Farm Credit Administration

...we ensure a dependable source of credit for agriculture and rural America

Performance and 

Accountability Report

FY 2018
FCA Performance and Accountability Report FY 2018 3

Contents

Statement of Board Chairman and CEO.......................................................................................................................................... 3

Management’s Discussion and Analysis......................................................................................................................................... 4

FCA at a Glance....................................................................................................................................................................... 5

Highlights of FCA’s Performance Goals and Results ....................................................................................................... 9

Analyses and Highlights of FCA’s Financial Statements................................................................................................ 11

Analysis of FCA’s Systems, Controls, and Legal Compliance ....................................................................................... 16

Statement of Assurance........................................................................................................................................................ 19

Program Performance........................................................................................................................................................................ 20

FCA Performance Report..................................................................................................................................................... 21

Financial Section................................................................................................................................................................................ 33

	 Statement of Chief Financial Officer .................................................................................................................................. 34

	 Transmittal Letter of Auditor’s Report............................................................................................................................... 35

Independent Auditor’s Report ............................................................................................................................................ 37

Financial Statements ............................................................................................................................................................. 41

Other Information.............................................................................................................................................................................. 55

	 Letter from Inspector General on FCA’s Management Challenges .............................................................................. 56

	 Management’s Response to Challenges Identified by FCA’s Inspector General ........................................................ 62

	 Summary of Financial Statement Audit and Management Assurances........................................................................ 66

Payment Integrity.................................................................................................................................................................. 67

Fraud Reduction Report....................................................................................................................................................... 68

	 Civil Monetary Penalty Adjustment for Inflation ............................................................................................................ 68

	 Grants Oversight and New Efficiency Act ........................................................................................................................ 68

Additional Information........................................................................................................................................................ 69
2 FCA Performance and Accountability Report FY 2018

List of Tables Appearing in Report

Table 1. Composition of assets ...................................................................................................................................................... 11

Table 2. Composition of liabilities................................................................................................................................................. 12

Table 3. Agency budget.................................................................................................................................................................. 13

Table 4. Funds used by major budget category .......................................................................................................................... 13

Table 5. Performance measures and results ................................................................................................................................ 30

Table 6. Summary of financial statement audit .......................................................................................................................... 66

Table 7. Summary of management assurances ........................................................................................................................... 66

Table 8. Civil monetary penalties annual inflation adjustments.............................................................................................. 68

List of Figures Appearing in Report

Figure 1. Organization of the Farm Credit Administration........................................................................................................ 8

Figure 2. Composition of liabilities .............................................................................................................................................. 12

Figure 3. FY 2018 gross costs by agency goal.............................................................................................................................. 14

Figure 4. FY 2018 gross revenue by agency goal........................................................................................................................ 14

List of Acronyms Appearing in Report

Farmer Mac 	 	 Federal Agricultural Mortgage Corporation

FCA Farm Credit Administration

FCS Farm Credit System

FCSIC Farm Credit System Insurance Corporation

FMFIA 		 	 Federal Managers’ Financial Integrity Act

FIRS Financial Institution Rating System

FY 	 	 	 fiscal year

GAAP generally accepted accounting principles

GAO 	 	 	 Government Accountability Office

GSE government-sponsored enterprise

IT information technology

NCB National Consumer Cooperative Bank

OE 	 	 	 Office of Examination

OIG 	 	 	 Office of Inspector General

OMB 	 	 	 Office of Management and Budget

OPM 	 	 	 Office of Personnel Management

OSMO 		 	 Office of Secondary Market Oversight

SFFAS Statements of Federal Financial Accounting Standards

USDA United States Department of Agriculture

YBS 	 	 	 young, beginning, and small (farmers and ranchers)
FCA Performance and Accountability Report FY 2018 3

Statement of Board Chairman and CEO

November 13, 20

I invite you to review the Farm Credit Administration Performance and Accountability Report for Fiscal Year 2018.

I am pleased to report that we achieved the goals outlined in our strategic plan and achieved or exceeded almost all

targets. In addition, our financial statements received an unmodified opinion from an independent auditor. Based

on the results of our internal evaluations, I can provide reasonable assurance that the financial and performance

information in this report is complete and reliable. We also have no material weaknesses in our internal controls.

FCA is the arm’s length regulator of the Farm Credit System (System) and the Federal Agricultural Mortgage

Corporation (Farmer Mac). Our 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.

The System holds almost 41 percent of the nation’s total farm business debt, so it plays a vital role in the health of

the nation’s agricultural economy. And Farmer Mac, which provides a secondary market for agricultural real estate

mortgages and rural cooperative loans, enhances the ability of lenders to offer competitive financing to rural borrowers and farmland investors.

Both the System and Farmer Mac are well capitalized and remain financially safe and sound. The banks and associations of the System together held $334 billion in assets as of June 30, 2018, up 4.2 percent from the year before.

Farmer Mac had a net worth of $766 million as of that date, up 12.5 percent from the year before.

Over the past 12 months, we worked to protect the financial soundness of the System and Farmer Mac and to ensure that they continue to fulfill their missions to serve agriculture and rural America. Here are some of the ways

we accomplished these goals:

• Examined System institutions and Farmer Mac in accordance with statutory requirements

• Prepared more than 50 formal reports of examination and more than 30 interim activity letters

• Issued proposed rules on standards of conduct and governance requirements for System institutions

• Issued final rules governing the eligibility of investments for the System and Farmer Mac

• Analyzed and reported on the System’s service to young, beginning, and small farmers and ranchers

• Issued guidance to System institutions on various topics, such as how to strengthen lending and loan servicing 

controls and how to prepare for the expected phase-out of the London Interbank Offered Rate (LIBOR)

• Responded to borrower inquiries and complaints

In addition, we have continued our focus on improving the engagement of our employees. I am pleased to report 

that our employee engagement index on the Federal Employee Viewpoint Survey improved by three points for the

second year in a row. It went up from 72 in 2016 to 78 in 2018. Last year, we were ranked in the top three among 

small agencies in the Partnership for Public Services’ Best Places to Work in the Federal Government.

Thanks to the hard work and dedication of our employees, we had a successful year in FY 2018, and we look forward to further success in FY 2019 and beyond.

Dallas P. Tonsager

Board Chairman and CEO
4 FCA Performance and Accountability Report FY 2018

Management’s Discussion and Analysis
FCA Performance and Accountability Report FY 2018 5

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 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.

• We issue policies and regulations governing how

System institutions conduct their business and interact

with 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 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.

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. 

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.
6 FCA Performance and Accountability Report FY 2018

FCA offices

As of Sept. 30, 2018, FCA had 324 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. Dallas P. Tonsager

is the board chairman.

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. Dallas P. Tonsager is the 

CEO.

The chief operating officer (COO) has broad responsibility for planning, directing, and controlling the operations 

of the Offices of Agency Services, Examination, Regulatory

Policy, Information Technology, Chief Financial Officer,

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 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 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 serves 

as the agency’s principal point of contact for Congress, 

the media, other government agencies, FCS institutions, 

employees, System borrowers, and the public. The office

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. It also

provides information to external audiences through news

releases, fact sheets, reports, and other publications. The

office cultivates relationships with media representatives

who report on matters related to agriculture and rural

credit, and it manages the content of the FCA website. It

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/bank-oversight/guidance and click board policy statements to read

“Examination Philosophy” (FCA-PS-53).

The Office of General Counsel 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. The office supports the

agency’s development and promulgation of regulations, 

enforcement of applicable laws and regulations, and

implementation of conservatorships and receiverships. 

It 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.
FCA Performance and Accountability Report FY 2018 7

The Office of Information Technology 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. It is responsible for continuing to

leverage FCA’s investment in technology by collaborating

across agency offices to identify and re-engineer business

processes. The office 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 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. The office

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 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. It 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 (DAEO) 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.
8 FCA Performance and Accountability Report FY 2018

Figure 1. Organization of the Farm Credit Administration

As of September 30, 2018
FCA Performance and Accountability Report FY 2018 9

Highlights of FCA’s 

Performance Goals and 

Results 

FCA’s mission is to ensure that Farm Credit 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. In

the FCA Strategic Plan for Fiscal Years 2018 – 2023, we

identified three goals we must meet to fulfill our mission.

For each goal, we identified strategies and actions to

achieve the goal, as well as a set of performance measures 

to monitor our progress 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 percent)

We achieved or exceeded our targets for all six measures

associated with goal 1. 

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: ≥90 percent)

4.	 Whether the Office of Secondary Market Oversight’s

examination and oversight plan and activities effectively identify emerging risks, and whether appropriate supervisory and corrective actions have been taken

to effect change when needed. (Target: Yes)
10 FCA Performance and Accountability Report FY 2018

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)

We achieved or exceeded the targets for five of the six

measures associated with goal 2. For performance measure 5, we missed our target of 100 percent because three

institutions did not have acceptable corrective action plans

in place at the end of the reporting period.

Goal 3 Highlights—Workforce 

Management: Cultivate an 

environment that fosters a welltrained, 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-level examiners, FCA has ensured that 25 percent of its

outreach efforts target disabled or minority potential

applicants. (Target: Yes)

2.	 Whether we have maintained or improved our score

from last year in the Annual Employee Satisfaction 

Survey. (Target: Yes)

We achieved the targets for both measures associated with

goal 3. In fact, for the second measure, our employee engagement index score on the Federal Employee Viewpoint

Survey increased by 3 percentage points — from 75 in 2017

to 78 in 2018. 

For more information about our performance results, see

the performance results tables on pages 30 to 32.
FCA Performance and Accountability Report FY 2018 11

Analyses and Highlights 

of FCA’s Financial 

Statements

Financial highlights

Financial operation of 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 unexpected, unbudgeted

expenses without needing to increase assessments.

This section highlights our financial condition for fiscal

years 2018 and 2017. Our financial statements are provided

on pages 40 to 52.

FCA’s assets, liabilities, and net position

As shown in table 1, our total assets (the resources we

own) for FY 2018 are composed of the following:

• Our fund balance with Treasury (11.0 percent)

• Investments (83.7 percent)

• Accounts receivable and prepayments (1.0 percent)

• Property and equipment (4.3 percent)

During FY 2018, total assets increased by $1,152,808, or 3.2

percent, from amounts reported in FY 2017.

Our investment portfolio, which accounts for the largest 

portion of our total assets, decreased by $1,400,885 in FY

2018. This decrease occurred in part because we received

a large influx of cash on the last business day of September — after the cutoff for investing. The large cash influx

occurred because we received some prepaid assessments

(that is, assessments due on Oct. 1 but received on or

before Sept. 30). Another reason for the decline in investments is the decrease in our carryover funds. As we continue to reduce carryover from year to year, the amount 

available for investing decreases as well.

We purchased $23,986,730 in U.S. Treasury securities

during fiscal year 2018, 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, 2018, the agency held $4,127,940 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.

Table 1. Composition of assets

Fiscal Year

Fund Balance with 

Treasury Investments

Accounts 

Receivable and 

Prepayments

Property and 

Equipment Total

2018 $4,127,940 $31,492,515 $365,497 $1,607,341 $37,593,293

2017 $1,457,378 $32,893,400 $499,409 $1,590,298 $36,440,485
12 FCA Performance and Accountability Report FY 2018

Our liabilities, as shown in figure 2 and table 2, consist of

the following:

• Accounts payable (8.0 percent)

• Payroll and benefits (42.5 percent)

• Employer contributions and taxes payable

(5.9 percent)

• Workers’ compensation (9.0 percent)

• Deferred revenue (34.6 percent)

Like total assets, our total liabilities (what we owe to the

public and other government agencies) increased. Driven primarily by the increase in accounts payable, overall

liabilities increased by $1,544,487 or 9.9 percent from 2017

to 2018.

Accounts payable, which accounted for approximately

half of the increase in total liabilities from 2017 to 2018,

increased primarily because of travel and other expense

accruals. The Office of Examination held an examiner

conference in late September 2018. Because of the timing,

vouchers for the travel obligations could not be submitted

before Sept. 30, so we recorded them as year-end accruals.

Other expense accruals also increased because of various

year-end awards that were approved before Sept. 30 but

were not paid until October.

Deferred revenue, which consists of assessments received 

from FCS institutions that are not yet due, increased 

slightly this year. At the beginning of each fiscal year, we

reclassify any prepaid assessments as revenue earned in 

October of the new year.

Figure 2. Composition of liabilities

Table 2. Composition of liabilities

Liabilities FY 2018 FY 2017

Accounts payable $1,360,201 $578,143

Accrued liabilities (payroll and benefits) 7,253,008 6,771,200

Employer contributions and taxes payable 1,006,195 942,048

Workers’ compensation (funded and unfunded) 1,542,010 1,499,584

Deferred revenue $5,907,939 $5,733,890
FCA Performance and Accountability Report FY 2018 13

The net position, which represents the cumulative results of operations since the agency began, decreased by

$391,680, or 1.9 percent, during FY 2018. The net position 

decreased in part because of the increase in the net cost of

operations (see the Program Costs and Revenues section)

but also because of an increase in imputed financing

sources (that is, rent and federal employee benefits). For a

breakdown of the net position, see the statement of changes in net position on page 44.

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 2018 and 2017. The overall FY 2018

budget increased by 3.0 percent over the 2017 budget.

In FY 2018, we continued to carry out our mission, 

program goals, and objectives within the available budget.

While our board-approved budget for FY 2018 was $73.2

million, the congressional limitation on our spending was 

$70.6 million. The FY 2017 limitation was $68.6 million.

As table 4 shows, we used $69,637,676 of the funds

available in 2018, compared with $67,628,714 of the funds

available in 2017. The funds we used in 2018 amounted to

98.1 percent of our congressional limitation in 2018. The 

increase in personnel compensation, driven by salary and

benefit increases, accounts for the largest dollar amount

increase in funds used from 2017 to 2018. Personnel 

compensation and benefits continue to account for the

most significant use of funds at FCA, representing 84.5

percent of total funds used in 2018.

Property and equipment costs represented the largest

decrease in funds used this year. These costs declined 

by 49.0 percent in part because we had fewer capitalized

property additions in 2018 compared with 2017. 

Table 4. Funds used by major budget category

Budget Category FY 2018

Percentage 

of Total FY 2017

Percentage 

of Total

Personnel compensation and benefits 58,821,237 84.4% 56,719,365 83.9%

Travel and transportation 3,029,833 4.4% 2,441,070 3.6%

Contractual services 5,487,623 7.9% 5,919,695 8.8%

Property and equipment 526,704 0.8% 1,032,465 1.5%

Other 1,772,279 2.5% 1,516,119 2.2%

Total $69,637,676 100.0% $67,628,714 100.0%

Table 3. Agency budget

2018 2017

Assessments (current year)* $71,200,000 $69,800,000

Assessments (carryover from prior years) 1,400,000 0

Reimbursable activity 600,000 600,000

Total $73,200,000 $70,400,000

* Assessments for both FY 2017 and 2018 were reduced by $3 million in the fourth quarter of each 

year.
14 FCA Performance and Accountability Report FY 2018

Program costs and revenues

This section describes our program costs and revenues for

the fiscal years ended Sept. 30, 2018, and Sept. 30, 2017.

Please read this section in conjunction with the statements

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.

We manage agency costs through sound business planning

and effective resource management. The net cost of o

programs totaled $7,461,968 for the 12 months ended Sept. 

30, 2018, compared with $3,705,568 for the same period the 

previous year. Because gross costs increased more than 

gross revenue, net costs increased in FY 2018.

The total cost of our programs for FY 2018 is $76,746,813, 

compared with $71,366,166 for FY 2017. This represents 

an increase of $5,380,647, or 7.5 percent, from 2017. Figure 

3 shows the breakdown of FY 2018 gross costs for each

of our goals. Most of our costs support our mission and

program goals. The increase in total costs is primarily due 

Figure 3. FY 2018 gross costs by agency 

goal

Figure 4. FY 2018 gross revenue by agency goal

to increases in staff, employee compensation, and information technology.

Employee salaries and benefits represent our greatest

overall cost. For 2018, employee compensation totaled 

$61,625,113, or 80.3 percent of total cost. Increases in staff,

pay-for-performance and employee benefits, and career

ladder promotions contributed to the cost increase in

2018. We periodically perform compensation studies to

comply with the Financial Institution Reform, Recovery, 

and Enforcement Act of 1989, which requires us to keep

our salaries and benefits comparable with the salaries and

benefits of other federal financial institution regulators.

Keeping compensation competitive helps us continue to 

fulfill our mission to provide the FCS, including Farmer

Mac, with effective regulation and oversight.

Figure 4 shows the breakdown of FY 2018 gross revenue

for each of our goals. Earned revenue for 2018 totaled 

$69,284,845, up $1,624,247, or 2.4 percent, from 2017. 

Earned revenue went up because of increases in institution assessments and interest earned on investments.
FCA Performance and Accountability Report FY 2018 15

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 2018, 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.

Our costs for the Public Mission program include the review of borrower complaints. In accordance with the Farm

Credit Act, we also review and approve FCS institutions’ 

mergers to enable institutions to structure themselves to

best serve their customers.

For the fiscal year ended Sept. 30, 2018, program costs for

public mission was $20,089,846, representing an increase

of $1,226,262, or 6.5 percent, from the same period the 

previous year. The cost for the public mission program

represents 26.2 percent of our total costs for 2018.

Safety and soundness program

The examination and supervision of the FCS account for

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

2018, cost of the safety and soundness program increased 

because of increases in staff and higher costs for employee

compensation, travel, and professional training. We hired

more examiners to meet additional human capital demands for institution examination and oversight.

We invest heavily in the recruitment and training of examination 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.

During FY 2018, 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 $4,401,812 to $55,986,290, 

which represents 72.9 percent of our total costs in 2018.

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. Because we provided fewer 

reimbursable services this year, costs associated with this

category declined by $247,427 from 2017 to $670,677. The

costs for providing reimbursable services represented

approximately 0.9 percent of our total costs in 2018, a

decrease from 1.3 percent of total costs in 2017.

Earned revenue for other activity totaled $487,337 for 

2018, compared with $541,833 for 2017. Since the amount 

of reimbursable work declined, so did the revenue from

these activities.

Limitations of financial statements

As required by 31 U.S.C. 3515(b), we have prepared the

principal financial statements to report the financial

position and results of our operations. 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.
16 FCA Performance and Accountability Report FY 2018

Analysis of FCA’s 

Systems, Controls, and 

Legal Compliance

The Federal Managers’ Financial Integrity Act requires executive branch agencies to establish and maintain internal

controls to ensure that federal programs operate effectively, efficiently, and in accordance with applicable laws.

Agencies must evaluate and report on the effectiveness

of their internal controls for achieving the objectives of

effective and efficient operations, reliable reporting, and

compliance with laws and regulations. They must also 

assess whether their financial management systems comply with requirements outlined in section 4 of the Federal

Managers’ Financial Integrity Act.

Through our financial management system strategy, management control program, and compliance with applicable

laws and regulations, we ensure our compliance with the 

Federal Managers’ Financial Integrity Act.

Financial management system 

strategy

We partner with the Bureau of the Fiscal Service’s Administrative Resource Center (ARC) to provide FCA with several financial management services. This shared services

approach helps us maximize efficiency while maintaining

a high standard of financial management and accountability. 

We have access to core financial systems without having

to maintain the necessary technical and systems architectures. 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

Management control program

We have established management controls to reasonably

ensure that our programs and financial systems operate effectively and comply with applicable laws and regulations.

We use management controls to hold managers accountable for the performance of their programs.

Managers evaluate management controls annually to

ensure controls conform to the principles and standards 

established by the Office of Management and Budget and

the Government Accountability Office (GAO). We use

the results of these evaluations to identify and report any 

material weaknesses.

The FCA Senior Assessment Team assesses our internal controls every two years in accordance with GAO’s 

Standards for Internal Control in the Federal Government 

(Green Book). During the FY 2018 assessment, the team

concluded that our system of internal controls is effective,

and we did not report any material weaknesses.

Federal Financial Management 

Improvement Act

The Federal Financial Management Improvement Act

requires certain executive branch agencies to implement

and maintain financial management systems that substantially comply with federal financial management systems

requirements, applicable accounting standards, and the

U.S. Standard General Ledger at the transaction level. A 

financial management system includes an agency’s overall

financial operation, reflecting the people, processes, and

technology to capture, classify, summarize, and report data 

in a meaningful manner to support business decisions.
FCA Performance and Accountability Report FY 2018 17

Although we are not required to report under this act,

we conformed with the requirements of OMB Circular

A-123, Appendix D, Compliance with the Federal Financial Management Improvement Act of 1996, for FY 2018.

We assess available information from audit reports and

other relevant sources to determine whether our financial management systems substantially comply with the

Federal Financial Management Improvement Act.

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 2018, we paid on time 99.9 percent of the 

3,064 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. During FY 2018, we transferred one debt after

it exceeded the 120-day outstanding debt requirement.

Improper payments

The Improper Payments Elimination and Recovery 

Improvement Act of 2012 requires agencies to annually

report on all programs and activities, identify programs 

that may be susceptible to significant improper payments, estimate annual improper payment amounts in 

the susceptible programs, and report on the results of

improper payment activities. 

Additional information on our improper payment activities are reported in the “Other information” section of

this report. 

Digital Accountability and 

Transparency Act 

The Digital Accountability and Transparency Act of 2014

(DATA Act) was enacted to increase accountability and

transparency in federal spending and expand the requirements of the Federal Funding Accountability and Transparency Act of 2006. 

The DATA Act requires executive branch agencies to report

spending data using the standardized data structure established by the Treasury Department and OMB. Expenditure

information for contracts, loans, and grants is posted on 

the USASpending.gov website for each appropriations

account. Since our agency does not receive federal tax

dollars, OMB has determined that FCA is not subject to the

reporting requirements of the DATA Act.

Inspector General Act

The Inspector General Act of 1978, as amended, requires

inspectors general to report semiannually to their agency 

heads and to Congress. The semiannual reports prepared 

by the FCA OIG describe its audits, inspections, evaluations, investigations, and related activities, as well as the 

agency’s follow-up to its recommendations.

The FCA OIG posts all of its public reports, including its

semiannual reports, on its website within three days of final submission to the agency. These reports are also posted

on Oversight.gov, which contains OIG reports from across 

the federal government.

Below is a summary of the recommendations or 

agreed-upon actions in these reports, as well as our 

progress in taking corrective action. 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 2018

Summary of OIG audit, inspection, and 

evaluation activities

The OIG issued eight audit, inspection, or evaluation 

reports during FY 2018, resulting in 17 new agreed-upon actions. Twenty-eight agreed-upon actions have been

closed (including 13 from prior fiscal years). Therefore,

two actions remain open this fiscal year. The reports are

available on the FCA OIG’s website at www.fca.gov/about/

inspector-general-plans-and-reports.

• Oct. 27, 2017: The OIG issued a final report on an evaluation of our compliance with the Federal Information 

Security Modernization Act for FY 2017. The report

contained four recommendations.

• Nov. 8, 2017: 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 2017. The audit 

produced no recommendations.

• March 19, 2018: The OIG issued the inspection report, 

“Physical Security in FCA’s Bloomington Field Office.”

The inspection resulted in five agreed-upon actions.

For security purposes, this report was not made public.

• March 20, 2018: The OIG issued the final audit report,

“FCA’s Office of Secondary Market Oversight.” The

audit resulted in five agreed-upon actions.

• March 30, 2018: The OIG issued the final inspection

report, “FCA’s Travel Compensation and Incentives.”

The inspection resulted in no recommendations. 

• April 19, 2018: The OIG issued the final inspection report, “Physical Security in FCA’s Dallas Field Office.”

The inspection resulted in no recommendations. For 

security purposes, this report was not made public.

• June 19, 2018: The OIG issued the final inspection

report, “Physical Security in FCA’s Sacramento Field 

Office.” The inspection resulted in three agreed-upon

actions. For security purposes, this report was not 

made public.

• Sept. 6, 2018: The OIG issued the final evaluation report, “Information Technology Benchmarking Study.”

The evaluation resulted in no recommendations. 

Summary of OIG recommendations

Recommendations or agreed-upon actions uncorrected as 

of Oct. 1, 2017: 13

New agreed-upon actions during FY 2018: 17

Agreed-upon actions closed during FY 2018: 28

Open agreed-upon actions as of Sept. 30, 2018: 2

Recommendations or agreed-upon actions open more than 

one year: 2

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 2018, 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 2018 19

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 our internal control to determine the effectiveness and efficiency of our operations and

compliance with applicable laws and regulations. We conducted the assessment 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, 2018, 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 an assessment of our internal control over financial reporting, which includes safeguarding assets and

complying with applicable laws and regulations. We conducted this assessment 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 Sept. 30, 2018, was operating effectively, and no material weaknesses were found in the design or operation

of the internal control over financial reporting.

We are in conformance with the Federal Managers’ Financial Integrity Act, and our financial management systems are

substantially in compliance, as of Sept. 30, 2018, with the requirements for federal financial management systems as presented in appendix D of circular A-123. 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, 2018
20 FCA Performance and Accountability Report FY 2018

Program Performance
FCA Performance and Accountability Report FY 2018 21

FCA Performance Report

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 2018 – 2023 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 2018 we issued a

final 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 2018:

• Issued a final rule governing the eligibility of investments made by the System’s banks and associations

• Continued to study the loan syndication market

• Issued a final rule governing the eligibility of Farmer

Mac’s nonprogram investments

• Provided guidance to the System on strengthening 

lending and loan servicing controls 

• Issued guidance to the System on regulatory capital 

treatment of centrally cleared derivative contracts 

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
22 FCA Performance and Accountability Report FY 2018

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 2019.

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 institutions and other lenders that seek a secondary market for 

their agricultural, rural housing, and rural utility cooperative loans. We evaluate Farmer Mac’s performance in

reaching out to all potential customers and in creating easy 

access to its services. 

Farmer Mac submits an annual mission report to FCA.

This report includes data on Farmer Mac’s participation in

federal guarantee programs, the geographic distribution

of Farmer Mac’s program business, the proportion of fixed

versus 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
FCA Performance and Accountability Report FY 2018 23

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 lender 

customers. 

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,

2017, through June 30, 2018, we responded to 33 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 (BL066) “Providing Credit to Farmers

and Ranchers Operating in Local/Regional Food Systems”

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 committees.

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. In 2018 we updated 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
24 FCA Performance and Accountability Report FY 2018

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 

one merger. On Oct. 1, 2017, two associations affiliated with

CoBank, ACB, merged to become one association.

As a result, at fiscal year-end 2018, the System had 69 institutions (68 agricultural credit associations and 1 federal

land credit association), compared with 70 associations a

year earlier. 

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

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.
FCA Performance and Accountability Report FY 2018 25

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 

allow them to properly assess the loans and risk exposures

in their portfolios. With three exceptions, all institutions

had adequate internal control programs or adequate corrective actions in place in FY 2018. We are currently evaluating the three institutions 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 en-
26 FCA Performance and Accountability Report FY 2018

hances 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 2018,

Farmer Mac focused on strengthening its risk and compliance areas by adding three new positions: a risk officer, a

compliance and corporate integrity officer, and a human

capital officer. Farmer Mac also promoted a staff member

to quality assurance manager in the treasury operations

division.

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,

2018, 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 analysis. 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
FCA Performance and Accountability Report FY 2018 27

intelligence tools that our examiners can use in analyzing

risk and reviewing loans.

In 2018, the Office of Examination, the FCA Risk Project,

and the Office of Information Technology continued to

work together to improve our examination processes by

better utilizing technology.

• We finished developing the FCA Data Mart, a centralized data warehouse for transactional and indicative 

data provided by each financial institution in the Farm

Credit System.

• We developed two new examiner analysis applications

that utilize the Data Mart.

• We completed implementation of the EDGe Loan

Workpaper, a web-based application that accesses the

FCS Loans2 database.

• We continued developing new management reports as

part of the EDGe project.

We continually evaluate whether institutions are maintaining systems 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.

In May 2018, we issued a proposed rule that would require

FCS institutions to develop a standards of conduct program 

based on certain core principles. It would also require each

institution to adopt a code of ethics and to develop strategies and a system of internal controls to promote institutional and individual accountability for ethical conduct.

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. We have made

good use of the Schedule A, Persons with Disabilities,

hiring authority. 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
28 FCA Performance and Accountability Report FY 2018

• Hiring to meet projected staffing needs

• Offering training programs and developing strategies

to increase technical competencies of employees

• 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, examiner

career 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 2018, 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 examiner career development and related specialist programs (for credit,

finance, operations, and examination management) 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 examiner career 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 examiner career development

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- incharge 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.
FCA Performance and Accountability Report FY 2018 29

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 percentage points in 2018, from 75 percent to 78 percent. FCA 

was ranked in the top three best places to work among

small federal agencies. 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 
30 FCA Performance and Accountability Report FY 2018

Table 5a. Goal 1 — Performance measures and results for public mission

July 1, 2017, to June 30, 2018

Measure Results

2017

Target

2017

Results

2018

Target

2018

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% 100% ≥90% 97.3%

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.

There were five rules that met the 

reporting requirement. Most of the 

objectives listed in the preambles of 

the final rules were met on the twoyear anniversary of the implementation 

dates.

Yes Yes Yes Yes

6.Percentage of pre-rulemaking 

projects and proposed rules on 

which FCA requested input from 

persons outside of FCA. (This 

measure considers all of the prerulemaking projects and proposed 

rules that were listed as completed 

on FCA’s Unified Agenda Abstracts 

for the reporting period.)

There was one project that met the 

reporting requirement, and we did 

request input on this project from 

persons outside of FCA.

100% 89% 100% 100%
FCA Performance and Accountability Report FY 2018 31

Table 5b. Goal 2 — Performance measures and results for safety and soundness 

July 1, 2017, to June 30, 2018

Measure Results

2017

Target

2017

Results

2018

Target

2018

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% 99.6% ≥90% 98.6%

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% NA ≥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 three have 

satisfactory audit and review 

programs, including institutions 

with acceptable corrective 

action plans.

100% 99% 100% 95.9%

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 

that use System data to assess 

risk.

Yes Yes Yes Yes
32 FCA Performance and Accountability Report FY 2018

Table 5c. Goal 3 — Performance measures and results for workforce management 

July 1, 2017, to June 30, 2018

Measure Results

2017

Target

2017

Results

2018

Target

2018

Results

Results 

vs. 

Target

1. Whether, as part of its recruiting 

efforts for entry level examiners, FCA 

has ensured that at least 25 percent 

of its outreach efforts target disabled 

or minority potential applicants. 

At least 25 percent of our 

outreach efforts targeted 

disabled or minority potential 

applicants.

Yes Yes Yes Yes

2. Whether we have maintained or 

improved our score from last year in 

the Annual Employee Satisfaction 

Survey.

We achieved a 3 percentage 

point increase in our Employee 

Engagement Index score.

Yes Yes Yes Yes

Notes: In April 2018, the FCA board adopted the FCA Strategic Plan for FYs 2018 – 2023. The performance measures in the new plan remain 

substantially the same as the measures in the previous plan. 

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 2018 target; indicates we achieved the FY 2018 target; indicates we did not meet the FY 2018 target.
FCA Performance and Accountability Report FY 2018 33

Financial Section
34 FCA Performance and Accountability Report FY 2018

Statement of Chief Financial Officer

November 13, 2018

I am pleased to present the Farm Credit Administration’s 2018 financial statements. This report provides

an assessment of FCA’s detailed financial status and demonstrates how FCA management has used the

resources entrusted to us to support our important mission. 

Our independent auditor released an unmodified opinion on the financial statements and identified no

significant issues. This achievement marks the 25th consecutive year that FCA has published a clean opinion. It underscores our commitment to transparency, accountability, and stewardship to rural America, the

president, Congress, and the members and investors of the Farm Credit System.

FCA leadership and staff remain dedicated to sound financial management practices. As the arm’s length

regulator of the Farm Credit System, we appreciate the value of strong financial management. We work

hard to maintain the expertise we need for proper financial reporting.

Looking forward, we are committed to sustaining our success in achieving clean financial statement audits.

We are also committed to strengthening our internal controls, reducing manual processes, and improving

data quality and reporting. We will continue to mature our enterprise risk management program so that we

can provide agency leadership with a portfolio view of risk. Doing so will allow us to improve our decision 

making and allocate our resources more effectively to achieve our mission. We will continue to refine our

internal controls to proactively identify and mitigate financial, operational, and compliance risks.

I appreciate the FCA professionals who plan, execute, and account for the agency’s resources. Their commitment to ensuring sound financial management provides the foundation for our strong stewardship and

ensures that we can deliver reliable financial information to our stakeholders.

Sincerely,

Stephen G. Smith

Chief Financial Officer
FCA Performance and Accountability Report FY 2018 35

Transmittal Letter of Auditor’s Report

Farm Credit Administration Office of Inspector General

1501 Farm Credit Drive

McLean, VA 22102-5090

November 13, 2018

The Honorable Dallas P. Tonsager, Board Chairman 

The Honorable Jeffery S. Hall, Board Member

The Honorable Glen R. Smith, Board Member 

Farm Credit Administration

1501 Farm Credit Drive 

McLean, Virginia 22102-5090

Dear Board Chairman Tonsager and Board Members Hall and Smith:

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, 2018. 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 financial statements present fairly, in all material 

respects, the financial position of the Agency as of the FY ended September 30, 2018, in 

accordance with accounting principles generally accepted in the United States of America (U.S.).

Harper, Rains, Knight & Company considered FCA’s internal control over financial reporting as a 

basis for designing audit procedures that are appropriate to express an opinion on the financial 

statements. Although they did not express an opinion on the FCA’s internal control over financial 

reporting, they did not identify any deficiencies considered to be material weaknesses. 

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

provisions of applicable 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 that would be reportable under 

U.S. generally accepted Government Auditing Standards or Office of Management and Budget 

(OMB) Bulletin 19-01, Audit Requirements for Federal Financial Statements. 
36 FCA Performance and Accountability Report FY 2018

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

Government Auditing Standards and OMB Bulletin 19-01, Audit Requirements for Federal Financial 

Statements. 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 

Enclosure
FCA Performance and Accountability Report FY 2018 37

Independent Auditor’s Report

Independent Auditors' Report

The Board and Inspector General

Farm Credit Administration

Report on the Financial Statements

We have audited the accompanying financial statements of the Farm Credit Administration (FCA). FCA's 

financial statements comprise the balance sheets as of September 30, 2018 and 2017, and the related 

statements of net cost and changes in net position, and combined statements of budgetary resources, for 

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

Management's Responsibility

FCA's management is responsible for (1) the preparation and fair presentation of these financial statements 

in accordance with accounting principles generally accepted in the United States of America; (2) 

preparing, measuring, and presenting the Required Supplementary Information (RSI) in accordance with 

accounting principles generally accepted in the United States of America; (3) preparing and presenting 

other information included in documents containing the audited financial statements and auditors' report, 

and ensuring the consistency of that information with the audited financial statements and the RSI; and 

(4) maintaining effective internal control over financial reporting, including 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 19-01, 

Audit Requirements for Federal Financial Statements. Those standards and OMB require that we plan and 

perform the audit to obtain reasonable assurance about whether the financial statements are free from 

material misstatement. We are also responsible for applying certain limited procedures to RSI and other 

information included with the financial statements.

An audit of financial statements 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 auditors' 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 
38 FCA Performance and Accountability Report FY 2018

The Board and Inspector General

Farm Credit Administration (continued) 

Auditors' Responsibility (continued)

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 of financial statements also involves evaluating the appropriateness of the accounting policies used 

and the reasonableness of significant accounting estimates made by management, as well as evaluating 

the overall presentation of the financial statements. Our audits also included performing such other 

procedures as we considered necessary in the circumstances.

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

our audit opinion. 

Opinion on the Financial Statements

In our opinion, FCA's financial statements present fairly, in all material respects, FCA's financial position 

as of September 30, 2018 and 2017, and its net cost of operations, changes in net position, and budgetary 

resources for the fiscal years then ended, in accordance with accounting principles generally accepted in 

the United States of America.

Other Matters

Required Supplementary Information 

Accounting principles generally accepted in the United States of America issued by the Federal 

Accounting Standards Advisory Board (FASAB) require that the information in the Management's 

Discussion and Analysis be presented to supplement the financial statements. Such information, although 

not a part of the financial statements, is required by FASAB who considers this information to be an 

essential part of financial reporting for placing the financial statements in appropriate operational, 

economic, or historical context. We have applied certain limited procedures to the RSI 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 RSI and comparing the information for consistency with 

management's responses to the auditors' inquiries, the financial statements, and other knowledge we 

obtained during the audit of the financial statements, in order to report omissions or material departures 

from FASAB guidelines, if any, identified by these limited procedures. We did not audit and we do not 

express an opinion or provide any assurance on the RSI because the limited procedures we applied do not 

provide sufficient evidence to express an opinion or provide any assurance. 

Other Information 

Our audit was conducted for the purpose of forming an opinion on FCA's financial statements. The 

information in the Statement of Board Chairman and CEO, Statement of Chief Financial Officer, and 

Other Information section contains a wide range of information, some of which is not directly related to 

the financial statements. This information is presented for purposes of additional analysis and is not a 

required part of the financial statements or the RSI. We read the other information included with the 

financial statements in order to identify material inconsistencies, if any, with the audited financial 

statements.
FCA Performance and Accountability Report FY 2018 39

The Board and Inspector General

Farm Credit Administration (continued) 

Other Matters (continued)

The Statement of Board Chairman and CEO, Statement of Chief Financial Officer, and Other Information 

section has not been subjected to the auditing procedures applied in the audit of the 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 FCA's financial statements as of and for the year ended September 

30, 2018, in accordance with U.S. generally accepted government auditing standards and OMB Bulletin 

19-01, Audit Requirements for Federal Financial Statements, we considered the entity's internal control 

over financial reporting as a basis for designing 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 the entity's internal control over financial reporting. Accordingly, we 

do not express an opinion on the entity's internal control over financial reporting. We did not consider all 

internal controls relevant to operating objectives as broadly established by the Federal Managers' Financial 

Integrity Act of 1982 (FMFIA), such as those controls relevant to preparing performance information and 

ensuring efficient operations. We are required to report all deficiencies that are considered to be significant 

deficiencies or material weaknesses.

Our consideration of internal control over financial reporting was for the limited purpose described in the 

preceding paragraph and was not designed to identify all deficiencies in internal control over financial 

reporting that might be material weaknesses or significant deficiencies, and therefore, material weaknesses 

or significant deficiencies may exist that were not identified. Given these limitations, during our audit, we 

did not identify any deficiencies in internal control over financial reporting that we consider to be material 

weaknesses.

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.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether FCA's financial statements are free form material 

misstatement, we performed tests of its compliance with selected provisions of applicable laws, 

regulations, contracts, and grant agreements, noncompliance with which would have a direct and material 

effect on the financial statements. We performed our tests of compliance in accordance with U.S. generally 

accepted government auditing standards and OMB Bulletin 19-01, Audit Requirements for Federal 

Financial Statements. We caution that noncompliance may occur and not be detected by these tests.

Management is responsible for complying with laws, regulations, contracts, and grant agreements 

applicable to the entity. 
40 FCA Performance and Accountability Report FY 2018

The Board and Inspector General

Farm Credit Administration (continued) 

Compliance and Other Matters (continued)

Our responsibility is to test compliance with selected provisions of applicable laws, regulations, contracts, 

and grant agreements applicable to the entity that have a direct effect on the determination of material 

amounts and disclosures in the entity's financial statements and perform certain other limited procedures. 

Accordingly, we did not test compliance with all laws, regulations, contracts, and grant agreements 

applicable to FCA. 

Our tests for compliance with selected provisions of applicable laws, regulations, contracts, and grant 

agreements disclosed no instances of noncompliance for fiscal year 2018 that would be reportable under 

U.S. generally accepted government auditing standards or OMB Bulletin 19-01, Audit Requirements for 

Federal Financial Statements. However, the objective of our tests was not to provide an opinion on 

compliance with laws, regulations, contracts, and grant agreements applicable to FCA. Accordingly, we 

do not express such an opinion. 

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. These reports are an integral part of an audit performed in accordance with U.S. generally 

accepted government auditing standards in considering the entity's internal control and compliance. 

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

November 13, 2018 
FCA Performance and Accountability Report FY 2018 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 A-136, as amended. For comparison purposes, we present

our financial statements and notes for FY 2018 and FY 2017. All amounts are in whole dollars. The financial statements

include the following:

• Balance sheets, which show our assets, our liabilities, and our net position (assets minus liabilities).

• Statements of net cost, which show 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.

• Statements of changes in net position, which show the change in our net position over the two-year period ending 

Sept. 30, 2018.

• Statements of budgetary resources, which show 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, or a statement of changes in social insurance amounts.
42 FCA Performance and Accountability Report FY 2018

Balance sheets

As of September 30, 2018 and 2017 

(In dollars)

2018 2017

Assets Intragovernmental

Fund balance with Treasury (note 2) $4,127,940 $1,457,378

Investments (note 3) 31,492,515 32,893,400

Accounts receivable (note 4) 13,382 10,994

Total intragovernmental 35,633,837 34,361,772

Accounts receivable (note 4) 84,409 154,726

General property, equipment, and software, net (note 5) 1,607,341 1,590,298

Prepaid expenses 267,706 333,689

Total assets $37,593,293 $36,440,485

Liabilities Intragovernmental

Accounts payable $49,426 $27,806

Accrued post-employment compensation 32,618 36,536

Employer contributions and payroll taxes payable 484,936 455,088

Other 109 0

Total intragovernmental 567,089 519,430

Accounts payable 1,310,666 550,337

Actuarial workers’ compensation liability (Note 6) 1,509,392 1,463,048

Accrued payroll and benefits 7,253,008 6,771,200

Employer contributions and payroll taxes payable 521,259 486,960

Deferred revenue 5,907,939 5,733,890

Total liabilities $17,069,353 $15,524,865

Net position Cumulative results of operations – Other funds $20,523,940 $20,915,620

Total net position 20,523,940 20,915,620

Total liabilities and net position $37,593,293 $36,440,485

The accompanying notes are an integral part of these statements.
FCA Performance and Accountability Report FY 2018 43

Statements of net cost

For the years ended September 30, 2018 and 2017

(In dollars)

Program Costs 2018 2017

Public mission Gross costs $20,089,846 $18,863,584

Less: Earned revenue (18,156,025) (17,954,870)

Net program cost $1,933,821 $908,714

Safety and soundness Gross costs $55,986,290 $51,584,478

Less: Earned revenue (50,641,483) (49,163,895)

Net program cost $5,344,807 $2,420,583

Other activity Gross costs $670,677 $918,104

Less: Earned revenue (487,337) (541,833)

Net program cost $183,340 $376,271

Net cost of operations (note 7) $7,461,968 $3,705,568

The accompanying notes are an integral part of these statements.
44 FCA Performance and Accountability Report FY 2018

Statements of changes in net position

For the years ended September 30, 2018 and 2017

(In dollars)

2018 2017

Cumulative results of operations

Beginning balances $20,915,620 $18,976,664

Other financing sources (Non-exchange)Imputed financing sources

Federal employee benefits (note 8) 3,070,288 2,044,524

Rent (note 9) 4,000,000 3,600,000

Total financing sources 7,070,288 5,644,524

Net cost of operations (7,461,968) (3,705,568)

Net change (391,680) 1,938,956

Cumulative results of operations $20,523,940 $20,915,620

Net position $20,523,940 $20,915,620

The accompanying notes are an integral part of these statements.
FCA Performance and Accountability Report FY 2018 45

Statements of budgetary resources

For the years ended September 30, 2018 and 2017

(In dollars)

2018 2017

Budgetary resources Unobligated balance from prior year budget authority, net $21,406,841 $19,207,882

Spending authority from offsetting collections 69,496,735 69,042,437

Total budgetary resources (note 11) $90,903,576 $88,250,319

Memorandum (nonadd) entriesNet adjustments to unobligated balance brought forward, Oct. 1 (12,558,636) (8,871,267)

Status of budgetary 

resources

New obligations and upward adjustments (total) $68,952,482 $66,843,478

Unobligated balance, end of year

Exempt from apportionment, unexpired accounts 16,043,155 15,672,951

Exempt from apportionment, not available 5,907,939 5,733,890

Unexpired unobligated balance, end of year 21,951,094 21,406,841

Unobligated balance, end of year (total) 21,951,094 21,406,841

Total budgetary resources (note 11) $90,903,576 $88,250,319

Outlays, net Outlays, net (total) (1,280,081) (4,123,352)

Agency outlays, net $(1,280,081) $(4,123,352)

The accompanying notes are an integral part of these statements.
46 FCA Performance and Accountability Report FY 2018

Notes to the financial statements

Note 1. Significant accounting policies

A. Reporting entity —See the section titled Management’s Discussion and Analysis for a description of the reporting

entity. 

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. 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, which allows us to respond

effectively and efficiently to unexpected, unbudgeted expenses 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 we have determined that the collection is unlikely to occur after considering

the debtor’s ability to pay.

The Office of the Chief Financial Officer, 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, 2018, are fully collectible. See note 4.

F. Advances and prepaid expenses —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 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
FCA Performance and Accountability Report FY 2018 47

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 when the software 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, or software over its estimated useful life. 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 provides to each agency the cost factors used in the calculation of these

federal employee benefit expenses. See note 8.

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 9. 

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. Our methodology for calculating the leave liability includes the cost of benefits associated

with the compensation. This 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.

N. Deferred revenue —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 “exempt from apportionment, 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.

Q. Reclassifications — Certain amounts presented in the prior years have been reclassified to conform to the current

period financial statement presentation. These reclassifications have no effect on previously reported net position or

budgetary resources.
48 FCA Performance and Accountability Report FY 2018

Note 2. Fund balance with Treasury

2018 2017

Status of fund balance with Treasury

Unobligated balance

Available $16,043,155 $15,672,951

Unavailable 5,907,939 5,733,890

Obligated balance not yet disbursed 13,505,029 12,769,200

Subtotal — Status of fund balance 35,456,123 34,176,041

Funds invested with Treasury net of unamortized discount (31,328,183) (32,718,663)

Total fund balance with Treasury $4,127,940 $1,457,378

The status of our fund balance with Treasury may be classified as unobligated available, unobligated unavailable, or obligated. Unobligated available amounts represent funds available for incurring new obligations. The unobligated unavailable amounts include funds not yet available for use and represent the amount of new fiscal year assessments received

prior to Oct. 1. These unavailable amounts are also classified as deferred revenue on the Balance Sheet. Amounts noted as

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

yet paid. 

Obligated and unobligated balances listed under “status of fund balance with Treasury” agree with obligated and unobligated balances reported on the Statement of Budgetary Resources.

All of our funds invested with Treasury are in U.S. Treasury securities.
FCA Performance and Accountability Report FY 2018 49

Note 3. Investments

Intragovernmental securities

Amounts for 2018 balance sheet reporting

Cost Amortized 

(Premium) 

Discount

Investments 

Net

Interest 

Receivable

9/30/18 

Investment 

Balance

Market Value 

Disclosure

Nonmarketable market-based $31,435,396 $(24,955) $31,410,441 $82,074 $31,492,515 $31,177,346

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

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 $597,007 and $317,990 for FYs 

2018 and 2017, respectively.

Note 4. Accounts receivable

2018 2017

Intragovernmental

Reimbursements for services provided $13,382 $10,994

Subtotal 13,382 10,994

With the public

Reimbursements for services provided 78,834 145,890

Expenditure refunds 5,575 8,836

Subtotal 84,409 154,726

Total accounts receivable $97,791 $165,720

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

30.
50 FCA Performance and Accountability Report FY 2018

Note 5. General property, equipment, and software

As of September 30, 2018

Estimated 

Useful Life

Depreciation 

Method

Acquisition 

Value

Accumulated/

Amortized 

Depreciation

Book Value

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

Equipment 5 years Straight line 434,055 (146,358) 287,697

Equipment 10 years Straight line 305,304 (106,379) 198,925

Internal Use Software 5 years Straight line 1,270,813 (270,691) 1,000,122

Total $2,733,752 $(1,126,411) $1,607,341

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

Capitalization thresholds for property and equipment are $50,000 per individual asset and $500,000 for bulk purchase of

equipment. Capitalized internal use software is capitalized when costs exceed $250,000.

Note 6. Liabilities not covered by budgetary resources (actuarial workers’ compensation 

liability)

We record an unfunded liability (liability not covered by budgetary resources) for the actuarial liability under the Federal

Employees’ Compensation Act (FECA). The actuarial FECA liability is the estimated liability for future benefit payments

and is recorded as a component of federal employee benefits. The actuarial liability estimate for benefits under FECA includes the expected liability for costs associated with death, disability, and medical care for approved compensation cases.

The estimate also includes costs associated with incurred but unreported claims.

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. 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 2018 model to estimate FECA actuarial liability.

2018 2017

Total liabilities not covered by budgetary resources $1,509,392 $1,463,048

Total liabilities covered by budgetary resources 15,559,961 14,061,817

Total liabilities $17,069,353 $15,524,865
FCA Performance and Accountability Report FY 2018 51

Note 7. 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 2018 and

2017. We display our cost and earned revenue amounts by office within each program.

For the year ended September 30, 2018

Office of 

Examination

Office of 

Regulatory 

Policy

Office of 

Secondary 

Market 

Oversight

Other 

Offices

Total

Public 

mission

Gross costs $585,548 $5,476,669 $571,224 $13,456,405 $20,089,846

Less: Earned revenue (531,923) (4,975,058) (446,357) (12,202,687) (18,156,025)

Net program cost 53,625 501,611 124,867 1,253,718 1,933,821

Safety and 

soundness

Gross costs 36,583,724 1,268,009 1,325,825 16,808,732 55,986,290

Less: Earned revenue (33,196,083) (1,150,304) (1,033,734) (15,261,362) (50,641,483)

Net program cost 3,387,641 117,705 292,091 1,547,370 5,344,807

Other 

activity

Gross costs 220,211 56,537 634 393,295 670,677

Less: Earned revenue (160,013) (41,081) (460) (285,783) (487,337)

Net program cost 60,198 15,456 174 107,512 183,340

Net cost of operations $3,501,464 $634,772 $417,132 $2,908,600 $7,461,968

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
52 FCA Performance and Accountability Report FY 2018

Note 8. Federal employee benefits

2018 2017

Imputed pension costs $1,150,819 $564,494

Other imputed retirement benefits 1,919,469 1,480,030

Total $3,070,288 $2,044,524

We report the amount of our pension expense and other retirement benefits in accordance with SFFAS No. 5, Accounting

for Liabilities of the Federal Government. These expenses are treated as an imputed expense, which is recognized when

amounts remitted to OPM are less than the full cost to the government. Corresponding amounts of imputed revenue are

recorded to offset the imputed cost.

Pension expenses — 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.

Other retirement benefit expenses — We also recognize an expense for the cost of providing health benefits and life insurance to our employees after they retire. OPM provides the factors used to calculate these costs.

Note 9. Rent

2018 2017

Leased field offices $1,378,394 $1,232,874

FCA headquarters 2,621,606 2,367,126

Total $4,000,000 $3,600,000

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. Our imputed rent expense

is an estimate based on the Building Association’s estimated budget for 2018. 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.
FCA Performance and Accountability Report FY 2018 53

Note 10. Undelivered orders at the end of the period

As of Sept. 30, 2018, budgetary resources obligated for undelivered orders were as follows:

Federal Nonfederal Total

Paid undelivered orders $0 $267,706 $267,706

Unpaid undelivered orders 671,538 4,017,579 4,689,117

Total undelivered orders $671,538 $4,285,285 $4,956,823

As of Sept. 30, 2017, budgetary resources obligated for undelivered orders were as follows:

Federal Nonfederal Total

Paid undelivered orders $0 $333,689 $333,689

Unpaid undelivered orders 855,688 4,458,848 5,314,536

Total undelivered orders $855,688 $4,792,537 $5,648,225

Note 11. 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 2017 Statement of Budgetary Resources and

the FY 2017 actual amounts reported in the FY 2019 Budget of the United States Government. The FY 2020 Budget of the 

United States is not yet available to compare the FY 2018 actual amounts to the FY 2018 Statement of Budgetary Resources.

The budget is expected to be available in February 2019.

Note 12. 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, since 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 $557 for the period ended Sept. 30, 2018, 

and $272 for Sept. 30, 2017. The funds collected in FY 2018 were transferred to the Department of the Treasury at the end 

of FY 2018.
54 FCA Performance and Accountability Report FY 2018

Note 13. 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.

2018 2017

Resources Used to Finance 

Activities

Budgetary resources obligated

Obligations incurred $68,952,482 $66,843,478

Spending authority from offsetting collections and 

recoveries

(69,496,735) (69,042,437)

Net obligations (544,253) (2,198,959)

Other resources

Imputed financing from costs absorbed by others 7,070,288 5,644,524

Other resources 174,049 1,057,103

Net other resources used to finance activities 7,244,337 6,701,627

Total resources used to finance activities 6,700,084 4,502,668

Resources used to finance items not part of net cost of operations 207,753 (1,188,279)

Total resources used to finance net cost of operations 6,907,837 3,314,389

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

resources in current period

554,131 391,179

Net cost of operations $7,461,968 $3,705,568
FCA Performance and Accountability Report FY 2018 55

Other Information
56 FCA Performance and Accountability Report FY 2018

Letter from Inspector General on FCA’s 

Management Challenges 
FCA Performance and Accountability Report FY 2018 57
58 FCA Performance and Accountability Report FY 2018
FCA Performance and Accountability Report FY 2018 59
60 FCA Performance and Accountability Report FY 2018
FCA Performance and Accountability Report FY 2018 61
62 FCA Performance and Accountability Report FY 2018

Management’s Response to Challenges Identified by 

FCA’s Inspector General

Farm Credit Administration 1501 Farm Credit Drive

McLean, VA 22102-5090

(703) 883-4000

October 29, 2018

Ms. Wendy Laguarda

Inspector General

Farm Credit Administration

1501 Farm Credit Drive

McLean, VA 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 information 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

Enclosure
FCA Performance and Accountability Report FY 2018 63
64 FCA Performance and Accountability Report FY 2018
FCA Performance and Accountability Report FY 2018 65
66 FCA Performance and Accountability Report FY 2018

Summary of Financial Statement Audit and 

Management Assurances

FCA has no reported material weakness, and we are in conformance with the Federal Managers’ Financial Integrity Act

(FMFIA) and in compliance with the Federal Financial Management Improvement Act (FFMIA).

Table 6. Summary of financial statement audit

Audit opinion: Unmodified

Reinstatement: No

Material Weaknesses Beginning 

Balance

New Resolved Consolidated Ending Balance

No material weaknesses 0 0 0 0 0

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

No material weaknesses 0 0 0 0 0 0

Effectiveness of internal control over operations (FMFIA § 2)

Statement of Assurance: Unmodified

Material Weaknesses Beginning 

Balance

New Resolved Consolidated Reassessed Ending Balance

No material weaknesses 0 0 0 0 0 0

Conformance with FMFIA section 4

Statement of assurance: Federal systems conform

Nonconformances Beginning 

Balance

New Resolved Consolidated Reassessed Ending 

Balance

Total nonconformance 0 0 0 0 0 0

Compliance with FFMIA section 803(a)

Compliance Requirements 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 2018 67

Payment integrity

Background

The Improper Payments Information Act of 2002 (IPIA),

as amended by the Improper Payments Elimination and

Recovery Act of 2010 (IPERA) and the Improper Payments

Elimination and Recovery Improvement Act of 2012 (IPERIA), outlines legislative and administrative requirements

with which agencies must comply in order to identify, 

estimate, and report on their improper payment activities. 

Appendix C to OMB Circular A-123, Requirements for

Payment Integrity Improvement, provides implementation 

guidance for agencies to comply with IPIA, IPERA, and 

IPERIA. OMB Circular A-136 provides the guidance for

reporting on payment integrity in the Performance and 

Accountability Report.

Payment reporting

Agencies are required to report annual improper payment

estimates for OMB-designated high-priority programs

and programs that are susceptible to significant improper payments. For FY 2018, a program is considered to be

high priority if it has $2 billion in estimated improper

payments. A program is deemed susceptible to significant

improper payments if its improper payments amount to 

more than $10 million and more than 1.5 percent of all 

payments made under that program, or if the program has 

more than $100 million in estimated improper payments.

Detailed information on improper payments for the U.S. government is available online at www.paymentaccuracy.gov.

FCA data are not included on this website because we do

not have any programs that were designated by OMB as

high priority and our risk assessments did not identify any 

programs or activities that were susceptible to significant

improper payments. Thus, we are not required to perform

any statistically valid estimates of improper payments or 

report on root cause identification, corrective actions, or

reduction targets.

Risk assessments

In accordance with legislative requirements and OMB

guidance, we conduct risk assessments at least once every 

three years to identify programs that have a significant

risk of improper payments. We performed our assessment

on contract payments, purchase cards, travel cards, claims 

and vouchers, and payroll. Following our most recent risk 

assessment in FY 2017, we determined that our programs 

and activities are low risk and are not susceptible to significant improper payments. The next assessment will be for

the period ended Sept. 30, 2020.

Payment recapture audits

To recover improper payments, the Improper Payments 

Elimination and Recovery Act requires agencies to conduct

payment recapture audits for each program and activity 

that expends $1 million or more annually — provided that

conducting these audits would be cost-effective.

We have determined that a payment recapture audit is not

cost-effective for our agency because of the low risk for our

programs. 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.

ARC, our service provider, has internal control procedures 

to ensure that payments are made properly. One such procedure is the post-payment audit in which ARC reviews 

a random sample of 10 percent of invoices processed each 

month. In addition, our agency invoice approvers review 

payments before they are processed to ensure payments

are appropriate. We also work closely with ARC to ensure

that payroll and charge card payments are reviewed and 

monitored to ensure payments are complete, accurate, and 

timely. Plus, we perform routine operational reviews and 

oversight to help identify improper payments. 

For FY 2018, we identified five improper payments

amounting to $674, or 0.001 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

Treasury’s Do Not Pay Working System is the legislatively

mandated and OMB-designated source of centralized data

and analytic services to help agencies verify eligibility and

to identify and prevent potential fraud, waste, and abuse

associated with improper payments. We work closely

with ARC to ensure that all payments are proper and paid 

to valid vendors. ARC 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 that only eligible recipients are paid. To date, we

have not had any vendors with a match to these Do Not 

Pay databases.
68 FCA Performance and Accountability Report FY 2018

Fraud Reduction Report

The Fraud Reduction and Data Analytics Act of 2015 

requires agencies to take steps to improve financial and

administrative controls and procedures to assess and 

mitigate fraud risks. According to GAO’s Green Book, the 

objective of fraud risk management is to proactively facilitate a program’s mission by continuously and strategically

mitigating the likelihood and impact of fraud. Whether an

act is in fact fraud is a determination made through the judicial or other adjudicative system and is beyond management’s professional responsibility for assessing risk.

We maintain effective processes and systems to detect and

prevent potential fraud. This includes a leadership culture 

that fosters integrity, ongoing training to help employees 

identify and report potential fraud, an independent inspector general to conduct investigations, a strong system 

of internal controls, appropriate segregation of duties, 

routine risk assessments, quality assurance reviews, and

quality control programs. We place the highest value on

our people and expect them to act with a high degree of

integrity.

Through our internal assessments, in accordance with 

OMB Circular A-123, we monitor and evaluate controls to

ensure that our business units are preventing, detecting,

and responding to potential fraud. 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 Name & 

Description

Year 

Enacted

Latest year of 

adjustment 

(via statute or 

regulation)

Current Penalty 

(Dollar Amount 

or Range)

Bureau 

Name

Location 

for Penalty 

Update 

Details

Section 5.32(a) of 

the Farm Credit Act 

of 1971, as amended

Violation of a final 

order

1985 2018 $2,269 83 FR 1293

Section 5.32(a) of 

the Farm Credit Act 

of 1971, as amended

Violation of the act 

or regulation

1985 2018 $1,026 83 FR 1293

Section 102(f) of 

the Flood Disaster 

Protection Act of 

1973

Pattern or practice 

of committing 

violations of 

the National 

Flood Insurance 

Program

1994 2018 $2,133 83 FR 1293
FCA Performance and Accountability Report FY 2018 69

The Farm Credit Administration Performance and Accountability Report Fiscal Year 2018 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 

www.fcsic.gov or from

Farm Credit System Insurance Corporation

1501 Farm Credit Drive

	 McLean, VA 22102

Telephone: 703-883-4380

In addition, FCS banks and associations are required by regulation to prepare annual and quarterly financial reports. Copies of these documents are available for public inspection at FCA headquarters in McLean, Virginia.

Additional Information
Office of Congressional and Public Affairs

Copies are available from

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