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Board Report: 2014-AE-B-006 March 28, 2014

The Board's Law Enforcement Unit Could Benefit From Enhanced Oversight and Controls to Ensure Compliance With Applicable Regulations and Policies

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Appendix B: Management's Response

March 25, 2014
Melissa Heist, Associate Inspector General for Audits and Evaluations
Michell Clark, Director, Management Division
Management’s Response to OIG Inspection of the LEU

We have reviewed your report entitled “The Board’s Law Enforcement Unit Could Benefit From Enhanced Oversight and Controls to Ensure Compliance With Applicable Regulations and Policies,” prepared as part of your responsibility as the external oversight function for reviewing and evaluating the Board’s law enforcement program.  Thank you for the opportunity to provide comments on your findings and recommendations.

Finding 1: The IOC does not perform inspections and evaluations on a routine basis


We recommend that the Chief Operating Officer

  1. Ensure that effective and consistent oversight of the Board’s LEU is maintained by establishing a policy that documents
    1. an expected frequency for IOC meetings.
    2. the scope and frequency of IOC inspections and evaluations.
    3. specific roles and responsibilities for the IOC members.
  2. Ensure that IOC inspections and evaluations of the Board’s LEU are performed biennially at a minimum and that results are reported to the EOF.

Management’s Response

We concur and Chief Operating Officer (COO) has already taken several steps toward ensuring that the IOC meets regularly and ensures consistent oversight of the LEU.  Reserve Bank IOCs are required to perform inspections every 24 months, but the Board is not. The Committee reviewed the inspections of the LEU performed by the OIG in 2006 and 2009.  Based on the scope of these inspections, the Committee did not conduct its own inspections of the LEU. Effective August 30, 2013, responsibility for appointing the Chair of the Internal Oversight Committee was transferred to the Board’s COO. Under the direction of the COO, the by-laws relating to the administration of the IOC have been amended to establish a formal procedure for the appointment of members to the Committee.  Effective the same date, the directors of the Management, Legal, Board Members, and Reserve Bank Operations and Payment Systems (RBOPS) Divisions were given the responsibility of designating their representative membership on the IOC. Effective November 5, 2013, the committee was re-formed and the COO designated a new chairperson.

The chair and other members of the oversight committee have met informally to discuss, among other things, procedures for inspections of the LEU by the committee.  The committee will consider the matters contained in the recommendations at upcoming meetings. Consistent with the Federal Reserve Law Enforcement Officers Uniform Rules the IOC will provide the external oversight function with copies of any evaluations conducted.

Finding 2: The LEU did not effectively or consistently implement established controls to account for property Account for Property


We recommend that the Chief of the LEU

  1. Strengthen accountability and control over credentials and badges by
    1. requiring that periodic updates of inventory records be signed and dated certifying items on hand and those that have been assigned.
    2. requiring a second-level review of each inventory update, to include signed and dated records certifying that the review was completed.
  2. Require that credentials be destroyed or rendered void within one week of officer separation from the LEU and that the LEU Operations Support Bureau prepare and maintain an administrative record of the disposition.
  3. Ensure that the daily firearms inventory is documented in a consistent manner and that a second-level review of the inventory is performed and documented.
  4. Strengthen accountability and control over ammunition by
    1. requiring formal quarterly inventories of all ammunition, to include signed and dated records certifying that the inventory was completed.
    2. requiring a second-level review of each quarterly inventory, to include signed and dated records certifying that the review was completed.
  5. Require evidence confirming officers’ receipt of credentials, badges, and firearms when these items are issued and evidence confirming their return when officers separate from the LEU. The evidence should include relevant information describing the property as well as the appropriate dates and signatures.

Management’s Response

Overall the Management Division concurs with the recommendations. The LEU has already taken steps to tighten accountability of property. The Operations Support staff are properly tracking the disposition of issued and un-issued badges, and all unassigned badges have been collected, inventoried, and locked in a safe. In addition, a 100% inventory has been conducted of all issued badges. Credentials will be destroyed or rendered void within one week of an officer’s separation and the disposition of these destroyed credentials will be recorded and maintained by the Operations Support Bureau. A physical inventory of all serialized property will occur annually. Additionally, physical inventory of badges and credentials will occur biannually. The daily firearms inventory report has been retooled and supervisory staff have been re-trained regarding expectations for counting and inventory control of weapons and ammunition.  A monthly secondary review of all inventories has also been implemented.

The LEU is in the process of identifying a scalable inventory management system capable of tracking all real property belonging to the unit. This system will aid in maintaining accurate records as well as ensuring accountability for critical assets such as badges, firearms, ammunition, credentials, and badges.

Finding 3: The LEU Training Bureau did not ensure that all training and recertification requirements were documented or met recertification requirements


We recommend that the Chief of the LEU

  1. Require periodic reviews of training records to ensure that instructors and officers comply with all training and recertification requirements contained in the Federal Reserve System Law Enforcement Training Manual.
  2. Ensure that a signed Instructor Performance and Expectations Acknowledgement form is obtained annually from instructors and retained by the Training Bureau.

Management’s Response

The Management Division concurs with recommendations eight and nine. The Law Enforcement Unit Training Bureau has modified forms, where appropriate, and is strengthening controls by storing the Instructor Performance and Expectations form in a consolidated repository and reviewing the required documents annually. Additionally, a new form has been developed which records each officer’s participation in Federal Reserve System required training topics. The form is signed, stored electronically, and reviewed annually to ensure compliance.  

Regarding the fourth set of findings that opportunity exists to strengthen controls around the signature and retention of firearms eligibility and use-of-force forms, the Management Division concurs with the recommendations. The Law Enforcement Training Bureau has already strengthened the controls to ensure that firearms eligibility and use-of-force forms are signed and retained. A new form has been developed and is presented to each LEO at in-service training. These forms are signed, collected, and scanned into a single repository. This collection of records is then audited internally each year to ensure compliance.