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Farm Credit System: Farm Credit Administration Effectively Addresses Identified Problems

GGD-94-14 Published: Jan 07, 1994. Publicly Released: Jan 07, 1994.
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Highlights

GAO reviewed how the Farm Credit Administration (FCA), Farm Credit System Assistance Board, and Farm Credit System Insurance Corporation (FCSIC) oversee and regulate Farm Credit System institutions.

Recommendations

Matter for Congressional Consideration

Matter Status Comments
To enable FCA to effectively ensure the safety and soundness of the National Bank for Cooperatives (CoBank), Congress should amend the 1987 act to give FCA authority to set appropriate lending limits for this special bank.
Closed – Not Implemented
CoBank merged with other institutions and is no longer a bank for cooperatives.
Congress should require that FCSIC be subject to oversight of the FCA Inspector General and be required to have an annual independent audit of its financial statements to ensure that all aspects of its operations are reviewed.
Closed – Not Implemented
No action was taken in the 105th Congress.

Recommendations for Executive Action

Agency Affected Recommendation Status
Farm Credit Administration To further enhance the effectiveness of FCA regulation of Farm Credit System institutions, the FCA board should ensure that the Examination Manual is revised during 1993.
Closed – Implemented
The revised exam manual was approved in June 1994.
Farm Credit Administration To further enhance the effectiveness of FCA regulation of Farm Credit System institutions, the FCA board should adopt a policy requiring annual peer reviews of the examination and monitoring work of field and regional offices.
Closed – Implemented
FCA's Office of Examinations issued a revised directive on "Quality Assurance" on November 9, 1995, that states that annual quality assurance reviews by the Office of Examinations are required. The directive contains other requirements to ensure the quality of examinations and monitoring of Farm Credit System institutions.
Farm Credit Administration To further enhance the effectiveness of FCA regulation of Farm Credit System institutions, the FCA board should require examiners to make comprehensive reviews of all segments of the loan portfolio with random sampling used where appropriate within the context of the risk-based approach to examinations.
Closed – Implemented
The FCA Office of Examination adopted a new directive on loan sampling August 23, 1996. It provides guidance on the use of statistical sampling techniques in examinations.
Farm Credit Administration To further enhance the effectiveness of FCA regulation of Farm Credit System institutions, the FCA board should decide whether Loan Accounts Report System (LARS) contributions to FCA oversight exceed its costs and if making LARS easier for examiners to use would have benefits that would exceed the costs of modifications.
Closed – Implemented
FCA completed its evaluation of LARS, made some modifications to it, and plans to continue using it. FCA has begun to access Farm Credit System banks' loan portfolio databases directly. Those databases vary, and until they become consistent throughout the System and FCA has access to all of them, it intends to rely on LARS.
Farm Credit Administration To further enhance the effectiveness of FCA regulation of Farm Credit System institutions, the FCA board should issue guidelines for the use of Early Warning System reports.
Closed – Implemented
Guidelines were developed and included in the revised examination manual.
Farm Credit Administration In considering the proposed Market Access Agreement or similar proposals for approval, FCA should ensure its regulatory powers, including its duty to approve market access decisions, and FCSIC authority, will not be impaired.
Closed – Implemented
The FCA Board approved a market access agreement on August 8, 1994.

Full Report

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Topics

Agricultural programsBank examinationBanking regulationFarm creditFarm credit banksFarm income stabilization programsFinancial management systemsInteragency relationsLending institutionsRegulatory agencies