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April 1, 2018–September 30, 2018

Semiannual Report to Congress

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Full Report:

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Message From the Inspector General

This year marks the 40th anniversary of the Inspector General Act of 1978, which established the first 12 Inspectors General in federal departments and agencies. The act, which passed by large margins and with bipartisan support, empowered the Inspectors General to curb waste, fraud, and abuse and to promote economy and efficiency in government operations. While the Inspector General community has grown larger over the past 40 years, it has remained fundamentally committed to overseeing and improving the programs and operations of federal government.

During the past 6 months, we issued four reports related to the Board of Governors of the Federal Reserve System's (Board) programs. These reports addressed the Federal Reserve Banks' reliance on consolidated supervision of regional banking organizations; knowledge management practices supporting the supervision of large, complex financial firms; information security controls for the Division of Research and Statistics; and the failure of Fayette County Bank. We issued four reports on the Bureau of Consumer Financial Protection's (Bureau) operations, which covered the Civil Penalty Fund's compliance with the Improper Payments Information Act of 2002, as amended; contract financing for and management of the GMMB contract; a security control review of the Mosaic application used to manage consumer complaints; and a review of travel card program controls.

We also provided the agencies with independent investigative oversight. Our Office of Investigations pursued bank fraud, obstruction, bribery of a public official, and other cases related to the programs and operations of the Board and the Bureau. We processed 272 new hotline complaints and closed 15 investigations. Our work resulted in 9 persons referred for criminal prosecution; 4 indictments; and over $2.5 million in civil judgments, criminal fines, restitution, and special assessments. Our investigative work continues to demonstrate that those who commit wrongdoing against the Board or the Bureau will be held accountable.

We have continued to engage with stakeholders inside and outside the Board and the Bureau. We remain an active presence with current Board, Bureau, and Reserve Bank senior leadership, and we look forward to working with the new Board Vice Chairman. Since our previous report, we have met with five key members of our oversight committees. Finally, we have continued to connect with the public through outreach and through Oversight.gov, a publicly accessible, searchable website that contains the latest public reports from Inspectors General.

President Jimmy Carter described the newly established Inspectors General as "perhaps the most important new tools in the fight against fraud." As we commemorate the 40th anniversary of the Inspector General Act, the role of independent oversight remains as critical as ever. I am proud that our work is making a positive difference. Of course, we could not fulfill our mission without our talented and dedicated staff. I am deeply grateful to the OIG staff for their exemplary work and steadfast commitment to our mission, vision, and values.

Sincerely,
/signed/
Mark Bialek
Inspector General
October 31, 2018


Highlights

We 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 Bureau of Consumer Financial Protection (Bureau). The following are highlights of our work during this semiannual reporting period.

Audits, evaluations, and inspections. 8 reports issued: 4 Board reports and 4 Bureau reports. 25 recommendations closed: 9 Board recommendations and 16 Bureau recommendations.

The Reserve Banks' Reliance on the Primary Federal Regulator of the Insured Depository Institution in the Consolidated Supervision of Regional Banking Organizations
Federal Reserve Banks appear to have increased their reliance on the primary federal regulators (PFRs) in the supervision of regional banking organizations (RBOs), but document sharing among the Board, the Reserve Banks, and the PFRs can be improved.

The Bureau's Management of Its GMMB Contract
The Bureau competitively awarded the GMMB blanket purchase agreement (BPA) and performed technical and price reasonableness evaluations in compliance with the Federal Acquisition Regulation (FAR); however, the Bureau can strengthen controls over its contracting processes to help ensure compliance with the FAR and internal policies and procedures.

The Bureau's Mosaic System
The security controls we tested for the Mosaic system were operating effectively; however, the Bureau can strengthen controls in the area of identity and access management to ensure that the security control environment for Mosaic remains effective.

The Board's Comprehensive Liquidity Analysis and Review
The Comprehensive Liquidity Analysis and Review (CLAR) program appears to preserve and maintain institutional knowledge related to supervisory findings and fosters effective collaboration; however, the program's knowledge management practices can be further strengthened.

The Bureau's Government Travel Card Program
Although the Bureau's government travel card (GTC) program controls are generally effective, they can be further strengthened to prevent improper reimbursements and to ensure compliance with Federal Travel Regulation requirements.

The Board Division of Research and Statistics' General Support System
The Division of Research and Statistics (R&S) has taken steps to implement information security controls for its general support system (GSS) in accordance with the Federal Information Security Modernization Act of 2014 (FISMA) and Board information security policies, procedures, standards, and guidelines. However, we identified opportunities for improvement in the implementation of the Board's information system security life cycle for the R&S GSS to ensure that information security controls are effectively implemented, assessed, authorized, and monitored.

Investigations. 14 cases opened; 15 cases closed. 9 matters for prosecutorial consideration; 4 indictments. $2,490,875 in criminal fines, restitution, and special assessments. $140,000 in civil judgments.

Four Former Senior Executives of Wilmington Trust Convicted by Jury in Federal District Court
Former top executives of Delaware's Wilmington Trust, including its President and its Executive Vice President, were found guilty of conspiracy to defraud the United States, securities fraud, making false statements to federal agencies, and falsifying banking records. The defendants conspired to conceal the truth about Wilmington Trust's failing financial health by omitting information about past-due loans in reports to federal regulators and the investing public.

Former Bureau Examiner Sentenced for Bribery of a Public Official
A former Bureau employee was sentenced in Arizona to probation and fines for accepting a bribe in the form of a preferential home mortgage loan from a credit union. At the time, the defendant worked for the National Credit Union Administration (NCUA) as the primary examiner of the credit union. Later hired by the Bureau, the defendant failed to disclose this financial misconduct in his application. The defendant resigned from the Bureau on the same day he entered his guilty plea.