COMMODITY FUTURES TRADING COMMISSION

SEMIANNUAL REPORT 

OF THE 

OFFICE OF THE 

INSPECTOR GENERAL

FOR THE PERIOD ENDING September 30, 2014

i

OFFICE OF THE INSPECTOR GENERAL

COMMODITY FUTURES TRADING COMMISSION

SEMIANNUAL REPORT

FOR THE PERIOD FROM

April 1, 2014 THROUGH September 30, 2014

EXECUTIVE SUMMARY

This semiannual report is issued by the Office of the Inspector General (OIG) for the 

Commodity Futures Trading Commission (CFTC) pursuant to the Inspector General Act of 

1978, as amended. It summarizes OIG’s activities and accomplishments for the period April 1, 

2014, through September 30, 2014. During this period OIG completed two contract audits,

completed two reviews, began three reviews, continued work on two contract audits, and began 

work on three contract audits. In addition, OIG completed a peer review of the audit function of 

the U.S. Capitol Police OIG and a peer review of the CFTC OIG audit function was conducted 

by the Export/Import Bank OIG. 

OIG reviewed proposed enforcement actions and rules proposed by CFTC and by 

regulated entities, participated in training, visited CFTC field offices, and participated in 

Government-wide OIG professional and cooperative meetings. No investigations were opened

or closed during this reporting period. No significant problems, abuses or deficiencies regarding 

CFTC programs and operations were identified during this reporting period. 

Highlights of OIG’s completed and ongoing audit, inspection, review, investigative and 

other projects include: 

• OIG completed a contract audit that assessed the review process employed by CFTC 

examination staff in the Division of Swap Dealer and Intermediary Oversight to evaluate 

financial information received from Futures Commission Merchants and Retail Foreign 

Exchange Dealers in compliance with CFTC financial regulatory requirements including 

CEA section 1.16 and 1.17. 

• OIG completed a contract audit of the CFTC Consumer Outreach Program’s efforts for 

enhancing awareness of regulatory resources and protections available to commodity market 

users against fraud.

• OIG completed a review of the CFTC’s leased space at its Kansas City field office, with 

recommendations.

• OIG completed a review of CFTC’s compliance with the Improper Payments Elimination 

and Recovery Act of 2010 during Fiscal Year (FY) 2013.
ii

• OIG continued monitoring a contracted survey audit of CFTC’s resource allocation on 

information technology for achieving its strategic regulatory goals of ensuring sound 

markets, mitigating systemic risk, and monitoring intermediaries. OIG issued the audit report

after the close of the reporting period.

• In accordance with the Accountability of Tax Dollars Act of 20021

, OIG continued

monitoring the required FY 2014 audit of the CFTC financial statements. 

• In accordance with the Dodd-Frank Act,

2 OIG contracted for and is monitoring the required 

FY 2014 audit of the CFTC Customer Protection Fund financial statements. 

• OIG contracted for and is monitoring an audit of CFTC’s FY 2014 compliance with the 

Federal Information Security Management Act (FISMA).

• OIG contracted for and is monitoring an audit of CFTC’s Rule Enforcement Reviews of 

designated Contract Markets for the period FY2011 through FY2014. 

• OIG began reviews of CFTC’s leased space in Chicago and New York City. 

• OIG began a review of the Dodd-Frank Whistleblower program. 

• OIG received a peer review of its audit function from the Export/Import Bank OIG. The peer 

review report and accompanying management letter were issued during the reporting period. 

Federal audit organizations can receive a rating of pass, pass with deficiencies, or fail. CFTC 

OIG received a peer review rating of pass with deficiencies. 

• OIG completed a peer review of the audit function of the Office of the Inspector General for 

the U.S. Capitol Police, and issued a report. U.S. Capitol Police received a rating of pass. 

 

 1 P.L. 107-298, 116 Stat. 2049 (2002). 2 Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-208, 124 Stat. 1376 (2010). 
iii

TABLE OF CONTENTS

EXECUTIVE SUMMARY ............................................................................................................. i

TABLE OF CONTENTS...............................................................................................................iii

INDEX OF IG ACT REPORTING REQUIREMENTS ................................................................ v

INTRODUCTION .......................................................................................................................... 1

CFTC Programs and Operations................................................................................................. 1

OIG Responsibilities................................................................................................................... 1

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

COMPLETED AUDITS, INSPECTIONS, EVALUATIONS, REVIEWS and OTHER 

PROJECTS ..................................................................................................................................... 3

Completed Audits....................................................................................................................... 3

Audit of the CFTC’s Management Controls and Procedures for Evaluating Futures 

Commission Merchants’ (FCM) and Retail Foreign Exchange Dealers’ (RFED) Compliance 

with CFTC Financial Reporting Requirements Mandated by the Commodity Exchange Act 

and the Dodd-Frank Act.......................................................................................................... 3

Performance Audit of CFTC’s Consumer Outreach Program’s Efforts for Enhancing 

Awareness of Regulatory Resources and Protections Available to Commodity Market Users 

Against Fraud.......................................................................................................................... 4

Completed Inspections, Surveys, Evaluations, Reviews and Other Projects ............................. 4

Review of Leasing and Occupancy Levels in Kansas City at the Commodity Futures 

Trading Commission............................................................................................................... 4

Review of CFTC’s Compliance With the Improper Payments Elimination and Recovery Act 

of 2010 During Fiscal Year 2013............................................................................................ 5

IN-PROCESS AUDITS, INSPECTIONS, EVALUATIONS, REVIEWS and OTHER 

PROJECTS ..................................................................................................................................... 6

In-Process Audits........................................................................................................................ 6

Audit of CFTC’s Financial Statement for Fiscal Year 2014 .................................................. 6

Audit of CFTC’s Fiscal Year 2014 Implementation of the Federal Information Security 

Management Act of 2002........................................................................................................ 7

Audit of CFTC’s Customer Protection Fund Financial Statement for Fiscal Year 2014 ....... 7

Audit of CFTC’s Rule Enforcement Reviews of Designated Contract Markets for the Period 

Fiscal Year 2011 Through Fiscal Year 2014 .......................................................................... 8

Survey of CFTC’s Resource Allocation on Information Technology for Achieving its 

Strategic Regulatory Goals of Ensuring Sound Markets, Mitigating Systemic Risk, and 

Monitoring Intermediaries ...................................................................................................... 8

In-process Inspections, Surveys, Evaluations, Reviews and Other Projects .............................. 9

Review of CFTC’s Use of Leased Space in the Chicago Field Office................................... 9

Review of CFTC’s Use of Leased Space in the New York City Field Office........................ 9

Review of CFTC’s Whistleblower Program......................................................................... 10
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AUDIT REPORTS and REVIEWS OVER SIX MONTHS OLD ............................................... 10

Corrective Action not Completed ............................................................................................. 10

Corrective Action Completed ................................................................................................... 11

Management Decision not Made .............................................................................................. 11

INVESTIGATIONS ..................................................................................................................... 11

Completed Investigations.......................................................................................................... 11

Ongoing Investigations............................................................................................................. 11

SUMMARY OF MATTERS REFERRED TO PROSECUTORIAL AUTHORITIES ............... 12

CONGRESSIONAL INQUIRIES ................................................................................................ 12

LEGISLATIVE, REGULATORY AND RULE REVIEWS........................................................ 12

Introduction and Summary ....................................................................................................... 12

Rule Reviews Initiated in Previous Reporting Periods............................................................. 12

Rule Reviews Initiated this Reporting Period........................................................................... 13

Legislative Activities................................................................................................................ 13

OTHER REVIEWS ...................................................................................................................... 13

Other Reviews and Activities. .................................................................................................. 14

SUMMARY OF EACH REPORT MADE TO THE AGENCY HEAD CONCERNING 

REQUESTS FOR INFORMATION OR ASSISTANCE............................................................. 14

REVISED MANAGEMENT DECISIONS.................................................................................. 14

INSPECTOR GENERAL DISAGREEMENT............................................................................. 15

GAO LIAISON............................................................................................................................. 16

STRATEGIC PLAN FOR THE OFFICE OF THE INSPECTOR GENERAL .......................... 16

Investigative Agenda ................................................................................................................ 16

Legislative and Regulatory Review Agenda............................................................................. 17

Audit, Inspection, Survey, Evaluation and Review Agenda..................................................... 17

Introduction........................................................................................................................... 17

Annual Audits....................................................................................................................... 18

Annual Review and Evaluation ............................................................................................ 18

Other Audits, Inspections, Surveys, Evaluations, Reviews and Projects ............................. 19

Resources Required .................................................................................................................. 19

CONTACTING THE OFFICE OF THE INSPECTOR GENERAL............................................ 20

Table 1 – Reports Issued with Questioned Costs.......................................................................... 21

Table 2 – Reports Issued with Recommendations........................................................................ 22
v

INDEX OF IG ACT REPORTING

REQUIREMENTS

Section 4(a)(2) ....................Review of legislation and regulations......................................13

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

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

Section 5(a)(3) ...................Significant recommendations that have not been completed..........10

Section 5(a)(4) ....................Matters referred to prosecutorial authorities............................12

Section 5(a)(5) ................... Summary of instances where information was refused.................14

Section 5(a)(6) ...................Completed audit, inspection and evaluation reports......................3

Section 5(a)(7) ....................Significant reports...............................................................i

Section 5(a)(8) ....................Statistical Table—Questioned Costs.....................................21

Section 5(a)(9) ................... Statistical Table—Funds Recommended for Better Use...............22

Section 5(a)(10) ..................Audit, inspection and evaluation reports lacking..........................

 management decision........................................................11

Section 5(a)(11) ................. Significant revised management decisions...............................14

Section 5(a)(12) .................Significant management decisions where the IG disagrees............15

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

 Improvement Act of 1996............................................................6

Section 6(b)(2) ....................Summary of reports to Chairman where assistance was refused.....14
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.

1

 In May of 2008, Congress reauthorized the CFTC through Fiscal Year 2013.2 On 

July 21, 2010, the President signed into law the Dodd-Frank Act, which expanded the CFTC’s 

jurisdiction and authorities. 

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 Dodd-Frank Act authorizes the CFTC to regulate swap dealers, increase 

transparency and improve pricing in the derivatives marketplace, and lower risk to the American 

public. 

In addition to the Offices of the Chairman and Commissioners, the CFTC operating 

divisions are: Office of the Executive Director, Office of General Counsel, Office of the Chief 

Economist, Division of Clearing and Risk, Office of Data and Technology, Division of 

Enforcement, Office of International Affairs, Division of Market Oversight, Division of Swap 

Dealer and Intermediary Oversight, Office of Legislative Affairs, and Office of Public Affairs. 

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 amendments3 to the 

Inspector General Act of 1978 (IG Act).

4

 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, inspections, evaluations, reviews, projects and, where 

necessary, investigations relating to the administration of CFTC programs and operations; 

 1 P.L. 106-554, 114 Stat. 2763 (2000). 2 P.L. 110-246, 122 Stat. 1651 (2008). 3 P.L. 100-504, 102 Stat. 2515 (1988). 4 P.L. 95-452, 92 Stat. 1101 (1978). 
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 Commission 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. 

It is the duty and responsibility of the OIG to conduct, supervise and coordinate audits 

relating to CFTC programs and operations in accordance with generally accepted government 

auditing standards. Likewise, it is the duty and responsibility of the OIG to conduct 

investigations and inspections in accordance with standards set by the Inspector General 

community. 

The purpose of OIG audits, inspections, evaluations, reviews and projects 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 independent of the Agency and has not experienced any interference from 

the CFTC Chairman in connection with the conduct of any investigation, audit, inspection, 

evaluation, review or project, and our investigations have been pursued regardless of the rank or 

party affiliation of the target. In some instances, OIG has recommended improvement to futures 

regulation efforts. 

CFTC is a designated Federal entity (DFE) under the IG Act.5

 The Dodd-Frank Act 

altered the relationship between the DFE Inspectors General and the Agency head by clarifying 

that “head” of a DFE means “the board or commission of the designated Federal entity.”6 The 

effective date of this provision was July 22, 2010. The OIG has not experienced any interference

from the head of the CFTC in the conduct of its official duties. 

 5 5 USC App. 3 § 8G(a)(2).

6 P.L. 111-203, Title IX, Subtitle I, § 989B, 124 Stat. 1945 (2010) (codified at 5 USC App. 3 § 8G(a)(4)). 
3

3. OIG Resources

OIG consists of six staff: the Inspector General, an Acting Assistant Inspector General 

for Audit, a Program Analyst, two Attorney-Advisors, and a secretary. The Inspector General 

assumed his position on October 7, 1990. The Acting Assistant Inspector General for Audit

joined the office in March 2011, the Program Analyst joined the office in 1999, and the 

Attorney-Advisors joined in 2007 and 2013, respectively. 

COMPLETED AUDITS, INSPECTIONS, EVALUATIONS,

REVIEWS and OTHER PROJECTS

1. Completed Audits

a. Audit of the CFTC’s Management Controls and Procedures for Evaluating Futures 

Commission Merchants’ (FCM) and Retail Foreign Exchange Dealers’ (RFED) 

Compliance with CFTC Financial Reporting Requirements Mandated by the 

Commodity Exchange Act and the Dodd-Frank Act

Background and Audit Objectives

In May 2013, CFTC OIG issued its Review of CFTC’s Oversight and Regulation of MF 

Global, Inc.7

 Among other concerns, we noted that the examination processes for Futures 

Commission Merchants (FCM) at the time had no manuals, were not performed in accordance 

with generally accepted audit standards, and that the teams assigned to perform FCM reviews 

had no peer review or other internal review requirement. In addition, we voiced concern with 

staff documentation of requests for information designed to assure the safety of customer funds. 

The objective of this audit was to assess the process CFTC examination staff, in the Division of 

Swap Dealer and Intermediary Oversight, undertake in their review of financial information 

submitted by FCM and RFED in compliance with CFTC regulatory requirements, including 

CEA section 1.16 and 1.17. CFTC OIG contracted with an independent public accounting firm

and monitored their conduct of the audit.

Status

CFTC OIG issued the audit report on July 17, 2014. The audit found that CFTC had 

management controls to help achieve its regulatory oversight of FCMs’ and RFEDs’ compliance 

with CFTC financial reporting requirements during FY 2012 and FY 2013. The audit identified 

and separately communicated to management certain matters about CFTC’s control deficiencies 

for which CFTC could take measures to strengthen its controls. The full report is available here: 

http://www.cftc.gov/ucm/groups/public/@aboutcftc/documents/file/oig_auditreportp05.pdf. 

 7 Available here: http://www.cftc.gov/ucm/groups/public/@aboutcftc/documents/file/oigregulationmfglobal.pdf.
4

b. Performance Audit of CFTC’s Consumer Outreach Program’s Efforts for 

Enhancing Awareness of Regulatory Resources and Protections Available to 

Commodity Market Users Against Fraud 

Background and Audit Objectives

The CFTC website states: “CFTC’s Office of Consumer Outreach continually strives to 

provide effective information and tools to help consumers avoid fraud.” CFTC conducted an 

audit of the CFTC Consumer Outreach Program’s efforts for enhancing awareness of regulatory 

resources and protections available to commodity market users against fraud. CFTC OIG 

contracted with an independent public accounting firm and monitored their conduct of the audit. 

Status

CFTC OIG issued this audit report on May 1, 2014. The audit concluded that, while 

recent efforts in the area of education and outreach are commendable, additional actions could be 

taken to ensure circulation of or delivery of information about potential fraud, and how to avoid 

it in the commodities market, is disseminated to the public to the maximum extent possible. The 

report is available here: 

http://www.cftc.gov/ucm/groups/public/@aboutcftc/documents/file/oigocoaudit2014.pdf.

2. Completed Inspections, Surveys, Evaluations, Reviews, and Other Projects

a. Review of Leasing and Occupancy Levels in Kansas City at the Commodity Futures 

Trading Commission

Background

CFTC OIG issued a review of small purchases in 2012.8 Our field work for this review

drew our attention to the fact that the Kansas City Office currently is not staffed at capacity; we 

viewed at least 30 empty workspaces (offices and cubicles) during our interviews there. The 

new offices in Kansas City at the time were less than a year old and we realized some staffing 

increases might be anticipated; however, since our report issued the Kansas City Board of Trade 

building has been sold, with all trading moved to Chicago. In our review of small purchases, and 

in our previous Semiannual Report,9 we noted the issue and advised that if space is not being 

used, we believe steps should be taken to reduce associated costs, perhaps through subleasing. 

Status

 8 Our final report issued on December 21, 2012. Available here: 

http://www.cftc.gov/ucm/groups/public/@aboutcftc/documents/file/oig_finalreview122112.pdf. 9 CFTC OIG Semiannual Report for the Period Ending March 31, 2013, page 9. Available here: 

http://www.cftc.gov/ucm/groups/public/@aboutcftc/documents/file/oigsar033113.pdf. 
5

Field work for this review, including document review and interviews, was completed 

during the reporting period, with the final report issued on June 4, 2014. The CFTC OIG found 

that CFTC presently utilizes approximately one-third of its Kansas City Regional office space; it

has 25 staff working in office space that accommodates 78, with rental payments averaging 

approximately $44,000 a month. CFTC OIG recommended that CFTC take immediate steps to 

dispose of the excess space. After issuing a preliminary report to management and after issuing 

the final report, we have learned that management has reached out to the landlord, that the 

landlord has sold the building, and that management now plans to consolidate staff in a portion 

of the office space, in order to permit the remaining unused space to be released to the landlord 

or sublet. The full report is available here: 

http://www.cftc.gov/ucm/groups/public/@aboutcftc/documents/file/oig_rkcr061014.pdf. 

b. Review of CFTC’s Compliance With the Improper Payments Elimination and 

Recovery Act of 2010 During Fiscal Year 2013

Background

On July 22, 2010, President Obama signed into law the Improper Payments Elimination 

and Recovery Act (IPERA), amending the Improper Payments Information Act of 2002. IPERA 

requires agencies to review all programs and activities they administer and identify those which 

may be susceptible to significant improper payments. 

Significant erroneous payments are defined as annual erroneous payments in the program 

exceeding both $10 million and 2.5 percent, or $100 million of total annual program payments. 

The Commission does not administer grant, benefit, or loan programs. CFTC’s most significant 

expenses are payroll and benefits for its employees, which are administered by the USDA’s 

National Finance Center and the Office of Personnel Management. The Commission has 

determined that none of its programs and activities is susceptible to significant improper 

payments at or above the threshold levels set by OMB. The Commission therefore is not 

required to determine a statistically valid estimate of erroneous payments or develop a corrective

action plan if the program is not susceptible to significant improper payments. 

Status

CFTC OIG conducted a limited review of the CFTC’s compliance with IPERA for Fiscal 

Year 2013. During the OIG’s limited review, nothing came to our attention that would indicate 

that the CFTC did not comply with IPERA requirements. Our limited review, issued on April 

14, 2014, is available here: 

http://www.cftc.gov/ucm/groups/public/@aboutcftc/documents/file/oig_ipera041414.pdf.
6

IN-PROCESS AUDITS, INSPECTIONS, EVALUATIONS,

REVIEWS and OTHER PROJECTS

1. In-Process Audits

a. Audit of CFTC’s Financial Statement for Fiscal Year 2014

Background

In 2002, Congress passed the Accountability of Tax Dollars Act.10 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 Inspector General selected an independent 

public accountant (IPA) to render an opinion on the agency’s financial statements for Fiscal Year 

2014 in accordance with generally accepted auditing standards, Government Auditing Standards,

Office of Management and Budget (OMB) Bulletin 01-02 and OMB Circular A-136.

Audit Objective

The objective of this audit is to render an opinion on the CFTC’s financial statement and 

report on internal controls and compliance with laws and regulations. 

Status

 

The Fiscal Year 2014 audit began during this reporting period 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.11 

 10 P.L. 107-289, 116 Stat. 2049 (2002). 11 The IG Act and the Federal Financial Management Improvement Act of 1996 (FFMIA), P.L. 104-208, 110 Stat. 

3009 (1996), 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 FFMIA. CFTC is not subject to the FFMIA; however, it voluntarily 

seeks to comply with its requirements. During this reporting period, we were aware of no events giving rise to a 

duty to report under FFMIA.
7

b. Audit of CFTC’s Fiscal Year 2014 Implementation of the Federal Information 

Security Management Act of 2002

Background

The Federal Information Security Management Act of 2002 (FISMA)12 outlines the 

information security management requirements for agencies, and includes an annual independent 

evaluation of an agency’s information security program and practices to determine their 

effectiveness. FISMA requires the annual evaluation to be performed by the agency’s Office of 

the Inspector General (OIG). 

Audit Objective

The objective of this audit is to perform an independent evaluation of the CFTC’s

compliance with FISMA during FY 2014. As part of this audit, the OIG will also assess the 

CFTC’s privacy program and privacy impact assessment processes as described in the Agency’s 

FISMA package. 

Status

CFTC OIG contracted with an independent public accounting firm to conduct the audit. 

Work on this audit was ongoing at the close of the reporting period. The planned completion 

date is in accordance with required deadlines. 

c. Audit of CFTC’s Customer Protection Fund Financial Statement for Fiscal Year 

2014

Background

Section 745(g)(5) of the Dodd-Frank13 Act requires the Agency to submit to Congress a 

yearly report on the Commission’s whistleblower award program that includes a complete set of 

audited financial statements, including a balance sheet, income statement, and cash flow 

analysis. The OIG is undertaking this required audit. 

Audit Objective

The objective of this audit is to render an opinion on the CFTC’s Customer Protection 

Fund’s financial statements and report on the Customer Protection Fund’s internal controls over 

financial reporting and compliance with laws and regulations. As part of this audit, the OIG will 

also review the agency’s report to designated Congressional committees on activities of the 

Customer Protection Fund during the previous year.

 12 P.L. 107-347, 116 Stat. 2899 (2002). 13 P.L. 111-203, Title VII, Subtitle A, § 748, 124 Stat. 1739 (2010) (codified at 7 USC § 26(g)(5)). 
8

Status

During this reporting period CFTC OIG contracted with an independent public accounting 

firm to perform this audit is monitoring their conduct of the audit.

d. Audit of CFTC’s Rule Enforcement Reviews of Designated Contract Markets for 

the Period Fiscal Year 2011 Through Fiscal Year 2014

Background

The Division of Market Oversight’s (DMO) Market Compliance Section conducts regular 

reviews of each designated contract market’s (DCM) ongoing compliance with core principles 

through the self-regulatory programs operated by the exchange in order to enforce its rules, 

prevent market manipulation and customer and market abuses, and ensure the recording and safe 

storage of trade information. These reviews are known as rule enforcement reviews (RERs). 

Audit Objective

The objectives of this audit are to review DMO Market Compliance Section’s responsibility 

for conducting Rule Enforcement Reviews (RER) under the Commodity Exchange Act and the 

Dodd-Frank Act; evaluate frequency of the RERs; length of time to complete RERs; remediation 

of CFTC identified RER findings and recommendations for improving the operations at DCMs. 

Further the audit team will examine the current staffing size of the Market Compliance SectionRER unit and comment on the RER unit’s ability to deliver a timely and quality product that 

achieves the CFTC’s stated goals for this oversight function of DCMs-in light of expanded 

CFTC jurisdiction over the Swaps Markets. 

Status

During this reporting period CFTC OIG contracted with an independent public accounting 

firm to perform this audit, and is monitoring their conduct of the audit.

e. Survey of CFTC’s Resource Allocation on Information Technology for Achieving its 

Strategic Regulatory Goals of Ensuring Sound Markets, Mitigating Systemic Risk, 

and Monitoring Intermediaries

Background

Since FY 2011, Congress has set aside specific funding levels to encourage the 

Commission to focus on technology as a key component of its surveillance and oversight 

program. CFTC OIG is auditing CFTC’s resource allocation on information technology for 

achieving its strategic regulatory goals of ensuring sound markets, mitigating systemic risk, and 

monitoring intermediaries.
9

Audit Objectives

CFTC OIG contracted with an independent public accounting firm to conduct a survey 

to 1) determine the highest IT priorities documented in CFTC’s IT acquisitions plan and 

spending plans for FYs 2011 through 2013, and 2) assess whether IT spending was consistent 

with the plans.

Status

Fieldwork for this survey was ongoing at the close of the reporting period. The report

was completed on October 1, 2014.

2. In-Process Inspections, Evaluations, Reviews and Other Projects

a. Review of CFTC’s Use of Leased Space in the Chicago Field Office

Background, Objective, Scope, and Methodology

CFTC OIG issued a review of leased space in the Kansas City during the prior reporting 

period. Interest in this issue in our view warrants additional examination of CFTC’s leased 

space. In contrast to other CFTC offices, the Chicago regional office is currently occupied at 

near capacity. Our review will acknowledge this achievement, analyze the use of this leased 

space, and make recommendations to increase efficiency as warranted. 

We will cover the period of operation of the most recent lease of space in Chicago. We 

will interview staff and management in the Chicago regional office, as well as relevant staff and 

management at Headquarters. 

Status

Field work for this review, including document review and interviews, was ongoing at 

the close of the reporting period. 

b. Review of CFTC’s Use of Leased Space in the New York City Field Office

Background, Objective, Scope, and Methodology

CFTC OIG issued a review of leased space in the Kansas City during the prior reporting 

period. Interest in this issue in our view warrants additional examination of CFTC’s leased 

space. The New York City regional office is currently less than 75% occupied. Our review will 

analyze the use of this leased space, and make recommendations to increase efficiency as 

warranted. 
10

We will cover the period of operation of the most recent lease of space in New York. We 

will interview staff and management in the New York regional office, as well as relevant staff 

and management at Headquarters. 

Status

Field work for this review, including document review and interviews, was ongoing at 

the close of the reporting period. 

c. Review of CFTC’s Whistleblower Program

Background, Objective, Scope, and Methodology

The Dodd-Frank Act mandated the establishment of a Whistleblower Program Office and 

Consumer Outreach Program Office. Specifically, section 748 added to the Commodity 

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

incentives and protection.14 In the intervening years, CFTC has adopted regulations to 

implement the program, and has made one whistleblower award (at the close of the reporting 

period). 

This review will examine the period from its inception to the present, will examine the 

statutory and regulatory background for the Whistleblower program, will describe activities by 

the program, and make recommendations as deemed necessary. We will interview staff and 

management in the Whistleblower program, in the Division of Enforcement, and in other CFTC 

divisions and offices. 

Status

Field work for this review, including document review and interviews, was ongoing at 

the close of the reporting period. 

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. 

 14 P.L. 111-203, Title VII, Subtitle A, § 748, 124 Stat. 1739 (2010) (codified at 7 USC § 26).
11

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. We 

note with approval that the Agency is taking steps to implement our recommendation made 

during this reporting period that management attempt to reduce excess leased space in Kansas 

City. Agency management represents that it has reached out to the landlord, and plans to 

consolidate staff in a smaller area of the leased space in order to make available excess space for 

sublet or for release to the landlord, if feasible. 

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. 

INVESTIGATIONS

1. Completed Investigations

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

receive and investigate complaints or information from Commission 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 this reporting period. No investigations were opened during this period. 

2. Ongoing Investigations

The CFTC OIG does not comment on all ongoing investigations and may not disclose the 

existence of all investigations. Ongoing investigations that have become public, through the 

press or otherwise, will be discussed in semi-annual reports, absent exigent circumstances. At 

the close of the reporting period, there were no ongoing investigations. 
12

SUMMARY OF MATTERS REFERRED TO 

PROSECUTORIAL AUTHORITIES

No matters were referred to prosecutorial authorities during this reporting period. 

CONGRESSIONAL INQUIRIES

The Inspector General continues to be involved in legislative activities pertaining to both 

the CFTC and the IG community. The IG serves on the legislation committee for the Council of 

Inspectors General on Integrity and Efficiency, which discusses and provides guidance on 

pending legislation affecting the IG community. 

During the reporting period OIG fielded requests for assistance from members of 

Congress and staff. 

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 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. The OIG actively monitors the proposed rules and regulations under 

development as a result of Dodd-Frank Act. 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. 
13

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 of the 

Office of Inspector General, and made contact with Congressional staff concerning various 

agency and IG issues as appropriate. The IG served on the legislation committee for the Council 

of Inspectors General on Integrity and Efficiency, which comments on proposed amendments to 

the IG Act and other legislation affecting the IG community. 

OTHER 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,

15

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.16

Section 989C of the Dodd-Frank Act implemented a requirement to include in each OIG 

semiannual report an appendix containing:

• The results of any peer review conducted by another Office of Inspector General during 

the reporting period; or if no peer review was conducted within that reporting period, a 

statement identifying the date of the last peer review conducted by another Office of 

Inspector General;

 15 http://www.ignet.gov/randp/fy07apr.pdf. 16 Id. at p.19. 
14

• A list of any outstanding recommendations from any peer review conducted by another 

Office of Inspector General that have not been fully implemented, including a statement 

describing the status of the implementation and why implementation is not complete; and

• A list of any peer reviews conducted by the Inspector General of another Office of the 

Inspector General during the reporting period, including a list of any outstanding 

recommendations made from any previous peer review (including any peer review 

conducted before the reporting period) that remain outstanding or have not been fully 

implemented.

During this reporting period the OIG for the Export-Import Bank conducted a peer review audit 

of the audit function at CFTC OIG. Federal audit organizations can receive a rating of pass, pass 

with deficiencies, or fail. CFTC OIG received a rating of pass with deficiencies. There are no 

outstanding recommendations from this peer review that have not been fully implemented. 

In addition, CFTC OIG conducted a peer review of the audit function of the U.S. Capitol Police 

OIG. The U.S. Capitol Police OIG received a rating of pass. There are no outstanding 

recommendations from this peer review that have not been fully implemented. 

CFTC OIG did not conduct any peer reviews of other OIGs’ investigative functions. The last 

peer review of the CFTC OIG investigative function by another Office of Inspector General was 

completed on March 27, 2013. CFTC OIG received a rating of pass. 

2. Other Reviews and Activities

No other review activity took place during this reporting period. 

SUMMARY OF EACH REPORT MADE TO

THE AGENCY HEAD CONCERNING REQUESTS FOR 

INFORMATION OR ASSISTANCE

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

information or assistance unreasonably refused or not provided (mandated under section 5(a)(5) 

of the IG Act).

REVISED MANAGEMENT DECISIONS

No management decisions were revised during this reporting period.
15

INSPECTOR GENERAL DISAGREEMENT

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

recommendations during this 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 follow-up 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, but required the Agency on a yearly basis 

to provide to OIG an analysis of regional case filing statistics and costs associated with cases in 

various regions of the country. The Division of Enforcement submitted their yearly analysis to 

OIG during the Acting Chairman’s remaining time in office. In light of current funding stresses 

at CFTC, we realize the practicalities of the situation will not permit expansion at this time. We 

advise the Agency to retain westward expansion as a long term goal. 

During the prior reporting period we issued a report titled: “Review of the Commodity 

Futures Trading Commission’s Response to Allegations Pertaining to the Office of the Chief 

Economist.” That report found that the Commission’s prohibition against publication absent 

express permission from the Office of General Counsel, coupled with a mandatory review 

process lasting up to 14 months, risked violating the First Amendment rights of CFTC 

economists publishing under their own name, with their CFTC affiliation listed as an 

autobiographical detail, regardless of their status as employees, contractors, or consultants at 

CFTC. At the end of this reporting period we obtained an update from the current Director of 

the Office of Chief Economist. He stated that the review periods for economic research papers 

have improved, with papers being approved in some instances in a matter of days. While the 

decision to speed up the review time follows our general recommendations, we are discouraged 

that only one economist has been brought on during the reporting period. As the Office of Chief 

Economist included 39 economists at the end of 2012 (prior to the receipt of allegations, and 

including several economists who serving in an unpaid capacity), we would like to see the 

Commission do more to reinvigorate the research program within OCE. Even with the increased 

staff, today there are 13 on staff in OCE. It appears that management has not determined at this 

time to fully implement the recommendations, which included increasing staff as well as 

speeding up review times. We are hopeful that, with the arrival of a new Chairman during the 

reporting period, the economic research program will continue to improve. 

In the meantime, we would note with appreciation that it appears Congress responded directly to 

this report, including in proposed HR 4413, a bill to reauthorize the Commodity Futures Trading 

Commission through 2018. Section 205 of HR 4413 would require the establishment of a 

permanent Office of the Chief Economist, headed by a Chief Economist appointed by the 

Commission, who reports directly to the Commission, and would require the appointment of 

such other economists as may be necessary to assist the Chief Economist in performing “such 

economic analysis, regulatory cost-benefit analysis, or research as the Commission may direct.” 
16

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, reviews 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, review and inspection activities identifies 

the goals of each endeavor 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 reviews or investigations per year. This strategy is followed 

because OIG believes that an independent regulatory agency such as the CFTC, without grant 

money or substantial contracts to award, is not likely to generate a substantial investigative 

workload.

To ensure that employee complaints can easily reach OIG, a 24-hour hotline was

established in 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.
17

2. Legislative and Regulatory Review Agenda

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

OIG selectively reviews proposed and final CFTC regulations, legislation and selected exchange 

rules generally using six basic criteria, to wit, 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.

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, Inspection, Survey, Evaluation and Review Agenda

a. Introduction

The primary objectives of the OIG audit, inspection, evaluation and review 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 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.
18

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 

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 the CFTC Customer Protection Fund

Section 745(g)(5)(I) of the Dodd-Frank Act requires the CFTC to submit to Congress a 

yearly report on the Commission’s whistleblower award program that includes a complete set of 

audited financial statements, including a balance sheet, income statement, and cash flow 

analysis. The OIG is undertaking this required audit.

c. Annual Reviews and Evaluations

We will perform the following reviews and evaluations on an annual basis:

Review 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 Compliance with the Federal 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. This compliance may also be performed through an audit. 

Review of Agency Compliance with the Improper Payments Elimination and Recovery Act

On July 22, 2010, President Obama signed into law the Improper Payments Elimination 

and Recovery Act. IPERA directs each agency’s Inspector General to review agency improper 

payment reporting in the agency’s Annual Financial Report. The Office of the Inspector General 

will annually review the agency compliance with IPERA. 
19

At the discretion of the Inspector General, the projects described above periodically may 

be performed as audits. 

d. Other Audits, Inspections, Surveys, Evaluations, Reviews and Projects

Looking to the long term, the OIG intends to focus the balance of its resources on the 

review of the management and operation of the agency and compliance with Congressional 

mandates. OIG plans to concentrate its efforts in reviewing activities relating to the most serious 

management challenges facing the CFTC. 

In addition, OIG is aware of the immense regulatory undertaking required under the 

Dodd-Frank Act. OIG will seek to identify issues and to conduct inspections, reviews, 

investigations and other activities relating to these management and regulatory challenges. 

Finally, OIG will stand ready to respond to issues and requests as they are received from 

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

e. Resources Required

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

next five years to the annual audits, the annual reviews, and the annual evaluations described 

above. However, OIG is updating its audit universe in view of CFTC’s increased responsibilities 

under the Dodd-Frank Act and will reevaluate its staffing needs once the update is complete. 

Revision of the CFTC OIG audit procedures and other remediation-related tasks, and all other 

investigations, inspections, evaluations, review and other projects will consume up to two and a 

half staff years. Because OIG resources can be diverted at any time to an investigation, audit, 

inspection, survey, evaluation, review, or other project 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. In FY 2015 we hope to hire three additional full time staff. Due to staff size, 

we will continue to utilize outside independent auditors to perform OIG audits as necessary. 
20

CONTACTING THE OFFICE OF THE 

INSPECTOR GENERAL

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

hours are between 8:30 AM and 5:00 PM, Monday through Friday, except Federal holidays. 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/About/OfficeoftheInspectorGeneral/index.htm. 
21

Table 1

Reports Issued with Questioned Costs

(April 1, 2014 – September 30, 2014)

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
22

Table 2

Reports Issued with Recommendations

That Funds be Put to Better Use

(April 1, 2014 – September 30, 2014)

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
Report FRAUD, WASTE or ABUSE

in connection with

CFTC Programs and Operations

to the Office of the

INSPECTOR GENERAL.

You may report ANONYMOUSLY.

(202) 418-5510 

HOTLINE 

THE INSPECTOR GENERAL

NEEDS YOUR HELP TO ASSURE 

THE INTEGRITY OF CFTC’S 

PROGRAMS AND OPERATIONS.

 

 

 

 

Office of the Inspector General 

Commodity Futures Trading Commission 

1155 21ST Street, N.W. 

Washington, D.C. 20581