OFFICE OF 

INSPECTOR GENERAL 

SURVEY REPORT 

Survey of 

Farm Credit System 

Institutions Regarding the 

Agency’s Examination Function 

First Quarter Fiscal Year 2018 

(October 1, 2017 - 

December 31, 2017) 

Issued April 10, 2018 

FARM CREDIT ADMINISTRATION 
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 nine FCS institutions to survey 

for the period October 1 – December 31, 2017. The Office of 

Inspector General (OIG) sent surveys to those institutions in 

February 2018. Eight of the nine institutions completed the 

survey (an 89% response rate). The OIG did not receive any 

responses from prior quarters for this report. 

For the first quarter of FY 2018, average numerical ratings 

ranged from 1.5 to 2.6 (with “1” reflecting a positive rating and 

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

rating for all survey statements was 1.9. For comparison, we 

provide data from the prior three quarters below. 

FY Quarter 

Average 

Numerical 

Rating Range 

Total Average 

Numerical Rating 

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 

2nd Quarter FY 

2017 

1.5 – 2.0 1.7 

Consistent with prior quarters’ responses, we received more 

positive than negative comments about the examiners and the 

examination process. 

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 
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 ____________________________________________________________________ 5

Statement #5 _________________________________________________________________________ 5

Statement #6 _________________________________________________________________________ 5

Statement #7 _________________________________________________________________________ 6

Statement #8 _________________________________________________________________________ 7

GENERAL QUESTIONS __________________________________________________________________ 7

Statement #9 _________________________________________________________________________ 7

Statement #10 ________________________________________________________________________ 7

Statement #11 ________________________________________________________________________ 8

Request for OIG Contact ______________________________________________________________ 8
1 

ACRONYMS 

FCA Farm Credit Administration 

FCS Farm Credit System 

FY Fiscal Year 

OE Office of Examination 

OIG Office of Inspector General 

BACKGROUND AND METHODOLOGY 

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 
2 

*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. 

SURVEY RESULTS 

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 

First Second Third Fourth FY 

FY Quarter Quarter Quarter Quarter Average 

FY 2018 1.8 1.8 

FY 2017 1.8 1.6 1.8 2.1 1.8 

FY 2016 1.6 1.8 1.9 1.7 1.8 

 
3 

Comments: 

 The audit took place 90 days after our merger date. As such much of the work 

predated the merger with differences in past practices between the three 

predecessors. The exam team was thoughtful about looking back to the 

predecessor policies and approaches rather than applying one set of new policies 

to all past activities. 

 The scope of the examination was appropriate. All areas were covered during the 

exam and were aligned with the risk and size of the institution. 

 The board continues to consider it very important for FCA to recognize the size, 

complexity, and risk profile of the institution when scoping and conducting 

examinations. The avoidance of unnecessary and costly administrative activities is 

a critical issue especially for smaller institutions.

Statement #2 

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

examination findings and conclusions. 

Average Numerical Ratings by FY Quarter 

First Second Third Fourth FY 

FY Quarter Quarter Quarter Quarter Average 

FY 2018 1.8 1.8 

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: 

 Appropriate recognition of the practical implementation of regulations. 

 The examiners cited specific regulations to support their findings. They were 

willing to discuss issues with management before reaching a conclusion. 

Statement #3 

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

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

Average Numerical Ratings by FY Quarter 

First Second Third Fourth FY 

FY Quarter Quarter Quarter Quarter Average 

FY 2018 2.6 2.6 

FY 2017 1.8 1.8 2.2 2.4 2.1 

FY 2016 2.1 2.2 2.1 2.0 2.1 
4 

Of note, two institutions rated this survey statement a “5” (Completely Disagree). 

Comments: 

 The institution was required to provide a complete list of stockholders (including 

stockholders whose loans are classified substandard and nonaccrual) to the 

nominating committee for consideration of board candidates. If members whose 

loans are classed substandard and nonaccrual are recommended by the 

nominating committee, they are immediately disqualified per institution bylaws. 

This requirement exposes the institution to unnecessary risk and possible liability.

 Our EIC and Senior Examiner had a preliminary close out call with Management 

and Board Chair/Audit Chair. During the call, FCA asked our two board members 

to verbally commit to correcting recommended and required actions during the 

phone call. This attempt to circumvent management and the rest of the board 

was not received well and put a "black eye" on an otherwise good review. FCA 

also needs to give a formal expectation of a required action vs. a recommended 

action.

 Recommendations and required actions adequately addressed risk and were 

implemented by the institution. 

Statement #4 

The examiners were professional and efficiently conducted examination activities. 

Average Numerical Ratings by FY Quarter 

First Second Third Fourth FY 

FY Quarter Quarter Quarter Quarter Average 

FY 2018 1.5 1.5 

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: 

 Good coordination of the requested information and the lead time necessary to 

gather the documentation. 

 Some challenges initially, but the EIC was out sick. Once the EIC returned the 

challenges were rectified. Some of the younger examiners lack perspective and 

wisdom.

 Exam as a whole took too long.

 The examiners were professional in their interaction with the board, management 

and staff. They made every effort to conduct their examination with minimal 

disruption to employees. 
5 

COMMUNICATIONS 

Statement #5 

Communications between the Office of Examination staff and the institution were 

clear, accurate, and timely. 

Average Numerical Ratings by FY Quarter 

First Second Third Fourth FY 

FY Quarter Quarter Quarter Quarter Average 

FY 2018 1.8 1.8 

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: 

 We have no complaints with communication between assigned examination staff 

and the institution. We did however provide written communication directly to 

OE and ORP related to our concerns about the nominating committee issue 

mentioned in [survey statement #3]. To date, over three months later, we have 

not received a reply. In fact, we have not even received an acknowledgment of 

our correspondence or concern.

 The exam was in person, but the examiners didn’t ask specific questions until they 

were gone. We wonder why they came to the office in the first place?

 The examination team communicated effectively with all staff. They were clear 

about objectives prior to the exam and the exit conference covered all findings 

prior to issuing the report. 

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 

First Second Third Fourth FY 

FY Quarter Quarter Quarter Quarter Average 

FY 2018 1.8 1.8 

FY 2017 1.8 1.6 1.7 2.1 1.8 

FY 2016 1.7 1.7 1.6 1.6 1.7 

 
6 

Comments: 

 The report back was at an appropriate level providing a summary view and not 

getting into detail. 

 We have confusion between recommended and required actions.

 All relevant items were communicated to the board. All suggestions and 

recommendations from the team were discussed. 

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 

First Second Third Fourth FY 

FY Quarter Quarter Quarter Quarter Average 

FY 2018 1.9 1.9 

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: 

 The institution was required to provide a complete list of stockholders (including 

stockholders whose loans are classified substandard and nonaccrual) to the 

nominating committee for consideration of board candidates. If members whose 

loans are classed substandard and nonaccrual are recommended by the 

nominating committee, they are immediately disqualified per institution bylaws. 

This requirement exposes the institution to unnecessary risk and possible liability. 

[same response to survey statement #3] 

 The examiners allowed us to extend our final response 30 days to allow plenty of 

time for management and the board to deliberate. 

 The examiners discussed all issues before reaching a conclusion. They were open 

to explanation and discussion. 
7 

Statement #8 

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

Average Numerical Ratings by FY Quarter 

First Second Third Fourth FY 

FY Quarter Quarter Quarter Quarter Average 

FY 2018 1.9 1.9 

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: 

 By their nature these are very general but it is helpful to know of the areas of 

focus. 

 Our EIC gave examples of similar actions in other institutions and we also can 

utilize the FCA exam manual. 

 Every effort was made to understand the institution's processes and incorporate 

these within system guidance. 

GENERAL QUESTIONS 

Statement #9 

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

 Validation of risk identifications was timely given our stress testing submission to 

FCA to fulfill a condition of merger. 

 Allows us another opinion of our risk management. 

 Suggestions regarding system access and controls were helpful in addressing 

potential risk. 

 Our EIC was professional and proactive with communications. 

 The progress and exit meeting discussions. 

Statement #10 

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

 Length of time to complete the exam process.

 Off site loan reviews.

 No areas showed weakness. 
8 

Statement #11 

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

examination process not provided in the preceding responses. 

 Very professional. 

 FCA needs to realize that institutions have a Senior Management team that is 

delegated authority from the Board to operate in a safe and sound manner. Too 

many times FCA examiners tried to circumvent management by going to either 

the Audit Committee Chair or Board Chair to get a response or a commitment to 

address an issue. Our Board does not want to micromanage our Senior 

Management team, and this year it appears as FCA tried to steer us that way.

 The report was reviewed in detail with the board. Discussions were held in 

general session as well as with the board in executive session. The examiners 

were open to discussion and were receptive to the views of the board. 

 The exam presentation to the board was clear and effective, and the exam 

process went smoothly. 

 The process was transparent and open. 

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. 

   
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