OFFICE OF 

INSPECTOR GENERAL Audit Report 

The Farm Credit Administration's 

Contracting Activities

A-17-02

Auditors

Sonya Cerne

Tori Kaufman

Tammy Rapp

Issued May 22, 2017

FARM CREDIT ADMINISTRATION
Farm Credit Administration Office of Inspector General

 1501 Farm Credit Drive 

 McLean, Virginia 22102-5090

 

 

 

May 22, 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 FCA Board Member Hall: 

The Office of Inspector General (OIG) completed an audit of the Farm Credit Administration’s (FCA or 

Agency) Contracting Activities.  The objective of this audit was to determine whether FCA’s contracting 

process was effectively administered.   

We found the contracting process is effectively administered. FCA has implemented and/or augmented 

aspects of the contracting process to improve effectiveness and efficiency. Although FCA has made 

positive changes, we identified opportunities for further improvement to the contracting process. In 

response to our report, the Office of Agency Services (OAS) agreed to:    

1. Develop a plan with milestones to ensure contract file documentation is complete.  Where 

feasible, OAS will include automation options.  

2. Provide all FCA Contracting Officer’s Representatives (CORs) with a handbook or other 

educational/reference materials on documentation requirements, invoice reviews, and overall 

responsibilities. 

3. Revise the contract file content checklist to include a comprehensive checklist of steps from 

solicitation to closeout in contract files. 

4. Coordinate with the Office of General Counsel to develop contract language requiring contractors 

to identify potential conflicts of interest throughout the performance of the contract, especially 

in light of FCA’s regulatory mission. 

5. Revise the contractor onboarding process to ensure required forms are obtained and placed in 

the contract files. 

6. Update PPM 812, PPM 840, Office Directives, and the Contracts Desk Manual, to include the 

following topics:  

a. Contract closeout, 

b. Conflict of interest statement requirements, 
c. Legal reviews, 

d. Contractor onboarding,  

e. COR appointment threshold,  

f. Section 508 compliance,  

g. Standard contract clauses, and 

h. Budget reporting process for contracts 

7. Develop a listing of standard contract clauses for FCA procurements and implement a policy to 

ensure this repository is up to date.   

We appreciate the courtesies and professionalism extended by FCA personnel to the OIG staff.  If you 

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

Respectfully, 

Elizabeth M. Dean 

Inspector General 

Enclosure 
The Farm Credit Administration (FCA or Agency) is an independent Federal agency 

esponsible for regulating, examining, and supervising the Farm Credit System and the 

ederal Agricultural Mortgage Corporation. In order to fulfill mission requirements, 

he Agency executes and administers contracts to meet the needs of the Agency. As a 

on‐appropriated Agency, FCA is not subject to the Office of Federal Procurement 

olicy Act or the Federal Acquisition Regulation.  

he objective of this audit was to determine whether FCA’s contracting process is 

ffectively administered. We found the process is effectively administered, but needs 

o make additional improvements, including: 

 Our review identified examples where contracting procedures were not 

followed. We identified two employee benefit contracts that did not include 

standard contract documentation and language. Both of these contracts also 

needed to be ratified. Ratification refers to the approval of an unauthorized 

commitment. Other contracts in our sample included errors in contract 

documentation or unspecified payment terms.  

 Contract clauses included in documentation were outdated, incomplete, 

and/or missing. 13 of 29 contract files in our sample did include 

documentation with standard clauses, and all 13 contained partially outdated 

FAR references, dates, and/or titles. The Agency didn’t have a repository of 

required standard clauses. 

 Although the Agency developed and began using a form for contractor 

onboarding, there was an inconsistent approach to how the onboarding 

process was initiated, documented, and updated. Forms were not always 

completed and placed in the contract file, and the process for reviewing the 

form and determining required next steps was not always documented.  

 We noted various examples in our sample where documentation could be 

improved. Examples of documentation missing from official contract files 

included: letters designating the Contracting Officer’s Representative (COR), 

interagency agreements, statements of work, proposals, and evaluations of 

proposals. 

 The Agency needs to revise aspects of the contracting process. Beyond the 

de‐obligation reporting process through Office of the Chief Financial Officer, 

contracting staff did not have a closeout process in place. Conflict of interest 

statements were not always required by contracting staff and officials 

involved in rating and selection. In addition, current processes for 

accessibility and legal reviews of contract documents were not consistent and 

fully documented.  

he Office of Agency Services (OAS) agreed with our report and provided tasks to be 

ompleted. OAS stated it would develop a contract documentation milestone plan, 

andbook, and revised checklist. OAS also plans to address potential conflicts of 

terest in contract language, revise the contractor onboarding process, revise 

olicies and procedures, and develop a listing of standard contract clauses.    

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AGREED‐UPON ACTIONS: 

In order to improve contract 

administration, OAS agreed to: 

1. Develop a plan with milestones to 

ensure contract file documentation 

is complete.  Where feasible, OAS 

will include automation options. 

2. Provide all FCA CORs with a 

handbook or other 

educational/reference materials on 

documentation requirements, 

invoice reviews, and overall 

responsibilities. 

3. Revise the contract file content 

checklist to include a comprehensive 

checklist of steps from solicitation to 

closeout in contract files. 

4. Coordinate with the Office of 

General Counsel to develop contract 

language requiring contractors to 

identify potential conflicts of interest 

throughout the performance of the 

contract, especially in light of FCA’s 

regulatory mission. 

5. Revise the contractor onboarding 

process to ensure required forms are 

obtained and placed in the contract 

files. 

6. Update PPM 812, PPM 840, Office 

Directives, and the Contracts Desk 

Manual, to include the following 

topics:  

a. Contract closeout, 

b. Conflict of interest statement 

requirements, 

c. Legal reviews, 

d. Contractor onboarding,  

e. COR appointment threshold,  

f. Section 508 compliance,  

g. Standard contract clauses, and  

h. Budget reporting process for 

contracts. 

7. Develop a listing of standard 

contract clauses for FCA 

procurements and implement a 

policy to ensure this repository is up 

to date. 
TABLE OF CONTENTS

BACKGROUND _______________________________________________________________________  1

Prior Reviews ________________________________________________________________________  2 

AUDIT RESULTS  ______________________________________________________________________  3

Contract Administration ________________________________________________________________  3 

Following Contracting Procedures ____________________________________________________  3 

Contract Clauses __________________________________________________________________  5 

Contractor Onboarding  ____________________________________________________________  6 

Documentation in Contract Files _____________________________________________________  6 

Contributing Elements _____________________________________________________________  8 

Insufficient Processes __________________________________________________________________  8 

Closeout Process  _________________________________________________________________  8 

Conflict of Interest ________________________________________________________________  9 

Accessibility Reviews ______________________________________________________________  9 

Legal Review ____________________________________________________________________  10 

Budget Reporting ________________________________________________________________  10 

Contributing Factors ______________________________________________________________  10 

Contracting Importance and Significance _________________________________________________  10 

Agreed‐Upon Actions 1‐7 ______________________________________________________________  11 

OBJECTIVE, SCOPE, AND METHODOLOGY ________________________________________________  13

ACRONYMS  ________________________________________________________________________  14
1 

BACKGROUND 

The Farm Credit Administration (FCA or Agency) is an independent Federal agency responsible for 

regulating, examining, and supervising the Farm Credit System and the Federal Agricultural Mortgage 

Corporation. The mission of the Agency is to ensure a safe, sound, and dependable source of credit and 

related services for agriculture and rural America.  

In order to fulfill mission requirements, the Agency executes and administers contracts and agreements 

to meet the needs of the Agency. As a non‐appropriated Agency, FCA is not subject to the Office of 

Federal Procurement Policy Act or the Federal Acquisition Regulation (FAR). Although not required, FCA 

has used the FAR as guidance for contracting activity. 

Contracting Staff 

The FCA Chairman has delegated contracting authority to the Agency’s primary Contracting Officer in 

Delegation 09, Delegation to Serve as Contracting Officer. The Agency has a second Contracting Officer 

with a purchasing limit of $150,000 as of 2017. Contracting Officers enter into, administer, and 

terminate contracting actions on behalf of FCA.  

The Agency also utilizes contract specialists who assist the Contracting Officers, maintain contract files, 

and communicate with staff on procurement actions. The Agency has one Contracting Specialist but has 

an ongoing contract for another temporary Contracting Specialist. For selected contracts, a Contracting 

Officer’s Representative (COR) is also chosen from FCA program offices. The COR is generally responsible 

for developing contract specifications, determining when contract changes are needed, and monitoring 

the contractor’s performance of technical requirements. 

Contracting Process 

Contracting is a multi‐step process which is monitored and modified as needed throughout the period of 

performance. The first phase of the process requires determining the needs of the program office and 

defining requirements, deliverables, and milestones. A statement of work can be used to solicit 

proposals and identify qualified contractors in consulting, advisory, and assistance services contracts. 

Once a contractor is selected, contractual documents are finalized and the contract is formally executed. 

An executed contract is officially agreed‐upon by both parties.  

An option year, identified as potential continued performance, gives the agency the ability to execute 

the contract for an additional year, if needed and appropriate. The option year is exercised through a 

modification of the original award. This is completed prior to the end of the period of performance of 

the award. 

Agency Policies and Procedures 

The Agency’s contracting procedures are primarily documented in Policies and Procedures Manual 

(PPM) 812, Contracting/Procurement Policy. PPM 812 establishes guidelines to help meet the goal to 

acquire products and services that will provide the best value to the FCA in a timely manner that most 

effectively meets program needs. PPM 812 also states, “the acquisition process shall, accordingly, 

encourage flexibility, innovation, responsiveness, and the use of sound business judgment.” FCA also 

documents its contracting process in the Contracts Desk Manual, other office directives, and PPM 840, 

Role and Responsibility of the Contracting Officer’s Technical Representative.  
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Prior Reviews

In 2011, the Office of Inspector General (OIG) conducted an audit, Contracting Activities (A‐11‐01), to 

determine whether FCA’s contracting environment was efficient and effective in acquiring products and 

services that provided the best value to FCA. As a result of the audit, the Agency took the following 

actions prior to issuance of the final report: 

1. Obtained a legal opinion on examiner assistant contracts being inconsistent with Federal and 

Agency guidelines resulting in non‐governmental contractors performing an inherently 

governmental function and providing personal services and took appropriate action; 

2. Included in the Agency’s ethics and contracting program an Agency policy on acceptable and 

prohibited conditions relevant to contracting practices with former FCA and FCS employees and 

examples of prohibited contract award practices; 

3. Strengthened internal controls over the contract administration function by performing 

quarterly and annual reviews; 

4. Established a policy that identifies training required of the contracting officer and contract 

specialist; 

5. Ensured the contracting officer and contract specialist develop an annual training plan; 

6. Revised the Contracts Desk Manual; and, 

7. Addressed the inconsistency in delegated authority to the contracting officer. 

The OIG also conducted an inspection, IT Equipment Acquisition (I‐12‐01), to determine whether the 

Agency’s acquisition process for IT equipment was appropriately planned and administered. As a result 

of the audit, the Agency took the following actions: 

1. Defined rating numbers on the laptop evaluation form; 

2. Included evaluation committee members in the entire evaluation and laptop recommendation 

process; 

3. Required all staff involved in the model and vendor selection process to sign a conflict‐of‐

interest statement; and 

4. Identified an evaluation method to apply on all IT equipment purchases. 

All agreed‐upon actions were closed in September 2012.  
3 

AUDIT RESULTS 

The objective of this audit was to determine whether FCA’s contracting process is effectively 

administered. We found the process is effectively administered, but there are opportunities for 

additional improvements. FCA has implemented and/or augmented aspects of the contracting process 

to improve effectiveness and efficiency: 

 During our last audit in 2011, the Agency had one Contracting Officer and one Contract 

Specialist. Since then, FCA has increased the overall contracting staff to include two Contracting 

Officers and two Contracting Specialists (one is a full‐time FCA employee and one is a temporary 

contractor).   

 Contracting staff are qualified and trained according to internal policies and procedures. The 

Contracts Desk Manual states contracting personnel will receive at least 80 hours of training 

within a two‐year period. We did not identify any exceptions to the training requirements.   

 FCA maintained a system for contract files. Contracting staff had a systematic approach to how 

the files would be maintained and began using a checklist for file completeness. Even though 

the contract files are stored in hard copy form, every file requested was available and 

maintained at FCA. 

 Contracting personnel are working with FCA’s Office of Information Technology to automate 

some of the contracting processes. There have been discussions on automating a form for 

contractor onboarding and using additional features in the contracting system to increase 

efficiencies. 

Although FCA has made positive changes, we identified opportunities for further improvements to 

contract administration and processes.  

Contract Administration

In order to answer our objective, we sampled and reviewed 29 contract files from fiscal years 2015 and 

2016. The contract files we reviewed totaled approximately $6.1 million.  From our review, we identified 

areas that could be improved including: contract procedures, contract clauses, contractor onboarding, 

and documentation.   

Following Contracting Procedures 

As a non‐appropriated fund Agency, FCA is not subject to the FAR. Procurement requirements are 

established in Agency policies and procedures. FCA contracting procedures are designed to ensure 

decisions are justified, documented, and the best value for the Agency. Contracting procedures 

generally include: defining requirements, evaluating prices and qualified providers, establishing a 

technical representative to oversee the contract, and maintaining and documenting an official contract 

file.  
4 

The following are examples of procedures not followed:  

 For an employee benefit contract, we noted a difference in the FCA contract language and 

documentation. Instead of using standard Agency language, the agreements were written by the 

contractor. The competitive process was also not fully utilized. Although the contract file 

documented FCA personnel involvement and legal reviews, the Agency did not issue standard 

contract documentation and language, which is usually incorporated in the statement of work. 

The competitive process included several proposals through a broker and verbal requests, but 

did not have a consistent, comprehensive evaluation process. Ratings or scorings were not used 

even though different vendors and proposals were considered. Personnel also stated that 

comparisons were made with other financial regulators, but the fee structure was not part of 

the comparison. Overall, without a fully documented contract file and a competitive process 

showing evaluation of the options considered, it is difficult to know whether the company was 

the best value for the Agency.  

 For a different employee benefit contract, the documentation showed inadvertent payment to 

the company, and competition used to select the vendor was not consistently documented. The 

Agency overpaid the company for services to be provided which resulted in confusion and 

inefficiencies when trying to recover the funds. Although not in the contract file, when we 

inquired concerning the extent to which the contract was competed, the Agency provided one 

other proposal it had considered. However, rating/scoring sheets documenting the evaluation of 

both companies were not in the contract file.  

Both of the examples above also had contracts that needed to be ratified. Ratification refers to the 

approval of an unauthorized, nonbinding agreement. An unauthorized commitment occurs when the 

FCA representative lacks the authority to enter into the agreement. The Contracts Desk Manual states 

the following:  

“An  unauthorized  commitment...  shall  be  coordinated  with  the  FCA  Contracting 

Officer. Ratification by the FCA Contracting Officer shall be made only after proper 

expenditure authority  has  been  obtained... The FCA  should  take  positive action  to 

preclude,  to  the maximum extent possible,  the need  for  ratification of contracting 

actions.” 

In one case, the vendor had not renewed its registration in the System for Award Management, where 

companies register to do business with the Federal government. So, the modification to award the 

option year could not be exercised. However, FCA was still receiving services from the company without 

a binding agreement. Contract staff were in contact with the vendor throughout the process and 

documenting that employee benefits would not be affected by the lack of renewal. In the other 

example, there was an oversight by the COR and contracting staff, so the option year was not exercised 

in a timely manner. This resulted again in receiving services from the company without a binding 

agreement.  

We also identified other examples where procedures were not followed, including: 

  

 For one contract we reviewed, the statement of work was prepared based on hourly rates. 

Subsequently, the contract was awarded based on fixed‐price milestones, not hourly rates. The 

statement of work was not updated, and the COR and contracting staff stated this was an error. 
5 

The payment schedule for this contract also did not correspond to the invoiced amounts paid. 

The contractor was paid for partial completion of their first milestone deliverable, contrary to 

the schedule established in the contract.  

 Another long‐term contract did not identify invoicing details in the statement of work. The 

documentation did not define what payments would be based on or how frequent the 

payments would be made on the contract.  

 Another contract had a modification completed after the period of performance had expired. 

The modification was executed to pay an outstanding invoice. Agency officials stated this was 

based on agreement by both parties; however, this was not documented in the contract file.  

 Another contract was inadvertently initiated, but later canceled. Personnel had to cancel the 

contract after it was initiated instead of exercising the option year. This was discovered after the 

contractor sent invoices that were declined for payment.  

Contract Clauses 

As noted above, FCA is not subject to the FAR. However, FCA elects to include, by reference, certain 

applicable FAR clauses in certain contract documents. The following clauses are generally referenced:  

FAR 

Subpart 

Title 

52.202‐1  Definitions 

52.203‐3  Gratuities 

52.203‐5  Covenant Against Contingent Fees 

52.203‐7  Anti‐Kickback Procedures 

52.203‐13  Contractor Code of Business Ethics and Conduct 

52.204‐9  Personal Identity Verification of Contractor Personnel 

52.222‐55  Minimum Wages Under Executive Order 13658 

52.239‐1  Privacy or Security Safeguards 

52.242‐15  Stop‐Work Order 

52.243‐1  Changes – Fixed Price 

52.243‐3  Changes – Time and Materials or Labor‐Hours 

52.246‐6  Inspection of Services 

52.246‐25  Limitation of Liability ‐ Services 
6 

These clauses cover important requirements and serve as part of the legal, binding agreements between 

FCA and those providing goods and services to the Agency. FCA’s PPM 812, Contracting Procurement 

Policy, states FCA General Provisions shall be incorporated into all contracts and that OAS will maintain a 

database of standard clauses to be used when applicable.   

We reviewed contract file documentation that included standard contract clauses. We found the 

contract clauses included in the documentation were outdated, incomplete, and/or missing. Of our 

sampled contracts, 13 contract files contained documentation with the standard clauses. However, all 

13 contained partially outdated FAR references, dates, and/or titles.  

In addition, because several of the contracts did not have statements of work issued to the 

individuals/companies/agencies doing business with FCA, the standard contract clauses were not part of 

the contract. As one example, a large employee benefit contract was implemented with no statement of 

work or standard clauses. Although the Agency entered into a contract that included the business’s 

contract information, FCA’s standard clauses were not included. In general, FCA includes the standard 

clauses as additional protection to the Agency.  

Contractor Onboarding 

FCA’s contractor onboarding process needs improvement. There was an inconsistent approach to how 

this process was initiated, documented, and updated. The Contracts Desk Manual states the Contract 

Specialist is responsible for notifying the Information Technology (IT) Security Specialist when a 

contracting/procurement action requires the hiring of a contractor/consultant who will require access to 

FCA’s IT systems. 

Confidentiality agreements are another component of contractor onboarding. Contracting personnel 

stated confidentiality agreements should always be signed and in the contract file, if applicable. 

However, the Agency did not have a clear process for determining when confidentiality agreements are 

needed and ensuring appropriate individuals signed an agreement.  

The Agency developed and began using a contractor onboarding form in 2015. The form covers the 

contractor’s work schedule at FCA facilities, accesses to sensitive data and systems, and use of Agency 

equipment. An email was issued to all CORs to use the form. We found that the forms were not always 

completed nor placed in contract files. There appeared to be confusion on when the form was needed 

and who makes that determination. The process for reviewing the form and determining required next 

steps was not always documented. The contracting staff is working with the Office of Information 

Technology to try and automate the process but has had difficulties in implementation.  

Documentation in Contract Files

We noted various examples in our sample where documentation could be improved. We reviewed 29 

contract files to ensure documentation was sufficient to address:  

 justification for goods or services to be purchased; 

 specifications, requirements, and milestones; 

 competition or basis for selection; 
7 

 conflicts of interest; and 

 oversight. 

When a COR is designated by the Contracting Officer, a copy of the COR designation letter is placed in 

the contract file. 8 of the 29 contract files we sampled were missing the COR designation letter. In many 

cases, even though the form was missing from the file, the Contract File Content Checklist, which lists 

standard documentation, stated a letter was completed and included. We also identified conflicting 

information in internal policies and procedures. PPM 840 states a COR should be designated when a 

contract or purchase order is expected to exceed $100,000. However, PPM 812 and the Contracts Desk 

Manual state a COR will be appointed for all contracts and procurements over $5,000. There were also 

inconsistencies on whether interagency agreements needed a COR designation.  

Another contract file in our sample did not contain the interagency agreement or statement of work. As 

a direct contrast, another interagency agreement in our sample, with the same government agency, 

included both documents. Without these key documents, we could not review deliverables and 

milestones. As of March 2017, contracting officials stated a copy of the interagency agreement had been 

requested.   

We identified errors in the memoranda completed by the Contracting Specialist in our sample. In several 

contract files, the Contracting Specialist wrote a memorandum to file summarizing the steps taken for a 

procurement action. This memorandum was useful in identifying: 

 the type of source selection, 

 modifications to the request for proposals,  

 listing of proposals received,  

 evaluation conclusions, and 

 selection made. 

In two examples, some of the final quotes received did not match the quotes stated in the Contracting 

Specialist’s memoranda. In both examples, the errors would not have altered the selection since the 

company ultimately selected was documented as the best value to the Agency.  

On another contract in our sample, we observed an increase in the quantity for goods purchased from 

the original requisition, but the requisition was not revised justifying and approving the increase in 

quantity. Documentation of the increased quantity was limited to an email from the COR to the 

Contracting Specialist and approving official on the requisition. 

As part of our review, we followed up with CORs to determine whether documentation existed that was 

not placed in the contract file. We noted various examples such as proposals, evaluations of proposals, 

statements of work, and conflict of interest statements that were provided by the COR or Contracting 

Specialist, but not included in the official contract file.  
8 

Contributing Elements  

Several causes contributed to the issues identified for improvement. FCA maintained paper contract 

files, and contract documents were mostly generated manually. Program offices generate requisitions 

and initiate modifications, based on Agency needs. FCA’s contracting staff documents contracting 

actions and maintains official contract files. Currently, contracting staff may send and receive 

documentation electronically from CORs or the contractor, and these documents must be printed and 

manually placed in the contract file. In addition, processes such as exercising option years and 

contractor onboarding rely on the COR to track due dates and initiate paper forms, which contributed to 

some of the issues identified in our review. Electronic, automated systems will streamline the 

contracting process and improve consistency, completeness, and timeliness.  

FCA currently uses a centralized document management and storage system. A similar approach could 

be used for contract files. With this type of system, both contracting staff and CORs could access and 

store documentation in one location. This will decrease duplication and ensure documentation is 

maintained efficiently by eliminating unnecessary steps in the current process. 

Other factors also affected documentation inconsistencies. FCA developed a Contract File Content 

Checklist that lists standard documentation. The checklist was designed to be completed multiple times 

as the contract is modified, and as noted previously, checklists were not always accurate. Beyond the 

checklist, FCA does not prescribe documentation requirements for contract files, but officials stated the 

contract file should include documentation from pre‐award through award. CORs take required training 

on their roles and responsibilities; however, there are no reference materials to help ensure records are 

complete and consistent. 

For contract clauses, FCA’s PPM 812, Contracting Procurement Policy, states that the Agency would 

maintain a database of standard FCA clauses to be used when applicable. Neither a database nor other 

informational repository was currently maintained to ensure standard clauses were correct and 

complete. 

Insufficient Processes

Overall, we identified several contracting processes that the Agency has not consistently implemented 

or that need improvement, including: contract closeout, conflict of interest declarations, accessibility 

reviews, legal reviews, and budget reporting.   

Closeout Process

The Agency does not have a consistent closeout process. FCA’s Contracts Desk Manual states that the 

COR is responsible for initiating administrative closeout of a contract and ensuring closeout procedures 

are complete. COR closeout procedures include ensuring physical property is returned, the contractor’s 

final invoice was submitted, and contract funds are reviewed and excess funds de‐obligated. Once these 

actions are completed, Contracting staff are then responsible for documenting completion of the 

requirements and closing out the contract file.  The Agency did not follow this process. 

Each quarter of the fiscal year, the Office of the Chief Financial Officer (OCFO) staff sends a listing of 

open purchase orders/contracts to each COR and asks them to identify funds to be de‐obligated. OCFO 

staff sends a de‐obligation report to contracting staff identifying excess funds, if applicable. Beyond the 
9 

de‐obligation reporting process through OCFO staff, other aspects of closeout were not documented 

and included in contract files. The Contract File Content Checklist addressed closeout; however, this 

section was incomplete for many of the contracts reviewed in our sample.  

Conflict of Interest

Conflict of interest declarations could be improved. Agency procedures state that FCA employees shall 

not take part in any action that may result in or create the appearance of a loss of complete 

independence and impartiality. Furthermore, employees purchasing goods and services shall conduct 

themselves so as to avoid even the appearance of any impropriety or conflict of interest.  

As a result of a previous OIG inspection, a process of signing a conflict of interest statement was put in 

place for staff involved in selections for large IT acquisitions. FCA’s Guidance for Project Management of 

Large Information Technology Projects defines “large” IT acquisitions as more than $500,000. The 

agency should consider lowering the threshold for requiring conflict of interest statements for all 

procurements and staff involved in the procurement process.  

Conflicts of interest are especially important given the Agency’s unique regulatory role. FCA contracts do 

not contain a specific provision requiring contractors to report any conflicts of interest that may exist or 

arise during the period of performance. Actual and potential conflicts of interest are not limited to 

specific types of acquisitions and must be evaluated continuously during the contracting process.   

Accessibility Reviews 

FCA developed guidance and created a standard form to assist offices performing Section 508 reviews to 

ensure compliance, but inconsistently documented Section 508 compliance reviews.  

FCA’s Section 508 Guidance states the following:  

“Section 508 refers to a statutory section in the Rehabilitation Act of 1973 (found at 29 U.S.C. 

794d), whose primary purpose is to provide access to, and use of, Federal executive agencies’ 

electronic and information technology (EIT1

) by individuals with disabilities, including both 

federal employees and the general public. Accessible technology is the type that can be 

accessed or operated in a variety of ways and does not rely on a single sense or ability of the 

user.” 

In most cases, information technology products were reviewed for compliance with Section 508. If a 

product is not compliant or partially compliant, Section 508 requires agencies to provide reasonable 

accommodations to EIT for employees with disabilities. However, Section 508 compliance review 

documentation was inconsistent, incomplete, or missing accommodations or Chief Information Officer 

(CIO) approval. In two examples, a compliance review was performed, but not signed by the Section 508 

Coordinator. In another example, a product was determined to be partially compliant, but did not 

indicate whether accommodations were made or approved by the CIO. Lastly, a different partially 

compliant product lacked a Section 508 compliance review form. However, a Voluntary Product 

                                                            

1 EIT is defined as “Any equipment or interconnected system or subsystem of equipment used in the creation, conversion, or duplication of data 

or information. The term EIT includes, but is not limited to, telecommunications products (such as telephones), information kiosks and 

transaction machines, World Wide Web sites, multimedia, and office equipment such as copiers and fax machines.” Typically, it includes 

personal computers and their peripherals, software, and the IT infrastructure. 
10 

Accessibility Template representing the vendor’s assessment of accessibility features was obtained at 

the time of procurement showing the product was partially compliant. A form was later provided with 

the CIO’s approval that was dated after the procurement stating, “data visualization tools are typically 

not Section 508 compliant”. The CIO provided a justification that purchasing a fully compliant product 

would result in an undue burden to the Agency. 

Legal Review

FCA’s current legal review process needs to be updated. Agency policy requires solicitation and contract 

documents (exceeding a minimum dollar threshold) to be reviewed by the Office of General Counsel for 

legal sufficiency. The policy states a memorandum will be prepared and provided to contracting 

personnel concerning legal sufficiency. However, this was not always documented in the contract files in 

our sample.  

Previously, the Agency had one Contracting Officer who is also an attorney. Because the Contracting 

Officer reviews and signs contract documentation, officials stated this constituted a legal sufficiency 

review. The Agency designated another Contracting Officer in February 2016, who is not an attorney, so 

the legal sufficiency review process should be revised.  

Budget Reporting 

FCA provided procurement data for the fiscal years in our scope. In reviewing this data to select our 

sample, we identified errors in the consulting services and single source table included in the Agency’s 

fiscal year 2017 proposed budget and performance plan. Contracting staff stated the information in that 

listing was generated by manually reviewing paper contract files, and this process would be revised 

immediately to prevent errors in information submitted in the future.  

 

Contributing Factors 

There were several contributing factors to the insufficient processes identified. Contracting policies and 

procedures were outdated. Various references need to be updated to reflect current offices, individuals, 

and responsibilities. There is an inconsistency in PPM 840, regarding the threshold for appointing CORs. 

In addition, established policies and procedures did not fully address contract closeout, legal sufficiency 

reviews, contractor onboarding, conflict of interest declarations, and Section 508 compliance. 

For the budgeting process, the Agency stated its new process going forward would use the procurement 

system where contract and purchase order information is maintained. In addition, officials stated they 

would obtain a list from the OCFO to identify all contracts awarded using the budget code for consulting 

services. This process has not been documented. 

Contracting Importance and Significance 

Across the government, contracting has consistently been identified as a high risk area. At FCA, 

contractor goods and services fill critical needs. Controls, oversight, and complete contracts mitigate 

important risks to the Agency. In cases of disputes, errors, or noncompliance with requirements, 

contract files and supporting documentation are critical in protecting the Agency’s interests. Contract 
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documentation also provides an important historical record that may be referenced during future 

procurement activities. 

The contracting process and corresponding procedures support best value selection. Best value 

selections help to ensure resources are available for the Agency’s highest priority needs. Because 

contracting decisions are based on many, unique factors, it is important for justifications and 

evaluations to be documented and maintained. Automating and standardizing required contracting 

documentation provides greater assurance that a consistent effective process is applied across the 

Agency.  

Knowledgeable personnel and multiple levels of review contribute to the integrity of the contracting 

process. Because FCA is not subject to the FAR, policies and procedures prescribe essential standards 

and principles for contracting. As personnel changes occur over time, FCA requirements must continue 

to provide a framework for efficient, effective contracting activities.  

Agreed‐Upon Actions 1‐7

In order to improve contract administration, OAS agreed to: 

1. Develop a plan with milestones to ensure contract file documentation is complete.  Where 

feasible, OAS will include automation options. 

2. Provide all FCA CORs with a handbook or other educational/reference materials on 

documentation requirements, invoice reviews, and overall responsibilities. 

3. Revise the contract file content checklist to include a comprehensive checklist of steps from 

solicitation to closeout in contract files. 

4. Coordinate with the Office of General Counsel to develop contract language requiring contractors 

to identify potential conflicts of interest throughout the performance of the contract, especially 

in light of FCA’s regulatory mission. 

5. Revise the contractor onboarding process to ensure required forms are obtained and placed in 

the contract files. 

6. Update PPM 812, PPM 840, Office Directives, and the Contracts Desk Manual, to include the 

following topics:  

a. Contract closeout, 

b. Conflict of interest statement requirements, 

c. Legal reviews, 

d. Contractor onboarding,  

e. COR appointment threshold,  

f. Section 508 compliance,  

g. Standard contract clauses, and 

h. Budget reporting process for contracts. 
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7. Develop a listing of standard contract clauses for FCA procurements and implement a policy to 

ensure this repository is up to date.  

OAS agreed with our report and provided tasks to be completed. OAS stated it would develop a contract 

documentation milestone plan, handbook, and revised checklist. OAS also plans to address potential conflicts 

of interest in contract language, revise the contractor onboarding process, revise policies and procedures, 

and develop a listing of standard contract clauses.  
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OBJECTIVE, SCOPE, AND METHODOLOGY 

The objective of this audit was to determine whether FCA’s contracting process is effectively 

administered. We conducted the audit at FCA’s Headquarters in McLean, VA from December 2016 

through May 2017. We limited our scope to contracts and agreements contracts awarded from October 

1, 2014 through September 30, 2016.  

We took the following steps to accomplish the objective: 

 Identified and reviewed applicable Federal laws, regulations, and guidance related to the 

objective. 

 Reviewed prior audits and inspections related to the audit objective.  

 Reviewed Agency policies and procedures related to the procurement process. 

 Conducted interviews with the Director of the Office of Agency Services, Supervisory 

Administrative Operations Specialist and Contracting Officer, Contracting Officer, Contracting 

Specialist, and others with responsibility for contract administration and oversight. 

 Identified significant internal control processes and determined if they are operating effectively 

and efficiently. 

 Assess the risk of fraud and illegal acts occurring within the context of the objective.  

 Reviewed contracting staff qualifications and trainings.   

 Reviewed contracting activities performed from October 1, 2014 through September 30, 2016. 

Judgmentally sampled 29 contract files based on award type, amount, vendor, and award 

descriptions. Micropurchase awards were excluded from our sample. The sample was 

judgmental and cannot be projected over the entire population. 

 Reviewed sampled contract files for contract administration, justifications, and documentation.  

 Evaluated contract clauses for completeness and accuracy.  

This audit was performed in accordance with the Generally Accepted Government Auditing Standards. 

Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence 

to provide a reasonable basis for our findings and conclusions based on our audit objective. We 

assessed internal controls and compliance with laws and regulations to the extent necessary to satisfy 

the objective. Because our review was limited, it would not necessarily have disclosed all internal 

control deficiencies that may have existed at the time of our audit. We assessed the computer‐

processed data relevant to our audit objective and determined that the data was sufficiently reliable. 

We assessed the risk of fraud related to our audit objectives in the course of evaluating audit evidence. 

Overall, we believe the evidence obtained provides a reasonable basis for our conclusions based on our 

audit objective. 
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ACRONYMS 

CIO    Chief Information Officer 

COR    Contracting Officer’s Representative 

EIT    Electronic and Information Technology 

FAR    Federal Acquisition Regulation 

FCA    Farm Credit Administration 

IT    Information Technology 

OAS    Office of Agency Services 

OCFO    Office of the Chief Financial Officer 

OIG    Office of Inspector General 

PPM    Policies and Procedures Manual 
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REPORT

Fraud  |  Waste  |  Abuse  |  Mismanagement 

FARM CREDIT ADMINISTRATION 

OFFICE OF INSPECTOR GENERAL 

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

Fax: (703) 883‐4059 

E‐mail: fca‐ig‐hotline@rcn.com

Mail: Farm Credit Administration 

Office of Inspector General 

1501 Farm Credit Drive 

McLean, VA 22102‐5090