Management Challenges
 

Farm Credit Administration
 

Office of Inspector General
 

October 9, 2020
 
 

 

 

MANAGEMENT CHALLENGES
 

As part of the Farm Credit Administration’s (FCA or Agency) annual Performance and Accountability Report, 

the Reports Consolidation Act of 2000 requires Inspectors General to provide a summary perspective on the 

most serious management and performance challenges facing the Agency. These challenges reflect ongoing

vulnerabilities identified by the Office of Inspector General (OIG) over recent years as well as new and emerging

issues that the FCA faces. The chart below summarizes the top management challenges. The pages following

the chart provide more depth regarding each challenge and the Agency’s progress in addressing them. 

Examination and Supervision Program 

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

examination and supervision to ensure it remains safe and sound.
 

Information Technology 

•Leveraging investments in information technology while maintaining a secure 

environment and mobile workforce. 

Data Quality and Analysis 

•Obtaining consistent and quality data vital to the Farm Credit Administration's mission. 

Human Capital 

•Maintaining a safe, well-trained, and sustainable workforce while facing challenges in 

retirement eligibilities, workforce retention, and diversity. 

Secondary Market Oversight 

•Providing effective and impartial oversight of the Federal Agricultural Mortgage 

Corporation through the Farm Credit Administration's Office of Secondary Market 

Oversight. 

1 | P a g e 
CHALLENGE ONE: EXAMINATION AND SUPERVISION PROGRAM 

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

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

Although the System remains financially sound, it continues to be impacted by changing risk conditions. This 

year, the COVID-19 pandemic has had a swift and substantial impact on the global economy. Disruptions to 

employees, markets, transportation, and other factors have yielded significant volatility and uncertainty, 

creating new and increased risks in the System. In addition to the pandemic, this year has brought significant 

natural disasters, which increase stress to borrowers in affected areas. These unprecedented challenges require 

FCS institutions to be increasingly proactive and responsive to risks in the System. Working with borrowers 

and adapting to increasing risks, while maintaining financial capacity, will further increase the complexity of 

the System. 

FCA’s examination and supervision program will face new challenges to align with evolving threats, risks, and 

conditions. As a result of the COVID-19 pandemic, FCA directed most of its workforce to telework, suspended 

onsite examinations, and restricted business travel and in-person training. Within this new environment, FCA 

will need to continue its risk-based approach to oversight of the System. The Agency will require more 

sophisticated risk evaluation techniques to align with emerging risk factors and identify and deter 

consequences with the greatest potential impact. Effective oversight will require using new technologies and 

developing new skill sets within the Agency to adapt to challenges, such as the challenges the System faces 

with the London Interbank Offered Rate (LIBOR) phase out. The control environment must also adapt to 

address increasing expectations associated with internal controls. 

More serious or persistent weaknesses require additional oversight activities. FCA must respond and intervene, 

when necessary, to protect the System. Effective examination and supervision require prompt identification of 

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

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

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

System. 

Agency Progress 

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

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

The Agency issued an IM titled, Guidance for System Institutions Affected by the COVID-19 Pandemic (May 4, 

2020), which addressed working with borrowers; meeting capital and liquidity requirements; complying with 

financial reporting requirements; and managing operational and other issues. The guidance also included

supplements addressing troubled debt restructurings; 2020 annual meeting and election activities; flood 

insurance requirements; consumer financial protection; regulatory capital requirements for Paycheck 

Protection Program (PPP) loans and PPP loans pledged to the PPP Liquidity Facility; and electronic delivery of 

borrower rights notices. OE issued an IM on the Coronavirus Aid, Relief, and Economic Security Act (CARES 

Act) requirements that may impact institutions, CARES Act Requirements and COVID-19 Related Compliance 

Guidance from the Consumer Financial Protection Bureau (May 14, 2020). The Office of Regulatory Policy issued 

an IM, Guidance on the Paycheck Protection Program for Small Businesses Affected by the COVID-19 Pandemic 

(July 14, 2020) with guidance on the PPP, which authorized forgivable loans to small businesses to support 

payroll and certain other needs during the COVID-19 pandemic. 

2 | P a g e 
On January 9, 2020, the Agency issued a Bookletter, Interest Rate Risk Management, to provide clarification 

and guidance to System institutions on an effective interest rate risk management framework. 

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

oversight activities. OE identified three risk topics for fiscal year 2020: risk identification in stressed industries 

and institutions’ lending controls; board governance over internal controls, with a focus on the internal audit 

program; and cybersecurity and emerging information technology-related threats. 

Relevant OIG Work 

FCA’s OIG completed an audit on FCA’s criminal referral process. The objective of the audit was to determine 

whether FCA’s criminal referral and follow-up process is effective and efficient. FCA established regulations on 

criminal referral requirements and had processes in place to enable examination staff to access criminal referral 

information. However, we identified opportunities to improve the overall effectiveness and efficiency of 

collecting, storing, and analyzing criminal referrals. We made seven recommendations to the Agency to 

improve the criminal referral process. In response to our recommendations the Agency agreed to: 

•	 Update policies and procedures; 

•	 Complete a Privacy Impact Assessment and update the System of Records Notice for criminal referrals; 

•	 Review and update processes for criminal referral reviews; 

•	 Minimize the storage and visibility of Personally Identifiable Information in criminal referrals; 

•	 Determine whether additional resources are needed to educate the System on criminal referral 

activities and trends; 

•	 Add potential loss and insider information fields to the criminal referral listing; and 

•	 Evaluate and identify ways to enhance the capture of criminal referral data and the presentation of

related statistics. 

The OIG also plans to address other challenges faced by the examination and supervision program, including

a review of the Agency’s examination staff scheduling and rotation, OE recruiting, and the similar entity lending

oversight process. 

CHALLENGE TWO: INFORMATION TECHNOLOGY 

A significant management challenge for FCA is the ability to leverage investments in information technology 

(IT) while maintaining a secure environment. 

Cybersecurity threats and vulnerabilities present significant challenges across the federal government. These

challenges require an IT security program that is responsive, agile, and forward-looking. The prevalence of 

cybersecurity threats and risks have been highlighted by security incidents and data breaches across the public 

and private sectors. Because FCA relies on various IT systems, security challenges can directly impact the 

Agency’s ability to achieve its mission. As such, FCA must continuously identify and respond to complex IT 

risks to effectively manage this challenge area. 

Given the current COVID-19 pandemic and national emergency, FCA has its staff working remotely full-time. 

While the FCA staff is telework-ready and has responded to the challenge of transition, additional resources 

are required from the IT staff to support the telework environment. Further, working remotely exposes

potential vulnerabilities that may go beyond the Agency’s control. The new working environment adds a new 

layer to the Agency’s IT services given the resources and support needed for a secure environment while 

3 | P a g e 
keeping the health and safety of FCA staff the upmost priority. 

It is imperative that FCA has the necessary tools and staff to operate efficiently and effectively. At the same 

time, the Agency must be prudent and responsible with its spending. To stay current and address the Agency’s

IT requirements, FCA needs well-trained personnel that can successfully maintain IT systems and integrate 

new tools to improve operations. This challenge becomes increasingly difficult as new IT requirements are 

developed and implemented across federal systems. 

Agency Progress 

FCA continues to invest in various IT tools to increase efficiency and effectiveness. In addition, FCA’s 

information security program continues to mature as it continuously identifies areas to strengthen and 

improve security. FCA has also updated several important policies and procedures to document new processes 

and overall responsibilities. Updates include the IT Security and Privacy Policy, the Information Security 

Continuous Monitoring Strategy, and multiple office directives on items such as privacy and security. OIT also 

continues to work on developing the privacy program. 

Over the last few years, the Office of Information Technology (OIT) has also supplemented its staff. FCA hired 

a privacy officer to address privacy requirements, including compliance with the Privacy Act. Several other 

positions within OIT have been filled, including a new Enterprise Data Management Team Lead, Information 

Security Specialists, and other IT Specialists. 

Relevant OIG Work 

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

Modernization Act of 2014. Looking ahead, the OIG will continue to focus on OIT operations and 

implementation of IT systems. 

CHALLENGE THREE: DATA QUALITY AND ANALYSIS 

A significant management challenge for FCA exists in the collection and use of data. 

Obtaining timely, consistent, and quality data is vital to FCA’s mission of ensuring that the System remains a 

dependable source of credit for agriculture and rural America. Such data allows FCA to better monitor the 

System’s condition and identify current and emerging risks, including the impacts of the COVID-19 pandemic.

In doing so, FCA enhances the development of a risk-based examination agenda and the promulgation of 

evidence-based regulations, policies, and guidance. 

Collecting useful data from the System is no simple task, as varying practices and technical capabilities among 

its 70-plus institutions can result in inconsistencies that inhibit robust data analysis. In imposing reporting 

requirements, the Agency must consider the resulting burdens to System institutions while ensuring that data 

is collected and maintained in a manner comporting with legal requirements and that sensitive information is 

safeguarded against unauthorized access or use. By identifying the gaps and critical data necessary to 

efficiently and effectively perform its mission, the Agency can better ensure the safety and soundness of the

System. 

Agency Progress 

The Agency’s Strategic Plan recognizes and underscores the importance of effective data analysis to oversight 

4 | P a g e 
of the FCS. In November 2019, in recognition of the importance of data analytics and with a view to the 

requirements of the Foundations for Evidence-Based Policymaking Act of 2018 (Evidence Act), the FCA Board 

established a new Office of Data Analytics and Economics (ODAE) to be headed by the Agency’s Chief Data 

Officer. The ODAE will, among other things, serve as a steward for Agency data and provide information to 

support objective, evidence-based decisionmaking Agency-wide. 

In further implementation of the Evidence Act, FCA created the Data Advisory Group as a forum for addressing 

data management standards, priorities, policies, and practices. Headed by the Chief Data Officer and 

composed of various Agency leaders, the Data Advisory Group is tasked with leading implementation of 

Agency-wide processes and standards, and with addressing common issues affecting FCA data programs and 

resources. The Agency has also formed a Data Users’ Group to focus on the technical implementation and 

management of core Agency datasets. 

In the interest of improving its data analytics, FCA has made investments in related IT and continues to develop 

and implement analytical and examination tools that will enhance its ability to perform systemic risk and data 

analysis. FCA also continues to work with the System to prioritize the most critical data fields for the overall 

improvement of data quality and consistency. 

Relevant OIG Work 

Recent OIG reviews relevant to this subject include a 2019 audit on the Agency’s implementation of stress 

testing guidance and use of data and analytical and examination tools; a 2016 audit on FCA’s oversight of 

young, beginning, and small farmer and rancher programs; and a 2016 audit on FCA’s risk project. Going 

forward, the OIG will continue monitoring the Agency’s progress in obtaining and analyzing data. 

CHALLENGE FOUR: HUMAN CAPITAL 

A significant management challenge for FCA is maintaining a safe, well-trained, sustainable workforce while

facing challenges in retirement eligibilities, succession planning and training, and diversity. 

Employees are FCA’s most valuable asset and the safety and well-being of FCA’s workforce is brought to the

forefront during the COVID-19 pandemic. The Agency’s success depends greatly on its ability to recruit, retain, 

and develop a capable workforce, and keep its workforce safe during challenging times such as the current

pandemic. Because FCA is a relatively small agency with nationwide responsibilities, changes in the workforce— 

such as the retirement of management and senior employees—must be accounted and planned for to avoid

undue disruption to Agency functions. 

The need for succession and human capital planning was highlighted in the past year by the retirement of

multiple senior Agency leaders. Planning ensures that institutional knowledge and experience are passed on,

and the Agency is less dependent on specific individuals. 

Workforce training and developing takes a significant investment of resources, but the use of several tools can 

ensure that FCA maintains a vital, experienced staff. For example, data analytics can help the Agency identify

training gaps. Job sharing, rotational details, and micro-assignment opportunities can be used to promote

career development. Mentoring programs can prepare employees for management positions. 

Diversity is another important aspect of human capital. A diverse staff brings different perspectives to problemsolving, enriching the Agency’s ability to regulate and supervise the System. The Agency must continually assess 

5 | P a g e 
 

 

 

and deploy strategies to reach its goals for diversity and inclusion. It can do this by using various tools that 

identify and reduce potential barriers to diversity and inclusion, enhance outreach, evaluate the Agency’s 

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

Agency Progress 

FCA mandated telework for most of its workforce on March 16, 2020, and quickly pivoted to accomplishing its 

mission through the use of technology and telework protocols. FCA’s Emergency Response Team, composed of 

the FCA Board and senior managers, meets regularly and continually monitors COVID-19 case trends, local 

school status, and government status at the Federal, state and local levels for its McLean, Virginia headquarters 

and four field offices in various parts of the United States. The Agency implemented several programs to 

promote employee safety and wellness during the pandemic, including a weather and safety leave program and 

an annual leave payout and restoration program. The Office of Agency Services created pulse surveys to gauge 

employee feedback on a variety of issues, including the Agency’s response to the COVID-19 pandemic. 

FCA developed a strategic framework to safely return its employees to the workplace, including continuing 

maximum telework flexibility for employees who are members, or are caring for dependents who are members, 

of a high-risk population, or who have childcare or transportation needs; conducting contactless temperature 

checks at all office locations; ensuring that employees wear a face covering and practice social distancing while 

in the office; and continuing building cleaning services and ensuring there are sufficient supplies (including hand 

soap and sanitizer) to support reopening FCA offices. 

The Agency’s Strategic Plan evidences a commitment to maintaining a diverse and capable workforce. Strategic 

objectives address maintaining a skilled, motivated workforce; ensuring adequate succession planning and

knowledge transfer; and encouraging an engaged, diverse, and ethical workforce. FCA measures its success

towards human capital goals based on employee outreach efforts and the results of the annual employee 

satisfaction surveys. The Agency also provides benefits and employee programs to attract and maintain a 

talented diverse workforce, including a Student Loan Repayment Program. FCA’s learning office also provides 

numerous online and in-person training resources to support technical skills, work/life balance, and managerial 

competencies. 

Relevant OIG Work 

The OIG has performed several reviews that have touched upon the subject of human capital in recent years, 

including an inspection of FCA’s implementation efforts for its 2017-2018 Fairness and Inclusiveness Assessment 

and an audit concerning the effectiveness of FCA’s process of obtaining background investigations for 

contractor personnel. Other reviews include a benchmarking evaluation comparing the structure and 

organization of FCA’s Office of Examination with comparable offices of other financial regulatory agencies, an 

inspection of FCA’s travel compensation program, and an audit of the Agency’s human capital planning. OIG 

plans to conduct an evaluation of the effectiveness of Agency programs in response to the COVID-19 pandemic. 

CHALLENGE FIVE: SECONDARY MARKET OVERSIGHT 

A significant management challenge for FCA is to ensure that it effectively and impartially regulates the Federal 

Agricultural Mortgage Corporation (Farmer Mac) through the Office of Secondary Market Oversight (OSMO). 

Farmer Mac is a stockholder-owned, federally-chartered corporation. Farmer Mac was established by the 

federal government in 1988 to provide a secondary market for credit by increasing access to, and reducing 

6 | P a g e 
the cost of, capital to American agriculture and rural communities. Although Farmer Mac is part of the FCS, its 

secondary market mission is unique among FCS institutions. Farmer Mac’s customer base includes commercial 

and community banks, insurance companies, non-bank lenders, agricultural funds, rural utilities, and other FCS 

institutions. 

OSMO examines, regulates, and supervises the activities of Farmer Mac to ensure its safety and soundness 

and the accomplishment of its public policy purpose as authorized by Congress. OSMO also ensures that 

Farmer Mac complies with applicable laws and regulations, and it manages FCA’s enforcement activities with 

respect to Farmer Mac. Under the Farm Credit Act of 1971, as amended (Act), the OSMO Director reports 

directly to the FCA Board rather than the Chief Operating Officer. The Act also provides that the supervision 

of the powers, functions, and duties of Farmer Mac is performed, to the extent practicable, by personnel who 

are not responsible for the supervision of the banks and associations of the FCS. To fulfill its duties, OSMO 

uses examiners who also examine FCS banks and associations. Therefore, OSMO is challenged to ensure that 

it fulfills the oversight role free of conflicts of interest or undue influence from those also responsible for the 

supervision and regulation of the FCS banks and associations. 

OSMO conducts the oversight and examination activities with a relatively small staff (4 employees with 

additional rotational staff), while balancing resources sourced from FCA’s OE, which is responsible for 

supervision of FCS banks and associations. OSMO staff must have the necessary knowledge, skills, and training

to understand the unique and complex mission, secondary market activities, and business model and

capitalization of Farmer Mac. Further, because Farmer Mac is a publicly-traded company, OSMO staff must 

understand the market forces and reputational risks that can potentially affect Farmer Mac’s safety and 

soundness. Other changing areas, such as the LIBOR phase out, will continue to increase the complexity of 

Farmer Mac. Advancements in data gathering, technology, and analytics that aid OSMO with risk 

measurement, management, and assessment, coupled with appropriate specialized training, can enhance 

FCA’s ability to oversee Farmer Mac as it grows in scale and complexity. This will be particularly important in 

an environment that may present more challenges to farmers, ranchers, rural communities and their lenders. 

As the complexity of Farmer Mac increases, OSMO will need to ensure it maintains appropriate readiness to

evaluate safety and soundness. To achieve its mission, OSMO may require increased resources and technical 

skills, which will present additional challenges for the Agency. 

Farmer Mac has experienced many changes in its organizational structure, which includes new members of its 

executive management team that result in disruptions in Farmer Mac operations. OSMO’s oversight role is 

made more difficult in ensuring the continued safety and soundness of Farmer Mac in the face of its large 

board representing diverse interests and the changes to its executive management. 

In addition, the COVID-19 global pandemic provides an additional challenge to OSMO and Farmer Mac 

leadership given the needs of employees, safety concerns, and forward-looking business models. The 

pandemic presents an ever-changing environment that requires flexibility and agility in business. For OSMO, 

the COVID-19 pandemic increases the need for highly qualified examiners and analysts to maintain vigilant 

oversight during these unprecedented and volatile times. 

Agency Progress 

OSMO provides guidance and implements regulatory and other changes related to Farmer Mac. These 

changes are made in addition to OSMO’s supervision and safety and soundness reviews of Farmer Mac. All 

FCA employees, including OSMO staff, were able to quickly transition to full-time telework status in March 

2020 in response to the COVID-19 pandemic. 

7 | P a g e 
 

 

In anticipation of resource needs during the 2021 and 2022 examination cycle, OSMO added rotational staff. 

OSMO reports that its consulting arrangements can also provide highly qualified resources needed during the 

pandemic. 

The FCA Board adopted Policy Statement 35 in January 2020, which provides the general strategy and direction 

of OSMO for the examination, regulation, and supervision of Farmer Mac. Policy Statement 35 also established 

OSMO reporting requirements to the FCA Board, including an annual oversight and examination plan and any 

proposed or amended regulations. OSMO also issued an IM outlining the 2020 examination focus areas as: 

capital, asset quality, management, earnings, liquidity, and sensitivity to interest rate risk. 

As a result of the COVID-19 pandemic and national emergency, OSMO created and issued guidance 

documents to Farmer Mac. On March 24, 2020, OSMO issued a memorandum that encouraged Farmer Mac 

to prudently work with its lending and servicing partners to provide flexibility and assistance to borrowers 

experiencing financial challenges due to COVID-19. OSMO also developed an IM that specifically addressed 

Farmer Mac’s position as a secondary market provider working with servicing partners to administer its Farm 

and Ranch portfolio. 

In addition, OSMO enhanced its oversight of Farmer Mac through additional reporting requirements to ensure 

potential risks were monitored and identified. Since the COVID-19 outbreak was declared a national 

emergency, OSMO established daily reporting requirements for funding, liquidity, and investments and 

developed the weekly funding and market reports. Weekly reporting requirements of loan servicing actions 

related to COVID-19 were also established. 

Relevant OIG Work 

In 2018, the OIG completed an audit to assess staffing arrangements and the reporting process for OSMO. 

Our review included recommendations to improve OSMO’s processes and increase transparency. The OIG 

plans to review other aspects of OSMO in future years. 

8 | P a g e