FY 2006 Performance and Accountability Report

46 Management’s Discussion and Analysis─Inspector General’s Assessment 

Management’s Discussion and Analysis 

Inspector General’s FY 2006 Assessment 
 FY 2006 Performance & Accountability Report

Management’s Discussion and Analysis─Inspector General’s Assessment 47 
FY 2006 Performance and Accountability Report

48 Management’s Discussion and Analysis─Inspector General’s Assessment 
 FY 2006 Performance & Accountability Report

Management’s Discussion and Analysis─Inspector General’s Assessment 49 

Management Addresses Inspector General’s FY 2005 Assessment 

In the FY 2005 Performance and Accountability Report, the Inspector General 

identified two “serious management challenges” facing the Commission: 1) 

Human Resource Planning, and 2) Challenges in the Marketplace. 

The following is the Inspector General’s FY 2005 assessment for each challenge 

and the Commission’s actions taken in FY 2006 to address these challenges. 

Challenge #1, Human Resource Planning 

FY 2005 IG Assessment: 

“Last year, we highlighted the forthcoming human resource challenge likely to 

be faced by the agency in FY 2006. This year that challenge is ever more 

apparent. By March 2006, current estimates are that over 20 percent of CFTC 

staff including 28 percent of the agency’s leadership positions will be eligible for 

retirement. Consequently, based on these factors, this is a significant challenge 

faced by a relatively small Federal agency which will necessitate careful 

planning by management. The OIG is heartened by the agency’s decision to 

establish a Human Capital Team to catalogue current skills of existing 

employees and propose possible pathways for meeting this potential deficit that 

is likely to occur in the next six months. We look forward to the agency 

successfully accommodating the approaching wave of employee retirements 

without materially disrupting the performance of the agency.” 

FY 2006 Actions Taken or Actions in Progress: 

• To assure high-level attention to human capital planning issues on an 

ongoing basis, agency leadership directed the formation of the Pay Parity 

Governance Committee (PPGC), in March 2006. The PPGC is a 

permanent body with rotating membership from all offices, divisions, 

and regions and is charged with identifying, studying, and 

recommending solutions to agency human resources challenges, 

particularly those that may be positively affected by pay parity. It focuses 

on effective use of the agency’s authority to seek total compensation 

parity with the other Federal financial regulators, as provided by the 

2002 amendments to the CEA, in support of attracting, retaining, and 

developing agency talent. The Office of Human Resources (OHR) 

provides two technical representatives to support committee research 

and communications. By meeting weekly since March of 2006, the PPGC 

has made significant progress by completing its initial project to prepare 

a compensation philosophy that will guide future pay parity program 

choices and to update the agency performance management system so it 

can support the move to a modern pay-for-performance system. These 

initiatives will provide the requisite foundation of an improved ability to 

account for and reward results, which will in turn support effective 

implementation of programs to strategically manage agency human 

capital assets. 
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50 Management’s Discussion and Analysis─Inspector General’s Assessment 

• Based on the successful launch of the Strategic Workforce Planning 

Survey system in 2005, OHR has worked with managers to help them act 

on that objective and provided quantitative data that details the areas 

and timeframes in which they stand to lose specific types and levels of 

mission critical employee job competencies through retirements or other 

attrition. By providing assistance in the use of the online Talent 

Management Action Plan template, OHR has encouraged planning and 

responsive action by managers to close the potential talent gaps in their 

units, since the tool facilitates creation of targeted, prioritized human 

capital plans down to the level of individual work units. At the same 

time, OHR and the Office of Information and Technology Services (OITS) 

have met regularly during the year to enhance the reporting capability of 

the Strategic Workforce Planning Survey system, so that managers will 

continue to receive data on competencies at risk of loss. Finally, OHR 

and OITS supported the first annual update by employees of their online 

self-assessment surveys, so that the inventory of employee job 

competencies available to meet the agency mission remains up to date. 

• In addition to aiding individual offices and divisions and their subunits 

to create specific action plans, OHR has acted to address human resource 

challenges that apply across the agency. Armed with data on trends such 

as the potential of 40 percent of CFTC supervisory and managerial 

personnel to retire by 2009, OHR has rolled out a customized suite of 

online managerial courses from Harvard Business School Publishing and 

prepared, during FY 2006, to provide all employees with the Skillsoft 

online training facility. By funding these initiatives, agency management 

has acted to train employees in the managerial skills required to close the 

gap in this crucial agency competency that would otherwise develop due 

to inevitable retirements. 

• OHR staff have continued to represent the agency on the Financial 

Regulatory Agency Group, comprised of Human Resources staff from the 

financial regulatory agencies that, like the CFTC, must seek 

comparability with one another under their legislative authority to offer 

pay and benefits outside of the normal limitations of Title 5 of the U.S. 

Code that apply to General Schedule and Senior Executive Service 

positions. These contacts assure that OHR maintains current awareness 

of pay parity issues, knowledge that is vital to supporting use of the CFTC 

pay parity authority as a mainstay of strategic planning to compete for 

mission-critical skills over time. 

• OHR staff continue to implement administrative improvements that will 

speed the recruitment of replacements for retiring employees, when 

directed. These include online systems that speed security and suitability 

checks on candidates for employment and support more efficient 

administrative processes. Examples include the project now underway to 

convert to the government-wide system of electronic Official Personnel 

Folders under the Office of Personnel Management’s Enterprise Human 

Resources Integration program. 
 FY 2006 Performance & Accountability Report

Management’s Discussion and Analysis─Inspector General’s Assessment 51 

Challenge #2, Challenges in the Marketplace 

FY 2005 IG Assessment: 

“The Commodity Futures Modernization Act of 2000 (CFMA) transformed the 

agency from a prescriptive regulator into an oversight regulatory agency. The 

agency’s regulatory mission over the futures industry is guided by core 

principles stated in the CFMA. Recent innovations in the industry such as the 

initial public offerings of major Chicago based futures exchanges and futures 

commission merchants (FCM) have broadened the impact of any malfeasance 

within the futures industry. How the agency handles unanticipated events such 

as market disruptions and FCM bankruptcies will be closely watched by a 

worldwide audience. To date, management has handled major turbulences that 

have occurred during the fiscal year.” 

FY 2006 Actions Taken or Actions in Progress: 

• Commission staff reviewed for compliance with the CEA and the 

Commission’s regulations, filings of exchanges submitted to the SEC 

prior to demutualization and initial public offering, including the review 

of the CBOT initial public offering and ongoing review of preparations for 

the NYMEX initial public offering. Staff also have been in contact with 

SEC staff when requests arise. 

• Commission staff reviewed for compliance with the CEA and the 

Commission’s regulations, exchange notifications to the Commission, 

including merger agreements and purchase and sale agreements, under 

Commission Regulation 38.5(d) when equity in an exchange is acquired 

by a new owner, including review of the acquisitions of equity in 

HedgeStreet, NYMEX and OneChicago. Such review includes evaluation, 

for compliance with the CEA and the Commission’s regulations, of both 

new exchange governance documents and changes to those documents, 

including bylaws, articles of incorporation, and limited liability 

agreements or operating agreements. 

• As part of its rule enforcement reviews, Commission staff considered the 

impact of such changes on the ability of the exchanges to continue to 

carry out their self-regulatory responsibilities. 

• As a result of financial difficulties experienced by Refco, Inc the parent of 

Refco LLC, a Commission-registered FCM, the Commission mobilized its 

staff to ensure that all customer segregated funds at Refco LLC, were protected until such time as they were transferred in an orderly manner to 

other FCMs – including the eventual sale of the remaining customer accounts and certain other assets of Refco LLC, to Man Financial, Inc. 

(Man) on November 25, 2005. CFTC staff took the following steps to ensure that customers were fully protected: 1) examining the FCM’s books 

and records; 2) undertaking daily calls with Refco staff on issues ranging 

from transfers of accounts, to satisfaction of clearing obligations, to requests to withdraw capital from the FCM; and 3) coordinating with Commission-registered DCOs to ensure that transactions were processed in a 
FY 2006 Performance and Accountability Report

52 Management’s Discussion and Analysis─Inspector General’s Assessment 

timely manner. The Commission also took an active role in the eventual 

sale of certain Refco LLC, assets during the bankruptcy proceeding, including consultations with the exchanges, Refco, and potential bidders 

concerning the means by which the assets could lawfully be sold.