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July 15, 2013
We appreciate the opportunity to comment on the draft report of the OIG's audit work related to the processes for establishing, maintaining, and monitoring internal control within the Board of Governors of the Federal Reserve System (Board). As the report notes, the Board's divisions have developed processes for establishing administrative internal controls that are tailored to their specific responsibilities. We are pleased that the report found that these controls generally utilize best practices and are designed to increase efficiency and react to changing environments. The following comments provide additional perspective on the report's recommendation and management's planned actions to further enhance our processes.
Recommendation 1: We recommend that the Chief Operating Officer designate responsible officials or an office to:
Concur with the recommendation's intent. We agree that effectively establishing, maintaining, and monitoring administrative internal controls can assist the Board in achieving its goals and objectives and in complying with laws and regulations. We also agree that there are opportunities to enhance our current practices related to administrative internal controls. To that end, we have already implemented, or are in the process of implementing, several enhanced administrative processes. For example, we are establishing within the Division of Financial Management a central tracking point for all audit, inspection, evaluation, or other similar reports pertaining to any Board functional area. This will allow us to better monitor findings across the organization and identify trends and opportunities to more broadly strengthen administrative internal controls. We have also established a comprehensive process for regularly reviewing and updating all of our management policies to ensure that the policies and the underlying practices and associated controls remain up-to-date; I receive regular reports on the status of this activity.
The audit report notes that shortly after FMFIA was enacted, as well as in later correspondence in 1984 and 1988, staff recommended that the Board comply with the spirit and intent of FMFIA. It is unclear, however, from this correspondence whether the Board officially adopted this recommendation or exactly what staff intended in establishing a FMFIA-compliant program. Given the priorities and budgetary constraints underlying the Board's new strategic framework, we believe that creating additional infrastructure to develop and implement policies and processes, to include developing a training program, must be carefully balanced with other competing resource priorities. We will evaluate whether, and in what form, an agency-wide framework makes sense and coordinate with the Executive Committee of the Board to implement any additional requirements.