CFPB Report: 2014-AE-C-005 March 27, 2014
The examination reporting policy, developed in June 2012, has not been updated to reflect the December 2012 reorganization of the CFPB’s supervision offices. Further, the policy does not reflect the current definition of fieldwork completion, which initiates the reporting process. The U.S. Government Accountability Office’s (GAO) internal control evaluation tool states that policies and procedures should reflect the practices currently in effect. According to a senior official, the policy has not been updated because the CFPB is still determining the most effective process for reviewing examination reports. We believe that this outdated policy could potentially cause confusion among staff, particularly recent hires. Specifically, examiners entering dates into SES may incorrectly identify a fieldwork completion date based on the outdated policy. This confusion could also detract from the tracking of reporting milestones.
The examination reporting policy has not been updated to reflect the December 2012 reorganization of the CFPB’s supervision offices. Specifically, neither the Office of Supervision Policy nor the Office of Supervision Examination are mentioned in the CFPB’s examination reporting policy; instead the policy still describes the roles and responsibilities of the Office of Large Bank Supervision and the Office of Nonbank Supervision, two offices that no longer exist. The CFPB’s examination reporting policy, issued in June 2012, describes the CFPB’s process and procedures for internal review and approval of examination reports and supervisory letters as well as roles and responsibilities of the supervisory staff involved in each step of the reporting process.
In December 2012, the supervision offices were restructured to include the Office of Supervision Examinations and the Office of Supervision Policy, both of which currently play important roles in shepherding examination products through the reporting phase. The Office of Supervision Policy acts as a central coordinator for draft reports once they reach headquarters, and the office is tasked with ensuring that internal stakeholders’ comments are incorporated as appropriate prior to headquarters approving the draft. The Office of Supervision Examinations also has an opportunity to comment on the draft once it reaches headquarters.
According to GAO’s internal control evaluation tool, agencies should apply “appropriate policies, procedures, techniques and mechanisms . . . to each of the agency’s activities.”15 One senior official noted that the CFPB is continually refining its processes, so there will always be a lag in updating policies. However, a policy that reflects an outdated organizational structure cannot provide staff with effective guidance. Therefore, the examination reporting policy should be updated to reflect the current organizational structure of the supervision offices.
In March 2013, the CFPB changed the definition for the completion-of-fieldwork milestone in SES training materials; however, the examination reporting policy has not been updated to reflect this change. A senior official explained that the policy has not been updated because the CFPB is still determining the most effective process for reviewing examination reports. However, the examination reporting policy identifies the completion of fieldwork as a key milestone that initiates the reporting process.16
We believe that the outdated definition could cause confusion among staff responsible for drafting and reviewing examination reports. Further, examiners entering incorrect dates into SES may impact the CFPB’s ability to track performance against reporting milestones.
We recommend that the Associate Director for SEFL
Regarding recommendation 8, the Deputy Director and Associate Director for SEFL stated the following:
As noted in the Report, CFPB senior management is currently reevaluating certain aspects of the existing internal examination report review process. Following the completion of those efforts, we will revise the June 2012 CFPB Process for Reviewing Supervisory Letters, Examination Reports, and Supervisory Actions discussed in the Report as necessary to reflect the earlier reorganization of CFPB’s supervision offices as well as relevant changes to the CFPB’s internal processes for examination report review.
Management’s full response is included as appendix B.
In our opinion, the actions described by the Deputy Director and Associate Director for SEFL appear to be responsive to our recommendation. We plan to follow up on the CFPB’s actions to ensure that the recommendation is fully addressed.
