Credit Administration 

Office of Inspector General 

Farm Credit Administration 

Office of Inspector General 

Management Letter for 

the Farm Credit 

Administration’s 

Financial Statement 

Audit 

Fiscal Year 2022 

November 10, 2022 
 

 

 

 

 

 

 

 

 

PCA0IG 

Farm Credit Administration 

Office of Inspector General 

November 10, 2022 

The Honorable Vincent G. Logan, Board Chairman and Chief Executive Officer 

The Honorable Jeffery S. Hall, Board Member 

The Honorable Glen R. Smith, Board Member 

Farm Credit Administration 

1501 Farm Credit Drive 

McLean, VA 22102-5090 

Dear Chairman Logan and Board Members Hall and Smith: 

The Office of Inspector General (OIG) contracted with the independent public accounting firm 

Harper, Rains, Knight & Company P.A. (HRK) to audit the financial statements of the Farm Credit 

Administration (FCA or Agency) as of and for the fiscal years ended September 30, 2022 and 2021. 

The auditors issued an unmodified opinion on the financial statements. 

As part of the financial statement audit, HRK considered FCA's internal control over financial 

reporting as a basis for designing audit procedures for the purpose of expressing an opinion on 

the financial statements, but not for the purpose of expressing an opinion on the effectiveness of 

FCA's internal control. Given these limitations, during the audit, HRK did not identify any 

deficiencies in internal control over financial reporting that it considered to be a significant 

deficiency or material weakness. However, the auditors noted an internal control deficiency over 

payroll operating expenses regarding re-hired annuitants. The attached management letter 

communicates the internal control deficiency identified by HRK. HRK is responsible for the 

enclosed management letter and the conclusions expressed therein. 

HRK made one recommendation to address the identified deficiency related to re-hired 

annuitants. FCA Management agreed with the recommendation and provided a corrective action 

plan, procedures, and updated internal control documentation. 

Respectfully, 

Sonya K. Cerne 

Assistant Inspector General for Audits, Inspections, and Evaluations 

Enclosure 

1501 Farm Credit Drive, McLean, VA 22102 703-883-4030 www.fca.gov/about/inspector-general 
MANAGEMENT 

LETTER 

FARM CREDIT ADMINISTRATION 

MCLEAN, VA 

FOR THE YEAR ENDED 

SEPTEMBER 30, 2022 

Harper, Rains, Knight & Company, P.A. 

700 12th ST NW, Suite 700 

Washington, DC 20005 

202-558-5162 

www.hrkcpa.com 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

H:K 

Harper, Rains. Knight & Company 

Certifi ed P ublic Accountants • Cons ultants • hrkc pa.com 

1052 Highland Colony Parkway, Suite 100 

Ridgeland, MS 39157 

p: 601-605-0722 · f: 601-605-0733 

700 12th Street NW, Suite 700 

Washington, DC 20005 

p: 202-558-5 162 · f: 601-605-0733 

November 10, 2022 

Chief Financial Officer 

Farm Credit Administration 

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

2022, and the related statements of net cost, changes in net position, and budgetary resources for 

the fiscal year then ended, and the related notes to the financial statements, and have issued our 

report thereon dated November 8, 2022. 

In planning and performing our audit of the basic financial statements of the FCA as of and for the 

year ended September 30, 2022, in accordance with auditing standards generally accepted in the 

United States of America and the standards applicable to financial audits contained in Government 

Auditing Standards, issued by the Comptroller General of the United States, we considered FCA'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 FCA's 

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

control over financial reporting. 

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 over financial reporting, 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 reasonable possibility exists when the 

likelihood of an event occurring is either reasonably possible or probable defined as follows: 

 Reasonably possible. The chance of the future event or events occurring is more than 

remote but less than likely. 

 Probable. The future event or events are likely to occur. 

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

and was not designed to identify all deficiencies in internal control that might be material 

weaknesses. 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. However, 

material weaknesses may exist that have not been identified. 
 

 

 

 

 

 

 

 

Chief Financial Officer 

Farm Credit Administration (continued) 

The following is a summary of the internal control deficiency for your attention that we determined 

did not constitute a significant deficiency or material weakness, see Appendix A for the full 

description: 

Payroll Operating Expenses 

During our audit, we noted an internal control deficiency over payroll operating expenses, 

specifically re-hired annuitants. A lack of standard operating procedures in place for cost-of-living 

increases to re-hired annuitants’ annuity offset resulted in overpayment to employees. FCA should 

develop and implement policies and procedures for updating annuity offsets for re-hired annuitant 

cost-of-living increases. 

The purpose of this communication, which is an integral part of our audit, is to describe, for 

management and those charged with governance, the scope of our testing of internal control and 

the results of that testing. Accordingly, this communication is not intended to be and should not 

be used for any other purpose. 

Harper, Rains, Knight & Company P.A. 

Washington, D.C. 
 

 

 

 

 

 

 

 

Appendix A 

Internal Control Deficiency 

I. Internal Control Deficiency 

A. Internal Control Over Payroll Operating Expenses 

Condition: 

We tested a sample of fifty-four (54) payroll expense transactions. During our testing, we noted 

the following: 

 For one (1) of the FCA employees tested, who is a re-hired annuitant, the Office of 

Personnel Management (OPM) annuity amount that should have been used to offset their 

pay was not updated for the annual adjustment resulting in an overpayment to the 

employee. 

o After communicating the exception with FCA, it was determined that this exception 

impacted three (3) employees and goes back to 2018 for one employee, 2019 for 

another and 2020 for the employee tested. The total effect, for all three (3) 

employees from 2018 to pay period 19 in 2022, is an overpayment of $12,540. 

Criteria: 

Civil Service Retirement System and Federal Employees Retirement System Handbook, Chapter 

100 - Reemployed Annuitants, Section 100A2.1-1 states: 

 The pay of a reemployed annuitant is subject to: 

o Offset by the allocable amount of annuity during the period of reemployment; and 

o Retirement deductions, if elected. 

Cause: 

The exception is due to a lack of procedures in place for updating annuity offsets for re-hired 

annuitant annual cost-of-living increases. 

Effect: 

For re-hired annuitants, a lack of standard operating procedures in place for cost-of-living 

increases to annuity offsets can result in overpayment to employees. The total effect, for all three 

(3) employees from 2018 to pay period 19 in 2022, is an overpayment of $12,540. 

Recommendation: 

Harper, Rains, Knight & Company recommends that the Farm Credit Administration develop 

and implement policies and procedures for updating annuity offsets for re-hired annuitant costof-living increases and annually obtaining annuity information directly from the Office of 

Personnel Management. 
Appendix A 

Internal Control Deficiency 

Management’s Response: 

FCA Management agreed with the recommendation and provided a corrective action plan, 

procedures on reemployed annuitants, and updated internal control documentation. 

HRK’s Response: 

The corrective actions will be evaluated during the OIG recommendation closeout process. 
 

PC.A 

Farm Cr dit Admini tration 

Offic of In pector General 

REPORT FRAUD, WASTE, ABUSE, & 

MISMANAGEMENT 

Fraud, waste, abuse, and mismanagement in government concerns

everyone: Office of Inspector General staff, FCA employees, Congress,

and the general public. We actively solicit allegations of any inefficient

and wasteful practices, fraud, and mismanagement related to FCA

programs and operations. You can report allegations to us in several 

ways: 

Phone: (800) 437-7322 (Toll-Free)

(703) 883-4316 

Email: fca-ig-hotline@rcn.com 

Mail: 1501 Farm Credit Drive 

McLean, VA 22102-5090 

To learn more about reporting wrongdoing to the OIG, please visit our

website at https://www.fca.gov/about/inspector-general.