensure only eligible recipients are paid. To 

date, we have not had any vendors with a match 

to these Do Not Pay databases.
76 FCA Performance and Accountability Report FY 2016

Table 9 (IPERIA Table 7)*

Results of the Do Not Pay Initiative in Preventing Improper Payments

($ in millions)

Number (#) 

of payments 

reviewed 

for possible 

improper 

payments

Dollars ($) 

of payments 

reviewed 

for possible 

improper 

payments

Number (#) 

of payments 

stopped

Dollars ($) 

of payments 

stopped

Number (#) 

of potential 

improper 

payments 

reviewed 

and determined to be 

accurate

Dollars ($) 

of potential 

improper 

payments 

reviewed 

and determined to be 

accurate

Reviews 

with the 

Do Not Pay 

databases

6,060 $9.3737 0 $0 0 $0

Reviews 

with databases not 

listed in 

IPERIA as 

Do Not Pay 

databases

0 $0 0 $0 0 $0

*OMB circular A-136 requires agencies to use the same table numbers that are used in the circular.

See section II.5.8.
FCA Performance and Accountability Report FY 2016 77

The Farm Credit Administration Performance and Accountability Report Fiscal Year 2016 is available 

on FCA’s website at www.fca.gov. While supplies last, printed copies of this publication and earlier 

editions may be obtained without charge from 

Office of Congressional and Public Affairs

Farm Credit Administration

1501 Farm Credit Drive

McLean, VA 22102-5090

Telephone: 703-883-4056

Fax: 703-790-3260

E-mail: info-line@fca.gov

The Federal Farm Credit Banks Funding Corporation, with the support of the System banks, prepares 

the financial press releases and the System’s annual and quarterly information statements, which contain the System’s combined financial statements. Copies are available on the Funding Corporation’s 

website at www.farmcredit-ffcb.com or from 

Federal Farm Credit Banks Funding Corporation

10 Exchange Place

Suite 1401

Jersey City, NJ 07302

Telephone: 201-200-8000

The Farm Credit System Insurance Corporation publishes an annual report. Copies are available on 

FCSIC’s website at www.fcsic.gov or from

Farm Credit System Insurance Corporation

1501 Farm Credit Drive

McLean, VA 22102

Telephone: 703-883-4380

In addition, FCS banks and associations are required by regulation to prepare annual and quarterly 

financial reports. Copies of these documents are available for public inspection at FCA headquarters 

in McLean, Virginia.

Additional Information
Office of Congressional and Public Affairs

Copies are available from

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