Table of Contents

Inspector General Foreword

A bit of perspective on the year 2001 is helpful to understand the results we are reporting in this performance report.

The year 2001 was a challenging time for the Office of Inspector General (OIG). After a long period of relative organizational stability, 2001 was marked by great flux, with the retirement of the head of the Office of Audits, the largest component of the OIG; a period of interim leadership of that office; and ultimately, the permanent appointment of a new leadership team for the office. As part of those changes, the Evaluations group was merged into the Office of Audits. The OIG also established a new Office of Policy Analysis and Congressional Relations, which assumed some of the responsibilities formerly carried out by the Evaluations group. Along with the new leadership in the Office of Audits and the Office of Policy Analysis and Congressional Relations came new organizational and process changes designed to more effectively achieve the OIG's mission.

Several other key events impacting the OIG's work occurred during 2001. In July the OIG was faced with responding to a congressional request to review the failure of Superior Bank, FSB, one of the costliest of all recent failures of FDIC-insured institutions. The OIG was also required, under the Government Information Security Reform Act, to conduct the most comprehensive review to date of the Corporation's information technology control environment and to deliver the results to the Office of Management and Budget through the FDIC Chairman in September. Additionally, the events of September 11, 2001 had a profound impact on all OIG staff and called into action OIG investigative resources to assist in New York and at the Pentagon in the aftermath of the terrorist activities in those locations. For all of these significant priorities and other work as well, the staff of the OIG rose to the occasion and produced impressive results.

While we are proud of these accomplishments and pleased to have either met or substantially met 74 percent of our goals for 2001, we are not satisfied. We are continuing efforts to become a better organization and improve performance.

We should note that the OIG's Office of Investigations has achieved enhanced client ratings and increased performance, as evidenced in this 2001 performance report. These were achieved in part due to a major reorganization in 1999. Likewise, we are now beginning to feel the positive impact of Office of Audit's reorganization of mid-2001 and are committed to take steps to achieve increased audit performance.

The future holds continued challenges for our office and others in the FDIC as we all undergo downsizing while addressing new and continuing risks to the banking industry. I am confident, however, that we will continue to successfully carry out the OIG mission and that our performance will provide valuable assistance to the Corporation in its efforts to insure deposits, regulate financial institutions, and minimize the number and cost of institution failures

Background

The Office of Inspector General develops its own independent strategic plan and annual performance plan. These plans were designed to establish goals to measure performance consistent with the principles of the Government Performance and Results Act (Results Act). This report presents our performance against our 2001 Annual Performance Plan focusing on the most meaningful annual measures related to achieving our strategic goals and objectives.

The FDIC is issuing its 2001 Program Performance Report to the Congress during the second quarter of 2002, presenting its performance against 21 annual goals. The Corporation's annual goals address its mission to "Contribute to the stability and public confidence in the nation's financial system" in four strategic result areas: (1) Insured depositors are protected from loss without recourse to taxpayer funding, (2) Insured depository institutions are safe and sound, (3) Consumers' rights are protected and FDIC-supervised insured depository institutions invest in their communities, and (4) Recovery to creditors of receiverships is achieved.

We believe that accomplishing the OIG's strategic and annual goals and objectives contributes to the Corporation's achievement of its mission and goals and objectives.

The requirement for an annual performance report under the Results Act applies to the agency as a whole rather than to the OIG as a separate component. However, because of the unique mission and independent nature of Inspectors General under the Inspector General Act, we have prepared separate strategic and annual plans and reports, rather than integrating OIG goals and results into the Corporation's plans and reports. The FDIC's 2001 Program Performance Report references this Annual Performance Report.

Annual performance reports of OIGs prepared under the Results Act differ from semiannual reports of OIGs prepared under the Inspector General Act. The two reports differ with respect to the time periods covered (12 months vs. 6 months) and the specific reporting requirements. However, because both types of reports present OIG accomplishments to the Congress, we have included the Annual Performance Report for calendar year 2001 as a separate but integral component of this Semiannual Report to the Congress, which covers the period of October 1, 2001 to March 31, 2002.

To date, the FDIC OIG has conducted its performance planning and reporting cycle under the Results Act on a calendar year basis, consistent with the Corporation's budget and accounting cycle. However, the OIG receives a separate appropriation based on the government-wide fiscal year ending September 30. We have made a decision to change our Results Act performance planning and reporting cycle to the fiscal year ending September 30. This cycle will also be consistent with the semiannual reporting periods required under the Inspector General Act. To accommodate our conversion from reporting on a calendar year basis to reporting on a September 30 fiscal year basis, we will use a 9-month transition period (January 1 to September 30, 2002) for our next performance reporting cycle. A new strategic plan and an updated annual performance plan with new goals and measures will be developed to be effective for fiscal year 2003, which begins on October 1, 2002.

Summary of Performance Against Annual Goals

The following table summarizes our collective performance against the annual performance goals for 2001. The table reflects whether the goals were Met, Substantially Met, or Not Met.

The table above indicates that we met or substantially met 74 percent of our goals for 2001. Performance cannot be evaluated based solely on a statistical summary of measures, given that all measures are not equal in weight and the quality of the measures is still evolving. A summary discussion of our performance and areas needing improvement is presented in the next section, Performance Overview.

For the previous reporting period (2000), we had an 83 percent level of achievement of goals either met or substantially met (see table on page 83). However, our performance statistics for 2001 are not directly comparable to prior years' performance results due to several factors, including:

• Changes in Goals - This year's goals differ somewhat from last year's because goals have been added, combined, or dropped. Most notably, the number of general client satisfaction goals has increased. We established new baseline data last year enabling us to measure client survey results for each of our three business line functions - audits, evaluations, and investigations - at three levels: senior headquarters executives (as was reported for prior surveys); 2nd tier headquarters and field executives and managers; and a combined rating. Thus, for this year, we have nine general client survey goals (compared to three last year) related to overall client satisfaction. We have an additional general client survey goal related to knowledge of the investigative function and a separate project-by-project survey goal for a total of 11 client survey goals. We believe this creates a disproportionate number of client survey goals in relation to total OIG goals. We will reevaluate appropriate goals for future performance reporting to address this issue and bring our goals into balance.
  
  
• Organizational Realignment - Organizational realignment and operational process changes, as discussed in the Inspector General Foreword, may have affected performance and client survey views related to audits and evaluations.

Performance Overview

As indicated in the statistical summary in the previous section, overall we met 25 of 34 goals (74 percent). Presented below is a brief overview of our performance for each of the three strategic goal areas. A more detailed discussion of goal accomplishment is presented in the next section.

Strategic Goal Area: Audit, Evaluations, and Investigations Add Value

The OIG's 2001 strategic objectives address five components of audit, evaluation, and investigative value (client satisfaction, quality, impact, productivity, and timeliness). While we met or substantially met 17 of 24 goals in these five areas, an assessment of our performance, as compared to the two previous years, indicates a continuing need to increase productivity, timeliness, and client satisfaction. Our Office of Audits and Office of Investigations are committed to doing so.

We met 12 of 19 goals related to productivity, timeliness, and client satisfaction; however, we did not meet 7 of these goals. Concerns with performance in these areas can be explained in part by factors discussed in the Inspector General Foreword related to OIG organizational and operational process transitions and workload priorities (Superior Bank failure and the Government Information Security Reform Act review) occurring during 2001. Full implementation of organizational and process changes should have a positive impact on productivity and timeliness. Steps to improve communication with management have already been initiated, which should address issues underlying client satisfaction results.

We have performed reasonably well against our existing measures and goals related to the quality and impact of our work, meeting or substantially meeting all five goals. However, determining appropriate measures and goals continues to be a challenge. We are currently in the process of updating our strategic and annual goals and measures. This process will give consideration to the new Chairman's priorities discussed at the FDIC Executive Leadership Conference in February 2002 and should result in improved measures.

Strategic Goal Area: Professional Advice

We have successfully met our two performance goals related to providing professional advice on vulnerabilities and emerging issues. We have participated in a number of joint initiatives with FDIC management related to bank supervision, information technology and security, and financial statement reporting. We believe these initiatives have served to improve corporate operations.

Strategic Goal Area: Communications

We met or substantially met six of eight goals related to semiannual reporting, referring hotline complaints, responding to Freedom of Information Act and Privacy Act requests, and establishing new client baseline data. We did not meet goals in two areas as discussed below.

• We did not meet our goal related to client satisfaction with OIG communication efforts. After 2 years of increases, the client survey has indicated a decline in client satisfaction with OIG communication efforts. Survey results suggest the need for OIG executives to have more direct contact and spend more time cultivating relationships with top FDIC managers. We have initiated efforts to achieve this and are beginning to see the positive impact of these actions.
  
  
• We did not meet our goal related to timeliness of acknowledgment of congressional and Chairman's requests. We are reviewing ways to improve this process.

Strategic Objective Area

Audits, Evaluations, and Investigations Add Value

Overall, we met or substantially met 17 of our 24 performance goals related to adding value to the Corporation. These value-added goals encompass the five strategic objective areas of client satisfaction, quality, impact/results, productivity, and timeliness.

Client Satisfaction - Meeting Clients Needs and Expectations

We met or substantially met 7 of our 11 client satisfaction goals for 2001 related to a general client survey and project-by-project surveys.

General Client Survey Overall Goals

We established new baseline data last year enabling us to measure client survey results for 2001 for each of our three business line functions - audits, evaluations, and investigations - at three levels: senior headquarters executives (as was reported for prior surveys); 2nd tier headquarters and field executives and managers; and a combined rating. Thus, for this year, we have nine overall general client survey goals (compared to three last year), creating a disproportionate number of goals in this area. We will reevaluate appropriate goals for future performance reporting to address this issue and bring our goals into balance.

Senior Executives Ratings: We met one of our three goals to increase client satisfaction ratings by FDIC's most senior executives for our core mission activities by 10 percent above the level achieved for 2000. As shown in the following graph, the Evaluation function met its goal and showed a significant (17 percent) increase and was graded as an A/A-. Investigations had a slight (3 percent) increase and received a grade of B/B+. The Audit function had a slight (7 percent) decrease from the previous year and received a C+. The decline may have been due to changed audit and evaluation processes and plans that management did not fully understand.

2nd Tier Executives and Managers Ratings: We met two of our three goals to increase client satisfaction ratings by the FDIC's 2nd tier executives and managers for our core mission activities by 10 percent above the level achieved for 2000. As shown in the following graph, Investigations met its goal and had a significant (86 percent) increase and received a grade of B/B+. The Audit function also met its goal and showed a significant (22 percent) increase and was graded as a C. The Evaluation function had a decrease (18 percent) from the previous year and received a B-/C+. It should be noted that the methodology for obtaining client survey results from 2nd tier executives and managers was changed from focus group interviews for 2000 to electronic email surveys for 2001. Therefore, survey results and ratings for the 2 years may not be fully comparable.

Combined Ratings: For each of the core mission areas, we combined the percentage increase or decrease in ratings for senior executives and 2nd tier executives and managers to determine a net percentage change. Based on the net percentage change, we met all three of the goals to increase client satisfaction ratings for our core mission activities by 10 percent above the level achieved for 2000, up to a sustaining level of 80 percent of the maximum score possible.

Audits: The Audit function showed a net percentage increase of 15 percent (7 percent decrease for senior executives and 22 percent increase for 2nd tier executives and managers).

Evaluations: The Evaluation function showed a net percentage decrease of 1 percent (17 percent increase for senior executives and 18 percent decrease for 2nd tier executives and managers). However, the goal was considered met because the average rating for the Evaluation function by senior executives and 2nd tier executives and managers for 2001 was 3.21, which is greater than the sustaining level of 80 percent of the maximum score possible (3.20).

Investigations: Investigations showed a net percentage increase of 89 percent (3 percent increase for senior executives and 86 percent increase for 2nd tier executives and managers).

Comments from the client survey report, specific to each of our three core mission areas, are summarized below.

Audits: Concerns were expressed about the lack of communications on the plans, activities, and direction of the audit function; the value and cost-benefit of certain audit products; and the timeliness and uneven quality of audit reports and recommendations. On a positive note, respondents believe they have been kept informed about ongoing audits and regard the audit staff as professional and competent.

Evaluations: As in previous years, evaluation work continues to receive the highest client satisfaction ratings of the three core mission areas. Evaluation reports are regarded as well balanced with clear recommendations that can be readily implemented. However, concerns were expressed about the lack of an in-depth understanding of the evaluation function and the integration of the evaluation function into the Office of Audits.

Investigations: Survey respondents expressed concerns about timeliness in completing investigations and had a general lack of knowledge about the investigation function. Only 5 of 15 interviewees at the senior executive level reported they had sufficient experience with the Office of Investigations during the past year to evaluate the investigation function.

Action plans are being developed to address client concerns.

General Client Survey - Office of Investigations Knowledge: The goal to increase the number of FDIC executives having knowledge or understanding of the Office of Investigations was not met. Results of the 2001 general client survey indicated that only 5 of the 15 (33 percent) executives interviewed reported they had sufficient knowledge to evaluate the investigation function. Of the ten who declined to provide an evaluation, five did make comments on their views of the Office of Investigations, which were mostly positive. In 2000, 10 of 14 (71 percent) interviewees reported sufficient knowledge of investigations. Significantly, 11 of the 15 senior executives interviewed during the 2001 survey also participated in the senior executives' interviews last year. As the survey report noted, there was no ready explanation for the sharp drop in reported understanding of the investigation function.

Project-by-Project Survey Goal - Our goal to achieve an average client satisfaction rating for audit and evaluation reports of 80 percent or greater of the maximum score possible on project-by-project client surveys was substantially met. Ratings averaged 87 percent for audit reports and 76 percent for evaluation reports issued during the year.

Quality - Complying with Professional Standards

We met or substantially met both of our quality goals. The Office of Audits goal to have no material weaknesses disclosed from internal and external quality assurance reviews and to resolve any significant matters identified by the reviews was met. The Office of Investigations goal to conduct internal operational reviews every 12 months in its regional offices and resolve significant matters was substantially met.

Impact/Results - Products Achieve Significant Impact or Results

We met or substantially met all three of our impact/results goals. As shown in the following graphs, two impact goals were met, one related to audit and evaluation reports, and the other to investigation results. In the first graph, "impact" reports are audit and evaluation reports that either (1) result in management's agreement to implement actions to achieve monetary benefits and improved programs or procedures or (2) provide FDIC management with relevant, timely information needed for decision-making. In the second graph, significant results are either reports to management, criminal convictions, civil actions, administrative actions, or a combination of these.

A quantitative goal was considered "substantially met" if actual performance came within 10 percent of the target level of performance.

A third impact goal related to establishing an Electronic Crimes Team, initiating investigations into unauthorized intrusions into the FDIC's computer networks, and conducting computer forensic examinations was substantially met.

The following factors present challenges in fully measuring the impact of audit, evaluation, and investigative work: accurately measuring cost savings from work; quantifying the impact of various OIG proactive prevention activities, including the value of improved internal controls resulting from OIG work; and measuring the deterrent value of OIG investigative work.

Our semiannual reports to the Congress present results that have had a significant positive impact on the operations of the FDIC. Results presented include a discussion of major issues facing the Corporation and significant audit, evaluation, investigation, and other OIG activities. The semiannual reports present various measures specified in the Inspector General Act including questioned costs and funds put to better use; fines, restitution, and monetary recoveries resulting from OIG investigations; and nonmonetary recommendations.

As shown in the following graphs, we met or substantially met two of our three productivity goals. Audit reports and memoranda issued (41) were substantially (46 percent) below the target of 76. Evaluation reports, memoranda, or letters issued (13) were above the goal of 12. The goal of 68 investigative cases closed was substantially met1 by closing 65 cases (96 percent of the goal).

The OIG's reorganization of the audit and evaluation functions and implementation of new processes may have had an impact on the issuance of audit and evaluation reports. However, once changes are completely implemented, productivity should improve. Additionally, departures from planned schedules for audits were necessary to address issues and carry out projects brought about by significant congressional requests resulting from the failure and closing of Superior Bank, Hinsdale, Illinois. Of the factors impacting the number of investigative cases closed, the most significant was case complexity.

We met three of our five timeliness goals. The left graph shows two goals. The right graph shows one goal for investigations that includes two aspects of timeliness in issuance of investigation reports.

As shown in the preceding graph - Audits - We did not meet our goal to issue 80 percent of audit reports or other reporting vehicles within 260 days. Actual performance was 59 percent (24 of 41 audit products). The median audit product issuance time was 233 days. Factors related to the difficulties in meeting this goal include those that have been previously mentioned. Evaluations - We met our goal to issue 80 percent of evaluation reports or other reporting vehicles within agreed-upon time frames or within 180 days. Actual performance was 80 percent (8 of 10 evaluation products).

As shown in the preceding graph - We also met our goal to issue 90 percent of Reports of Investigation within 30 working days upon completion of cases, and to issue 100 percent of Reports of Investigation within 60 working days. Actual performance was issuing 100 percent of investigation reports within 30 working days (35 of 35 reports); thus automatically satisfying both aspects of this goal.

As shown in the preceding graph - We did not meet our goal that at least 70 percent of pending investigative cases are less than 2 years of age. At year-end, only 51 percent of cases (58 out of 108) were less than 2 years old. The goal was not met because investigations are becoming more complex and are taking longer to complete. Also, the Office of Investigations is dealing with a number of personnel actions and has experienced some retirements and resignations.

As shown in the preceding graph - We achieved our goal that 100 percent of employee cases, with no criminal prosecution potential, are completed in less than a year. Actual results for the year equaled 100 percent (6 out of 6 cases).

OIG Professional Advice Assists Corporation

We met both of our performance goals in this strategic goal area. One goal relates to our Office of Audits' involvement in conducting assessments or participating in task forces relating to emerging issues, new systems, or other Corporation matters. The second goal relates to reviewing proposed legislation, regulations, and corporate policies.

Emerging Issues and Task Forces

OIG activities in 2001 related to emerging issues and task forces include the following:

• Participated in a technology meeting in New York and offered suggestions related to e-banking.
  
  
• Informed the Division of Information Resources Management (DIRM) of an error in the programming of SCOR (Statistical CAMELS Offsite Rating).
  
  
• Participated in meetings and discussions on ways to improve the FDIC's financial and reporting processes.
  
  
• Participated in the Division of Supervision's Process Redesign project and provided the Structure Group with information about regional and field office lease costs and field office staffing.
  
  
• Assisted DIRM with developing a new process for completing the federally mandated independent security reviews of major applications and general support systems.
  
  
• Analyzed key financial reporting areas to determine what improvements the Corporation can make to assist the Division of Finance in preparing complete financial statements more timely.

Reviewing Corporate Policies and Legislative and Regulatory Proposals

As shown in the graph below, we met the goal related to reviewing and analyzing proposed corporate policies and legislative and regulatory proposals.

Communicating Effectively With the Chairman, the Congress, and Other Stakeholders

As discussed below, we met six of the eight goals in this strategicgoal area.

Ensuring Clients are Informed of OIG Role, Mission, Activities, Issues, and Deficiencies

Client Satisfaction (Senior Executives) - The goal to increase the satisfaction of the senior executives with OIG communication efforts above the 2000 rating was not met. As shown in the first graph below, the communication rating decreased from 2.69 for 2000 to 2.19 for 2001, that is, a reduction from B- to C/C+ if stated in letter grades. This marked the first year communication scores had decreased after two consecutive years of increases. (Note: For comparison purposes, ratings for 1998 and 1999 were recomputed using the 2000 and 2001 grade numerical equivalent values published with the surveys.) Client survey results suggest the need for OIG executives to have more direct contact and spend more time cultivating relationships with the top FDIC managers than they have during the past year. Survey results depicted in the second graph below showed that the level of understanding of the OIG's mission, role, and functions by the senior executives was generally high; however, this was not a performance goal.

Client Satisfaction (Second-Tier Executives and Managers) - The goal to establish a baseline of FDIC management (below the senior executive level) satisfaction with OIG communications efforts and set future targets was met.

Providing Information to Clients - The goal related to providing information to and interacting with the Congress and corporate officials was met. The Semiannual Report to the Congress for the period ending March 31, 2001, which included the OIG 2000 Performance Report, and the Semiannual Report to the Congress for the period ending September 30, 2001, were issued in accordance with all statutory requirements. Also, an analysis and assessment of the Corporation's top 10 performance measures was provided to Congressman Dan Burton, Chairman of the House Committee on Government Reform.

Access to Reports - Our goal to provide OIG semiannual reports, audit reports, evaluation reports, and press releases to the FDIC Information Center and the OIG Webmaster in accordance with policy was met.

Responding to Congressional, Employee, and Public Inquiries and Requests

Hotline Complaints and Freedom of Information Act and Privacy Act (FOIA/PA) Requests - As shown in the first graph below, the OIG's goal to refer hotline complaints within an average of 15 working days of receipt was met. In meeting this goal, the first graph shows the 2001 "actual" average number of days (8), appropriately, as less than the target (15). As shown in the second graph, the goal to respond to 90 percent of FOIA/PA requests within 15 working days of receipt was also met.

Chairman and Congressional Requests - As shown in the graph below, the OIG did not meet its goal to timely acknowledge and track the resolution of requests from the Chairman's Office or from the Congress. During 2001, a tracking system was in place which showed that 50 percent (7 of 14) of Chairman's Office or congressional requests were acknowledged within 10 days of receipt. However, it should be noted that the mean (average) time for acknowledging requests or sending final responses in lieu of acknowledgements was 13 days.

Working with PCIE and Other Government Agencies to Address Crosscutting Issues

We met our goal to actively participate in the activities of the President's Council on Integrity and Efficiency (PCIE) and other government activities relevant to the OIG and FDIC. The FDIC Inspector General continues to serve as PCIE Vice Chair and, in this capacity, provides leadership on a wide variety of interagency activities. Significant OIG activities in achieving this goal in 2001 include:

• Publishing the PCIE and the Executive Council for Integrity and Efficiency (ECIE) Strategic Framework and introductory pamphlet on the Inspector General community.
  
  
• Overseeing the annual awards program and the PCIE and ECIE retreat.
  
  
• Preparing PowerPoint presentations for international visitors and other government audiences.
  
  
• Issuing the PCIE's Annual Progress Report to the President.
• Participating in the Inspector General community's telework and IGNet task group.
• Coordinating with the PCIE on the Government Information Security Reform Act (GISRA), making a presentation at DIRM's Seminar on GISRA, and discussing the OIG's role in satisfying the Corporation's GISRA requirements.
• Meeting with Inspectors General and staff from the Department of the Treasury and the Board of Governors of the Federal Reserve System on emerging issues for a symposium held in November.
  
  
• Coordinating meeting with Treasury OIG and FDIC officials on Office of Foreign Act Control compliance.
  
  
• Contributing an article to the Spring/Summer 2001 issue of the PCIE's Journal of Public Inquiry on a review of FDIC employee use of the Internet.
  
  
• Providing a full-time employee to the Federal Law Enforcement Training Center in support of the federal government OIG training program.
  
  
• Continuing to participate in PCIE Results Act Interest Group meetings.
  
  
• Funding and facilitating the design of two editions of the Journal of Public Inquiry.
• Commenting on various legislative proposals for the PCIE.
  
  
• Attending meetings of the Interagency Ethics Council and the Council of Counsels to the Inspectors General.
  
  
• Continuing to participate in Assistant Inspectors General for Investigations meetings of the PCIE Offices of Inspector General.

Resource Management Goals

In addition to the strategic goals, the OIG has adopted an operating principle that commits the OIG to the effective management of resources related to staffing; information technology; professional standards and internal controls; communications; legal advice; and administrative services.

Resource management goals relate to internal activities such as implementing the OIG's diversity action plan, completing internal quality assurance reviews; conducting risk assessments and internal control reviews; developing information systems and providing computer services to OIG staff; and providing legal advice and other administrative and support services.

A number of accomplishments and activities were involved in pursuing the OIG's resource management goals in 2001. Some of these are highlighted below:

• We continue to address the five action areas in the OIG's Diversity Action Plan through various diversity-related activities such as attending training sessions, participating in meetings and groups, and issuing quarterly OIG diversity reports.
  
  
• A new framework has been developed for a new approach for carrying out our internal Quality Assurance Review responsibilities.
  
  
• A new OIG Training and Professional Development System has been developed and is being implemented.
  
  
• Laptop computer docking stations were installed in the offices of all headquarters staff slated to receive the systems. Docking stations were also installed in field sites.
  
  
• Counsel's office provided advice and counsel on 113 matters which involved some amount of research, in addition to other matters for which responses could be provided immediately. Also, Counsel's office prepared 72 subpoenas for issuance by the Inspector General.
  
  
• A new tracking system was implemented to more accurately measure the time frames between the OIG's receipt and payment of invoices. The system should produce excellent results in paying all requisitions, credit cards, and invoices within the established time frame of 5 business days from the receipt of the request for payment.
  
  
• We are making substantial progress in meeting all of the OIG's human resources customer service standards for personnel actions.
  
  
• An OIG human capital strategic plan has been developed in draft. Work will continue until it is finalized during 2002.
  
  
• A number of improvements have been implemented in response to the 2000 survey of OIG staff satisfaction with our internal administrative services.

Reporting Terms and Requiremnts

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Index of Reporting Requirements - Inspector General Act of 1978, as amended

Our experience has found that the reporting terminology outlined in the Inspector General Act of 1978, as amended, often confuses people. To lessen such confusion and place these terms in proper context, we present the following discussion:

The Inspector General Act defines the terminology and establishes the reporting requirements for the identification and disposition of questioned costs in audit reports. To understand how this process works, it is helpful to know the key terms and how they relate to each other.

The first step in the process is when the audit report identifying questioned costs is issued to FDIC management. Auditors question costs because of an alleged violation of a provision of a law, regulation, contract, grant, cooperative agreement, or other agreement or document governing the expenditure of funds. In addition, a questioned cost may be a finding in which, at the time of the audit, a cost is not supported by adequate documentation; or, a finding that the expenditure of funds for the intended purpose is unnecessary or unreasonable.

The next step in the process is for FDIC management to make a decision about the questioned costs. The Inspector General Act describes a "management decision" as the final decision issued by management after evaluation of the finding(s) and recommendation(s) included in an audit report, including actions deemed to be necessary. In the case of questioned costs, this management decision must specifically address the questioned costs by either disallowing or not disallowing these costs. A "disallowed cost," according to the Inspector General Act, is a questioned cost that management, in a management decision, has sustained or agreed should not be charged to the government.

Once management has disallowed a cost and, in effect, sustained the auditor's questioned costs, the last step in the process takes place which culminates in the "final action." As defined in the Inspector General Act, final action is the completion of all actions that management has determined, via the management decision process, are necessary to resolve the findings and recommendations included in an audit report. In the case of disallowed costs, management will typically evaluate factors beyond the conditions in the audit report, such as qualitative judgements of value received or the cost to litigate, and decide whether it is in the Corporation's best interest to pursue recovery of the disallowed costs. The Corporation is responsible for reporting the disposition of the disallowed costs, the amounts recovered, and amounts not recovered.

Except for a few key differences, the process for reports with recommendations that funds be put to better use is generally the same as the process for reports with questioned costs. The audit report recommends an action that will result in funds to be used more efficiently rather than identifying amounts that may need to be eventually recovered. Consequently, the management decisions and final actions address the implementation of the recommended actions and not the disallowance or recovery of costs.

Appendix 1: Statistical Information Required by the Inspector General Act of 1978, as amended

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Table I.1: Significant Recommendations From Previous Semiannual Reports on Which Corrective Actions Have Not Been Completed

This table shows the corrective actions management has agreed to implement but has not completed, along with associated monetary amounts. In some cases, these corrective actions are different from the initial recommendations made in the audit reports. However, the OIG has agreed that the planned actions meet the intent of the initial recommendations. The information in this table is based on information supplied by the FDIC's Office of Internal Control Management (OICM). These 26 recommendations from 5 reports involve monetary amounts of over $11 million. OICM has categorized the status of these recommendations as follows:

Management is in the process of implementing the corrective action plan, which may include modifications to policies, procedures, systems or controls; issues involving monetary collection; and settlement negotiations in process.

Each case has been filed and is considered "in litigation." The Legal Division will be the final determinant for all items so categorized.

Supervision, Insurance, and Consumer Affairs Audit Report Number & Date Audit Report Title Total Questioned Costs Unsupported Questioned Costs Funds Put to Better Use 02-005 February 6, 2002 Issues Related to the Failure of Superior Bank, FSB, Hinsdale, Illinois EVAL-02-001 February 8, 2002 Evaluation of Rating Differences Between the FDIC and Other Primary Federal Regulators 02-004 February 20, 2002 Follow-up Audit of the FDIC's Use of Special Examination Authority and DOS's Efforts to Monitor Large Bank Insurance Risks 02-009 March 26, 2002 Division of Compliance and Consumer Affairs' Risk-Scoping Process for Fair Lending 02-013 March 26, 2002 Effectiveness of Prompt Corrective Action Provisions in Preventing or Reducing Losses to the Deposit Insurance Funds Resolution, Receivership, and Legal Affairs Audit Report Number & Date Audit Report Title Total Questioned Costs Unsupported Questioned Costs Funds Put to Better Use 01-024 December 5, 2001 FDIC's Identification of and Accounting for Unclaimed Deposits Transferred to State Unclaimed Property Agencies $1,451,248 01-025 December 13, 2001 Least Cost Test Model 02-002 February 8, 2002 Least Cost Decision of Superior Bank and Liquidation of Remaining Receivership Assets 02-006 March 5, 2002 DRR's Efforts to Facilitate Collections on Criminal Restitution Orders $123,450 Information Assurance Audit Report Number & Date Audit Report Title Total Questioned Costs Unsupported Questioned Costs Funds Put to Better Use 02-001 January 2, 2002 Follow-up Audit of Internal Controls Over the Customer Information and Control System for the FDIC Financial Systems 02-003 February 14, 2002 Controls Over Outlook Resources 02-008 March 22, 2002 FDIC's Efforts to Implement a Single Sign-on Process 02-011 March 26, 2002 FDIC's Excess Computer Hard Drive Sanitation Process 02-012 March 28, 2002 Security and Controls Over the Risk Analysis and Value Estimation (RAVEN) System 02-015 March 29, 2002 FDIC's Dividend Processing System Resources Management Audit Report Number & Date Audit Report Title Total Questioned Costs Unsupported Questioned Costs Funds Put to Better Use EVAL-01-004 December 7, 2001 The New Financial Environment Project 02-007 March 21, 2002 FDIC's Program for Managing FDIC-Owned Buildings at Headquarters 02-010 March 22, 2002 Contractor Billing Audit $50,460 02-014 March 29, 2002 Capitalization of Internal-Use Software Development Costs Item Total Questioned Costs Unsupported Questioned Costs Funds Put to Better Use TOTALS FOR THE PERIOD $50,460 $0 $1,574,698 An evaluation report In addition, this report identifed $252,675 in unresolved costs which may result in additional disallowed amounts. Table I.3 Audit Reports Issued with Questioned Costs Item Number of Questioned Costs Total Questioned Costs Unsupported Questioned Costs 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. 1 $50,460 0 Subtotals of A & B 1 $50,460 0 C. For which a management decision was made during the reporting period. 1 $50,460 0 (i) dollar value of disallowed costs. 1 $50,460 0 (ii) dollar value of costs not allowed. 0 0 0 D. For which no management decision has been made by the end of the reporting period. 0 0 0 Reports for which no management decision was made within 6 months of issuance. 0 0 0 In addition, this report identified $252,675 in unresolved costs which may result in additional disallowed amounts. Table I.4 Audit Reports Issued with Recommendations for Better Use of Funds Item Number Dollar Value 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. 2 1,574,698 Subtotals of A & B 2 1,574,698 C. For which a management decision was made during the reporting period. 0 1,574,698 (i) dollar value of recommendations that were agreed to by management. 0 0 - based on proposed management action. 0 0 (ii) dollar value of recommendations that were not agreed to by management. 2 1,574,698 D. For which no management decision has been made by the end of the reporting period. 0 0 Reports for which no management decision was made within 6 months of issuance. 0 0 Table I.5: Status of OIG Recommendations Without Management Decisions During this reporting period, there were no recommendations without management decisions. Table I.6: Significant Revised Management Decisions During this reporting period, there were no recommendations without management decisions. Table I.7: Significant Management Decisions with Which the OIG Disagreed During this reporting period, there were no recommendations without management decisions. Table I.8: Instances Where Information Was Refused During this reporting period, there were no recommendations without management decisions. Abbreviations and Acronyms Abbreviation and Acronym Definition AID Agency for International Development ATM Automated Teller Machine BIF Bank Insurance Fund BOA Bank of America CD Certificates of Deposit CICS Customer Information and Control System DCA Division of Compliance and Consumer Affairs DIRM Division of Information Resources Management DOS Division of Supervision DPS Dividend Processing System DRR Division of Resolutions and Receiverships DRR Ernst & Young ECIE Executive Council on Integrity and Efficiency ECT Electronic Crimes Team FBI Federal Bureau of Investigation FDIC Federal Deposit Insurance Corporation FOIA/PA Freedom of Information Act and Privacy Act FSBH First State Bank of Harrah GAO U.S. General Accounting Office GISRA Government Information Security Reform Act HCSB Hartford-Carlisle Savings Bank IFS Institution for Savings IG Inspector General IRS Internal Revenue Service IT Information Technology JTTF Joint Terrorism Task Force OI Office of Investigations OICM Office of Internal Control Management OIG Office of Inspector General OMB Office of Management and Budget OTS Office of Thrift Supervision PB&T Pueblo Bank and Trust Company PCA Prompt Corrective Action PCIE President's Council on Integrity and Efficiency RAVEN Risk Analysis and Value Estimation System Results Act Government Performance and Results Act RLS Receivership Liability System RTC Resolution Trust Corporation SAIF Savings Association Insurance Fund SCERS Seized Computer Evidence Recovery Specialists In Memory James A. Renick James A. Renick died of a heart attack on February 5, 2002. Jim retired from the FDIC in March 2000 after more than 23 years of service. Jim was involved in almost every aspect of audit and investigative activities at the FDIC. He joined the Corporation in 1976 as Assistant Director of the Office of Corporate Audits which in 1989 became the Office of Inspector General. At that time, he became the Deputy Inspector General, a position he held until then-Acting Chairman Andrew Hove selected him as the FDIC's Inspector General upon the retirement of Robert Hoffman in 1993. When the Congress amended the Inspector General Act in 1993 to designate the position of Inspector General at the FDIC a presidential appointment, Jim served as Acting Inspector General for more than 2 years until current Inspector General Gaston L. Gianni, Jr., was named Inspector General in April 1996. Jim served as Principal Deputy Inspector General until his retirement. Family, friends, and colleagues celebrated Jim's retirement together on March 30, 2000. At the time of his death, Jim resided in Fredericksburg, Virginia, with his wife, Marilyn. He is survived by his wife, three children, and eight grandchildren. OIG Hotline The Office of Inspector General (OIG) Hotline is a convenient mechanism employees, contractors, and others can use to report instances of suspected fraud, waste, abuse and mismanagement within the FDIC and its contractor operations. The OIG maintains a toll-free, nationwide Hotline (1-800-964-FDIC), electronic mail address (IGhotline@FDIC.gov), and postal mailing address. The Hotline is designed to make it easy for employees and contractors to join with the OIG in its efforts to prevent fraud, waste, abuse, and mismanagement that could threaten the success of FDIC programs or operations. Last Updated 06/27/2002 Contact the OIG Search | Accessibility | Privacy | Information Quality | Contact Us | Site Map | Home