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CFPB Report: 2013-AE-C-018 October 22, 2013

Observations and Matters for Consideration Regarding the CFPB's Annual Budget Process

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Attachment 1

1700 G Street, N.W., Washington, DC 20552

September 30, 2013

Mr. Mark Bialek
Inspector General
Board of Governors of the Federal Reserve System and
Consumer Financial Protection Bureau
20th and C Streets, NW
Washington, DC 20551

Dear Mr. Bialek,

Thank you for the opportunity to review and comment on the Office of the Inspector General's draft report "Observations and Matters for Consideration Regarding the CFPB's Annual Budget Process." We appreciate your acknowledgement of how the Bureau's budget processes support the achievement of Bureau performance goals and objectives. However, the report's conclusions are based on dated observations that are not reflective of the Bureau's current budget process environment. As noted in your report, the OIG's fieldwork ended nearly a year ago, in November 2012. Furthermore, the OIG's report evaluates the Bureau's FY 2013 budget justification which was finalized over 18 months ago, in February 2012. The formulation process for this budget justification began more than two years ago in summer of 2011, when the Bureau was standing up the basic functions of the agency. At that time, the Bureau did not yet have a confirmed Director or a permanent Chief Financial Officer, both of which the Bureau now has.

In the two years since the Bureau's launch, the Bureau's budget processes have matured and expanded. Accordingly, our comments below provide additional perspective on the OIG's observations and recommendations, including how the Bureau's processes have been enhanced and refined since your review.



Stephen Agostini
Chief Financial Officer

Funds Request Process Observation: We reviewed documentation that compared actual and projected spending amounts. While we noted that the request documentation contained increasing levels of detail, we could not conclude how the difference between actual and projected spending factored into the determination of whether an adjustment was needed for the funds request. Documenting how the results of the analysis between actual and projected spending factored into the OCFO's decisions to adjust, or not adjust, the planned request amount would better inform adjustment decisions in subsequent quarters. Therefore, we suggest that the OCFO maintain additional documentation regarding how any differences between actual and projected spending affect adjustments to planned funds requests.

The Bureau believes that it has fully addressed this observation. In October 2012, near the end of the OIG's fieldwork, the OCFO updated its procedures governing the transfer request process to provide for additional detail in the justification materials supporting each quarterly request. The new guidance clarifies how actual and projected spending should inform the decision to adjust a particular transfer request. These updated procedures were implemented in FY 2013 and all subsequent funding requests were governed by the enhanced guidance, including four transfer requests to the Board since the conclusion of the OIG's fieldwork. A review of these procedures as well as the subsequent transfer request supporting materials would reveal more robust documentation on how actual and projected spending factors into the funds transfer process.

Performance Monitoring Observation: Although OCFO officials told us that they had planned to rely on the fourth-quarter QPR results to complete the GPRA-required performance report, we observed that the CFPB had conflicting guidance pertaining to which measures would be addressed in the fourth-quarter QPR. We noted that the OS's written QPR guidance, dated August 16, 2012, stated that the fourth-quarter QPRs would contain modified performance measures in place of the measures that the agency needed to address in the performance report. We did not assess the fourth-quarter QPRs or the results contained in the annual performance report because both were completed after our review period. The Office of Inspector General discussed this matter with the OCFO, and recently initiated an audit of the CFPB's compliance with GPRA. The GPRA audit will include a detailed assessment of the QPR process.

The Bureau does not concur with the observation, noting that the OIG acknowledges that it neither requested nor reviewed the most relevant or timely documentation. As discussed earlier, the OIG's fieldwork concluded nearly one year ago, in November 2012. Although fourth-quarter QPRs were completed by the end of that month, the OIG acknowledges that it did not review any fourth-quarter QPR materials in order to assess the extent to which GPRA performance measures were integrated. A review of this documentation would have revealed that the fourth-quarter QPRs materials incorporated GPRA measures and indicators. Furthermore, the results associated with these performance measures were addressed in the most recent CFPB Performance Report, which was published to the Bureau's website on April 2013. We look forward to a more thorough assessment of the Bureau's use of GPRA performance measures during the OIG's engagement on CFPB compliance with GPRA.

Public Presentation of Budgetary Information Observation: We suggest that the CFPB consider enhancing its public presentation of budgetary information by establishing a schedule for the disclosure of the quarterly funds transfer letters and the quarterly CFO Updates.

The Bureau is committed to promoting a culture of transparency and believes that it has fully addressed this observation. As the OIG's report notes, the Bureau voluntarily publishes information about its budget and expenditures in excess of the disclosures required by law. The OIG's observations regarding these voluntary disclosures relate to the period of time in which Bureau first began to make this information available. In FY 2013, prior to the conclusion of the OIG's fieldwork, the Bureau updated its procedures to provide that quarterly CFO Updates and funds transfer letters would be published to the Bureau's website approximately 45 days after the end of year quarter. The schedule is based upon the timetable for the Bureau's Annual Financial Report, which is published 45 days after the end of the fiscal year. Since implementation of the new guidance, the OCFO has published all three subsequent quarterly CFO Updates and transfer letters consistent with the timeframe set forth in this guidance.