2 FCA Performance and Accountability Report FY 2017

Contents

Statement of Board Chairman and CEO 4

Management’s Discussion and Analysis 5

FCA at a Glance 6

 FCA Offices 7

Highlights of FCA’s Performance Goals and Results 10

Analyses and Highlights of FCA’s Financial Statements 12

 Financial Highlights 12

 Program Costs and Revenues 14

Limitations of Financial Statements 16

Systems, Controls, and Legal Compliance 17

Statement of Assurance 20

Program Performance 21

FCA Performance Report 22

Financial Section 34

Statement of Chief Financial Officer 35

Transmittal Letter of Auditor’s Report 36

Independent Auditor’s Report 38

Financial Statements 41

 Balance Sheets 42

Statements of Net Cost 43

 Statements of Changes in Net Position 44

 Statement of Budgetary Resources 45

 Notes to Financial Statements 46

Other Information 57

Letter from Inspector General on FCA’s Management Challenges 58

Management’s Response to Challenges Identified by FCA’s Inspector General 64

Summary of Financial Statement Audit and Management Assurances 68

Payment Integrity 69

Fraud Reduction Report 70

Civil Monetary Penalty Adjustment for Inflation 70

Grants Oversight and New Efficiency Act 70

Additional Information 71
FCA Performance and Accountability Report FY 2017 3

List of Tables Appearing in Report

Table 1. Composition of Assets 12

Table 2. Composition of Liabilities 13

Table 3. Agency Budget 13

Table 4. Funds Used by Major Budget Category 14

Table 5. Performance Measures and Results 31

Table 6. Summary of Financial Statement Audit 68

Table 7. Summary of Management Assurances 68

Table 8. Civil Monetary Penalties Annual Inflation Adjustments 70

List of Figures Appearing in Report

Figure 1. Organization of the Farm Credit Administration 9

Figure 2. FY 2017 Gross Costs by Agency Goal 15

Figure 3. FY 2017 Gross Revenue by Agency Goal 15

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)
4 FCA Performance and Accountability Report FY 2017

Statement of Board Chairman and CEO

November 8, 2017

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) 2017. I am pleased to report that we achieved the goals outlined in our Strategic Plan and 

achieved or exceeded almost all targets for which there are data to measure performance.

I am also pleased to report that our FY 2017 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 2018, our examiners will focus on two major risk topics. 

The first topic is portfolio risk. Production agriculture has experienced volatility in recent years, and prices for 

key commodities continue to be low. While producers have been weathering this storm, their working capital and 

debt repayment capacity have eroded. 

Fortunately, higher than normal crop production and lower input costs helped slow the working capital erosion on many grain farms in 2016, leading to lower than expected credit risk. Nevertheless, net farm income still 

declined over 24 percent. We expect some continued deterioration in credit quality on grain and soybean farms 

in 2017 and 2018 despite a projected 3.1 percent increase in 2017 net farm income. The expected improvement in 

2017 net farm income is largely driven by higher cash receipts from livestock products.

Both farmers and farm lenders face many risks in today’s economy, including higher interest rates, volatile energy prices, and possible changes to trade agreements, and these risks require continuous vigilance. We encourage 

institutions to be proactive and responsive by counseling customers, restructuring debt, establishing stronger 

credit controls, and, as always, fulfilling all FCA borrower rights requirements.

The second risk topic is internal controls over financial reporting. Effective internal controls over financial reporting are paramount to safeguarding the integrity and accuracy of institution financial reports, as well as financial reports compiled at the bank and System levels. System investors, shareholders, FCA, and external auditors 

rely on these controls. We support System institutions’ efforts to strengthen internal controls and encourage them 

to continue to dedicate staff and audit resources to ensuring effective controls.

In addition, we will continue to focus on earnings trends and operating expenses, as well as stress testing. Although the System’s earnings performance remains strong, the return on assets is declining at some associations. 

We expect institutions to maintain a strong corporate culture in managing expenses. Also, stress testing continues 

to be an important loan portfolio management and planning tool. We expect institutions to continue to assess and, 

if needed, strengthen stress testing processes.

For more than 100 years, the Farm Credit System has helped meet the credit needs of our nation’s farmers and 

ranchers. As regulator of the System, we are proud to do our part to ensure that this important source of credit is 

available to farmers and ranchers for the next 100 years.

Dallas P. Tonsager

Board Chairman and CEO
FCA Performance and Accountability Report FY 2017 5

Management’s Discussion 

and Analysis
6 FCA Performance and Accountability Report FY 2017

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 Farm Credit 

System (its banks, associations, and related entities) and 

the Federal Agricultural Mortgage Corporation (Farmer 

Mac). 

The System is a nationwide network of borrower-owned 

financial institutions that provide credit to farmers, ranchers, residents of rural communities, agricultural and rural 

utility cooperatives, and other eligible borrowers. 

FCA 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 Farm Credit System. 

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 System 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 examine 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 bring about appropriate corrective 

action. 

• We issue policies and regulations governing how 

System institutions conduct their business and interact 

with borrowers. These policies and regulations focus 

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 issuances, and other 

financial and operational matters. 

Our headquarters and one field office are in McLean, 

Virginia. We also have field offices in Bloomington, Minnesota; Dallas, Texas; Denver, Colorado; and Sacramento, 

California. 

FCA does not receive a federal appropriation. We maintain 

a revolving fund financed primarily by assessments from 

the institutions we regulate. Other sources of income for 

the revolving fund are interest earned on investments with 

the U.S. Treasury and reimbursements for services we 

provide to federal agencies and others. 

FCA 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 remain on the board until a successor is appointed. 

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 the board of directors 

for the Farm Credit System Insurance Corporation.

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 2017 7

FCA OFFICES

As of Sept. 30, 2017, FCA had 307 full- and part-time 

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 dayto-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, design, publication, 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. 

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. 
8 FCA Performance and Accountability Report FY 2017

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 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. 

The Office of Equal Employment Opportunity and 

Inclusion manages and directs the diversity, inclusion, 

and equal employment opportunity (EEO) 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 2017 9

Figure 1. Organization of the Farm Credit Administration

As of September 30, 2017
10 FCA Performance and Accountability Report FY 2017

Highlights of FCA’s 

Performance Goals and 

Results 

FCA’s mission as stated in the FCA Strategic Plan for 

Fiscal Years 2016 – 2021 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 three 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 

most of the 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 providing products and 

services that serve creditworthy and eligible persons 

and perform outreach to enhance diversity and inclusion. (Target: 100 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 YBS regulations. 

(Target: ≥90 percent)

5. Whether the majority of objectives listed in the preamble of each final rule were met on the two-year anniversary of the rule’s effective or implementation date. 

(Target: Yes)

6. Percentage of pre-rulemaking projects and proposed 

rules on which FCA requested input from persons 

outside of FCA. (Target: 100%)

The agency achieved or exceeded its targets for five of the 

six measures associated with goal 1. We did not achieve 

our target for performance measure 6 because there was 

one rulemaking project out of nine on which we did not 

request input from persons outside of FCA. In that one 

instance, we completed our research on the project well 

before the FCA board had adopted this performance measure.

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 six 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)

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. (Target: 100 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. Whether five or more reports and dashboards were 

created that use data collected from the Farm Credit 

System to assess risk in the System. (Target: Yes)
FCA Performance and Accountability Report FY 2017 11

We achieved or exceeded the targets for four 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 peri-

od. For performance measure 5, we missed our target of 

100 percent by 1 percentage point because one institution 

did not have an acceptable corrective action plan in place 

at the end of the reporting period. This one exception was 

identified shortly before the end of the reporting period, 

and we do expect the institution to submit an acceptable 

corrective action plan soon.

Goal 3 Highlights—Workforce Management: Cultivate 

an environment that fosters a well-trained, motivated, 

and diverse staff while providing an effective plan for 

leadership succession.

There are four strategies and two performance measures 

for goal 3 (see table 5c). The performance measures are as 

follows:

1. Whether, as part of its recruiting efforts for entry-lev-

el examiners, FCA has ensured that 25 percent of its 

outreach efforts target disabled or minority potential 

applicants. For the purpose of this measure, outreach 

consists of participating in career fairs, attending 

recruiting events, or placing employment listings or 

advertisements on websites targeting these audiences. 

(Target: Yes)

2. Whether we have maintained or improved our score 

from last year in the Annual Employee Satisfaction 

Survey. (Target: ≥72 percent)

We achieved or exceeded the targets for both measures 

associated with goal 3. In fact, for the second measure, our 

employee engagement index score on the Annual Employ-

ee Satisfaction Survey increased by 3 percentage points to 

75 percent. 

For more information about our performance results, see 

the Performance Results tables on pages 31 to 33.
12 FCA Performance and Accountability Report FY 2017

Analyses and Highlights 

of FCA’s Financial 

Statements

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 40, this section highlights key points about FCA’s 

financial condition for fiscal years 2017 and 2016.

FCA’s assets, liabilities, and net position

The balance sheets on page 41 presents our financial condition as of fiscal year-end 2017 and 2016. 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 2017 are composed of the following:

• Our fund balance with Treasury (4.0 percent)

• Investments (90.3 percent)

• Accounts receivable and prepayments (1.4 percent)

• Property and equipment (4.3 percent)

During FY 2017, total assets increased by $4,399,362, or 

13.7 percent, from amounts reported in FY 2016.

Our investment portfolio, which accounts for the largest 

portion of our total assets, increased by $3,136,919 in FY 

2017. This increase occurred because of increases in both 

prepaid assessments (assessments due Oct. 1 but received 

on or by Sept. 30) and in carryover from prior years. Higher prepaid assessments and carryover amounts translate 

into increased investment holdings because there is more 

cash available to invest in Treasuries. 

Table 1. Composition of Assets

Fiscal Year

Fund Balance With 

Treasury Investments

Accounts 

Receivable 

and 

Prepayments

Property and 

Equipment Total

2017 $1,457,378 $32,893,400 $499,409 $1,590,298 $36,440,485

2016 $546,292 $29,756,481 $461,249 $1,277,101 $32,041,123
FCA Performance and Accountability Report FY 2017 13

We purchased $17,739,245 in U.S. Treasuries during fiscal 

year 2017, 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, 2017, the agency held $1,457,378 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 (3.7 percent)

• Payroll and benefits (43.6 percent)

• Employer contributions and taxes payable (6.1 percent)

• Workers’ compensation (9.7 percent)

• Deferred revenue (36.9 percent)

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

2017 $578,143 $6,771,200 $942,048 $1,499,584 $5,733,890 $15,524,865

2016 $349,342 $6,232,550 $512,346 $1,293,434 $4,676,787 $13,064,459

Like total assets, our total liabilities increased from 2016 to 

2017. Driven primarily by the increase in deferred revenue, 

overall liabilities increased by 18.8 percent.

Deferred revenue represents October assessments received 

from FCS institutions that are not yet due. In FY 2017, it 

increased by 22.6 percent from 2016 to $5,733,890. Deferred 

revenue increased for two reasons: FY 2018 assessments 

were higher, and some of the System’s larger institutions 

prepaid their 2018 assessments. 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, increased by 

$1,938,956, or 10.2 percent, during FY 2017. The net position increased in part because of the decrease in the net 

cost of operations (see the Program Costs and Revenues 

section) but also because of a decrease in imputed financing sources (that is, rent and federal employee benefits). 

For a breakdown of the net position, see the Statement of 

Changes in Net Position on page 43.

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 2017 and 2016. The overall FY 

2017 budget increased by 6.3 percent over the 2016 budget.

Table 3. Agency Budget

2017 2016

Assessments (current year) $69,800,000 $58,300,000

Assessments (carryover from prior years) 0 4,400,000

Reserve 0 2,900,000

Reimbursable activity 600,000 600,000

Total $70,400,000 $66,200,000

* FY 2017 assessments were reduced by $3 million during FY 2017.
14 FCA Performance and Accountability Report FY 2017

Table 4. Funds Used by Major Budget Category

Budget Category FY 2017

Percentage of 

Total FY 2016

Percentage of 

Total

Personnel compensation and benefits $56,719,365 83.9% $53,610,277 83.8%

Travel and transportation 2,441,070 3.6% 3,103,579 4.8%

Contractual services 5,919,695 8.8% 4,574,559 7.1%

Property and equipment 1,032,465 1.5% 1,387,830 2.2%

Other $1,516,119 2.2% $1,375,337 2.1%

Total $67,628,714 100% $64,051,582 100%

In FY 2017, we continued to carry out our mission, program goals, and objectives within the available budget. 

While our board-approved budget for FY 2017 was $70.4 

million, the congressional limitation on our spending was 

$68.6 million. The FY 2016 limitation was $65.6 million.

As table 4 shows, we used $67,628,714 of the funds available in 2017, compared with $64,051,582 of the funds available in 2016. The funds we used in 2017 amounted to 97.9 

percent of our congressional limitation in 2017, while the 

funds used in 2016 amounted to 96.9 percent in 2016. The 

increase in personnel compensation, driven by salary and 

benefit increases, accounts for the largest increase in funds 

used from 2016 to 2017. Personnel compensation and 

benefits continue to account for the most significant use of 

funds at FCA, representing 83.9 percent of total funds used 

in 2017. 

Travel and transportation costs represented the largest 

decrease in funds used this year. The 21.3 percent decrease 

was the result of continued increases in efficiencies in technology which translates to reduced travel costs. 

PROGRAM COSTS AND REVENUES

This section describes our program costs and revenues for 

the fiscal years ended Sept. 30, 2017, and Sept. 30, 2016. 

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.

The total cost of FCA’s programs for FY 2017 is 

$71,366,166, compared with $68,124,668 for FY 2016. This 

represents an increase of $3,241,498, or 4.8 percent, from 

2016. Figure 2 shows the breakdown of FY 2017 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, employee compensation, and information technology. 

Employee salaries and benefits represent our greatest 

overall cost. For 2017, employee compensation totaled 

$56,605,021, or 79.3 percent of total cost. This cost increased by $3,179,091, or 6.0 percent, from 2016 because of 

staff growth, pay-for-performance and employee benefit 

increases, career ladder promotions, and funded leave. We 

periodically perform compensation studies to comply with 

the Financial Institution Reform, Recovery, and Enforcement Act of 1989, which requires us to keep FCA salaries 

and benefits comparable with the salaries and benefits 

of other federal financial institution regulators. Keeping 

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 $3,705,568 for the 12 

months ended Sept. 30, 2017, compared with $8,878,366 for 

the same period the previous year. Because gross revenue 

increased more than gross cost, net costs decreased in FY 

2017.
FCA Performance and Accountability Report FY 2017 15

compensation competitive helps 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 2017 gross revenue 

for each of our goals. Earned revenue for 2017 totaled 

$67,660,598, up $8,414,296, or 14.2 percent, from 2016. 

Earned revenue went up because of increases in assessments of the FCS 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 Congress. During FY 2017, 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.

Figure 2. Gross Costs by Agency Goal Figure 3. Gross Revenue by Agency Goal

For the fiscal year ended Sept. 30, 2017, program cost for 

public mission was $18,863,584, representing an increase 

of $1,955,282, or 11.6 percent, from the same period the 

previous year. The cost for the public mission program 

represents 26.4 percent of our total costs for 2017.

Safety and Soundness Program

The examination and supervision of the FCS account for 

the largest portion of our costs at the program level. In 

2017, 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 2017 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 unplanned employee attrition and the 

large number of retirements expected within the next few 

years.
16 FCA Performance and Accountability Report FY 2017

During FY 2017, 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 $1,208,724 to $51,584,478, 

which represents 72.3 percent of our total costs in 2017.

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. Although slightly fewer 

resources were used for other activity in 2017, actual costs 

incurred for this category increased by $77,492 to $918,104. 

The costs for providing reimbursable services represented 

approximately 1.3 percent of our total costs in 2017, an 

increase from 1.2 percent of total costs in 2016. 

Program costs for other activity increased because of 

higher employee compensation costs and the composition 

of staff assigned to perform this work. Earned revenue for 

other activity totaled $541,833 for 2017, compared with 

$652,420 for 2016. The level of revenue is based on the 

level of reimbursable work completed.

LIMITATIONS OF 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. 

Reports used to monitor and control budgetary resources 

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.
FCA Performance and Accountability Report FY 2017 17

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 Inspector General Empowerment Act of 2016, which was passed in December 2016 

and became effective in June 2017, amended the Inspector 

General Act. It confirms the Office of Inspector General’s 

(OIG’s) access to agency records, clarifies existing authorities, and requires new reporting and posting obligations. 

The semiannual reports prepared by the FCA OIG describe 

its audits, inspections, evaluations, and related activities, 

as well as the agency’s follow-up to its recommendations.

The OIG’s two semiannual reports covering FY 2017 are 

available on the FCA OIG’s website. Below is a summary 

of the recommendations or agreed-upon actions in these 

reports, as well as our progress in taking corrective action. 

The FCA OIG posts all public reports on its website within 

three days of final submission to the agency.

The OIG continues to report recommendations to correct 

audit, inspection, or evaluation findings as “agreed-upon 

actions” whenever we reach agreement with the OIG on an 

acceptable way to resolve a recommendation. 
18 FCA Performance and Accountability Report FY 2017

Summary of OIG audit, inspection, 

and evaluation activities

The OIG issued seven audit, inspection, or evaluation 

reports during FY 2017, resulting in 20 new agreed-upon actions. Twenty-five agreed-upon actions have been 

closed (including 13 of 18 from the prior fiscal year). 

Therefore, 13 actions remain open this fiscal year. The 

reports are available on the FCA OIG’s website at www.

fca.gov/home/inspector.html.

• On Nov. 14, 2016, the OIG issued a report on the 

audit of FCA’s financial statements, internal controls over financial reporting, and compliance with 

certain provisions of laws and regulations for FY 

2016. The auditors issued an unmodified opinion on 

our financial statements. In the auditors’ opinion, 

the principal financial statements presented fairly, in 

all material respects, our financial position as of the 

fiscal year ended Sept. 30, 2016, in conformity with 

generally accepted accounting principles. Although 

the auditors did not express an opinion on the effectiveness of internal controls, they did not identify 

any deficiency considered to be a material weakness. 

The auditors 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.

• On Nov. 10, 2016, the OIG issued a final report on an 

evaluation of our compliance with the Federal Information Security Modernization Act for FY 2016. This 

evaluation indicated that our information security 

program continues to mature. The report contained 

no recommendations.

• On Jan. 31, 2017, the OIG issued the final inspection 

report, “The Farm Credit Administration’s Travel Card Program.” The inspection resulted in two 

agreed-upon actions, including a recommendation 

for education to cardholders on misuse of the travel 

card, proper cash advances, delinquencies, potential 

disciplinary actions, reviewing statements, and the 

dispute process.

• On Feb. 23, 2017, the OIG issued the final audit 

report, “The Farm Credit Administration’s Awards 

Program.” The audit resulted in four agreed-upon actions, including education for supervisors on 

awards criteria, and revisions to policies and procedures.

• On March 7, 2017, the OIG issued the final inspection 

report, “Farm Credit Administration’s Purchase Card 

Program.” The inspection resulted in two agreed-upon 

actions, including an update of an agency directive on 

charge card operating procedures.

• On May 22, 2017, the OIG issued the final audit report, 

“The Farm Credit Administration’s Contracting Activities.” The audit resulted in seven agreed-upon actions, 

including developing a plan to ensure contract file documentation is complete, developing a handbook for 

the contracting officer’s representatives, and updating 

policies and procedures. 

• On Sept. 29, 2017, the OIG issued the final inspection report, “Physical Security in FCA’s Denver Field 

Office.” The inspection resulted in five agreed-upon 

actions. For security purposes, this report was not 

made public.

Summary of OIG audit, inspection, and 

evaluation recommendations

Recommendations or agreed-upon actions uncorrected as 

of Oct. 1, 2016: 18

New agreed-upon actions during FY 2017: 20

Agreed-upon actions closed during FY 2017: 25

Open agreed-upon actions as of Sept. 30, 2017: 13

Recommendations or agreed-upon actions open more than 

one year: 5

OIG survey of FCS institutions 

regarding the agency’s examination 

function

The OIG conducts a quarterly survey of FCS institutions on 

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 2017, and anonymous 

comments provided by institutions generally reflected 

favorably on the examination process and examiners. The 

comments of survey respondents often provide constructive information that we can use to strengthen our examination processes.
FCA Performance and Accountability Report FY 2017 19

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 

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 2017.

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 2017, we paid on time 99.9 percent of the 3,025 

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 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 68 for additional information on our efforts to comply with this regulation.

Digital Accountability and 

Transparency Act 

The Digital Accountability and Transparency 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, with the Office of Management and Budget’s concurrence, has determined that the requirements of 

Digital Accountability and Transparency Act do not apply 

to FCA because we are not funded by taxpayer dollars.
20 FCA Performance and Accountability Report FY 2017

Statement of Assurance

The Farm Credit Administration’s 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.

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 the Office of Management and Budget 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, 2017, 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 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, 2017, 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 Federal Managers’ Financial Integrity Act, 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, 2017. Our financial management systems also comply with applicable federal 

accounting standards and the U.S. Standard General Ledger at the transaction level.

Dallas P. Tonsager

Chairman and Chief Executive Officer 

FARM CREDIT ADMINISTRATION

September 30, 2017
FCA Performance and Accountability Report FY 2017 21

Program Performance
22 FCA Performance and Accountability Report FY 2017

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 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.

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 three 

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.

• Cultivate an environment that fosters a well-trained, 

motivated, and diverse staff while providing an effective plan for leadership succession.

Our Strategic Plan for Fiscal Years 2016 – 2021 contains a 

desired outcome for each goal, as well as 19 strategies we 

will use to meet these goals. In addition, we have 14 performance measures with associated targets to measure our 

success in meeting our goals.

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 

the three 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: Ensure that the capital rules for the FCS and 

Farmer Mac are consistent with standards for the financial service industry and preserve their financial strength 

and stability so they can meet the credit needs of eligible 

borrowers.

The FCA board adopted a final rule in March 2016 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. In FY 2017, we 

updated our Financial Institution Rating System benchmarks for capital and our examination guidance and examiner training to ensure that FCS institutions implement 

the capital rules properly. We also issued an informational 

memorandum to the System titled “Implementation of the 

Tier 1/Tier 2 Capital Framework.”

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.

Strategy #2: Within the framework of the Farm Credit 

Act, develop and update policies and regulations as appropriate so that the System, including Farmer Mac, can 

continue to effectively serve its members as conditions in 

agriculture and rural America change.

The following actions are examples of ways we have used 

this strategy in FY 2017:

• Issued a final rule on flood insurance

• Continued to study the loan syndication market
FCA Performance and Accountability Report FY 2017 23

• Issued a final rule on Farmer Mac’s corporate governance and standards of conduct

• Provided guidance to the System on implementing the 

tier 1/tier 2 regulatory capital framework

• Issued guidance to the System on evaluating personal 

and intangible property taken as loan security

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 May 2017. We plan to 

address the comments from this solicitation in FY 2018.

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.

Strategy #3: Emphasize the public purpose and mission-related responsibilities of the agricultural GSEs 

to serve all of agriculture and rural America. This includes innovative programs for serving the credit and 

related service needs of young, beginning, and small 

(YBS) farmers, ranchers, and producers and harvesters of 

aquatic products.

FCA examiners evaluate the operating and strategic plans 

and the credit delivery programs of System institutions. 

We also evaluate System outreach efforts and best practices for serving the credit and related service needs of all 

creditworthy eligible customers. 

In addition, our examiners evaluate each institution’s YBS 

farmer and rancher program relative to the demographics 

of its chartered territory. These evaluations help examiners 

identify trends in lending to YBS farmers and ranchers and 

to assess the System’s efforts to provide financial and business management assistance and outreach to YBS farmers 

and ranchers. 

When evaluating 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.

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 review these reports and evaluate the System’s 

progress in meeting this requirement. As part of our examination activities, we also review institution annual reports 

and encourage institutions to include a discussion of how 

they are meeting their mission.

We evaluate Farmer Mac’s mission accomplishment as 

well. Farmer Mac’s customer base includes financial insti-
24 FCA Performance and Accountability Report FY 2017

tutions 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 fixedversus variable- rate 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 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 the System to provide products 

and services to all creditworthy and eligible potential 

borrowers and to promote outreach to enhance diversity 

and inclusion. 

Our examinations assess the System’s efforts to provide 

financial or business management assistance and outreach 

to all creditworthy eligible customers, including 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. We have 

updated our examination guidance and communications 

with the System to clearly convey our minimum expectations regarding business plans, including our expectations 

regarding diversity and inclusion requirements.

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, 

2016, through June 30, 2017, we responded to 34 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 follow-up 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.

The 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 farm-related 

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 and senior officer compensation apply 

to financing local-food farmers (including those operating 

in urban areas).

Strategy #5: Encourage diversity on the boards and in the 

workforce of System institutions.

Our oversight and examination programs include riskbased evaluation of each institution’s human capital 

planning, director elections, and nominating commit-
FCA Performance and Accountability Report FY 2017 25

tees. Examination guidance and procedures consider any 

significant changes in bylaws, policies, control systems, 

staffing, board membership, board involvement, election 

processes, or issues related to standards of conduct. As part 

of our review of the nominating committee’s processes and 

practices, we evaluate the committee’s outreach efforts to 

expand diversity on the board. And we are in the process of 

updating examination guidance on this topic.

As part of the review of human capital management, we 

evaluate conditions such as staff turnover levels or changes 

in key personnel (actual or upcoming), depth of management, changes in compensation and benefit programs or 

levels, involvement of the compensation committee, and 

extent of operational weaknesses cited in audit, review, 

and examination reports that could be connected to human 

capital issues.

Strategy #6: Consistent with the Farm Credit Act, enable 

the agricultural GSEs to structure themselves to best serve 

their members and rural America.

FCA analyzes and approves periodic requests by institutions to restructure or offer new programs designed to better serve their customers. During the year, FCA approved 

three mergers: 

• On Jan. 1, 2017, two associations affiliated with 

CoBank, ACB, merged to become one association. 

• On July 1, 2017, three associations affiliated with 

AgriBank, FCB, merged to became one association.

• On July 1, 2017, two associations affiliated with 

AgriBank merged to become one.

As a result, at fiscal year-end 2017, the System had 70 institutions (68 agricultural credit associations and 2 federal 

land credit associations), compared with 74 associations a 

year earlier. Another merger was in progress at fiscal yearend. This merger became effective on Oct. 1, 2017.

Strategy #7: Encourage System institutions to be conscious of the reputation risk associated with their lending 

and investments decisions.

We issue guidance on business planning, capital management, portfolio risk management, debt issuance, secondary 

liquidity sources, and related topics. We also work with 

FCS-wide committees and groups to discuss challenges, 

opportunities, and best practices in these areas. Further, 

we assess System institutions’ use of programs undertaken 

jointly with other financial service providers. Through our 

supervisory and enforcement activities, we require institutions to develop plans to address any potential reputation 

risks associated with their lending and investment decisions.

Strategy #8: 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 4 above for more information about borrower inquiries and complaints.

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 #9: Encourage full participation of stakeholders 

in the development and review of regulatory and policy 

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 
26 FCA Performance and Accountability Report FY 2017

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 six strategies 

to accomplish this goal and six performance measures to 

evaluate our success.

Strategy #1: Seek early FCA board input on policy and 

regulatory issues. Ensure that the board has timely and 

comprehensive information to be fully informed and able 

to respond appropriately.

The FCA board provides early input on regulatory and 

policy projects. For regulatory projects, the board provides 

input before and during the development and approval of 

the semiannual Regulatory Projects Plan, which outlines 

our regulatory agenda. For policy projects, the board also 

provides early input; a policy project may produce a guidance document, or it may eventually become a regulatory 

project. 

After we’ve started a regulatory or policy project, board 

involvement continues to be crucial. We obtain board input 

regarding the initial issues paper, and we provide board 

briefings and monthly progress reports throughout the 

project. 

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: Maintain strong and frequent two-way communication with stakeholders on issues of risk and safety 

and soundness. 

FCA management and staff participate regularly in FCS 

meetings and conferences to answer questions related to 

regulatory and FCS operational issues. We also use these 

opportunities to reinforce our expectations regarding these 

issues and to discuss new regulatory direction. FCA staff 

also participates in agency-wide workgroups and FCSwide committees and groups to discuss challenges, opportunities, and best practices. 

Our approach to oversight and examination involves 

meeting with institution boards and audit committees on 

risk issues, interim examination activities, and corrective 

actions. Through direct interaction with System institutions, we hear about emerging issues and acquire a systemic view of issues warranting regulatory attention. Our 

oversight and examination approach also involves timely 

written communication through interim activity letters and 

examination reports. We also regularly communicate with 

FCS management on upcoming examination practices that 

may affect their institutions. 

Annually, we issue an informational memorandum on our 

National Oversight Plan in which we identify risk topics 

that we will emphasize in our examination and oversight 

activities. This informational memorandum provides 

perspective on our concerns and priorities. When needed, 

we use the supervisory and enforcement process to require 

institutions to take certain action. In addition, we review 

borrower inquiries and complaints about the lending process and investigate any allegations.

Strategy #3: Continue proactive oversight of institution-specific and systemic risks.

We proactively identify and evaluate emerging issues 

that create Systemwide risk and allocate oversight and 

examination resources based on that risk in accordance 

with board policy statement 53. FCA continues to prioritize oversight activities according to risk, and we develop 

individualized oversight and examination plans for each 

institution. A key element to this approach is the national 

oversight planning process, which guides our efforts to 

ensure the safety and soundness of the System. We manage 

and update this process on a regular basis. We strive to 

provide timely guidance related to how examinations are 

conducted and emerging 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 have internal control systems and processes to manage their operations and loan portfolios, and 

whether direct-lender institutions maintain systems that 
FCA Performance and Accountability Report FY 2017 27

allow them to properly assess the loans and risk exposures 

in their portfolios. With only one exception in FY 2017, all 

institutions have adequate internal control programs or 

adequate corrective actions in place. We are currently evaluating one institution for needed improvements. 

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 

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

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: Effectively 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, 

2017, there were no formal enforcement actions in place.

Strategy #5: Ensure that technology, information management, and cybersecurity awareness are priorities at 

FCA and in the FCS.

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 analy-
28 FCA Performance and Accountability Report FY 2017

sis. In addition, 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 tools and workpapers 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.

In 2017, the Office of Examination, the FCA Risk Project, 

and the Office of Information Technology continued to 

work together to obtain analysis and reporting tools and to 

incorporate them into examination processes. For example, 

we further refined the following:

• the FCA Data Mart, 

• our analyses of data in the FCS Loans Database and the 

Consolidated Reporting System, 

• our management reporting (which is phase 2 of the 

EDGe project), and 

• examination-related tools and applications, including 

the new FIRS report and loan workpaper application. 

We also continue to evaluate whether institutions are maintaining ystems to analyze their portfolio risk and borrower 

profiles. We review their processes and tools for analyzing 

sensitivity and stress. In June 2017, we issued an informational memorandum on cybersecurity risks titled “Reporting Security Incidents and Business Continuity Events to 

FCA.”

Strategy #6: Ensure that strong governance, standards of 

conduct, and ethical behavior are part of the organizational culture of the FCS.

We evaluate the compliance of System institutions with 

governance regulations and their adherence to cooperative principles. We evaluate each institution’s standards of 

conduct, ethics, and organizational culture. We share our 

conclusions and recommendations with System boards of 

directors. As discussed under goal 2, strategy 4, we use a 

three-tiered supervision program to ensure that institutions 

take appropriate measures to mitigate any risks our examiners identify.

Goal 3 — Cultivate an environment 

that fosters a well-trained, motivated, 

and diverse staff while providing 

an effective plan for leadership 

succession.

The purpose of goal 3 is to ensure that FCA maintains a 

workforce that can carry out its mission. We have four 

strategies to accomplish this goal and two performance 

measures to evaluate our success.

Strategy #1: Maintain a highly skilled and diverse workforce to meet FCA’s current and future regulatory development, risk analysis, examination, and supervision 

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 are taking 

the following measures:

• Identifying positions in which risk of key-person dependency exists and developing plans to build bench 

strength and manage succession for these positions

• Hiring to meet projected staffing needs

• Offering training programs and developing strategies 

to increase technical competencies of employees
FCA Performance and Accountability Report FY 2017 29

• Creating opportunities for employees to become more 

engaged with their work

• 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 #2: Facilitate the development of the skills our 

workforce needs to evaluate FCS risk and provide timely 

and proactive oversight.

In 2017, FCA continued to devote significant resources 

toward developing new employees through our examiner 

commissioning program. In addition, we increased our 

focus on helping mid-career staff develop their skills. For 

example, we took the following measures: 

• Trained and developed examination staff with the 

necessary technical and soft skill sets. 

• Completed revisions to the commissioning program’s 

training curriculum and tested certifications based on 

the 2015 updated job analysis.

• Supported post-commission career path and related 

specialist programs (for credit, finance, and operations) 

to ensure that our staff has the expertise and credibility 

to carry out our mission. We also provided training 

in the necessary soft skills. And we revised an operations directive related to our career path development 

program.

• Helped our staff maintain its readiness to administer 

elevated supervision when necessary. 

• Ensured that all our examiners understand our risk 

supervision approaches and how to implement them. 

Strategy #3: Ensure adequate succession planning and 

knowledge transfer to ensure that future FCA leadership 

and staff possess the knowledge and skills required to be 

an effective arm’s length regulator.

We have updated our career path program to help us 

replace retiring managers and supervisors by developing 

the leadership, management, and supervisory skills of our 

examiners. Our strategy is to develop a pool of candidates 

who could become successful supervisors and managers, 

including director of the Office of Examination. We recognize that retirements also create opportunity for diversity and inclusion in management. We use the following 

methods to develop our next group of program managers 

and leaders:

• Creating leadership positions for program and portfolio managers 

• Providing selected candidates with formal leadership 

training, on-the-job training, and opportunities to participate in other projects 

• Helping staff build skill sets by providing developmental assignments such as serving as examiners-in-charge of complex institutions, completing special projects, and participating in Office of Examination 

specialist programs

• Providing internal rotational assignments between 

divisions in our Office of Examination

• Offering opportunities for Office of Examination employees to work in other FCA offices

To transfer knowledge from more tenured examiners to 

the new generation of examination staff, we use developmental initiatives. Our ongoing project to update the 

FCA Examination Manual also provides opportunities for 

knowledge transfer.

Strategy #4: Encourage a workplace culture that motivates 

staff to be engaged, embraces diversity in all its forms, 

and promotes strong ethical behavior.

According to the Federal Employee Viewpoint Survey, 

FCA’s employee engagement index went up by 3 per-
30 FCA Performance and Accountability Report FY 2017

centage points in 2017, from 72 percent to 75 percent. We 

promote engagement in various ways, such as providing 

training and development opportunities for employees to 

build their skills and advance their careers. 

We also strengthen engagement by having an inclusive 

workplace. For example, our Special Emphasis Programs, 

such as the Federal Women’s Program, Blacks in Government, and HOLA FCA, sponsor regular presentations on 

issues affecting women and minority groups. And each 

year we have a Diversity Day on which we celebrate the 

diverse cultures represented in our workplace. 

We also strive to increase workforce diversity. We target at 

least 25 percent of our recruiting efforts toward disabled 

and minority potential applicants. For example, during 

each recruiting season, we attend career fairs at historically 

black colleges and universities and high minority enrollment schools.

And as a financial banking regulator, we emphasize ethical 

conduct among all employees. In 2011, our board adopted 

a policy statement on ethics, independence, and our role 

as an arm’s length regulator. This document states the 

following:

• 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.

• FCA board members and employees must remain 

mindful of their duty to make independent determinations on matters being considered by the agency.

• 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 performs the following functions:

• Oversees financial disclosure reporting (that is, the 

completion of public, confidential, and certification 

forms) of covered FCA and FCSIC employees

• Provides ethics counseling to FCA and FCSIC employees

• Provides ethics training to all covered FCA and FCSIC 

employees annually, as well as to new employees 

during their orientation

• Provides a liaison to coordinate with other government agencies regarding ethics issues

• Helps develop regulations and policies related to 

ethics
FCA Performance and Accountability Report FY 2017 31

Table 5a. Goal 1 — Performance Measures and Results for Public Mission

July 1, 2016, to June 30, 2017

Measure Results

2016

Target

2016

Results

2017

Target

2017

Results

Results 

vs. 

Target

1.Percentage of FCS institutions 

providing products and services 

that serve creditworthy and eligible 

persons and perform outreach to 

enhance diversity and inclusion.

All FCS institutions had satisfactory 

operating and strategic plans for 

providing products and services to all 

creditworthy and eligible persons.

≥90% 100% ≥90% 100%

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.

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 longterm credit and liquidity.

Yes Yes Yes Yes

3.Percentage of direct-lender 

institutions with satisfactory 

consumer and borrower rights 

compliance.

Ninety-nine percent of direct-lender 

institutions have satisfactory consumer 

and borrower-rights compliance.

≥90% 95% ≥90% 100%

4.Percentage of direct-lender 

institutions with YBS programs 

that are in compliance with YBS 

regulations.

All direct-lender institutions with YBS 

programs are in compliance with YBS 

regulations.

≥90% 100% ≥90% 100%

5. Whether the majority of objectives 

listed in the preamble of each final 

rule were met on the two-year 

anniversary of the rule’s effective 

or implementation date.

A majority of the objectives listed in 

the preambles of the final rules were 

met on the two-year anniversary of the 

implementation dates. 

N/A N/A Yes Yes

6.Percentage of pre-rulemaking 

projects and proposed rules on 

which FCA requested input from 

persons outside of FCA.

There was one project out of nine on 

which we did not request input from 

persons outside of FCA. In that one 

instance, we completed our research 

on the project well before the FCA 

board had adopted this performance 

measure.

100% N/A 100% 89%
32 FCA Performance and Accountability Report FY 2017

Table 5b. Goal 2 — Performance Measures and Results for Safety and Soundness 

July 1, 2016, to June 30, 2017

Measure Results

2016

Target

2016

Results

2017

Target

2017

Results

Results 

vs. 

Target

1.Percentage of System assets in 

institutions with composite CAMELS 

ratings of 1 or 2.

99 percent of System assets 

have composite CAMELS 

ratings of 1 or 2.

≥90% 99.7% ≥90% 99.6%

2.Percentage of requirements in

supervisory agreements with 

which FCS institutions have at 

least substantially complied within 

18 months of execution of the 

agreements.

The agency does not have 

any supervisory agreements in 

place with FCS institutions.

≥80% 91% ≥80% NA NA

3.Percentage of institutions 

complying with regulatory capital 

ratio requirements.

All institutions complied 

with regulatory capital ratio 

requirements.

≥90% 100% ≥90% 100%

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.

OSMO activities effectively 

identify emerging risks, and 

appropriate supervisory and 

corrective actions have been 

taken.

Yes Yes Yes Yes

5.Percentage of institutions with

satisfactory audit and review 

programs, including institutions with 

acceptable corrective action plans.

All institutions but one have 

satisfactory audit and review 

programs, including institutions 

with acceptable corrective 

action plans. The one exception 

was identified recently, and we 

expect that institution to submit 

an acceptable corrective action 

plan soon.

100% 100% 100% 99%

6. Whether five or more reports and 

dashboards were created that use 

data collected from the Farm Credit 

System to assess risk in the System.

We created at least five reports 

and dashboards that use 

System data to assess risk. 

N/A N/A Yes Yes
FCA Performance and Accountability Report FY 2017 33

Table 5c. Goal 3 — Performance Measures and Results for Workforce Management 

July 1, 2016, to June 30, 2017

Measure Results

2016

Target

2016

Results

2017

Target

2017

Results

Results 

vs. 

Target

1. Whether, as part of its recruiting 

efforts for entry-level examiners, FCA 

has ensured that 25 percent of its 

outreach efforts target disabled or 

minority potential applicants. For the 

purpose of this measure, outreach 

consists of participating in career 

fairs, attending recruiting events, 

or placing employment listings or 

advertisements on websites targeting 

these audiences.

At least 25 percent of our 

outreach efforts targeted 

disabled or minority potential 

applicants. 

N/A N/A Yes Yes

2. Whether we have maintained or 

improved our score from last year in 

the Annual Employee Satisfaction 

Survey.

We achieved a 3-percentagepoint increase in our Employee 

Engagement Index score

N/A N/A ≥72% 75%

Notes: In April 2016, the FCA board adopted the FCA Strategic Plan for FYs 2016 – 2021. The plan contains the performance measures listed 

in tables 5a, 5b, and 5c. 

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 we exceeded the FY 2017 target; indicates we achieved the FY 2017 target; indicates we did not meet the FY 2017 target.
34 FCA Performance and Accountability Report FY 2017

Financial Section
FCA Performance and Accountability Report FY 2017 35

Statement of Chief Financial Officer

November 8, 2017 

I am honored to join Chairman Tonsager in presenting the 2017 financial statements for the Farm Credit 

Administration. We hope this report provides a meaningful picture of FCA’s financial condition, operating 

performance, and internal controls. 

Our independent auditor has issued an unmodified opinion on our financial statements for FY 2017. In addition, the auditor did not identify any significant deficiencies or material weaknesses over internal control 

over financial reporting and there were no reportable instances of noncompliance with laws, regulations, 

and contracts. This marks the 24th consecutive year FCA has received a “clean” opinion and underscores 

our commitment to fiscal stewardship.

As 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 conduct FCA’s operations with transparency and accountability.

Through the commitment of FCA leaders and the dedication of staff from across the agency, FCA has 

maintained strong internal controls. Our internal controls allow us to efficiently provide sound financial 

management and reliable financial data, and to identify and respond to potential financial risks that may 

emerge.

While we are pleased with our results, we remain committed to making further improvements to our internal controls environment. One of our key priorities is to build out our in-house internal controls program so 

that we can better identity and resolve any internal control issues. We will continue to refine our enterprise 

risk management program to mitigate risk throughout the organization and effectively allocate resources to 

achieve our mission. 

As always, we remain committed to providing strong financial management, effective internal controls, 

and meaningful budget and performance integration. And we continue to look for creative opportunities to 

reduce costs by improving our processes and programs.

Sincerely,

Stephen G. Smith

Chief Financial Officer
36 FCA Performance and Accountability Report FY 2017

Farm Credit Administration Office of Inspector General

1501 Farm Credit Drive

McLean, VA 22102-5090

(703) 883-4030

November 8, 2017

The Honorable Dallas P. Tonsager, Chairman

The Honorable Jeffery S. Hall, Board Member

Farm Credit Administration

1501 Farm Credit Drive

McLean, Virginia 22102-5090

Dear Chairman Tonsager and Board Member Hall:

The attached report is the audit of the Farm Credit Administration’s (FCA’s or Agency’s) financial 

statements for the fiscal year (FY) ended September 30, 2017. The Office of Inspector General (OIG) 

contracted with Harper, Rains, Knight & Company, P.A., an independent public accounting firm, to 

perform the audit. 

Harper, Rains, Knight & Company issued an unmodified opinion on the Agency’s financial statements. 

In the auditors’ opinion, FCA’s principal financial statements present fairly, in all material respects, the 

financial position of the Agency as of the FY ended September 30, 2017, in conformity with generally 

accepted accounting principles. 

Harper, Rains, Knight & Company considered FCA’s internal control over financial reporting to determine 

the audit procedures to express an opinion on the financial statements. Although they did not express 

an opinion on the effectiveness of FCA’s internal controls, they did not identify any deficiencies 

considered to be a material weakness. 

Additionally, Harper, Rains, Knight & Company performed tests of FCA’s compliance with selected 

provisions of laws and regulations that could have a direct and material effect on the financial 

statements. Although they did not express an opinion on compliance with those provisions, they did 

not identify any instances of noncompliance or other matters required to be reported under Government 

Auditing Standards issued by the Comptroller General of the United States or the Office of Management 

and Budget (OMB) Bulletin No. 17-03, Audit Requirements for Federal Financial Statements. 

Transmittal Letter of Auditor’s Report
FCA Performance and Accountability Report FY 2017 37

Harper, Rains, Knight & Company was required to perform the audit in accordance with Government 

Auditing Standards and OMB Bulletin No. 17-03. To ensure the quality of the work performed, the OIG:

•	 reviewed Harper, Rains, Knight & Company’s approach to and planning of the audit,

•	 evaluated the qualifications and independence of the auditors,

•	 attended key meetings with auditors and Agency officials,

•	 monitored the progress of the audit, 

•	 examined workpapers, and 

•	 reviewed the audit report.

Harper, Rains, Knight & Company is responsible for the attached auditors’ report and the conclusions 

expressed in the report. The OIG is responsible for technical and administrative oversight regarding the 

audit firm’s performance under the terms of the contract. Our review was not intended for us to express, and accordingly we do not express, an opinion on the Agency’s financial statements or conclusions on internal control over financial reporting and compliance with laws and regulations, including 

whether the Agency’s financial management systems substantially complied with the Federal Financial 

Management Improvement Act. However, our monitoring review disclosed no instances in which 

Harper, Rains, Knight & Company did not comply, in all material respects, with the auditing standards.

 

Respectfully,

Wendy R. Laguarda

Inspector General
38 FCA Performance and Accountability Report FY 2017

Independent Auditors’ Report

The Board and Inspector General

Farm Credit Administration

Report on the Financial Statements

We have audited the accompanying balance sheets of the Farm Credit Administration (FCA), as of September 30, 2017 

and 2016, and the related statements of net cost and changes in net position, and statements of budgetary resources, for 

the fiscal years then ended and the related notes to the financial statements. 

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with 

general accepted accounting principles in the United States of America; this includes the design, implementation, and 

maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free 

from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 

in accordance with auditing standards generally accepted in the United States of America; the standards applicable 

to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United 

States; and Office of Management and Budget (OMB) Bulletin No. 17-03, Audit Requirements for Federal Financial 

Statements. Those standards and OMB Bulletin No. 17-03 require that we plan and perform the audit to obtain 

reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial 

statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material 

misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors 

consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order 

to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion 

on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes 

evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates 

made by management, as well as evaluating the overall presentation of the financial statements.
FCA Performance and Accountability Report FY 2017 39

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit 

opinions.

Opinion on the Financial Statements

In our opinion, the financial statements including the accompanying notes, present fairly, in all material respects, the 

financial position of FCA as of September 30, 2017 and 2016, and its net cost of operations, changes in net position, 

and budgetary resources for the fiscal years then ended, in conformity with accounting principles generally accepted in 

the United States of America.

Other Matters

Required Supplementary Information

Generally accepted accounting principles in the United States of America require that the information in the 

Management’s Discussion and Analysis, and Required Supplementary Information sections be presented to supplement 

the basic financial statements. Such information, although not a part of the basic financial statements, is required by 

the Federal Accounting Standards Advisory Board who considers it to be an essential part of financial reporting for 

placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied 

certain limited procedures to the required supplementary information in accordance with auditing standards generally 

accepted in the United States of America, which consisted of inquiries of management about the methods of preparing 

the information and comparing the information for consistency with management’s responses to our inquiries, the basic 

financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not 

express an opinion or provide any assurance on the information because the limited procedures do not provide us with 

sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming an opinion on the basic financial statements as a whole. The 

information in the Statement of the Board Chair and Chief Executive Officer (CEO), Letter from the Chief Financial 

Officer, and Other Information section is presented for purposes of additional analysis and is not a required part of the 

basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of 

the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

Other Reporting Required by Government Auditing Standards 

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements as of and for the year ended September 30, 2017, we 

considered FCA’s internal control over financial reporting (internal control) to determine the audit procedures that 

are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for 

the purpose of expressing an opinion on the effectiveness of FCA’s internal control. Accordingly, we do not express 

an opinion on the effectiveness of FCA’s internal control. We did not test all internal controls relevant to operating 

objectives as broadly defined by the Federal Managers’ Financial Integrity Act of 1982.
40 FCA Performance and Accountability Report FY 2017

A deficiency in internal control exists when the design or operation of a control does not allow management or 

employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements 

on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that 

there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, 

or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, 

in internal control that is less severe than a material weakness, yet important enough to merit attention by those 

charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and 

was not designed to identify all deficiencies in internal control that might be material weaknesses or significant 

deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we 

consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether FCA’s financial statements are free from material 

misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant 

agreements, noncompliance with which could have a direct and material effect on the determination of financial 

statement amounts. However, providing an opinion on compliance with those provisions was not an objective of 

our audit, and accordingly, we do not express such an opinion. The results of our tests of compliance disclosed no 

instances of noncompliance or other matters that are required to be reported herein under Government Auditing 

Standards or OMB Bulletin No. 17-03.

Purpose of the Other Reporting Required by Government Auditing Standards

The purpose of the communication described in the Other Reporting Required by Government Auditing Standards

section is solely to describe the scope of our testing of internal control and compliance and the result of that testing, 

and not to provide an opinion on the effectiveness of FCA’s internal control or compliance. This report is an integral 

part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal 

control and compliance. Accordingly, this communication is not suitable for any other purpose.

November 8, 2017
FCA Performance and Accountability Report FY 2017 41

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 2017 and FY 2016. 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, 2017.

• 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, and a Statement of Changes in Social Insurance Amounts.
42 FCA Performance and Accountability Report FY 2017

BALANCE SHEETS

As of September 30, 2017 and 2016 

(In Dollars)

2017 2016

Assets Intragovernmental

Fund balance with Treasury (Note 2) $1,457,378 $546,292

Investments (Note 3) 32,893,400 29,756,481

Accounts receivable (Note 4) 10,994 45,567

Total intragovernmental $34,361,772 $30,348,340

Accounts receivable (Note 4) 154,726 190,264

General property, equipment, and software, net (Note 5) 1,590,298 1,277,101

Prepaid expenses 333,689 225,418

Total assets $36,440,485 $32,041,123

Liabilities Intragovernmental

Accounts payable $27,806 $18,444

Accrued post-employment compensation 36,536 35,282

Employer contributions and payroll taxes payable 455,088 404,578

Other 0 33

Total intragovernmental 519,430 458,337

Accounts payable 550,337 330,865

Actuarial workers’ compensation liability (Note 6) 1,463,048 1,258,152

Accrued payroll and benefits 6,771,200 6,232,550

Employer contributions and payroll taxes payable 486,960 107,768

Deferred revenue 5,733,890 4,676,787

Total liabilities $15,524,865 $13,064,459

Net position Cumulative results of operations – Other funds $20,915,620 $18,976,664

Total net position 20,915,620 18,976,664

Total liabilities and net position $36,440,485 $32,041,123
FCA Performance and Accountability Report FY 2017 43

STATEMENTS OF NET COST

For the Years Ended September 30, 2017 and 2016

(In Dollars)

Program Costs 2017 2016

Public Mission Gross costs $18,863,584 $16,908,302

Less: Earned revenue (17,954,870) (14,727,123)

Net program cost $908,714 $2,181,179

Safety and Soundness Gross costs $51,584,478 $50,375,754

Less: Earned revenue (49,163,895) (43,866,759)

Net program cost $2,420,583 $6,508,995

Other Activity Gross costs $918,104 $840,612

Less: Earned revenue (541,833) (652,420)

Net program cost $376,271 $188,192

Net Cost of Operations (Notes 7 and 8) $3,705,568 $8,878,366
44 FCA Performance and Accountability Report FY 2017

STATEMENTS OF CHANGES IN NET POSITION

For the Years Ended September 30, 2017 and 2016

(In Dollars)

2017 2016

Cumulative results of operations

Beginning balances $18,976,664 $21,843,206

Other financing sources 

(Non-exchange)

Imputed financing sources

Federal employee benefits (Note 9) 2,044,524 2,611,824

Rent (Note 10) 3,600,000 3,400,000

Total financing sources 5,644,524 6,011,824

Net cost of operations (3,705,568) (8,878,366)

Net change 1,938,956 (2,866,542)

Cumulative results of operations $20,915,620 $18,976,664

Net position $20,915,620 $18,976,664
FCA Performance and Accountability Report FY 2017 45

STATEMENT OF BUDGETARY RESOURCES

For the Years Ended September 30, 2017 and 2016

(In Dollars)

2017 2016

Budgetary 

resources

Unobligated balance brought forward, Oct. 1 $19,207,882 $20,746,358

Spending authority from offsetting collections 69,042,437 61,678,681

Total budgetary resources (Note 12) $88,250,319 $82,425,039

Status of 

budgetary 

resources

New obligations and upward adjustments (total) $66,843,478 $63,217,157

Unobligated balance, end of year

Exempt from apportionment, unexpired accounts 15,672,951 14,531,095

Not available 5,733,890 4,676,787

Total unobligated balance, end of year 21,406,841 19,207,882

Total budgetary resources (Note 12) $88,250,319 $82,425,039

Change in 

obligated 

balance

Unpaid obligations

Unpaid obligations, brought forward, Oct. 1 $11,498,656 $10,890,646

New obligations and upward adjustments 66,843,478 63,217,157

Outlays (gross) (64,699,671) (62,609,147)

Unpaid obligations, end of year 13,642,463 11,498,656

Uncollected payments

Uncollected customer payments, federal sources, brought 

forward, Oct. 1

(653,849) (690,666)

Change in uncollected customer payments, Federal sources (219,414) 36,817

Uncollected customer payments, federal sources, end of year (873,263) (653,849)

Memorandum entries

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

Obligated balance, end of year $12,769,200 $10,844,807

Budget 

authority and 

outlays, net

Budget authority, gross $69,042,437 $61,678,681

Actual offsetting collections (68,823,023) (61,715,498)

Change in uncollected customer payments, federal 

sources

(219,414) 36,817

Budget authority, net $0 $0

Outlays, gross $64,699,671 $62,609,147

Actual offsetting collections (68,823,023) (61,715,498)

Agency outlays, net $(4,123,352) $893,649
46 FCA Performance and Accountability Report FY 2017

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. 

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, 2017, are fully collectible. See Note 4.
FCA Performance and Accountability Report FY 2017 47

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 and equipment 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 capitalize software when its costs exceed $250,000 and it has a useful life of two years 

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.

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 nonvested leave 

are expensed as the leave is taken. During FY 2017, we updated our methodology for calculating the leave liability to 

account for the cost of benefits associated with the compensation. This change ensures that our estimated liability for 

leave reflects the current composition of our staff; most of our employees are under the Federal Employees Retirement 

System instead of the Civil Service Retirement System.

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.
48 FCA Performance and Accountability Report FY 2017

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.

P. Financial Data — All amounts presented in this report are in whole dollars.
FCA Performance and Accountability Report FY 2017 49

Note 2. Fund Balance With Treasury

2017 2016

Fund balance with Treasury

Revolving fund $1,457,378 $546,292

Total fund balance with Treasury $1,457,378 $546,292

Status of fund balance with Treasury

Unobligated balance available $15,672,951 $14,531,095

Unobligated balance unavailable 5,733,890 4,676,787

Obligated balance not yet disbursed 12,769,200 10,844,807

Subtotal — Status of fund balance 34,176,041 30,052,689

Funds invested with Treasury net of unamortized discount (32,718,663) (29,506,397)

Total fund balance with Treasury $1,457,378 $546,292

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.
50 FCA Performance and Accountability Report FY 2017

Note 3. Investments

Intragovernmental Securities

Amounts for 2017 Balance Sheet Reporting

Cost Amortized 

(Premium) 

Discount

Investments 

Net

Interest 

Receivable

9/30/17 

Investment 

Balance

Market Value 

Disclosure

Nonmarketable 

market-based

$32,928,707 $(89,972) $32,838,735 $54,665 $32,893,400 $32,767,237

Amounts for 2016 Balance Sheet Reporting

Cost Amortized 

(Premium) 

Discount

Investments 

Net

Interest 

Receivable

9/30/16 

Investment 

Balance

Market Value 

Disclosure

Nonmarketable 

market-based

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

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 $317,990 and $248,331 for FYs 

2017 and 2016, respectively.

Note 4. Accounts Receivable

2017 2016

Intragovernmental

Reimbursements for services provided $10,994 $45,567

Subtotal 10,994 45,567

With the public

Reimbursements for services provided 145,890 140,798

Expenditure refunds 8,836 49,466

Subtotal 154,726 190,264

Total accounts receivable $165,720 $235,831

The intragovernmental receivables represent reimbursable services provided to USDA and FCSIC but unbilled as of Sept. 

30.
FCA Performance and Accountability Report FY 2017 51

Note 5. General Property, Equipment, and Software

As of September 30, 2017

Estimated 

Useful Life

Depreciation 

Method

Acquisition 

Value

Accumulated/

Amortized 

Depreciation

Book Value

Equipment 3 years Straight line 723,580 (361,790) 361,790

Equipment 5 years Straight line 347,055 (68,246) 278,809

Equipment 10 years Straight line 305,304 (75,849) 229,455

Internal use software 5 years Straight line 718,049 (71,805) 646,244

Software in 

development

74,000 0 74,000

Total $2,167,988 $(577,690) $1,590,298

As of September 30, 2016

Estimated 

Useful Life

Depreciation 

Method

Acquisition 

Value

Accumulated/

Amortized 

Depreciation

Book 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

During FY 2017, we increased the capitalization threshold for internal use software to $250,000. Capitalization thresholds 

for property and equipment remains unchanged at $50,000 per individual asset and $500,000 for bulk purchase of equipment. 
52 FCA Performance and Accountability Report FY 2017

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 2017 model to estimate FECA actuarial liability.

2017 2016

Actuarial FECA liability $1,463,048 $1,258,152

Total liabilities not covered by budgetary resources 1,463,048 1,258,152

Total liabilities covered by budgetary resources 14,061,817 11,806,307

Total liabilities $15,524,865 $13,064,459
FCA Performance and Accountability Report FY 2017 53

Note 7. Costs and Exchange Revenue

For the Years Ended September 30, 2017 and 2016

2017 2016

Public Mission Intragovernmental costs $3,747,773 $3,249,440

Public costs 15,115,811 13,658,862

Total costs 18,863,584 16,908,302

Intragovernmental earned revenue (85,147) (62,405)

Public earned revenue (17,869,723) (14,664,718)

Total revenue (17,954,870) (14,727,123)

Net program costs 908,714 2,181,179

Safety and Soundness Intragovernmental costs 11,481,392 10,707,624

Public costs 40,103,086 39,658,130

Total costs 51,584,478 50,375,754

Intragovernmental earned revenue (232,843) (185,926)

Public earned revenue (48,931,052) (43,680,833)

Total revenue (49,163,895) (43,866,759)

Net program costs 2,420,583 6,508,995

Other Activity Intragovernmental costs 169,197 119,158

Public costs 748,907 721,454

Total costs 918,104 840,612

Intragovernmental earned revenue (396,437) (511,622)

Public earned revenue (145,396) (140,798)

Total revenue (541,833) (652,420)

Net program costs 376,271 188,192

Net cost of operations (+/−) $3,705,568 $8,878,366

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.
54 FCA Performance and Accountability Report FY 2017

Note 8. Suborganization Program Costs/Program Costs by Segment

The following tables provide a detailed breakout of the Statement of Net Cost for each of the fiscal years ended 2017 and 

2016. We display our cost and earned revenue amounts by office within each program.

For the Year Ended September 30, 2017

Office of 

Examination

Office of 

Regulatory 

Policy

Office of 

Secondary 

Market 

Oversight

Other 

Offices

Total

Public 

mission

Gross costs $531,629 $5,374,750 $726,926 $12,230,279 $18,863,584 

Less: Earned revenue (507,308) (5,128,844) (649,992) (11,668,726) (17,954,870)

Net program cost 24,321 245,906 76,934 561,553 908,714 

Safety and 

soundness

Gross costs 34,589,419 1,197,363 728,794 15,068,902 51,584,478 

Less: Earned revenue (32,986,710) (1,142,555) (624,897) (14,409,733) (49,163,895)

Net program cost 1,602,709 54,808 103,897 659,169 2,420,583 

Other 

activity

Gross costs 315,070 31,674 860 570,500 918,104 

Less: Earned revenue (185,943) (18,693) (508) (336,689) (541,833)

Net program cost 129,127 12,981 352 233,811 376,271 

Net cost of operations $1,756,157 $313,695 $181,183 $1,454,533 $3,705,568 

For the Year Ended September 30, 2016

Office of 

Examination

Office of 

Regulatory 

Policy

Office of 

Secondary 

Market 

Oversight

Other 

Offices

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
FCA Performance and Accountability Report FY 2017 55

Note 9. Federal Employee Benefits

2017 2016

Imputed pension costs $564,494 $787,888

Other imputed retirement benefits 1,480,030 1,823,936

Total $2,044,524 $2,611,824

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 2017 and 2016. 

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

2017 2016

Leased field offices $1,232,874 $1,226,614

FCA headquarters 2,367,126 2,173,386

Total $3,600,000 $3,400,000

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 2017. 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.

Note 11. 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, 2017 and 2016, undelivered orders that were unpaid amounted to 

$5,314,536 and $4,369,169 respectively.
56 FCA Performance and Accountability Report FY 2017

Note 12. Explanation of Differences Between the SBR and the Budget of the U.S. 

Government

SFFAS 7 requires the reporting of material differences between amounts reported in the SBR and the actual amounts reported in the Budget of the United States Government. 

There are no material differences between the amounts reported in the FY 2016 Statement of Budgetary Resources and 

the FY 2016 actual amounts reported in the FY 2018 Budget of the United States Government. The FY 2019 Budget of the 

United States is not yet available to compare the FY 2017 actual amounts to the FY 2017 Statement of Budgetary Resources. The budget is expected to be available in February 2018.

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 $272 for the period ended Sept. 30, 2017, and 

$299 for Sept. 30, 2016. The funds collected in FY 2017 were transferred to the Department of the Treasury at the end of FY 

2017.

Note 14. Reconciliation of Net Cost of Operations to Budget

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. 

2017 2016

Resources Used to Finance 

Activities

Budgetary resources obligated

Obligations incurred $66,843,478 $63,217,157

Spending authority from offsetting collections and 

recoveries

 (69,042,437) (61,678,681)

Net obligations (2,198,959) 1,538,476

Other resources

Imputed financing from costs absorbed by others 5,644,524 6,011,824

Other resources 1,057,103 2,535,327

Net other resources used to finance activities 6,701,627 8,547,151

Total resources used to finance activities 4,502,668 10,085,627

Resources used to finance items not part of net cost of operations (1,188,279) (1,089,260)

Total resources used to finance net cost of operations 3,314,389 8,996,367

Components of the net cost of operations that will not require or generate 

resources in current period

 391,179 (118,001)

Net cost of operations $3,705,568 $8,878,366
FCA Performance and Accountability Report FY 2017 57

Other Information
58 FCA Performance and Accountability Report FY 2017

Letter from Inspector General on FCA’s 

Management Challenges 

Farm Credit Administration Office of Inspector General 

1501 Farm Credit Drive 

McLean, Virginia 22102‐5090 

October 11, 2017 

The Honorable Dallas P. Tonsager, Board Chairman 

The Honorable Jeffery S. Hall, Board Member 

Farm Credit Administration 

1501 Farm Credit Drive 

McLean, Virginia 22102‐5090 

Dear Board Chairman Tonsager and Board Member Hall: 

As part of the Agency’s annual Performance and Accountability Report, the Reports Consolidation Act of 2000 

requires Inspectors General to provide a summary perspective on the most serious management and 

performance challenges facing the Agency. We solicited the FCA Board and Management for thoughts on this 

issue and identified the following top four management challenges: 

1. Examination and Supervision Program, 

2. Information Technology, 

3. Human Capital, and 

4. Organizational Structure and Governance.    

We attached a summary of these challenges and the Office of Inspector General’s assessment of the Agency’s 

progress in addressing them. 

We appreciate the continued, ongoing support of Agency leadership. We will continue to work with you in 

addressing these and other challenges faced by the Agency in achieving FCA’s mission. 

If you have any questions, please call me at 703‐883‐4234. 

  

Sincerely, 

Wendy R. Laguarda 

Inspector General 

Enclosure 
FCA Performance and Accountability Report FY 2017 59

MANAGEMENT CHALLENGES 

As part of the Agency’s annual Performance and Accountability Report, the Reports Consolidation Act of 2000 requires 

Inspectors General to provide a summary perspective on the most serious management and performance challenges 

facing the Agency. These challenges reflect ongoing vulnerabilities identified by the OIG over recent years as well as new 

and emerging issues that the Farm Credit Administration (FCA) faces. The chart below summarizes the top management 

challenges. The pages following the chart provide more depth regarding the challenge and the Agency’s progress in 

addressing the challenge. 

   

Examination and Supervision Program

•Identifying and addressing risks in the Farm Credit System (System) through effective examination 

and supervision to ensure the System remains safe and sound.

Information Technology

•The ability to leverage investments in information technology while maintaining a secure 

environment.

Human Capital

•Maintaining a well‐trained, sustainable workforce while facing challenges in retirement 

eligibiltiies, workforce retention, and diversity.

Organizational Structure and Governance

•Aligning FCA's organizational structure to the goals and priorities of the FCA Board and the 

Executive Branch reform initiatives while remaining a strong safety and soundness regulator.

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60 FCA Performance and Accountability Report FY 2017

CHALLENGE ONE: EXAMINATION AND SUPERVISION PROGRAM

A significant challenge for FCA lies in identifying and addressing risks in the Farm Credit System (FCS or System) through 

effective examination and supervision to ensure the System remains safe and sound. 

The System continues to be impacted by changing risk conditions. Over the last number of years, net farm income has 

declined and price levels for key commodities have been low. Macroeconomic factors, such as changing interest rates 

and energy prices, will likely also impact risk in the System. FCS institutions must continue to be proactive and 

responsive to these risks. Working with borrowers and adapting to increasing risks while maintaining financial capacity 

will further increase the complexity of the System.  

FCA’s examination and supervision program must align with evolving threats, risks, and conditions. FCA uses a risk‐based

approach for oversight of the System. The Agency will require more sophisticated risk evaluation techniques to align 

with existing and emerging risk factors and identify and deter consequences with the greatest potential impact. Effectiv

oversight will require using new technologies and developing new skillsets within the Agency. The control environment 

must also evolve to address increasing expectations associated with internal controls.  

From time to time, more serious or persistent weaknesses require additional oversight activities. FCA must respond and 

intervene, when necessary, to protect the System. Effective examination and supervision requires prompt identification 

of unacceptable risks. Both internal and external factors can cause significant changes in condition in a short period of 

time. Corrective actions and follow‐up are critical to preventing the escalation of issues that impact safety and 

soundness. The Agency must be agile to monitor and prevent such conditions to protect the System.  

e 

Agency Progress 

FCA continuously works to address the challenges of the examination and supervision roles and responsibilities. The 

Office of Examination (OE) has issued Informational Memoranda with guidance for institutions. An Informational 

Memorandum titled Servicing Loans to Borrowers in Distressed Industries (January 21, 2016), highlights risk conditions 

and encourages System institutions to ready themselves and their customers for less favorable conditions. Another 

Informational Memorandum titled Reporting Security Incidents and Business Continuity Events to FCA (June 27, 2017), 

addresses reporting such events to FCA. The Agency also conducts systemic risk analyses to identify and monitor 

emerging risks. 

Each year, OE identifies National Oversight Plan risk topics that are emphasized in ongoing examinations and oversight 

activities. For Fiscal Year 2017, OE identified two risk topics:  Intensifying Credit Risk – Deeper into the Commodities Cycle 

and Implementing the New Capital Regulations. For Fiscal Year 2018, two risk topics were identified: Portfolio Risk – 

Weathering the Storm and Internal Controls Over Financial Reporting. Other areas of emphasis in the 2018 plan include 

stress testing and earnings trends/operating expenses. 

The OIG plans to review OE programs during Fiscal Years 2018‐2019 to address challenges faced by the examination and 

supervision program. Our plan includes a review of the Agency’s oversight of internal controls and a benchmarking study 

on the organizational structure of OE. We completed an audit on the Examination of Business Continuity at FCS 

Institutions in June 2016. 

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FCA Performance and Accountability Report FY 2017 61

CHALLENGE TWO: INFORMATION TECHNOLOGY

A significant management challenge for FCA is the ability to leverage investments in information technology (IT) while 

maintaining a secure environment.   

Cybersecurity threats and vulnerabilities require an IT security program that is both realistic and forward‐looking. The 

continuous challenge created by cybersecurity threats is highlighted by security incidents and data breaches involving 

both the public and private sector. Cybersecurity threats could have a direct impact on FCA and other government 

agencies’ abilities to perform their missions. As such, it is imperative to prevent and respond to these types of attacks to 

ensure that the Agency can continue to perform its mission.  

While cybersecurity threats are increasing, FCA is increasingly reliant on IT software to identify and analyze potential 

risks from the sensitive financial data that the Agency receives from the System. Hence, it is imperative that FCA has the 

necessary IT tools and staff to stave off cybersecurity threats and to operate more efficiently and effectively. At the 

same time, the Agency must be prudent and responsible with its spending. Finally, to be effective, FCA needs a well‐

trained staff that can successfully integrate new tools into its operations.

The successful implementation of IT provides FCA staff with the tools and skills that enable the Agency to continue to:  

 Improve the quality and availability of financial data used to examine potential risks across the System without 

creating an undue burden on the System;  

 Streamline business processes and build business intelligence to provide decision‐makers with timely 

management information;  

 Develop electronic recordkeeping and management capability for capturing, maintaining, and sharing 

institutional knowledge; and  

 Protect and secure FCA information systems and data from ever‐increasing external and internal threats.  

Agency Progress 

Over the past few years, FCA has invested in various IT tools to increase efficiency and effectiveness. Recently, FCA 

invested in analytical tools with the goal of improving risk identification in the System by analyzing System loan data. 

The Office of Information Technology (OIT) provided training for the new analytical tools.  

FCA’s risk‐based information security program continues to mature as it continuously identifies areas to strengthen and 

improve security. The OIT supplemented its staff with an information security contractor to assist with further 

development of its security program.  

The OIG performs an annual evaluation of FCA’s compliance with the Federal Information Security Modernization Act of 

2014. Additionally, the OIG will conduct a benchmarking study of the OIT and its use of contractors. 

   

3 | P a g e
62 FCA Performance and Accountability Report FY 2017

CHALLENGE THREE: HUMAN CAPITAL 

A significant management challenge for FCA is maintaining a well‐trained, sustainable workforce while facing challenges 

in retirement eligibilities, workforce retention, and diversity. Employees are FCA’s most valuable asset. The Agency must 

continue to invest in its employees and their development.  

FCA’s success depends on its workforce. When the workforce changes, the disruption can affect the Agency. FCA 

continues to have a significant amount of retirement eligibilities. This presents a challenge for the Agency because of key 

person dependencies and a loss of institutional knowledge when these individuals retire. It is important for the Agency 

to have succession plans in place to pass down the knowledge and experience gained throughout employees’ careers 

and to reduce dependencies.  

The Agency also faces a challenge in retaining its workforce. Workforce training and developing takes a significant 

investment of resources. Specifically, the Commissioning Program at FCA is a four‐year program with an extensive 

amount of training and other resources devoted to its success. Retaining staff should remain a focus for FCA. Using tools, 

such as data analytics and trending data through collection efforts, can help the Agency identify gaps or areas for 

improvement.  

Increasing diversity also remains a human capital challenge for FCA. As noted in some of our previous work,  

the Agency must assess and deploy strategies to reach its goals for diversity and inclusion. It can do this by using various 

tools that:  identify and reduce potential barriers to diversity and inclusion; enhance outreach; evaluate the Agency’s 

recruitment data; and heighten awareness through programs that support diversity and inclusion.     

Agency Progress 

The Agency maintains a Human Capital Plan and has identified specific strategies and goals relating to human capital in 

its Strategic Plan with two related performance measures. FCA continues to evaluate employees’ opinions on surveys 

and identifies retirement eligibilities. The Agency also has implemented several employee benefits to attract and retain 

well‐qualified employees, including a new Student Loan Repayment Program. The FCA’s Special Emphasis Programs, 

including new ones added over the last few years, increase awareness of, and appreciation for, diversity within the 

Agency. 

The OIG has completed numerous audit and inspections relating to human capital over the last two years. The OIG will 

conduct an audit of the separating employee process and a benchmarking study on the organizational structure of the 

OE.   

   

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FCA Performance and Accountability Report FY 2017 63

CHALLENGE FOUR: ORGANIZATIONAL STRUCTURE AND GOVERNANCE 

A significant management challenge for FCA is to align its organizational structure to the goals and priorities of the FCA 

Board and the Executive Branch reform initiatives while remaining a strong safety and soundness regulator.  

Although the Agency’s statutory mission has remained constant, many factors affect the Agency’s operations and 

organization. One factor is the periodic turnover of the FCA Board as reflected by Chairman Tonsager’s appointment as 

Chairman in November of 2016, Board Member Hall’s term expiration in October 2018, and the September 2017 

Presidential nomination of a new board member. The FCA has the ongoing challenge of responding to the goals and 

priorities of the rotating Chairman and board members. Another factor affecting the Agency’s operations and 

organization is the Executive Branch reform initiatives, which task agencies with looking for ways to operate more 

efficiently. 

As an arm’s length regulator, FCA is uniquely challenged to ensure that it remains independent, equitable, and 

transparent. This dynamic is especially important for the Board and employees with decision‐making authorities. FCA 

must also be cognizant of how outside forces can affect, or be perceived to affect, regulations and policy. To achieve its 

mission, the organizational structure must align in a way that ensures a quality staff, dedicated to understanding, 

addressing, and communicating these issues.  

Agency Progress 

The Agency plans for the changes in the FCA Board’s composition by preparing briefing material for newly‐entering 

board members and ensuring that their on‐boarding runs as smoothly as possible. The Agency’s senior leaders are led by 

a Chief Operating Officer (COO) who liaisons day‐to‐day with the Chairman and board members. This leadership 

structure has proven to be an effective and efficient way of responding to the goals and priorities of the Chairman and 

board members and ensuring that all Agency staff is aware of, and responsive to, such priorities. 

The Agency actively reviews and develops its Agency Reform Plan in response to the Administration’s government‐wide 

reorganization efforts. The Agency continues to focus on identifying key positions and on recruiting, selecting, and 

developing a diverse and well‐trained workforce.  

The OIG has audits and evaluations planned to consider the impact of FCA governance and organization on Agency 

operations and will continue to identify potential audit work in this area. 

5 | P a g e
64 FCA Performance and Accountability Report FY 2017

November 8, 2017

Ms. Wendy Laguarda

Inspector General

Farm Credit Administration

1501 Farm Credit Drive

McLean, Virginia 22102-5090

Dear Ms. Laguarda:

Thank you for your statement on the management and performance challenges facing FCA. We 

are committed to financial efficiency and operational effectiveness at FCA, and we appreciate your 

role in this effort. The attached table contains our response to each of the challenges you identified 

in your statement.

The actions outlined in our response demonstrate our commitment to ensuring the safety and 

soundness of the Farm Credit System and improving the agency’s performance. We look forward 

to working with you to address the challenges we face.

Sincerely,

Dallas P. Tonsager

Board Chairman and CEO

Management’s Response to Challenges Identified by 

FCA’s Inspector General
FCA Performance and Accountability Report FY 2017 65

Challenge 1: Examination and Supervision Program

FCA management agrees with the IG’s assessment of this challenge and provides the 

following additional thoughts for consideration.

FCA assigns resources for examination and supervision according to the risks at each 

institution. In addition, we develop a National Oversight Plan for each new fiscal year. 

This plan identifies risk topics that affect institutions across the System. Our examiners 

focus on these topics during their examinations of System institutions in the coming 

fiscal year. 

In our National Oversight Plan for FY 2018, we outlined the following risk topics: 

•	 Portfolio Risk – Weathering the Storm

•	 Internal Controls Over Financial Reporting

In FY 2018, we are also emphasizing stress testing, and earnings trends and operating 

expenses. We discussed all of these topics in an informational memorandum we sent to 

System institutions in September 2017.

Also during FY 2018, we are implementing guidance regarding how institutions are to 

manage intensified credit risk, and we are evaluating compliance with the new capital 

regulations. 

Challenge 2: Information Technology

FCA management agrees with the IG’s assessment of this challenge and provides the 

following additional thoughts for consideration.

The agency’s Information Resources Management planning process supports timely 

and cost-effective IT services and identifies new application development needs. FCA 

will continue to improve and automate tasks to optimize business processes and gain 

efficiencies. By partnering with agency business units on IT initiatives from inception, 

our Office of Information Technology ensures that final products are effective in 

meeting the agency’s mission. 

The Office of Information Technology works with the business units to identify and 

implement validation rules to improve data quality. The agency will expand its suite 

of business intelligence tools and create additional reports to model and analyze Farm 

Credit System loan data to better identify and address risks in the System. We will also 

use these tools in the future for internal operational analysis. 

In addition, we have developed new examination applications, including EDGe, the 

EDGe loan workpaper, and the FIRS application, to address examiner technology needs. 

We have also purchased IT resources to increase our use of videoconferencing so that 

we can reduce travel costs. 
66 FCA Performance and Accountability Report FY 2017

We will continue to mature our security program and position FCA to better identify 

and address risks in our IT environment. We will continue to invest in contract support 

to improve our security and address new government-wide mandates. We are working 

to provide services in the cloud so that we can benefit from cloud security. And we 

will continue to work with the director of national intelligence and the Department of 

Homeland Security to enhance our network monitoring. 

Through training and communication, we will develop a corporate culture in which 

employees are aware that security is everyone’s responsibility. For example, we 

conduct periodic phishing exercises to help employees recognize possible cyberattacks. 

Increasing the vigilance of our employees further strengthens our security.

Challenge 3: Human Capital

FCA management agrees with the IG’s assessment of this challenge and provides the 

following additional thoughts for consideration. 

Because a large percentage of the agency’s workforce will be eligible to retire in the 

next few years, we will need to attract and retain well-qualified staff. We continue 

hiring a large number of associate examiners and summer interns for the Office of 

Examination. 

By participating in recruiting events at various career fairs and universities, including 

several with high minority enrollment, we have been able to hire a diverse group of 

new associate examiners. 

In FY 2017, we were subject to the federal hiring freeze during the major portion of 

the college recruiting season, and this kept us from hiring as many new associate 

examiners as we had planned. We have a well-reasoned recruitment plan for FY 2018 

to address our continuing need for new associate examiners. We have also evaluated 

and modified several internal procedures in the Human Resources Division to ensure 

that we consider veterans and disabled applicants as part of our applicant pool for open 

positions. 

We will need to continue to provide a full range of training to ensure that employees not 

only have fundamental skills and knowledge but also the specialized skills to perform 

complex analyses and oversight, including more in-depth data analysis.

In FY 2017 we offered numerous training opportunities to employees. Most of these 

opportunities were based on an extensive survey conducted to determine both the 

learning culture of the agency, as well as the skills most needed. We also conducted an 

in-person management training program for all supervisors and managers to maximize 

employee development and potential.

Through the leadership of our learning officer, we strive to have a continuous learning 

environment that values and rewards employees who work hard to enhance their skills. 

In addition, we are working to provide a clear training path for our future leaders. To 

retain highly qualified staff members, we must provide them with challenging work and 

strong job incentives.
FCA Performance and Accountability Report FY 2017 67

We also formed a Human Capital Steering Committee to help implement the human 

capital factors in the Strategic Plan and in our Human Capital Plan. This committee meets 

periodically to discuss factors related to succession planning and knowledge transfer in 

each office.

Challenge 4: Organizational Structure and Governance

FCA management agrees with the IG’s assessment: Managing and governing the agency 

is a dynamic challenge. The leadership and organizational changes may create challenges, 

but they also provide great opportunities for the agency. We provide the following 

additional thoughts for consideration. 

FCA has had strong, consistent leadership for the past several years. We have a smooth 

transition process to guide board members when they join the board or take on new roles. 

As noted in the human capital section above, we continue to focus on preparing our staff 

to step into leadership roles as current leaders retire. 

The FCA board regularly updates the Strategic Plan and oversees processes to ensure 

the continuity of its operations. Congress designed the FCA board to change on a regular 

basis. This change is an opportunity to bring new insight and perspective to the agency. 

FCA has turned what might be a challenge into a strength by using the new outlooks, 

experience, and knowledge of new members. 

As shown by the revisions to the Strategic Plan and the organizational changes made last 

year, the board has been proactive in seeking the optimal organizational structure for the 

agency. The Strategic Plan recognizes and addresses the risks associated with changes 

inside the agency, among our stakeholders, and in the agriculture industry. In addition 

to refining and refocusing the Strategic Plan, the agency has defined those risks and is 

working to address them. 

FCA will manage performance and risk from an organizational perspective. In addition 

to existing processes, FCA’s executive leadership will implement enterprise risk 

management, the integrated management of risk at the strategic, program, and 

operational levels.
68 FCA Performance and Accountability Report FY 2017

Summary of Financial Statement Audit and 

Management Assurances

Table 6. Summary of Financial Statement Audit

Audit opinion: Unmodified

Reinstatement: No

Material Weaknesses Beginning 

Balance

New Resolved Consolidated Ending Balance

(Not applicable)

Table 7. Summary of Management Assurances

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

Statement of Assurance: Unmodified

Material Weaknesses Beginning 

Balance

New Resolved Consolidated Reassessed Ending 

Balance

(Not applicable)

Effectiveness of Internal Control Over Operations (FMFIA § 2)

Statement of Assurance: Unmodified

Material Weaknesses Beginning 

Balance

New Resolved Consolidated Reassessed Ending Balance

(Not applicable)

Compliance With Federal Financial Management System Requirements (FMFIA § 4)

Statement of Assurance: Federal systems comply

Noncompliance Beginning 

Balance

New Resolved Consolidated Reassessed Ending 

Balance

(Not applicable)

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

Agency Auditor

1. Federal financial management system requirements No lack of compliance noted No lack of compliance noted

2. Applicable federal accounting standards No lack of compliance noted No lack of compliance noted

3. U.S. Standard General Ledger at transaction level No lack of compliance noted No lack of compliance noted
FCA Performance and Accountability Report FY 2017 69

Payment Integrity

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 payment 

integrity in the Performance and Accountability Report. 

Payment reporting

All agencies are required to assess the improper payment 

risk level at least once every three years. Our last IPERIA 

assessment was completed for 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, the Office of Management and Budget 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 2017 was $70.4 million, which was well under 

this threshold; therefore, we do not have any high-priority 

programs according to this measure.

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 for the period ended Sept. 30, 2017. 

Recapture of improper payments 

reporting

Given the low risk for all 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, Bureau of the Fiscal Service, has 

internal control procedures to ensure that payments are 

made properly. One such procedure is the post-payment 

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 2017, we 

identified three improper payments amounting to $30,819, 

or 0.05 percent of total outlays for the year. In all instances, 

the amounts were fully recovered.

Agency improvement of payment 

accuracy 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.
70 FCA Performance and Accountability Report FY 2017

Detailed information on improper payments for the U.S. 

government is available online at paymentaccuracy.gov. 

FCA data are not included on this website as we do not 

have any programs that OMB considers susceptible to 

significant improper payments.

Fraud Reduction Report

The Fraud Reduction and Data Analytics Act of 2015 

requires agencies to report on fraud reduction efforts 

undertaken. 

Our agency maintains effective processes and systems to 

prevent and detect fraud. This includes a leadership culture that fosters integrity, ongoing training for all employees to identify and report fraud, an independent inspector 

general, strong internal controls, segregation of duties, 

risk assessments, quality assurance, and quality control 

programs. 

Our internal controls are designed to prevent and detect 

fraud by identifying any deficiencies in programs and 

reporting. Our strong controls over programs and processes reduce the risk of fraud in operational activities. We 

place the highest value on our people and expect them to 

act with a high degree of integrity. No instances of fraud 

in our programs have surfaced through management’s 

internal identification and reporting mechanisms or from 

internal and external auditors.

Civil Monetary Penalty 

Adjustment for 

Inflation

Under the Federal Civil Penalties Inflation Adjustment Act 

Improvements Act of 2015, agencies must make annual inflation adjustments to civil monetary penalties and report 

on these adjustments. Table 8 below shows the adjustments FCA has made this year. 

Grants Oversight and 

New Efficiency Act

The Grants Oversight and New Efficiency Act requires 

agencies to report on federal grant awards and the status 

of these awards. We do not award any grants or have any 

grant-related activity. Therefore, the reporting requirements under this act do not apply to FCA.

 

Table 8. Civil Monetary Penalties Annual Inflation Adjustments

Statutory 

Authority Penalty

Year 

Enacted

Latest year of 

adjustment 

(via statute or 

regulation)

Current 

Penalty Level 

($ Amount or 

Range)

Subagency/ 

Bureau/

Unit

Location 

for Penalty 

Update 

Details

Section 5.32(a) of 

the Farm Credit Act 

of 1971, as amended

Violation of a final 

order

1985 2017 $2,224 82 FR 8807

Section 5.32(a) of 

the Farm Credit Act 

of 1971, as amended

Violation of the act 

or regulation

1985 2017 $1,005 82 FR 8807

Section 102(f) of 

the Flood Disaster 

Protection Act of 

1973

Pattern or practice 

of committing 

violations of 

the National 

Flood Insurance 

Program

1994 2017 $2,090 82 FR 8807
FCA Performance and Accountability Report FY 2017 71

The Farm Credit Administration Performance and Accountability Report Fiscal Year 2017 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
Copies are available from 

Office of Congressional and Public Affairs

Farm Credit Administration

1501 Farm Credit Drive

McLean, VA 22102-5090

703-883-4056

www.fca.gov

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