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Board Report: 2014-SR-B-015 September 30, 2014

Opportunities Exist to Enhance the Board’s Oversight of Future Complex Enforcement Actions

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Finding 2: The Board Did Not Use a Project Management Function to Support This Complex Initiative

The Board assigned three senior officials to oversee the project who, rather than serving exclusively in a support and guidance capacity, also engaged in time-consuming, day-to-day oversight, management, and implementation activities. We believe that this unprecedented interagency initiative would have benefitted from a project management function to assist in guiding the effort from planning through the execution phase with oversight and support provided by senior Board officials. Such an approach might have allowed the officers to delegate more of the daily oversight activities to the project management function, freeing the senior Board officials to focus more on other priorities. We attribute the significant allocation of senior Board officials' time to (1) the preference for maintaining the continuity of the initial team given the steep learning curve associated with this project; (2) the lack of project management resources available to support this large, complex initiative; and (3) the unique need for quick decisionmaking on implementation issues associated with the payment agreement given the Board's sense of urgency in providing checks to the borrowers as quickly as possible. The time these officers spent on this project minimized the time they could devote to other responsibilities.

Senior Board Officials Conducted Day-to-Day Oversight Activities for the Payment Agreement

To oversee the project, the Board assigned one senior official from each of three Board divisions: BS&R, DCCA, and Legal. In addition to serving in a leadership capacity for the project, however, these senior Board officials also engaged in day-to-day oversight, management, and implementation activities for the project. For example, these officers participated in multiple conference calls each week with their OCC counterparts, the Reserve Bank examiners assigned to the project, and Rust employees. In addition, in coordination with OCC staff, certain of these senior Board officials (1) reviewed and approved payment agreement correspondence to borrowers; (2) suggested changes to Rust's operating procedures for the call center scripts and processes to handle undeliverable mail; (3) resolved issues faced by borrowers, especially when the situation involved procedural adjustments for Rust's complaint resolution activities; and (4) monitored Rust's performance to confirm resolution of issues identified on the issues log.

Two of the senior officials noted that they spent as much as 50 to 60 percent of their time on this project, and the third reported spending 40 to 50 percent. According to an interviewee, one of the lessons learned from the IFR and a contributing factor in the significant allocation of officer time to this initiative was the importance of ensuring effective communication with the in-scope borrowers covered by the payment agreement. Another senior Board official explained that the direct senior official involvement allowed the oversight team to make quick decisions related to implementing the payment agreement.

A Project Management Function Could Allow the Board to Better Allocate Resources to Support Complex Projects

While the Board does not have a policy requiring the use of project management resources in support of large, complex initiatives such as the payment agreement, we believe that this unprecedented, interagency initiative would have benefitted from such support. Board staff on the payment agreement project team explained that project management resources were not available to the team. While we understand that the Board's senior management chose to keep the horizontal review and the IFR project team in place because of the team members' familiarity with the project and the steep learning curve associated with this project, we believe that the transition from the IFR to the payment agreement presented an opportunity for the Board to supplement the skills of the existing team on an as-needed basis. 

Although both the IFR and the payment agreement involved Board staff oversight of Rust and the Reserve Bank dedicated teams, overseeing the payment agreement was different from overseeing the IFR. The IFR relied heavily on independent consultants to perform file reviews. The Board's oversight of the payment agreement, however, involved overseeing the dedicated teams at the three Reserve Banks conducting the reviews of the slotting processes. Further, for the IFR, the oversight of Rust's performance was primarily coordinated by a consortium of servicer officials. For the payment agreement, however, the Board and the OCC assumed the role of directly overseeing Rust's administration of the payment agreement involving the use of multiple third parties. As such, the team managing the payment agreement may have benefitted from additional resources to coordinate such a large, complex initiative. 

Further, the Board did not have staff devoted solely to project management who could be available to support projects such as the payment agreement. One of the senior Board officials overseeing the payment agreement explained that additional resources could have been helpful to the project, but the Board does not typically expand staffing with temporary appointments or hire independent contractors to perform work. We believe that the Board should consider additional staffing approaches for monitoring large, complex initiatives, particularly those involving third-party vendor oversight. 

Finally, Board staff explained that oversight of the payment agreement required direct involvement of senior Board officials because of the need to resolve issues quickly. As borrowers faced challenges cashing or depositing their checks, Board staff held almost daily conference calls and a few in-person meetings with Rust employees. For example, Board and OCC staff suggested revisions to Rust's operating procedures to improve processes for resolving borrowers' difficulties receiving checks, such as making it easier for borrowers to quickly provide their current address to Rust, and Rust updated its procedures and implemented the new processes accordingly. Our interviews revealed that the Board staff's scrutiny of Rust's performance during the payment agreement process exceeded the level of oversight Rust typically experiences.


The same Board staff who had been previously responsible for overseeing the horizontal review and then the IFR were responsible for managing the payment agreement. These officials devoted considerable time to day-to-day oversight of the project because the Board did not have project management resources available to them to whom certain tasks could be delegated. The Board's oversight of the payment agreement is an example of how the Board could benefit from developing a staffing plan that includes project management resources. Such staff could be available to support large, complex Board projects, allowing the Board to better allocate resources, define project objectives and milestones, monitor project progress, and oversee vendor performance as necessary.


We recommend that the Directors of BS&R, DCCA, and the Legal Division

  1. Identify the circumstances in which project management resources should be used and develop a staffing plan to include project management resources with appropriate subject-matter expertise for those situations.

Management's Response

The Director of BS&R, the Director of DCCA, and the Board's General Counsel agreed with our recommendation. In their consolidated response to recommendation 2, the Board officials indicated that they will integrate available project management resources with appropriate subject-matter expertise when staffing similar complex enforcement actions in the future.

OIG Comment

In our opinion, the actions described by the Division Directors and the Board's General Counsel are responsive to our recommendation. We plan to follow up on the Board's actions to ensure that the recommendation is fully addressed.