COMMODITY FUTURES TRADING COMMISSION 

SEMIANNUAL REPORT 

OF THE 

OFFICE OF THE 

INSPECTOR GENERAL 

FOR THE PERIOD ENDING MARCH 31, 2009 
 

 

U.S. COMMODITY FUTURES TRADING COMMISSION 

Three Lafayette Centre
 

1155 21st Street, NW, Washington, DC 20581
 

Telephone: (202) 418-5110
 

Facsimile: (202) 418-5522
 

www.cftc.gov

Office of the April 30, 2009 Inspector General 

TO: Michael V. Dunn 

Acting Chairman 

FROM: A. Roy Lavik 

Inspector General 

SUBJECT: Semiannual Report of the Office of the Inspector General 

Attached is the Semiannual Report of the Office of the Inspector General for the period 

from October 1, 2008 through March 31, 2009. This report is submitted to you in accordance 

with the requirements of Section 5 of the Inspector General Act of 1978, as amended. 

I appreciate your continuing support of this office. 

Attachment 
OFFICE OF THE INSPECTOR GENERAL 

COMMODITY FUTURES TRADING COMMISSION

SEMIANNUAL REPORT 

FOR THE PERIOD FROM 

October 1, 2008 THROUGH March 31, 2009 

TABLE OF CONTENTS 

INDEX OF IG ACT REPORTING ............................................................................................... iii 

EXECUTIVE SUMMARY ............................................................................................................ 1 

INTRODUCTION .......................................................................................................................... 2 

CFTC Programs and Operations ................................................................................................. 2 

OIG Responsibilities ................................................................................................................... 2 

OIG Resources ............................................................................................................................ 3

COMPLETED AUDITS and REVIEWS ....................................................................................... 4 

Audit of CFTC Financial Statements for Fiscal Year 2008 ........................................................ 4 

Report of IG Assessment CFTC’s Management Challenges ...................................................... 5 

Update of the Review of the Need for a Los Angeles Office ..................................................... 6 

CURRENT AUDITS and REVIEWS ............................................................................................. 7 

GovTrip and Travel Card Review............................................................................................... 7 

AUDIT REPORTS and REVIEWS OVER SIX MONTHS OLD.................................................. 7 

Corrective Action not Completed ............................................................................................... 7 

Corrective Action Completed. .................................................................................................... 7 

Management Decision not Made. ............................................................................................... 8 

INVESTIGATIONS ....................................................................................................................... 8 

SUMMARY OF MATTERS REFERRED TO PROSECUTORIAL AUTHORITIES ................. 8 

CONGRESSIONAL INQUIRIES .................................................................................................. 8 

LEGISLATIVE, REGULATORY AND RULE REVIEWS .......................................................... 9 

Introduction and Summary. ........................................................................................................ 9 

Rule Reviews Initiated in Previous Reporting Periods. .............................................................. 9 

Rule Reviews Initiated this Reporting Period. ............................................................................ 9 

Legislative Activities .................................................................................................................. 9 

OTHER REVIEWS ...................................................................................................................... 10 

Peer Reviews. ............................................................................................................................ 10 

i
Other Reviews. .......................................................................................................................... 10 

SUMMARY OF EACH REPORT MADE TO THE AGENCY HEAD ...................................... 10 

REVISED MANAGEMENT DECISIONS .................................................................................. 10 

INSPECTOR GENERAL DISAGREEMENT ............................................................................. 11 

GAO LIAISON ............................................................................................................................. 11 

STRATEGIC PLAN FOR THE OFFICE OF THE INSPECTOR GENERAL ........................... 12 

Investigative Agenda ................................................................................................................ 12 

Legislative and Regulatory Review Agenda............................................................................. 12 

Audit Agenda ............................................................................................................................ 13 

Introduction........................................................................................................................... 13

Annual Audits ........................................................................................................................ 13

Other Audits .......................................................................................................................... 14

Resources Required .............................................................................................................. 15

CONTACTING THE OFFICE OF THE INSPECTOR GENERAL ............................................ 15 

Table 1 – Reports Issued with Questioned Costs.......................................................................... 16 

Table 2 – Reports Issued with Recommendations ........................................................................ 17 

ii
iii

INDEX OF IG ACT REPORTING 

REQUIREMENTS 

Section 4(a)(2) ...................... Review of legislation and regulations.....................................9 

Section 5(a)(1) ...................... Significant problems, abuses and deficiencies..... .....................1 

Section 5(a)(2) ..................... Recommendations with respect to significant problems...............1 

Section 5(a)(3) ...................... Significant recommendations that have not been completed.........7 

Section 5(a)(4) ...................... Matters referred to prosecutorial authorities............................8 

Section 5(a)(5) ..................... Summary of instances where information was refused...............10 

Section 5(a)(6) ..................... Completed audit reports.....................................................4 

Section 5(a)(7) ..................... Significant audit reports.......................................................4 

Section 5(a)(8) .....................Statistical Table—Questioned Costs....................................16 

Section 5(a)(9) .................... Statistical Table—Funds Recommended for Better Use..............17 

Section 5(a)(10) .................. Audit reports lacking management decision..............................8 

Section 5(a)(11) ................. Significant revised management decisions...............................10 

Section 5(a)(12) ................. Significant management decisions where the IG disagrees............11 

Section 5(a)(13) ................. Information described under the Federal Financial Management......5 

............................................. Improvement Act of 1996.............................................................. 

Section 6(b)(2) .................... Summary of reports to Chairman where assistance was refused.....10 
EXECUTIVE SUMMARY

This semiannual report is issued by the Commodity Futures Trading Commission’s 

(CFTC’s) Office of Inspector General (OIG) pursuant to the Inspector General Act of 1978, as 

amended. It summarizes OIG’s activities and accomplishments for the period October 1, 2008, 

through March 31, 2009. During this period, OIG completed one audit, updated one review, 

issued required management challenges, and began one review. OIG also responded to 

Congressional inquiries, commented to Congressional staff on pending legislation and other 

issues, and testified before Congress. OIG reviewed proposed enforcement actions, as well as 

rules proposed by CFTC and by regulated entities, participated in training, monitored peer 

review activities, visited CFTC field offices, and participated in Government-wide OIG 

professional and cooperative meetings and activities. OIG continued its participation in a 

procurement to secure an external auditor to perform the CFTC financial statement audit. No 

investigations were pending, opened or completed during this reporting period. No significant 

problems, abuses or deficiencies regarding CFTC programs and operations were identified 

during the reporting period. 

 Highlights of OIG’s completed and ongoing audit, evaluation, investigative and other 

projects include: 

• OIG oversaw the completion of the fiscal year (FY) 2008 audit of the CFTC financial 

statements. For fiscal year 2008, the financial statement audit resulted in an unqualified audit 

opinion. 

• OIG issued its Assessment of the Most Serious Management Challenges Facing the CFTC: 

Modernization of Electronic Surveillance and Efficient Acquisition and Integration of Skilled 

Human Capital. 

• OIG updated its review of the need to reopen the Los Angeles field office. The prior 

recommendation remains unchanged. 

• In response to concerns raised by Agency staff and others, the OIG began a review of the 

Govtrip electronic travel system. 

• OIG again responded to discrete allegations pertaining to the CFTC transit subsidy program. 

Again, the evidence did not warrant referrals to the Agency or law enforcement for further 

action; however, we received conclusive evidence of compliance. 

• OIG met with Congressional staff to discuss issues arising from recent efforts to procure an 

external auditor to perform the CFTC financial statement audit. Allegations concerning 

possible misconduct relating to the procurement were referred to the Integrity Committee. 

• OIG testified before the House Committee on Oversight and Government Reform, 

Subcommittee on Government Management, Organization and Procurement on: “The Roles 

and Responsibilities of Inspectors General within Financial Regulatory Agencies." 

1
INTRODUCTION 

1. CFTC Programs and Operations.

Congress created the Commodity Futures Trading Commission in 1974 as an 

independent agency with the mandate to regulate commodity futures and options markets in the 

United States. The Commission’s mandate was renewed and/or expanded in 1978, 1982, 1986, 

1992 and 1995. In December 2000, the Commission was reauthorized by Congress and the 

President through Fiscal Year 2005 with the passage of the Commodity Futures Modernization 

Act of 2000 (CFMA). In May of 2008, Congress reauthorized the CFTC through Fiscal Year 

2013. 

 The CFTC is responsible for fostering the economic utility of futures markets by 

encouraging their competitiveness and efficiency, ensuring their integrity and protecting market 

participants against manipulation, abusive trade practices and fraud. Through effective oversight 

regulation, the CFTC enables the commodity futures markets better to serve their vital function 

in the nation’s economy–providing a mechanism for price discovery and a means of offsetting 

price risks. 

 The CFTC operating divisions are: Office of the Chairman, Office of the Executive 

Director, Office of General Counsel, Division of Clearing and Intermediary Oversight, Division 

of Enforcement, Division of Market Oversight and Office of the Chief Economist. In addition to 

its headquarters office in Washington, DC, the CFTC maintains offices in Chicago, Illinois; 

Kansas City, Missouri; and New York, New York. 

2. OIG Responsibilities.

The CFTC OIG was created in 1989 in accordance with the 1988 amendments to the 

Inspector General Act of 1978 (P.L. 95-452). OIG was established as an independent unit to: 

• Promote economy, efficiency and effectiveness in the administration of CFTC programs and 

operations and detect and prevent fraud, waste and abuse in such programs and operations; 

• Conduct and supervise audits and, where necessary, investigations relating to the 

administration of CFTC programs and operations; 

2
• Review existing and proposed legislation, regulations and exchange rules and make 

recommendations concerning their impact on the economy and efficiency of CFTC programs 

and operations or the prevention and detection of fraud and abuse; and 

• Keep the Chairman and Congress fully informed about any problems or deficiencies in the 

administration of CFTC programs and operations and provide recommendations for 

correction of these problems or deficiencies. 

 OIG is required to conduct, supervise and coordinate audits of CFTC programs and 

operations in accordance with generally accepted government auditing standards. OIG is also 

required to recommend changes to existing and proposed CFTC programs and operations to 

promote economy, efficiency and effectiveness and to prevent and detect fraud and abuse. 

 The purpose of OIG audits generally is to ensure that: 

• Funds have been expended in a manner consistent with related laws, regulations and policies; 

• Resources have been managed effectively and efficiently; 

• Stipulated program objectives have been achieved; 

• Agency operations have not been subject to improper influence or corruption; and 

• Resources have been safeguarded. 

 OIG operates independently of the Agency and has not experienced any interference from 

the CFTC Chairman in connection with the conduct of any investigation or audit, and our 

investigations have been pursued regardless of the rank or party affiliation of the target. OIG has 

also conducted audits without interference where it has perceived the opportunity to recommend 

improvement to futures regulation efforts, again without regard to the party affiliation of any 

Chairman.1

 No Chairman has interfered with OIG decisions regarding personnel actions, 

training, travel or other expenditures; however, a recent procurement process initiated to secure 

the services of an external auditor to conduct the required CFTC financial statement audit has 

developed issues pertaining to IG independence, as well as allegations requiring referral to the 

Integrity Committee. 

3. OIG Resources.

 OIG consists of the Inspector General, the Assistant Inspector General for Audits, an 

Attorney-Advisor and a secretary. The present Inspector General assumed his position on 

October 7, 1990. The Assistant Inspector General joined the office in 1999, and the AttorneyAdvisor joined in 2007. 

 

1

 The Inspector General Act of 1978, as amended, states: “Neither the head of the establishment nor the officer next 

in rank below such head shall prevent or prohibit the Inspector General from initiating, carrying out, or completing 

any audit or investigation....” 5 U.S.C. App. 3 sec. 3(a). 

3
COMPLETED AUDITS and REVIEWS

1. Audit of CFTC Financial Statements for Fiscal Year 2008 

Objective. 

In FY 2002, Congress passed the Accountability of Tax Dollars Act. The Act requires 

the CFTC, along with numerous other Federal entities, to have its financial statements audited 

annually. To this end, in 2004 the OIG selected KPMG, an independent auditor, to provide the 

audit effort required to enable the contractor to render an opinion on the Agency’s financial 

statements for Fiscal Year 2008. 

The specific objectives of this audit included determinations whether: 

(1) The financial statements present fairly the financial position of the Commodity 

Futures Trading Commission in accordance with generally accepted accounting 

principles (GAAP) as promulgated by the Federal Accounting Standards Advisory Board 

(FASAB). The five financial statements, along with all corresponding notes to be audited 

include: (a) Balance Sheet; (b) Statement of Net Cost; (c) Statement of Changes in Net 

Position; (d) Statement of Budgetary Resources; and (e) Statement of Custodial Activity. 

(2) Management’s assertions about the effectiveness of its internal controls for achieving 

internal control objectives described in AU Section 319 and the Federal Managers 

Financial Integrity Act (FMFIA) are fairly stated in all material respects. The contractor 

makes this determination in part by obtaining an understanding of the internal control 

policies and procedures and assessing the level of control risk relevant to all significant 

cycles, classes of transactions, and account balances. For those significant control 

policies and procedures that have been properly designed and placed in operation, the 

contractor performs sufficient tests to provide reasonable assurance as to whether the 

controls are effective and working as designed. 

The independent public accountant (IPA) limits its internal control testing to those 

controls necessary to achieve the objectives described in OMB Bulletin 07-04. Further, 

the IPA is not required to test all internal controls relevant to operating objectives as 

broadly defined by the FMFIA, such as those controls relevant to achieving efficient 

operations. 

With respect to internal controls related to performance measures reported in the 

accountability report, the IPA obtains an understanding of the design of significant 

internal controls relating to the existence and completeness assertions, as required by 

OMB Bulletin 07-04. The procedures are not required to provide assurance on internal 

controls over reported performance measures. 

4
(3) The agency has complied with selected provisions of laws and regulations identified 

by OMB Bulletin 07-04 or the Inspector General, noncompliance with which could have 

a direct and material effect on the determination of financial statement amounts. The IPA 

limits its tests of compliance to these provisions and need not test compliance with all 

laws and regulations applicable to the CFTC. 

KPMG rendered an opinion on the agency’s financial statements for Fiscal Year 2008 in 

accordance with generally accepted auditing standards, Government Auditing Standards and 

OMB Bulletin 07-04. 

Status.

For the fourth consecutive year, the public accounting firm KPMG LLP reported that the 

CFTC financial statements were presented fairly in all material respects, and in conformity with 

the U.S. generally accepted accounting principles for Federal agencies. For the second 

consecutive year the Commission had no material weaknesses, and was compliant with laws and 

regulations. This includes substantial compliance with the Federal Information Security 

Management Act. Furthermore, the CFTC financial management system is in substantial 

compliance with the Federal Financial Management Improvement Act of 1996 (although CFTC 

is not required to comply with FFMIA, it has elected to do so.) KPMG issued its report on 

November 12, 2008.

2. Report of IG Assessment of CFTC’s Management Challenges

Objective.

 In addition to authorizing the agencies to provide financial and performance information 

in a more meaningful and useful format for Congress, the Reports Consolidation Act of 2000 

also required the Inspector General to summarize the most serious management and 

performance challenges facing the CFTC and to assess the Agency’s progress in addressing 

those challenges for inclusion in the annual Performance and Accountability Report (PAR). 

Status.

The OIG prepared the required summary of the Agency’s most serious management and 

performance challenges in accordance with the Reports Consolidation Act of 2000 for inclusion 

in the FY 2008 PAR, and also reported on status of the most serious management and 

performance challenges identified by the Inspector General in FY 2007. In FY 2007, the OIG 

identified two potential management challenges: The Modernization of Electronic Market 

Surveillance and Expansion of CFTC Oversight into New Markets. The OIG noted that during 

the past year, the Agency expended approximately $11 million to update its electronic 

surveillance systems. In addition, Congress, with the passage of the CFTC Reauthorization Act 

of 2008, 2

 codified and expanded the Agency’s responsibilities over Exempt Commercial 

Markets with Significant Price Discovery Contracts (ECM-SPDC). Agency activity in this area 

 

2 Incorporated as Title XIII of the Food, Conservation and Energy Act of 2008, Public Law 110–246, 122 Stat. 1624 

(June 18, 2008). 

5
is continuing, we note that the Agency on March 23, 2009, issued final rules to implement the 

ECM-SPDC provisions of the CFTC Reauthorization Act of 2008.3

 

For FY 2009, the OIG identified two “most serious” management challenges: Modernization of 

Electronic Market Surveillance and Efficient Acquisition and Integration of Skilled Human 

Capital. During the past years the futures markets have transformed substantially from an open 

outcry system to an electronic system. This structural change demands that the Agency redefine 

and modernize its market surveillance techniques. As anticipated funding increases permit the 

Agency to grow its workforce, the efficient and effective acquisition of qualified employees will 

be a major goal for the Agency. In November 2008 the OIG submitted the report to the Agency 

for inclusion in the PAR, and the Agency transmitted the PAR to OMB and Congress. 

3. Update of the Review of the Need for a Los Angeles Office 

Objective.

Our report titled “Review of the Need for a Los Angeles Office” was completed in 2006. 

Because of budgetary constraints, the Chairman was not in a position to act on the 

recommendations in the report. In part due to Congressional interest in open recommendations, 

the OIG revisited the issue and issued an updated report on March 12, 2008. In January 2009, 

then Acting Chairman Lukken issued a statement voicing his opposition to the recommendation 

based on cost considerations. On March 11, 2009, Congress approved a significant funding 

increase for the CFTC for FY 2009. 

 

Status.

 During the reporting period, the Inspector General consulted with both California State 

securities enforcement officials and the Department of Justice in Los Angeles, and all contacts 

stressed the need for expertise on the West Coast to assist prosecution of complex frauds 

occurring under the Commodity Exchange Act. While our most recent statistical analysis of 

Enforcement productivity on the West Coast indicates that cases are being brought in adequate 

numbers, the Inspector General strongly believes that expansion of the Agency to the West Coast 

will facilitate nationwide enforcement of the laws governing futures trading. In view of his 

recent consultations with West Coast regulators, the IG reiterates the previous recommendation 

particularly in light of increased funding for the CFTC for FY 2009. 

 

3

 74 FR 12178 (Mar. 23, 2009). 

6
CURRENT AUDITS and REVIEWS

1. GovTrip and Travel Card Review.

 Recently the Office of the Inspector General (OIG) has received complaints regarding 

difficulties encountered in connection with the use of GovTrip, and in connection with use of the 

new travel credit cards. Govtrip is part of a government-wide electronic travel initiative 

designed to facilitate the entire travel process, generate cost savings, and improve employee 

productivity. Specific Govtrip issues include time delays receiving reimbursement, as well as 

difficulties scheduling non-direct routes for trips and for scheduling flights. 

Federal travel regulations mandate the use of a government contractor issued credit card. 

In November 2008, a new issuing bank assumed the contract for supplying travel credit cards 

and distributed new cards to agency personnel. Bank travel credit card issues include inoperative 

PINs (Personal Identification Numbers) as well as difficulties obtaining cash advances on the 

government contractor issued credit cards. 

Scope and Objective 

This review of GovTrip will be limited to a two fiscal year period. Fiscal Years 2008 and 

2009 will be reviewed. The objectives of this review are: to elicit employee experiences with 

GovTrip, catalog benefits and difficulties regarding the use of GovTrip, find out what works and 

what doesn’t, determine which issues appear with greatest frequency, and evaluate what 

organizational change could alleviate these issues. 

The review of travel credit cards will be limited to fiscal year 2009, with emphasis placed 

on experiences with the new travel credit cards. Experience with the prior travel credit cards 

used by CFTC will also be examined for means of comparison. However, improper usage of 

travel credit cards will not be examined during this review. 

AUDIT REPORTS and REVIEWS OVER SIX MONTHS OLD

1. Corrective Action not Completed.

 There were no instances of audit reports over six months old where corrective action had 

not been completed. 

2. Corrective Action Completed.

 There were no instances of reports issued before the commencement of the reporting 

period for which corrective action had been completed by the end of the reporting period. 

7
3. Management Decision not Made.

 There are no instances of a report issued before the commencement of the reporting 

period for which a management decision had not been made by the end of the reporting period. 

In 2006, the CFTC OIG issued a report titled “Review of the Need for a Western Regional Office 

in Los Angeles.” That report recommended, among other things, that the Commission review 

the feasibility of reestablishing the former Los Angeles field office. That recommendation was 

not carried out largely due to budget constraints. In January 2008, partially in response to a 

Congressional inquiry, CFTC OIG updated its analysis and on March 12, 2008, issued a followup report which reiterated the earlier recommendation. In January 2009, the Acting Chairman 

issued a decision declining to implement the recommendation generally due to cost 

considerations. In light of increased funding for FY09, as well as further consultation with 

regulators, we renew the recommendation. 

INVESTIGATIONS

The Inspector General Act of 1978, as amended, provides that the Inspector General may 

receive and investigate complaints or information from the Commission's employees and other 

sources concerning the possible existence of an activity constituting a violation of law, rules or 

regulations, or mismanagement, abuse of authority, or gross waste of funds, or a substantial and 

specific danger to the public health and safety. 

 No investigations were pending as of the beginning of the reporting period. No 

investigations were opened during this period. One preliminary inquiry, regarding alleged 

misuse of the transit subsidy, was closed without formal investigation upon submission of proof 

of compliance. 

SUMMARY OF MATTERS REFERRED TO 

PROSECUTORIAL AUTHORITIES

 No matters were referred to prosecutorial authorities during the reporting period. In 

accordance with section 11(d)(4) of the Inspector General Act of 1978, as amended, an allegation 

relating to suspected misconduct within the OIG was referred to the Integrity Committee of the 

Council of the Inspectors General on Integrity and Efficiency. 

CONGRESSIONAL INQUIRIES

 OIG fielded multiple requests for assistance from members of Congress and staff during 

the reporting period. Issues addressed included recent OIG activities. In March, the Inspector 

8
General testified before the Subcommittee on Government Management, Organization, and 

Procurement, Committee on Oversight and Government Reform on the "The Roles and 

Responsibilities of Inspectors General within Financial Regulatory Agencies." The IG also 

consulted Congressional staff regarding issues relating to the procurement of an external auditor 

to perform the CFTC financial statement audit. 

LEGISLATIVE, REGULATORY AND RULE REVIEWS 

1. Introduction and Summary.

 As specified in Section 4(a)(2) of the Inspector General Act of 1978, OIG reviews the 

impact of existing and proposed legislation and regulations on CFTC programs and operations 

and makes recommendations regarding more effective or efficient alternatives or protections 

against fraud and abuse. OIG also reviews all exchange rule proposals circulated to senior staff 

at CFTC. 

OIG notified the responsible Divisions as to any concerns with draft and final documents 

relating to legislation, rules or investigations. Formal comments were not filed with the 

Commission during this reporting period. 

2. Rule Reviews Initiated in Previous Reporting Periods.

 There were no rule reviews initiated in previous reporting periods which were continued 

into this reporting period. 

3. Rule Reviews Initiated this Reporting Period.

 No rule reviews were initiated during this reporting period. 

4. Legislative Activities.

OIG tracked legislation impacting programs and operations of the CFTC, and made 

contact with Congressional staff concerning various agency and IG issues as appropriate. The 

IG serves on the legislation committee for the Executive Council on Integrity and Efficiency, 

which comments on proposed amendments to the IG Act and other legislation affecting the IG 

community. In March, the Inspector General testified before the Subcommittee on Government 

Management, Organization, and Procurement, Committee on Oversight and Government Reform 

on the "The Roles and Responsibilities of Inspectors General within Financial Regulatory 

Agencies," and specifically addressed the provisions of HR 885 at that time. HR 885 would 

convert the Inspector General for five financial regulatory agencies, including the CFTC 

Inspector General, to a Presidential Appointment. The IG has no specific objection to HR 885, 

but did discuss issues of concern. 

9
OTHER REVIEWS 

1. Peer Reviews.

An important function in each Agency OIG is the peer review process. The Inspector 

General community’s annual report, A Progress Report to the President, Fiscal Year 2007,

4

described the processes for audits and investigative peer reviews as follows:

Government Auditing Standards require that audit organizations conducting audits 

of Federal agencies undergo peer reviews every 3 years. The IG community has 

implemented a process to meet this requirement. The purpose of the peer review 

is to determine whether the reviewed audit organization’s internal quality control 

systems are adequate and provide reasonable assurance that applicable auditing 

standards, policies and procedures are met. 

Similarly, investigative peer reviews are conducted to ensure compliance with the 

requirements of the Quality Standards for Investigations and determine whether 

adequate internal safeguards and management procedures exist to ensure that law 

enforcement powers are properly exercised.5

 During this reporting period, OIG continued to monitor the government-wide OIG peer 

review schedules as communicated by the Council of the Inspectors General on Integrity and 

Efficiency. OIG discussed scheduling issues with our partner OIG offices as appropriate. No 

peer reviews were begun or completed during this reporting period. 

2. Other Reviews.

 No other review activity took place during this reporting period. 

SUMMARY OF EACH REPORT MADE TO 

THE AGENCY HEAD 

 No reports were made to the Agency head under section 6(b)(2) concerning information 

or assistance unreasonably refused or not provided (mandated under section 5(a)(5) of the Act). 

REVISED MANAGEMENT DECISIONS

 No management decisions were revised during the reporting period. 

 

4

 http://www.ignet.gov/randp/fy07apr.pdf. 

5

 Id. at p.19. 

10
INSPECTOR GENERAL DISAGREEMENT

 The Inspector General did not disagree with any management decisions on OIG 

recommendations during the reporting period. 

GAO LIAISON 

 OIG is charged with providing policy direction for, and conducting, supervising, and 

coordinating audits and investigations relating to CFTC programs and operations. In addition, 

OIG is required to recommend policies for, and conduct, supervise, and coordinate with other 

Federal agencies, state and local governmental agencies, and nongovernmental entities, audits, 

investigations, and evaluations regarding the economy, efficiency, and effectiveness of CFTC 

programs and operations. 

 GAO also conducts audits of CFTC activities, and OIG plans its audits so as not to 

duplicate GAO's efforts. Moreover, OIG in its audit activities identifies the goals of each audit 

and the methods of reaching the goals so as to minimize the requirements placed on CFTC 

resources. 

11
STRATEGIC PLAN FOR THE 

OFFICE OF THE INSPECTOR GENERAL 

1. Investigative Agenda.

 The Inspector General Act of 1978, as amended, provides that the Inspector General may 

receive and investigate complaints or information from the Commission's employees concerning 

the possible existence of an activity constituting a violation of law, rules or regulations, or 

mismanagement, gross waste of funds, abuse of authority or a substantial and specific danger to 

the public health and safety. 

 OIG has to date conducted only a reactive investigative program chiefly relying on 

unsolicited employee complaints as the source of investigative leads. However, allegations and 

complaints are also received from the general public and Congress. This reactive program has 

resulted in only a handful of investigations per year. This strategy was followed because OIG 

believed that an independent regulatory agency such as the CFTC, without grant money or 

substantial contracts to award, was not likely to generate a substantial investigative workload. 

 To insure that employee complaints could easily reach OIG, a 24-hour hotline was 

established in February 1993 to receive complaints. The hotline phone number is (202)418-

5510. 

 Because of the necessarily reactive nature of OIG's investigative program, no 

investigative agenda has been established. 

2. Legislative and Regulatory Review Agenda.

 Because of the importance of this activity in a financial and economic regulatory agency, 

OIG reviews proposed and final CFTC regulations, legislation and selected exchange rules using 

six basic criteria: Whether the agency: (1) has identified specifically the problem(s) to be 

addressed by the proposal; (2) has defined through case study or data analysis a clear link 

between the proposed solution and the identified problem(s); (3) has specified clearly the means 

to effectively and efficiently enforce the proposal; (4) has assessed the likely efficiency and 

effectiveness of alternative solutions; (5) can reasonably document that the proposal will yield 

positive net benefits over the long term; and (6) has met the requirements of the Regulatory 

Flexibility Act and the Paperwork Reduction Act. 

12
 The Regulatory Flexibility Act requires the agency to evaluate the impact of its 

regulations on small entities. The Paperwork Reduction Act requires the agency to manage 

effectively and efficiently its information collections so that they are the least burdensome 

necessary to achieve the stipulated objectives. 

 Because OIG does not initiate legislation or, generally, regulations, OIG legislative and 

regulatory review program is reactive to the legislative and regulatory proposals developed by 

others. Accordingly, no independent legislative and regulatory review agenda has been 

established. 

3. Audit Agenda.

a. Introduction

 The primary objectives of the OIG audit agenda is to promote long-term efficiency and 

effectiveness in the administration and operation of the Commission and to protect against fraud 

and abuse. The audit agenda and priorities for OIG are determined based on the following 

factors: 

• Adequacy of internal control systems as indicated by vulnerability assessments and 

internal control reviews recommended by OMB Circular A-123; 

• Changes in the program conditions or particular vulnerability of the organization, 

program, activity, or function to problems or deficiencies; 

• Current and potential dollar magnitude and likely benefits of a review on the 

efficiency or effectiveness of CFTC programs and operations; 

• Management priorities and improvements that may be possible; 

• Results of audits of CFTC programs and operations by other Federal agencies; and 

• Availability of audit resources and the potential opportunity costs to the agency. 

b. Annual Audits

 The following required audits are performed on an annual basis. 

Audit of CFTC Financial Statements.

 In FY 2002, Congress passed the Accountability of Tax Dollars Act. The Act requires 

the CFTC, along with numerous other Federal entities, to have its financial statements audited 

annually. To this end, OIG has engaged a contractor to provide the audit effort required to 

13
enable the contractor to render an opinion on the agency’s financial statements for each fiscal 

year in accordance with generally accepted auditing standards, Government Auditing Standards 

and OMB Bulletin 07-04. 

Audit of Compliance with the Federal Managers' Financial Integrity Act, FMFIA.

 In support of OMB Circular A-123 (Revised), the Inspector General will evaluate, 

provide technical assistance and advise the agency head as to whether the agency's review and 

evaluation process was conducted in accordance with the circular's requirements. 

Evaluation of the CFTC Information Security Management Act, FISMA.

 The Federal Information Security Management Act requires the Inspector General or his 

designee to perform annual independent evaluations of the information security program and 

practices of the agency. 

c. Other Audits.

 OIG intends to focus the balance of its audit resources on the review of the management 

and operation of the agency and compliance with Congressional mandates. Specifically, OIG 

intends to continue to monitor the agency’s use of contractors from time to time, with an 

emphasis on contracts for IT services. In addition, OIG intends to focus its efforts with a view to 

auditing or reviewing activities relating to the most serious management challenges facing the 

CFTC. 

 OIG issues an assessment of the most serious management challenges each year for 

publication in the CFTC Performance and Accountability Report. In the past three years, OIG 

has identified as management challenges the following areas of concern: 

 Efficient Acquisition and Integration of Skilled Human Capital 

 Modernization of Electronic Market Surveillance 

 Expansion of CFTC Oversight into New Markets 

 Industry Consolidations 

 Exchange Trading Revolutions (Growth of Derivative Trading) 

OIG will seek to identify issues and to conduct audits and reviews relating to these management 

challenges. Finally, OIG will stand ready to respond to issues and audit requests as they are 

received from Congress, the Agency and members of the public or any other source. 

14
d. Resources Required.

 OIG estimates that approximately one staff year of effort will be devoted over each of the 

next five years further reviews of the agency’s use of contractors. One-half staff year of effort 

will be devoted over each of the next five years to the “Annual Audits” described above. All 

other Audits will consume up to one and a half staff years. Because OIG resources can be 

diverted at any time to an investigation or audit that responds to current concerns or allegations, 

and must be completed in a timely fashion in order to be of assistance to the Agency or 

Congress, it is impossible to forecast with complete accuracy how resources will be utilized from 

year to year. 

CONTACTING THE OFFICE OF THE 

INSPECTOR GENERAL 

 OIG is located at 1155 21st Street, N.W., Washington, D.C. 20581. The telephone 

number is (202)418-5110. The facsimile number is (202)418-5522. The hotline number is 

(202)418-5510. The OIG web page is located at http://www.cftc.gov/aboutthecftc/oig.html 

Regular business hours are between 8:30 AM and 5:00 PM, Monday through Friday, except 

Federal holidays. 

15
Table 1 

Reports Issued with Questioned Costs 

(April 1, 2008 – September 30, 2008)

Dollar Value 

Thousands

Number Questioned Unsupported 

A. For which no management decision has 

been made by the commencement of the 

reporting period 0 0 0 

B. Which were issued during the reporting 

period 0 0 0 

Subtotals (A + B) 0 0 0 

C. For which a management decision was 

made during the reporting period 0 0 0 

( I ) dollar value of 

disallowed costs 0 0 0 

( ii ) dollar value of costs not 

disallowed 0 0 0 

D. For which no management decision 

has been made by the end of the 

reporting period 0 0 0 

16
17

Table 2 

Reports Issued with Recommendations 

That Funds be Put to Better Use 

(April 1, 2008 – September 30, 2008)

Dollar Value 

Number Thousands 

A. For which no management decision has 

been made by the commencement of the 

reporting period 0 0 

B. Which were issued during the reporting 

period 0 0 

Subtotals (A + B) 0 0 

C. For which a management decision was 

made during the reporting period 0 0 

( i ) dollar value of 

recommendations that 

were agreed to by management 

0 0 

( ii ) dollar value of 

recommendations that 

were not agreed to by 

management 0 0 

D. For which no management decision 

has been made by the end of the 

reporting period 0 0 
THE INSPECTOR GENERAL 

 NEEDS YOUR HELP TO 

 ASSURE THE INTEGRITY OF 

 CFTC’S PROGRAMS

 

 Report FRAUD, WASTE

Or ABUSE to the 

INSPECTOR GENERAL 

ANONYMOUSLY

HOTLINE 

(202) 418-5510 

Office of the Inspector General 

Commodity Futures Trading Commission 

1155 21ST Street, N.W. 

Washington, D.C. 20581