OFFICE OF SURVEY REPORT

INSPECTOR GENERAL 

Second Quarter Fiscal Year 2018 

(January 1, 2018 - March 31,

2018) 

Issued June 21, 2018 

Survey of

Farm Credit System Institutions

Regarding the Agency’s 

Examination Function 

FARM CREDIT ADMINISTRATION
 

 

The FCS institutions asked to 

respond to the survey are those 

institutions that: 

1. Received a Report of 

Examination during the FY 

quarter; or 

2. Had significant examination 

activity and interface with 

OE during the same period. 

The survey asks respondents 

to rate eight survey 

statements as: 

Completely Agree 1 

Agree 2 

Neither Agree 

nor Disagree 3 

Disagree 4 

Completely Disagree 5 

Does Not Apply 6 

Each fiscal year (FY) quarter the Office of Examination (OE) 

identifies several Farm Credit System (FCS) institutions that were 

in a position to provide meaningful survey responses for that 

period. The OE identified 12 FCS institutions to survey for the 

period January 1 – March 31, 2018. The Office of Inspector 

General (OIG) sent surveys to those institutions in May 2018. 

Ten of the twelve institutions completed the survey (an 83% 

response rate). The OIG did not receive any responses from 

prior quarters for this report. 

For the second quarter of FY 2018, average numerical ratings 

ranged from 1.9 to 2.2 (with “1” reflecting a positive rating and 

“5” reflecting a negative rating). The total average numerical 

rating for all survey statements was 2.0. For comparison, we 

provide data from the prior three quarters below. 

FY Quarter 

Average 

Numerical 

Rating Range 

Total Average 

Numerical Rating 

2st Quarter FY 

2018 

1.9 – 2.2 2.0 

1st Quarter FY 

2018 

1.5 – 2.6 1.9 

4th Quarter FY 

2017 

1.6 – 2.4 2.1 

3rd Quarter FY 

2017 

1.4 – 2.2 1.8 

Consistent with prior quarters’ responses, we received more 

positive than negative comments about the examiners and the 

examination process. 
TABLE OF CONTENTS 

ACRONYMS __________________________________________________________1 

BACKGROUND AND METHODOLOGY ____________________________________1 

SURVEY RESULTS ____________________________________________________2 

EXAMINATION PROCESS _______________________________________________________________ 2 

Statement #1 _________________________________________________________________________ 2 

Statement #2 _________________________________________________________________________ 3 

Statement #3 _________________________________________________________________________ 3 

Statement #4 _________________________________________________________________________ 4 

COMMUNICATIONS ____________________________________________________________________ 4 

Statement #5 _________________________________________________________________________ 4 

Statement #6 _________________________________________________________________________ 5 

Statement #7 _________________________________________________________________________ 6 

Statement #8 _________________________________________________________________________ 6 

GENERAL QUESTIONS __________________________________________________________________ 7 

Statement #9 _________________________________________________________________________ 7 

Statement #10 ________________________________________________________________________ 7 

Statement #11 ________________________________________________________________________ 7 

Request for OIG Contact______________________________________________________________ 8 
 

 

 

 

 

ACRONYMS 

FCA Farm Credit Administration 

FCS Farm Credit System 

FY Fiscal Year 

OE Office of Examination 

OIG Office of Inspector General 

BACKGROUND AND METHODOLOGY 

1 

Each fiscal year (FY) quarter the Office of Examination (OE) identifies several Farm Credit 

System (FCS) institutions that were in a position to provide meaningful survey responses 

for that period. The criteria for including an FCS institution in the survey are: 

1. The institution received a Report of Examination during the FY quarter; or 

2. There was significant examination activity and interface with an institution during 

the same period. 

The Office of Inspector General (OIG) provides a survey report for FY quarters ending 

December 31, March 31, June 30, and September 30. The fourth quarter report includes 

FY summary data. 

When outstanding responses from prior quarters are received, they are included in the 

next quarterly report. 

The survey asks respondents to rate eight survey statements from “1” (Completely 

Agree) to “5” (Completely Disagree), or “6” if the statement does not apply. The rating 

choices are: 

Completely Agree 1 

Agree 2 

Neither Agree nor Disagree 3 

Disagree 4 

Completely Disagree 5 

Does Not Apply* 6 
 

*We do not include ratings of “6” in rating averages because a “6” will skew the 

numerical average negatively even though the statement is not applicable to the 

institution. 

We provide the current FY quarter’s average numerical rating for survey statements 1-8 

and, for comparison, the prior two FYs’ data. 

Survey statements 1-4 pertain to the examination process and statements 5-8 pertain to 

communications during the examination. Statements 9-11 are general questions about 

the overall process. Respondents may submit comments for each of the 11 survey 

statements. 

Narrative responses are provided verbatim, except any identifying information has been 

removed and grammatical, punctuation, and spelling errors are usually corrected. Any 

bracketed text is for the purpose of removing information that identifies an institution 

or an examiner or providing clarification to a response. Perceived negative comments of 

any degree are color coded in red. 

At the end of the survey we ask whether the respondent would like the OIG to contact 

the institution confidentially to discuss the submitted responses. This quarter, no 

respondents requested the OIG to contact them. 

SURVEY RESULTS 

2 

EXAMINATION PROCESS 

Statement #1 

The scope of examination activities was focused on areas of risk to the institution 

and appropriate for the size, complexity, and risk profile of the institution. 

Average Numerical Ratings by FY Quarter 

FY 

First 

Quarter 

Second 

Quarter 

Third 

Quarter 

Fourth 

Quarter 

FY 

Average 

FY 2018 1.8 1.9 1.9 

FY 2017 1.8 1.6 1.8 2.1 1.8 

FY 2016 1.6 1.8 1.9 1.7 1.8 
 

 

 

 

 

Comments: 

• On task and in line with Agency guidance and risk focus areas. 

• Scope focused on areas applicable to the institution. 

• Part of the exam seemed focused on "Hot Buttons" that propose very little risk to 

the institution. 

• It is important that the examination process continue to recognize the differences 

across the spectrum of institutions. 

• Note that there is a change in "best practices" being eliminated and all criticized 

and suggested items were lumped together. This review highlighted more 

noncritical and cursory items. 

Statement #2 

Examiners appropriately applied laws, regulations, and other regulatory criteria to 

examination findings and conclusions. 

Average Numerical Ratings by FY Quarter 

FY 

FY 2018 

First 

Quarter 

1.8 

Second 

Quarter 

2.0 

Third 

Quarter 

Fourth 

Quarter 

FY 

Average 

1.9 

FY 2017 1.8 1.7 1.8 2.1 1.9 

FY 2016 1.9 1.8 2.1 1.8 1.9 

Comments: 

• Justification for 2 exam areas (LGD determination & cost of restructure vs. cost of 

foreclosure) was lacking and not well founded. 

• FCA examiners are thoughtful in considering how the regulations apply to our 

institution. 

• Generally agree, but significant discussion was required before overly strong 

language was replaced with language consistent with the examination guidance. 

• Some communication came after auditor's opinion was formed and documented 

to supervisors. 

Statement #3 

The recommendations, required actions, and any supervisory agreement with FCA 

assisted the board and management in addressing the risks of the institution. 

3 
 

 

Average Numerical Ratings by FY Quarter 

FY 

First 

Quarter 

Second 

Quarter 

Third 

Quarter 

Fourth 

Quarter 

FY 

Average 

FY 2018 2.6 2.1 2.4 

FY 2017 1.8 1.8 2.2 2.4 2.1 

FY 2016 2.1 2.2 2.1 2.0 2.1 

Comments: 

• We had no required actions this year, however, recommendations were helpful. 

• Not always clear on how to address recommendations and requirements and 

then come back later and made comments it was addressed was adequate. 

• Some of the risk areas as identified by FCA are not applicable to our institution 

due to our size and portfolio composition. A more balanced approach to risk 

would be appropriate. 

• Some duplication in policy procedures occurred from recommended actions. 

Statement #4 

The examiners were professional and efficiently conducted examination activities. 

Average Numerical Ratings by FY Quarter 

FY 

First 

Quarter 

Second 

Quarter 

Third 

Quarter 

Fourth 

Quarter 

FY 

Average 

FY 2018 1.5 2.1 1.8 

FY 2017 1.8 1.5 1.4 1.6 1.6 

FY 2016 1.5 1.5 1.8 1.3 1.5 

Comments: 

• Top notch exam team! 

• While onsite staff were professional, one of the presenters at the Board meeting 

was confrontational on a variety of topics not included in the written examination 

report. 

• The examiners were professional in their interaction with the Board and 

management. We had a number of examiner trainees that impacted efficiency. 

• Examiners expressed that previous team had been "light" in reviewing. 

COMMUNICATIONS 

Statement #5 

Communications between the Office of Examination staff and the institution were 

clear, accurate, and timely. 

4 
 

 

 

 

Average Numerical Ratings by FY Quarter 

FY 

First 

Quarter 

Second 

Quarter 

Third 

Quarter 

Fourth 

Quarter 

FY 

Average 

FY 2018 1.8 2.1 2.0 

FY 2017 1.6 1.5 1.7 2.0 1.7 

FY 2016 1.8 1.7 1.8 1.6 1.7 

Comments: 

• Well done! 

• Examiners were helpful in answering our follow up questions on requests if not 

clear. 

• Shortly after the onsite visit both the Examiner In Charge and Senior Portfolio 

Manager left FCA. This turnover resulted in periods of several weeks without 

communication and in the examination report being delayed. The report was 

completed by staff who had not been onsite during the examination and who did 

not have prior experience with the institution. The new individuals appeared to 

have somewhat different views than the onsite examination staff. 

• Communications were appropriate and timely. 

• Several pieces could have been cleared during field work, rather than at report 

draft stage. 

Statement #6 

Examination communications included the appropriate amount and type of 

information to help the board and audit committee fulfill their oversight 

responsibilities. 

Average Numerical Ratings by FY Quarter 

FY 

First 

Quarter 

Second 

Quarter 

Third 

Quarter 

Fourth 

Quarter 

FY 

Average 

FY 2018 1.8 1.9 1.9 

FY 2017 1.8 1.6 1.7 2.1 1.8 

FY 2016 1.7 1.7 1.6 1.6 1.7 

Comments: 

• The exam team was focused on creating understanding. Well done. 

• The written report was helpful. The confrontational nature of one of the presenters 

on a variety of topics not included in the written report was not helpful. 

• All relevant information was communicated to the Board. 

• To be determined - based on future exams.

5 
 

 

Statement #7 

Examiners fairly considered the views and responses of the board and 

management in formulating conclusions and recommendations. 

Average Numerical Ratings by FY Quarter 

FY 

First 

Quarter 

Second 

Quarter 

Third 

Quarter 

Fourth 

Quarter 

FY 

Average 

FY 2018 1.9 2.2 2.1 

FY 2017 1.6 1.8 2.1 2.1 1.9 

FY 2016 1.9 1.8 1.9 1.8 1.9 

Comments: 

• Always very open throughout the exam process. Pre-exam meeting with Board 

Chair and Audit Committee Chair was much appreciated. 

• Examiners were open to our input. 

• The written report reflected consideration. 

• Supervisor handled this very well. 

• The FCA exam scope and areas of risk are applied without regard for the Board's 

level of comfort or management's sound knowledge of our borrowers and our 

institution. 

• Generally, fairly considered. Once in the draft, not much change was made, even 

when verbal agreement was reached that contradicted the report. 

Statement #8 

FCS-wide guidance from the Office of Examination was proactive and helpful. 

Average Numerical Ratings by FY Quarter 

FY 

First 

Quarter 

Second 

Quarter 

Third 

Quarter 

Fourth 

Quarter 

FY 

Average 

FY 2018 1.9 2.0 2.0 

FY 2017 2.0 2.0 1.9 2.3 2.1 

FY 2016 1.7 2.2 2.2 1.8 2.0 

Comments: 

• We appreciate the timeliness and clarity of the information distributed. 

• Portions were helpful. However, lots of verbiage to sift through to find beneficial 

tidbits. 

6 
 

 

 

GENERAL QUESTIONS 

Statement #9 

What aspect of the examination process did you find most beneficial? 

• Pre-exam meetings and the Report of Examination closeout were very 

helpful. Great System-wide perspective was provided at the closeout. Good 

reinforcement and validation. Also, helpful to hear that the Agency is supportive 

of sticking with customers that have long-term success opportunities during this 

period of low commodity prices. . . encouraged the institution to be comfortable 

changing FIRS level if necessary to serve the market/LSA. 

• The dialogue and exchange with examiners is most beneficial. 

• The process enhances the institution's understanding of the various regulations. 

• Final Closing meeting. 

• Executive session with the board was very beneficial. 

• Interaction with examiners in conference call and board setting. 

• Discussions with the EIC were more productive than past experience. 

• The parts directly applicable to regulations and statutes. 

Statement #10 

What aspect of the examination process did you find least beneficial? 

• Timing of the examination is the most difficult part of the process. 

• The condescending nature of one of the FCA staff members toward the Board 

and management. 

• Testing of the whistle blower program. 

• None. 

• We continue to be criticized for our top 10 attribution hold percentage and the 

level of loans we hold in our portfolio despite reducing our risk exposure in this 

area. 

• Extensive verbiage and closed mind when younger auditors reported up to more 

seasoned managers. 

• The process took a lot of time to complete. 

Statement #11 

Please provide any comments from the Board as a whole regarding the 

examination process not provided in the preceding responses. 

• Board and management feel FCA costs are high in relation to overall size of our 

organization. 

7 
 

• Would be nice to have more differentiation in Exam findings between 

institutions. We always strive to rise to a higher level than "satisfactory" or 

"adequate". 

• The Board appreciated the flexibility from FCA in allowing the exit exam to be 

held via conference call versus in person. This created efficiency and cost savings 

for both FCA and Farm Credit Foundations. 

• Board critique delivered in an unprofessional manner which overshadowed 

legitimate concerns of the audit. 

• Overall it was a pretty good experience. 

• We appreciated having a new examination team out to our institution. The new 

EIC and Senior Portfolio Manager seemed to listen to the Board's responses. 

• Lack of tenure for many of the auditors/reviewers, including "examiner in charge." 

• No comment. 

Request for OIG Contact 

Would you like the Office of Inspector General to contact you confidentially to 

discuss your survey responses and/or the examination? 

This quarter, no institution indicated they would like a call from the OIG. 

8 
 

FARM CREDIT ADMINISTRATION 

OFFICE OF INSPECTOR GENERAL 

REPORT 

Fraud | Waste | Abuse | Mismanagement 

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

Fax: (703) 883-4059 

E-mail: fca-ig-hotline@rcn.com 

Mail: Farm Credit Administration 

Office of Inspector General 

1501 Farm Credit Drive 

McLean, VA 22102-5090