U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Centre 
 

1155 21st Street, NW, Washington, DC 20581 
 

Telephone: (202) 418-5110 
 

Facsimile: (202) 418-5522 
 

Office of the 
 

Inspector General 
 

MEMORANDUM 

TO: 

FROM: 

Gary Gensler, Chairman 

A. Roy Lavik, Inspector GeneraO K£ 

DATE: January 28, 2013 

SUBJECT: Transmittal of Audit Report 

This memorandum tra11smits the Office of the Inspector General's final report, Audit on 

the Impact ofthe Freedom ofInformation Act Exemption Related to Protecting the Identity of 

Whistleblowers in Fiscal Years 2012 and 2011 , OIG-AU-13-01. This audit was conducted to 

address a requirement in the Dodd Frank Wall Street Reform and Consumer Protection Act for 

the l11spector General to conduct a study: 

(aa) on whether the exemption under section 552(b)(3) oftitle 5, United States Code 

(known as the Freedom oflnformation Act) established in paragraph (2)(A) aids 

whistleblowers in disclosing information to the Commission; 

(bb)on what impact the exemption has had on the public's ability to access information 

about the Commission's regulation of commodity futures and option markets; and 

(cc) to make any recommendations on whether the Commission should continue to use 

the exemption. 

On behalf ofthe Office of the Inspector General, Toski & Company, conducted this audit and 

issued the attached report. The OIG concurs with the findings in this report. In finalizing this 

report, we solicited management's comments to our draft report and have included those 

comments in their entirety as Appendix A. 

The audit presented two recommendations for improving the operations ofthis program area. 

Specifically, we recommend that: 

1. 	 written policies and procedures be established within the FOIA office and CFTC 

Whistleblower office for interacting with the FOIA Office if a FOIA request involves a 

whistleblower. 

2. 	 the Consumer Protection webpage within the CFTC website and CFTC Form TCR be 

revised to highlight 7 U.S.C. Section 26(h) regarding the protection for whistleblowers. 
In the next 30 days, please provide me with your management decisions describing the specific 

actions that you will take, including timeframes, to implement each recommendation. 

As a result of OIG interviews with current whistleblowers the audit concluded that the 

protections afforded to whistleblowers by 7 U.S.C. Section 26(h) (2) have aided whistleblowers 

in disclosing information to the Commission. Furthermore, it is our recommendation that the 

Commission continue to use 7 U.S.C. Section 26(h) (2) in conjunction with Exemption 3 as a 

protection to whistleblowers in the future. 

Thank you and your staff for the assistance extended to my team during this audit. 

2 
 
U.S. COMMODITY FUTURES TRADING COMMISSION 

Performance Audit Report on the Impact of the Freedom of Information Act 


Exemption Related to Protecting the Identity ofWhistle blowers in 


Fiscal Years 2012 and 2011 

300 Essjar Road, S1c. I I 5 

Williams,.illc. New York I-122 I 

T: 7 I 6.6 3-1.0700 

F: 7 I 6.63-1.076-1 

W: ToskiC PA.com 

January 16, 201 3 

U.S. Commodity Futures Trading Commission 

Offi ce of the Inspector General 

Washington, D.C. 

We are pleased to present our fi ndings in regard to the performance audit procedures that we 

performed for the fiscal years 20 12 and 20 I I. The report includes an introduction, a description 

of the audit objective, audit proced ures, findings/comments/recommendations and a conclusion. 

Introduction: 

The U.S. Commodity Futures Trading Commission (CFTC) was created by the U.S. Congress in 

1974 as an independent agency with a mandate to regulate commodity futures and option 

markets in the United States. CFTC consists of five commissioners appointed by the President, 

with the advice and consent of the U.S. Senate, to serve staggered five year terms. One of the 

commissioners is designated by the President to serve as the Chairman of CFTC. The DoddFrank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was signed into law 

on July 21, 20 I 01

• The Dodd-Frank Act established new mandates for the Commodity Futures 

Trading Commission. Among the mandates was the establishment of a Whistleblower Program 

Office and Consumer Outreach Program Office 

Audit Objective: 

Toski & Co., P.C. was engaged by the CFTC on behalf of the Inspector General to conduct a 

performance audit to comply with Section 748 of the Dodd-Frank Act. Section 748 added to the 

Commodity Exchange Act new section 23, 7 U.S.C. 26, establishing commodity whistleblower 

incentives and protection, and new subsection 23(h)(2)(C)(iii)(l). It requires the Inspector 

General of the Commission to conduct a "Study on Impact of FOIA Exemption on Commodity 

Futures Trading Commission". The relevant sections ofthe Act are as follows: 

(I) 	 Study- The Inspector General of the Commission shall conduct a study ­

(aa) on whether the Exemption under 552(b )(3) of title 5, United States Code (known as 

the Freedom of Information Act) established in paragraph (2)(A) of the Dodd-Frank Act 

aids whistleblowers in disclosing information to the Commission; 

(bb) on what impact the exemption has had on the public's ability to access information 

about the Commission's regulation of commodity futures and options markets; and 

(cc) to make any recommendations on whether the Commission should continue to use 

the exemption. 

1 Pub. L. 111 -203. 124 Stat. 1376 

2 

Audit Objective (Continued): 

The Freedom of Information Act allows for the application of nine (9) exemptions that may be 

cited by an agency for withholding information on a FOIA request. The specific subject matter 

of the engagement was Exemption 3. This Exemption incorporates the disclosure prohibitions 

that are contained in various other Federal statutes. The engagement included a review of the 

law indicated in 7 U.S.C. Section 26(h)(2) which provides confidentiality to whistleblowers and 

a determination as to whether the confidentiality provision came into play on any of the FOIA 

requests that fell under Exemption 3. 

The objective of the performance audit was to assess whether the Exemption under Section 

552(b)(3) of title 5, USC (known as the Freedom of Information Act) established in Section 748 

of the Dodd-Frank Act aids whistleblowers in disclosing information to the Commission. Our 

intention was to examine the Commission's disposition of requests made under FOIA and the 

CFTC's utilization of Exemption 3. Our audit set out to include the examination of records and 

reports retained by the Commission supporting the FOIA requests received for the fiscal years 

ending September 30, 2012 and 2011. We also intended to interview whistleblowers to obtain 

direct feedback in regard to whether 7 U.S.C. Section 26(h)(2), which provides confidentiality to 

whistleblowers, aided them in disclosing information to CFTC. 

The objective also included a review of the application of the requirements for Exemption 3 for 

FOIA requests. This included a review of the guidance indicated in 7 U.S.C. Section 26(h)(2), 

which provides confidentiality to whistleblowers, and its relevance to the FOIA requests for 

which Exemption 3 was utilized. We also sought to verify the aggregate totals for all Exemption 

categories as reported within the CFTC FOIA Annual Reports for FY12 and FY11, which 

included reconciling the Exemption totals to detailed source reports. Each Fiscal Year the CFTC 

is required to prepare a report of FOIA related activities which serves as a basic document for the 

public on CFTC FOIA activities including total of Exemptions applied to FOIA requests 

received at the CFTC. This document is known as the CFTC FOIA Annual Report. 

Our performance audit was conducted in accordance with auditing standards generally accepted 

in the United States of America and conformed to the Government Accountability Office and 

Government Auditing Standards prescribed by the Comptroller General ofthe United States. 

Audit Procedures: 

The following procedures were conducted as part ofthe performance audit: 

Internal Control 

The Auditor conducted interviews to obtain an understanding of the internal control system 

sufficient to plan the audit and establish a risk level and scope. This involved interviewing a 

number of CFTC personnel and examining documentation to support established processes. The 

internal controls observed and tested included procedures related to receiving, logging, tracking, 

researching, timeliness, appeals and fulfilling or denying FOIA requests. We also addressed the 

Commission's standards related to utilization and substantiation of Exemptions. In addition to a 

3 

Audit Procedures (Continued): 

number of meetings with the Contracting Officer's Representative from the Office of the 

Inspector General the following interviews were conducted: 

• 	 Paralegal Specialist with the CFTC' s Office of the General Counsel - Discussed the 

process for receiving an initial FOIA request. Requests are received via mail and e-mail. 

The items received in the mail are sent directly to the CFTC mail room and they are 

delivered to the Office of the General Counsel. The mail is then time-stamped and 

identified as a FOIA request in the Office of the General Counsel. The request is entered 

into the FOIA software application, which is a database management tool utilized by the 

CFTC. The email receipts are sent directly to a FOIA submission mailbox at CFTC.gov, 

which is only accessible by certain Office of the General Counsel staff who work within 

the FOIA program. The requests received via e-mail are automatically entered into the 

FOIA database. 

• 	 Staff Attorney with the CFTC's Office of the General Counsel- Discussed the process 

for incoming FOIA requests, which involves logging the request in the FOIA software 

system. The cases are assigned to staff attorneys or paralegal specialists and they are 

reviewed for completeness. If appropriate, the division or program office is then 

contacted to determine if the specific requested information is available. Then the 

reviewers examine the information and determine if any Exemptions apply. The CFTC 

may issue a full release, partial denial or full denial of responsive documents. CFTC 

FOIA regulations call for a turnaround of 20 business days to process a case from receipt 

date to response date2

• We did not examine the turnaround time for processing a case. 

• 	 Deputy General Counsel for Intergovernmental Affairs - An appeal is routed in the same 

manner as an original FOIA request. The Senior Assistant to the General Counsel 

assigns the appeal to a member of the Intergovernmental Affairs team. The appeal is 

reviewed, any necessary legal research is completed and a response letter is drafted. The 

appeals are usually the result of legal issues relating to Exemptions. During the period of 

review the Deputy and Acting Deputy did not encounter any appeals known to be related 

to whistleblowers over the course ofthe period of review. 

• 	 Counsel with the Office of the General Counsel - The Auditor had several discussions 

with the individual who serves as FOIA Counsel. She decides the assignment of the 

initial review of all FOIA cases. It was confirmed that she determines how FOIA 

requests are assigned to staff for record collection and initial review and she conducts the 

final review of all FOIA requests before the response letter is sent to the requester. She 

stated that there has not been an Exemption 3 case logged into the FO lA software system 

that utilized 7 U.S.C. Section 26(h)(2) which relates to protecting the identity of a 

whistleblower. 

2 17 CFR 145.7(h)(3) 

4 

Audit Procedures (Continued): 

• 	 Director of the CFTC Whistleblower Office - Per discussion with the Director, the 

Auditor determined that the purpose of the CFTC Whistleblower Office is to accept 

whistleblower submissions and verify whether the required information is complete. It 

was noted that a potential whistleblower must first submit a Tip, Complaint or Referral 

Form (TCR) to the Whistleblower Office. The office serves as the agency point of 

contact, for both whistleblowers and Commission personnel, with respect to issues and 

questions regarding the whistleblower program. There is a Whistleblower A ward 

Determination Panel that decides whether the whistleblower is eligible to receive an 

award and determines the award percentage. The Director stated that he has never had 

any discussions with a whistleblower, or an attorney representing a whistleblower, 

regarding 7 U.S.C. Section 26(h)(2) which relates to protecting the identity of a 

whistleblower. 

• 	 Consumer Outreach Officer for the Office of the Executive Director- The Auditor had a 

discussion to understand the role that the Consumer Outreach Program plays in raising 

awareness of the existence of the Whistleblower Office. It was noted that there is a 

monthly newsletter to consumer groups and federal agencies which mentions the 

Whistleblower Office and there is a Consumer Protection webpage on the CFTC website 

which includes a link to the Whistleblower Program. The Consumer Outreach Officer 

has also designed a draft brochure for the Whistleblower Office. 

Compliance 

The Auditor reviewed the requirements for the application of Exemption 3 for FOIA requests 

which included a review of the law indicated in 7 U.S.C. Section 26. Section 26(h)(2) provides 

protection to whistleblowers. It states "Except as provided in subparagraphs (B) and (C), the 

Commission, and any officer or employee ofthe Commission, shall not disclose any information, 

including information provided by a whistleblower to the Commission, which could reasonably 

be expected to reveal the identity of a whistleblower, except in accordance with the provisions of 

section 552a of title 5, unless and until required to be disclosed to a defendant or respondent in 

connection with a public proceeding instituted by the Commission or any entity described in 

subparagraph (C)." 

We identified FOIA requests in Fiscal Year 2012 and 2011 for which Exemption 3 was cited as a 

reason for partial or full denial. We did not find any requests that had been denied due to 7 

U.S.C. Section 26(h)(2), protection to whistleblowers. Therefore it was not necessary to 

interview anyone or to review documentation. It was a narrow focus to determine if the 

protection indicated in 7 U.S.C. Section 26(h)(2), which provides confidentiality to 

whistleblowers, aided them in disclosing information to the CFTC. 

The Director of the Whistleblower office was interviewed to gain an understanding of the 

internal policies and procedures. The Auditor reviewed the CFTC Whistleblower Office Policies 

and Procedures document and the Whistleblower Rules. In addition, we researched the CFTC 

website, CFTC Consumer Protection webpage, which includes the whistleblower program and 

5 

Audit Procedures (Continued): 

reviewed Form TCR to determine if the provisions of 7 U.S.C. Section 26(h)(2) are highlighted 

for the public to see. We discussed the legislative provision that prohibits the Commission from 

disclosing any information, including information provided by a whistleblower to CFTC which 

could reasonably be expected to reveal the identity of a whistleblower. 

Substantive Testing 

The Auditor reviewed the Commodity Futures Trading Commission FOIA Annual Reports for 

the fiscal years ending September 30, 2012 (FY 12) and 20 I1 (FY II) and noted the following 

statistics. For FY 12 there were 175 requests received and I70 processed during the fiscal year. 

There were 64 partial grants/denials and II full denials based on exemptions. The Exemption 3 

statute was relied upon 13 times. For FY 11 there were 168 requests received and I45 processed 

during the fiscal year. There were 28 partial grants/denials and I7 full denials based on 

Exemptions. The Exemption 3 statute was relied upon 16 times. As part of the audit procedures 

we obtained the detailed reports from the FOIA Office that were utilized to accumulate the 

Exemption totals in the FY 12 and FY 11 annual reports. The auditor reconciled the data to the 

annual reports. There were two exceptions identified during the reconciliation but they were 

determined not to be material in regard to the integrity ofthe reports. 

We selected the entire population of FOIA requests for which Exemption 3 was cited as a reason 

for partial or full denial. Based on our review of the FYI2 and FYII FOIA Annual Reports, 

Exemption 3 was cited 13 and 16 times, respectively. Due the relatively low number within the 

total population, we chose to test I 00% of the FOIA requests for which Exemption 3 was relied 

upon rather than choose a sample. 

For each instance where Exemption 3 was cited we reviewed the Exemption descriptions to 

determine if any cases dealt with whistleblowers. It was determined that all of the denials 

involved 7 U.S.C. 12 which prohibits the disclosure of data and information that would 

separately disclose the business transaction of any person and trade secrets or names of 

customers gathered in the course of CFTC investigations under the Commodity Exchange Act. 

There were no denials that involved 7 U.S.C. Section 26(h)(2) which provides confidentiality to 

whistleblowers. 

The Office of the Inspector General obtained a list of all whistleblowers that have come forth 

during FY12 and FY11. It should be noted that each whistleblower had received an 

identification number. There was no information on the list that provided the identity of the 

individuals or that could reasonably be expected to reveal the identity of a whistleblower, per 

Dodd-Frank Section 748(h)(2)(A). The list contained a total of 58 whistleblower TCR Forms. 

The Auditor chose a statistical sample of 20 selections to interview, which was based on a 

confidence level of 95% and a confidence interval of 18. For each selection, we conducted a 

voluntary interview by telephone. The interviews were conducted by an employee from the 

Office of the Inspector General. In order to protect the whistleblower's identity the Auditor was 

not present while the individuals were contacted. 

6 

Audit Procedures (Continued): 

The Auditor received the information to support the results of the survey from the Office of the 

Inspector General employee who conducted the interviews. He signed an acknowledgement to 

attest that the information provided to the Auditor was true and accurate. 

Based on the responses received, we assessed whether the guidance indicated in 7 U.S.C. Section 

26(h)(2), which provides confidentiality to whistleblowers, aided them in disclosing information 

to the CFTC. 

Findings/Comments/Recommendations: 

Based on the results of our performance audit procedures we offer the following findings, 

comments and recommendations in regard to the existing process: 

• 	 Policies and Procedures- There are no written policies and procedures within the FOIA 

Office nor does the CFTC Whistleblower Office have written policies and procedures for 

interacting with the FOIA Office if a FOIA request involves a whistleblower. 

Recommendation: We recommend that written policies and procedures be established 

and they should include a protocol to ensure that the confidentiality of the whistleblower 

remains intact. 

• 	 FOIA Office- The Auditor met with personnel from the FOIA Office and reviewed all 

29 instances where Exemption 3 was used during FY12 and FYI I. It was determined 

that all of the denials involved 7 U.S.C. 12, which prohibits the disclosure of data and 

information that would separately disclose the business transaction of any person and 

trade secrets or names of customers gathered in the course of CFTC investigations under 

the Commodity Exchange Act. There were no denials that involved 7 U.S.C. Section 

26(h)(2) which provides confidentiality to whistleblowers. 

• 	 CFTC Website - The CFTC website has a Consumer Protection webpage where 

information about the Whistleblower Program can be found. Under the Resources 

section of the Whistleblower Program information, 7 U .S.C. Section 26 - Commodity 

Whistleblower Incentives and Protection is available for download, however, there is no 

specific focus on Section 26(h) regarding the protection for whistleblowers. We also 

reviewed metrics related to the volume of visitors to the CFTC website and the 

whistleblower webpage. During calendar 2012, it was noted that the whistleblower 

portion of the CFTC website experienced 17,716 visitors. However, it should be noted 

that confidential protection identity offered to whistleblowers is not apparent to the 

webpage viewer. 

In addition, Form TCR makes no mention of 7 U.S.C. Section 26(h) and does not 

highlight CFTC's protection ofwhistleblowers in any way. 

7 

Findings/Comments/Recommendations (Continued): 

Recommendation: The Consumer Protection webpage within the CFTC website and 

Form TCR should be revised to highlight 7 U.S.C. Section 26(h) regarding the protection 

for whistleblowers. As reviewed, it would seem that the volume of visitors seem to 

justify the availability of whistleblower information. Accordingly, the protections 

afforded potential whistleblowers should be readily available. 

• 	 Whistleblower Office - As a result of the feedback received from the whistleblower 

survey, and the study carried out on behalf of the Inspector General of the Commission it 

was determined that: 

• 	 (aa) The protections afforded by 7 U.S.C. Section 26(h)(2), appear to positively aid 

whistleblowers in disclosing information to the CFTC. Our testing showed that a 

total of seventeen of the twenty whistleblowers that were contacted stated that they 

were aware of the legislative provision that prohibits the Commission from disclosing 

any information, including information provided by a whistleblower to CFTC which 

could reasonable be expected to reveal the identity of a whistleblower. Of these 

seventeen, twelve indicated that this protection positively impacted their decision as a 

whistleblower. The whistleblowers that were interviewed were asked to what extent 

the confidentiality provision aided them in disclosing information to CFTC. The 

responses were as follows: 

o 	 8 - A great extent 

o 	 1 - Some to a great extent 

o 	 2 - Some extent 

o 	 1 - Little to some extent 

o 	 5 -No extent 

o 	 3 -Not applicable 

• 	 (bb) 7 U.S.C. Section 26(h)(2) which provides for whistleblower confidentiality was 

not cited in conjunction with Exemption 3 within the period of our examination. 

Therefore, we found no evidence that it has helped or hindered the public's ability to 

access information about the Commission's regulation of commodity futures and 

options markets. 

• 	 ( cc) Based on the results of the performance audit and the whistleblower survey, the 

impact of 7 U .S.C. Section 26(h)(2) has been positive and there is strong evidence to 

support the Commission's continued usage of 7 U.S.C. Section 26(h)(2) in 

conjunction with Exemption 3. 

8 

U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Centre 
 

1155 21st Street, NW, Washington, DC 20581 
 

Telephone: (202) 418-5000 
 

Facsimile: (202) 418-5521 
 

www.cftc.gov 

Office of the 

Inspector General 

OIG audit AU-13-01 

Performance Audit Report on the Impact ofthe Freedom ofInformation Act Exemption Related 

to Protecting the Identity ofWhistleblowers in Fiscal Years 2012 and 2011 

APPENDIX A 

MANAGEMENT'S RESPONSE LETTER 
U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Centre 

1155 21st Street, NW 

Washington, DC 20581 

Response Letter January 25,2013 

Roy A. Lavik, Inspector General 

U.S. Cominodity Futures 

Trading Commission 

Three Lafayette Centre 

1155 21st Street, NW 

Washington, DC 20581 

Re: OIG AU 1301 

Dear Mr. Lavik: 

Thank you for the opportunity to respond to the audit report, entitled "Performance Audit 

Report on the Impact ofthe Freedom ofInfonnation Act Exemption Relate4 to Protecting the 

Identity ofWhistleblowers in Fiscal Years 2012 and 2011." Based on our review ofthe audit, 

the Commodity Futures Trading Commission ("Commission") offers the following responses: 

Recommendation 1 

We recommend that written policies andprocedures be established and they should 

include a protocol to ensure that the confidentiality ofthe whistleblower remains intact. 

Response 

The FOIA office agrees with the recommendation to prepare written materials 

documenting the office's policies and procedures. These materials will include the protocol the 

agency uses to ensure that whistleblower confidentiality is protected. 

Recommendation 2 

The Consumer Protection webpage within the CFI'C website and Form TCR should be 

revised to highlight 7 U.S. C. Section 26(h) regarding the protectionfor whistleblowers. As 

reviewed, it would seem that the volume ofvisitors seem to justify the availability of 

whistleblower information. Accordingly, the protections affordedpotential whistleblowers 

should be readily available. 

Response 

Information about the confidentiality protections afforded to whistleblowers under 

7 U.S.C. § 26(h)(2) and 17 C.F.R. § 165.4 is available on the Commission's "Whistlel;»lower 
'Program'' webpage because copies ofSection23 ofthe Con11nodity Exchange Act, the 

Whistleblower Rules, and frequently asked questions about the program are linked on the page. 

However, given the web traffic cited in the audit report, the Whistleblower Office agrees to 

display the information more prmninently on the page. The Whistleblower Office also agrees to 

include such information on the Form, provided that the Office of Management and Budget 

approves such a change to the Form. 

On behalf ofthe Commission, thank you once again for the opportunity to respond. 

Please let me know if\ve can provide any further infmmation or assistance. 

Sincerely yours, 

~ro- Eric Juzenas 

Chief Operating Officer and 

Senior Counsel to the Chainnan