COMMODITY FUTURES TRADING COMMISSION

SEMIANNUAL REPORT 

OF THE 

OFFICE OF THE 

INSPECTOR GENERAL 

FOR THE PERIOD ENDING September 30, 2009 

i

OFFICE OF THE INSPECTOR GENERAL 

COMMODITY FUTURES TRADING COMMISSION

SEMIANNUAL REPORT 

FOR THE PERIOD FROM 

April 1, 2009 THROUGH September 30, 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

Review of Agency Use of GovTrip ............................................................................................ 4

CURRENT AUDITS and REVIEWS ............................................................................................. 5

Audit of CFTC Financial Statements for Fiscal Year 2008. ....................................................... 5

Audit of Compliance with the Federal Managers' Financial Integrity Act, FMFIA ................... 6

Evaluation of the Federal Information Security Management Act at CFTC .............................. 7

Review of the Effect of the CFTC Pay System on Recruitment and Retention ......................... 7

AUDIT REPORTS and REVIEWS OVER SIX MONTHS OLD ................................................. 8

Corrective Action not Completed ............................................................................................... 8

Corrective Action Completed. .................................................................................................... 8

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

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

SUMMARY OF MATTERS REFERRED TO PROSECUTORIAL AUTHORITIES ................. 9

CONGRESSIONAL INQUIRIES .................................................................................................. 9

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

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

Rule Reviews Initiated in Previous Reporting Periods. ............................................................ 10

Rule Reviews Initiated this Reporting Period. .......................................................................... 10

Legislative Activities ................................................................................................................ 10

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

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

Other Reviews. .......................................................................................................................... 11
ii

SUMMARY OF EACH REPORT MADE TO THE AGENCY HEAD ...................................... 11

REVISED MANAGEMENT DECISIONS .................................................................................. 11

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
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.........8

Section 5(a)(4) ...................... Matters referred to prosecutorial authorities............................9

Section 5(a)(5) ..................... Summary of instances where information was refused...............11 

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...............................11 

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

Section 5(a)(13) ................. Information described under the Federal Financial Management......6

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

Section 6(b)(2) .................... Summary of reports to Chairman where assistance was refused.....11 
1

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 April 1, 2009, 

through September 30, 2009. During this period, OIG completed one review and began work on 

one review and three audit projects. OIG also responded to Congressional inquiries, and met 

with Congressional staff to discuss pending legislation and other issues. 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 training. One preliminary 

investigation was opened and closed during the reporting period. No investigations were 

pending at the close of 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 conducted and completed a review of the Agency’s use of GovTrip, finding 

significant issues related to the use of GovTrip and making several recommendations to 

improve GovTrip use and save money. 

 OIG began work on a new review of the Agency’s pay system. This review will evaluate 

whether the CFTC is getting value for the additional pay its employees receive. 

 OIG began work on the fiscal year (FY) 2009 audit of compliance with the Federal 

Managers’ Financial Integrity Act (FMFIA), the FY 2009 Federal Information Security 

Management Act (FISMA) independent evaluation, and the FY 2009 financial statement 

audit. 

 OIG continued its participation in a procurement to secure an external auditor to perform 

the CFTC financial statement audit; however, the Acting Chairman selected the external 

auditor in May 2009. Allegations concerning possible misconduct relating to the 

procurement process that CFTC OIG referred to the Integrity committee during the last 

reporting period were pending at the close of this reporting period. 

 OIG received multiple allegations that CFTC began to implement HSPD-12 out of 

compliance with applicable law. Upon determination that the CFTC Chairman and 

Office of General Counsel had not yet been afforded the opportunity to examine the 

relevant legal issues, OIG declined to investigate pending Agency action. 

 On August 17, 2009, the Assistant Inspector General for Audits began a detail to the 

International Trade Commission to serve as Acting Inspector General. 
2

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; 

 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. 
3

 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. The Integrity Committee investigation is pending. 

3. OIG Resources.

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

(AIGA), 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 

Attorney-Advisor joined in 2007. 

 On August 17, 2009, the AIGA began a detail to the International Trade Commission 

(ITC). The AIGA will serve as the IG for the ITC on a reimbursable basis for a period of up to 

120 days. While serving as the IG, we anticipate the AIGA will gain experience that will be 

valuable to this Office at the completion of the detail. The AIGA remains available to consult 

with this Office regarding the financial statement audit and other activities during the detail. 

 

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). 
4

COMPLETED AUDITS and REVIEWS

1. Review of Agency Use of GovTrip

Objective. 

The objectives of the GovTrip review were to identify issues, strengths and difficulties regarding 

the use of GovTrip, find out what works and what doesn’t, determine which difficulties appear 

with greatest frequency, and evaluate what improvements could alleviate any problems. With 

regard to travel card usage, we were concerned with identifying problems encountered by card 

users during the transition period to a new travel card, as well as any ongoing problems with the 

new travel cards. 

The review covered each employee’s overall experience with GovTrip, with significant focus on 

FY 2008 and FY 2009. Employees have used GovTrip from its introduction at CFTC in 2006 or 

since their start date at CFTC (if later). With regard to travel card usage, the review addressed 

the travel card transition period at the end of FY 2008 up to the present. 

In order to complete our review, we sat down with 46 CFTC employees to discuss their 

experiences with GovTrip and with the travel cards. We focused on Division of Enforcement 

(DOE) employees because they do a high volume of travel, including travel on short notice. 

Status.

The results of our review were mixed. We found no significant problems with the new travel 

cards. While a few employees experienced some difficulties during the travel card transition 

period, none were experiencing ongoing difficulties, and we received no new complaints during 

our review. Another topic revealing no significant problems was reimbursements. Employees 

uniformly were pleased with the speed with which they receive reimbursements through 

GovTrip, with many citing it as an improvement over prior travel systems at CFTC. We were 

also encouraged by the number of employees who made clear that saving money was a priority 

when scheduling travel through GovTrip. 

Nevertheless, the interviews revealed several areas of concern. We learned of significant 

difficulties pertaining to employee use of the GovTrip website on CFTC computers (which 

appears to be exacerbated in the CFTC regional offices). In addition, DOE employees 

demonstrated a lack of knowledge of basic GovTrip functions and official travel policy. It 

appeared that both training and guidance in GovTrip were not readily accessible to CFTC 

employees. The combination of system difficulties and lack of expertise caused many CFTC 

employees to spend far more time than should be necessary or practicable to schedule travel. We 

continued to receive informal complaints about GovTrip from CFTC employees in DOE and 

other divisions while our review was pending. Finally, we were concerned that high level 

employees in DOE were scheduling their own travel, possibly resulting in wasted resources. 
5

We recommended enhanced training and web-based guidance, and encouraged CFTC to urge the 

implementation of constructive changes to the GovTrip system. In addition, we asked CFTC to 

identify and remedy any computer network deficiencies that may exacerbate GovTrip issues. 

The problems relayed to us by CFTC employees were so serious that we believe the core issue --

whether CFTC travelers or administrative employees should schedule travel through GovTrip --

is a question in need of further examination by both the Office of Financial Management (OFM) 

and Agency management. We especially recognized this as an area of concern because DOE 

employees at Headquarters and in two Field Offices schedule their own travel until they reach 

the deputy level. 

During the pendency of our review, the Agency announced the creation of a Travel Services 

Office (TSO) which is described in a response by OFM included with our review. We were 

encouraged by the creation of the TSO, and recommended that use of the TSO be required in all 

instances where CFTC supervisory personnel decide employee time would be better spent on 

mission critical activities, and encourage the OFM to create guidelines to assist CFTC 

supervisory personnel to determine which employees should be required to use the TSO in order 

to process travel in the most efficient and cost effective way possible, prioritizing missioncritical tasks before administrative tasks. 

CURRENT AUDITS and REVIEWS

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

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

the CFTC, along with numerous other Federal entities, to obtain an independent financial 

statement audit each year. During the reporting period, the Acting Chairman selected an external 

auditor to render an opinion on the agency’s financial statements for Fiscal Year 2009 in 

accordance with generally accepted auditing standards, Government Auditing Standards and 

OMB Bulletin 01-02. 

The specific objectives of this audit include 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 Statement on Auditing Standards (AU) Section 

319 and the Federal Managers Financial Integrity Act (FMFIA) are fairly stated in all 

material respects. The Independent Public Accountant (IPA) makes this determination in 

part by obtaining an understanding of the internal control policies and procedures and 
6

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 IPA limits its internal control testing to those controls necessary to achieve the 

objectives described in OMB Bulletin 01-02. 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 01-02. The procedures are not required to provide assurance on internal 

controls over reported performance measures. 

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

by OMB Bulletin 01-02 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. 

Status.

 

 In May 2009, the Acting Chairman selected an external auditor to complete the CFTC 

Financial Statement Audit. The Fiscal Year (FY) 2009 audit began in May with an entrance 

conference with senior agency managers, the OIG and representatives from the IPA. Further 

meetings and reviews have taken place throughout this reporting period while work on the audit 

is ongoing. The final audit report is to be delivered to the Office of the Inspector General in 

November 2009. 

 The IG Act and the Federal Financial Management Improvement Act of 1996 (FFMIA) 

require the Inspectors General of certain agencies to report ―instances and reasons‖ when the 

Agency has not met intermediate target dates established in a remediation plan to bring the 

Agency’s financial management system into substantial compliance with the Act. CFTC is not 

subject to the requirements of the FFMIA; however, it voluntarily seeks to comply with its 

requirements. During this reporting period, there were no events giving rise to a duty to report 

under FFMIA. 

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

The Federal Managers' Financial Integrity Act of 1982 requires federal managers to 

establish a continuous process for evaluating, improving, and reporting on the internal control 

and accounting systems for which they are responsible. OMB Circular A-123, revised December 
7

2004, "Management Accountability and Control," is the implementing guidance for FMFIA. 

The annual FMFIA report will be included in the Performance and Accountability report issued 

on November 16th under the heading ―Management Assurances.‖

Status.

The Office of the Inspector General in the process of receiving and reviewing draft 

internal control reviews produced by agency staff, and will provide comments to the originating 

divisions. OIG will report its assessment of the final FMFIA documents in its annual assurance 

letters to the Chairman which will be included in the PAR. 

3. Evaluation of the Federal Information Security Management Act at CFTC.

The Federal Information Security Management Act (FISMA) was enacted on December 

17, 2002. FISMA requires the Office of the Inspector General to perform annual independent 

evaluations of the information security program and practices of the agency. 

Status.

Due to a new reporting collection system tool, the Office of Management and Budget 

(OMB) established November 18, 2009 as the new deadline for FISMA reports. The OIG is 

currently completing its evaluation of the agency’s FISMA related documents and will submit its 

assessment along with the agency’s documents to OMB by the established due date.

4. Review of the Effect of the CFTC Pay System on Recruitment and Retention.

Scope and Objective

This review will evaluate the effect of the CFTC pay scale on current recruitment and 

retention. Section 10702 of Public Law 107-171, the Farm Security and Rural investment Act of 

2002 (FSRIA) authorized CFTC to create its own pay system (The CT Pay System). CFTC began 

paying employees under the new pay system in 2003. We are going to review retention during the 

past six years, as well as changes in recruitment that may be attributed to the new pay system. The 

objectives of this review are: to elicit employee and management views on how the CT pay 

system has effected recruitment and retention over the past six years, coupled with Agency data 

that will permit an informed analysis of the effect of the CT pay system. 

Status

During the reporting period, the OIG initiated the planning stages of this review, 

researching applicable law and policy regarding the CT pay system and informally discussing the 

review with Agency management. 
8

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. 

3. Management Decision not Made.

 There were 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 and FY10, as well as further consultation 

with regulators as well as Agency management and senior staff, we renew the recommendation. 

In addition, current legislative proposals could greatly expand the CFTC’s jurisdiction and 

mission, and if this is the case we believe it will add to the reasons to open additional CFTC 

Offices on the West Coast and possibly other areas as well. 

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. 
9

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

investigations were opened during this period. One preliminary inquiry was closed without 

formal investigation due to the failure of the submitter to provide any evidence to support the 

claims, and following interviews with appropriate CFTC staff. 

HSPD-12, ―Policy for a Common Identification Standard for Federal Employees and 

Contractors,‖ requires the development and agency implementation of a mandatory, governmentwide standard for secure and reliable forms of identification for Federal employees and

contractors, and was signed by former President George W. Bush on August 27, 2004. In August 

2009 OIG received multiple allegations that CFTC began to implement HSPD-12 out of 

compliance with applicable law. CFTC employees complained that Agency investigations 

undertaken supposedly in furtherance of HSPD-12 were not authorized under HSPD-12 or any 

applicable law. Upon determination that the CFTC Office of General Counsel had not yet been 

afforded the opportunity to examine the relevant legal issues, OIG declined to investigate 

pending Agency action. We understand these issues were pending at the end of the reporting 

period. 

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 supposed 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 as well as pending 

legislation. 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 
10

and makes recommendations regarding more effective or efficient alternatives or protections 

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

CFTC. 

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

relating to legislation, rules (including exchange rules) or investigations. Initial discussions are 

usually informal. Formal comments were not submitted to 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. At the request of Congressional staff, the IG continued to discuss pending HR 885, 

a bill that would convert the IGs at five financial regulators to Presidential appointments. 

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,

2

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 

 

2

 http://www.ignet.gov/randp/fy07apr.pdf. 
11

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.3

 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. 

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 

 

3

 Id. at p.19. 
12

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. 

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 
13

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

Flexibility Act and the Paperwork Reduction Act. 

 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.
14

 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 

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.

 During the next reporting period, the OIG will review the CT pay system and its effect on 

retention and recruitment. 

 Looking to the long term, the 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. The 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 four 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) 

 Efficient Acquisition and Integration of Skilled Human Capital 

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

management challenges. Our forthcoming review of the CT pay system will examine the effects 

of the CT pay system on recruitment and retention efforts, which will speak to the CFTC’s 
15

challenge to efficiently acquire skilled human capital. 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. 

d. Resources Required.

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

reporting period in completion of the review of the CT pay system. 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. 
16

Table 1 

Reports Issued with Questioned Costs 

(April 1, 2009 – September 30, 2009)

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
17

Table 2 

Reports Issued with Recommendations 

That Funds be Put to Better Use 

(April 1, 2009 – September 30, 2009)

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