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April 1, 2014–September 30, 2014
The Office of Inspector General (OIG) continued to promote the integrity, economy, efficiency, and effectiveness of the programs and operations of the Board of Governors of the Federal Reserve System (Board) and the Consumer Financial Protection Bureau (CFPB). The following are highlights of our work during this semiannual reporting period.
The Federal Reserve's Supervisory Activities Related to the Loss at JPMorgan Chase & Co.'s Chief Investment Office. We completed our evaluation of the Federal Reserve's supervisory activities related to the loss at JPMorgan Chase & Co.'s (JPMC) Chief Investment Office (CIO). We found that there was a missed opportunity for the Federal Reserve Bank of New York (FRB New York) and the Office of the Comptroller of the Currency (OCC) to discuss risks related to the CIO and consider how to deploy the agencies' collective resources most effectively. We also found that (1) Federal Reserve and OCC staff lacked a common understanding of the Federal Reserve's approach for examining Edge Act corporations, (2) FRB New York staff were not clear about the expected deliverables resulting from continuous monitoring activities, and (3) FRB New York's JPMC supervisory teams appeared to exhibit key-person dependencies. We made 10 recommendations that encourage the Board's Division of Banking Supervision and Regulation to enhance its supervisory processes and approach to consolidated supervision for large, complex banking organizations.
The CFPB's Headquarters Renovation Project. We conducted an evaluation in response to a congressional request concerning the renovation budget for the CFPB's headquarters. We found that the approval of funding for the renovation was not in accordance with the CFPB's policies for major investments. We also found that the figures associated with the renovation had significantly different scopes. Lastly, we determined that competitive procedures were used during the three major contracting efforts associated with the CFPB headquarters building renovation.
The Board's Oversight of Future Complex Enforcement Actions. In February 2013, the Board and the OCC issued amended consent orders that required mortgage servicers to provide about $3.67 billion in payments to nearly 4.2 million borrowers based on possible harm and to provide other foreclosure prevention assistance. We evaluated the Board's overall approach to oversight of the amended consent orders, determined the effectiveness of the Board's oversight of the borrower slotting process, and determined the effectiveness of the Board's oversight of the servicers' paying agent. We found that the Board's advance preparation and planning efforts for the payment agreement with the 13 servicers that joined the agreement in January 2013 were not commensurate with the complexity associated with this unprecedented interagency effort. In addition, project management resources were not available to the Board's oversight team for this initiative to assist in guiding and supporting this large, complex initiative. Finally, we found that data integrity issues at two mortgage servicers impacted the reliability and consistency of the slotting results, and we determined that an approach has not been selected to end the payment agreement. We made five recommendations to improve the Board's oversight of future complex enforcement strategies.
The CFPB's Acquisition and Contract Management of Select Cloud Computing Services. In January 2014, the Council of the Inspectors General on Integrity and Efficiency (CIGIE) spearheaded a governmentwide review of select agencies' efforts to adopt cloud computing technologies. In support of this initiative, we reviewed the CFPB's acquisition and contract management for two cloud service providers to determine whether requirements for security, service levels, and access to records were planned for, defined in contracts, and being monitored. Our report contains four recommendations to assist the CFPB's Chief Information Officer in strengthening processes for the acquisition and contract management of cloud services.
Enforcement Actions and Professional Liability Claims Against Institution-Affiliated Parties and Individuals Associated With Failed Institutions. Our office, the Federal Deposit Insurance Corporation (FDIC) OIG, and the U.S. Department of the Treasury (Treasury) OIG participated in an evaluation concerning actions that the FDIC, the Board, and the OCC took against individuals and entities in response to actions that harmed financial institutions. The report contains three recommendations intended to strengthen the Board's and the OCC's programs for pursuing enforcement actions, and four recommendations that apply exclusively to the FDIC.
The CFPB's Performance and Results Processes. We conducted an audit to assess the effectiveness of the CFPB's processes that address the Government Performance and Results Act of 1993, as amended by the GPRA Modernization Act of 2010 (GPRA). We also assessed the CFPB's compliance with applicable sections of GPRA. We found that the CFPB has developed effective strategic and performance planning processes; however, we made three recommendations designed to ensure full GPRA compliance and to assist the CFPB in building on its current success in establishing GPRA processes.
The CFPB's Process for Complying With Section 1100G of the Dodd-Frank Wall Street Reform and Consumer Protection Act. We assessed the CFPB's compliance with section 1100G of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Section 1100G requires the CFPB to assess the impact of any proposed rule on the cost of credit for small business entities and convene panels to seek direct input from small business entities prior to issuing certain rules. Overall, we found that the CFPB complied with the provisions of section 1100G as well as the agency's interim policies and procedures; however, we made three recommendations designed to improve the CFPB's process related to section 1100G.
Sentencing of Former Vice President of Fifth Third Bank. On August 26, 2014, a former Vice President of Fifth Third Bank in Jacksonville, Florida, was sentenced to five years in prison for embezzling at least $10.5 million from Fifth Third Bank over a four-year period. He also must pay $2 million in restitution to the bank after he is released. The defendant operated a bank-fraud scheme that included stealing more than $10 million from one corporate account and transferring money from two individual accounts to cover the original thefts. Fifth Third Bank is a state member bank regulated by the Board.
Guilty Plea for Former Bank Director of Montgomery Bank & Trust. On June 5, 2014, a former Bank Director pleaded guilty to bank, securities, and wire fraud to resolve charges brought in the Southern District of Georgia and the Eastern District of New York. The charges relate to a multimillion-dollar fraud scheme that the individual executed to defraud dozens of investors and a federally insured bank. Montgomery Bank & Trust (MB&T) is a subsidiary of Montgomery County Bankshares, Inc., a bank holding company regulated by the Board.