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The economic disruptions caused by the COVID-19 pandemic resulted in an abrupt shock to financial markets and affected many credit channels that households, businesses, and state and local governments rely on. In response, the Board of Governors of the Federal Reserve System took steps to support the flow of credit to these sectors by establishing emergency lending programs that made liquidity available to ensure market stability and provide lending support to various sectors of the economy.
In addition, the Bureau of Consumer Financial Protection has continued to play a vital role throughout the pandemic by enforcing federal consumer protection laws and protecting consumers from abuse.
As the Board and the Bureau's independent inspector general, we provide robust oversight of their pandemic response efforts through continuous monitoring, audits, evaluations, and criminal investigations, as well as coordination with our oversight and law enforcement partners.
The following describes our ongoing and planned work. See the Work Plan for full details.
Monitoring of the Federal Reserve's Lending Programs
In response to the economic effects of the COVID-19 pandemic, the Federal Reserve created new lending programs to provide loans to employers, certain businesses, and communities across the country to support the U.S. economy. Specifically, the following programs have been created: the Main Street Lending Program, the Paycheck Protection Program Liquidity Facility, the Municipal Liquidity Facility, the Primary Market Corporate Credit Facility, and the Secondary Market Corporate Credit Facility. We initiated an active monitoring effort of these programs to gain an understanding of the operational, governance, reputational, and financial matters associated with them. Through this monitoring effort, we will refine our focus on the programs and identify areas for future audits or evaluations.
Audit of the Board's Data Aggregation, Validation, and Reporting Processes for Its CARES Act Lending Programs
Section 4026 of the CARES Act and section 13(3) of the Federal Reserve Act require the Board to report certain information regarding its emergency lending programs. The Board has stated its commitment to transparency and accountability by announcing that it will report, on a monthly basis, information on the lending programs using CARES Act funding, including the names and details of the participants in each program; the amounts borrowed and the interest rate charged; and overall costs, revenues, and fees for each program. The Board also reports aggregate information on its weekly comprehensive balance sheet, which is publicly available. We are assessing the Board's processes for collecting, aggregating, and reporting lending information related to its CARES Act lending programs, including the data validation processes it uses to ensure that the information is current, accurate, and complete.
Evaluation of Third-Party Cybersecurity Risk Management Processes for Vendors Supporting the Main Street Lending Program (MSLP) and the Secondary Market Corporate Credit Facility (SMCCF)
In response to the economic effects of the COVID-19 pandemic, the Board created new lending programs and facilities to provide loans to employers, certain businesses, and communities across the country to support the U.S. economy. To support the implementation of specific programs and facilities, the Federal Reserve Banks have contracted with third-party vendors for various services, such as administrative, custodial, legal, design, and investment management services. These vendors provide data generated from the operations and management of the facilities to the Reserve Banks, who then provide the data to the Board. We are evaluating the effectiveness of (1) the risk management processes designed to ensure that effective information security and data integrity controls are implemented by third parties supporting the administration of the MSLP and the SMCCF and (2) select security controls managed by the Reserve Banks for selected systems that process and maintain MSLP and SMCCF data.
Audit of the Board's Oversight of the Reserve Banks' Vendor Selection and Management Processes Related to Its CARES Act Lending Programs
Many of the CARES Act lending programs use vendors to establish and operate the programs, and some programs use multiple vendors. Federal Reserve Banks awarded some of these contracts noncompetitively because of the exigent circumstances, and other contracts pose potential conflict-of-interest risks to the Federal Reserve System. In addition, the reliance on vendors highlights the importance of Reserve Banks' monitoring of vendor performance. We plan to assess the Board's processes for overseeing the Reserve Banks' selection and monitoring of vendors related to its CARES Act lending programs.
Audit of the Bureau's Consumer Response Operations
Pursuant to the Dodd-Frank Act, the Bureau's Office of Consumer Response collects, monitors, and responds to consumer complaints on financial services and products. The Bureau uses these consumer complaints to help inform the agency's supervision activities, enforce federal consumer financial laws, and write rules and regulations. With an increase in consumer complaints as a result of the COVID-19 pandemic and a recent organizational shift to the newly created Division of Consumer Education and External Affairs, Consumer Response faces an operational risk with respect to the timeliness with which it can respond to consumer complaints. We plan to assess the Bureau's effectiveness and timeliness in responding to consumer complaints.
Major Management Challenges