Federal Reserve System Audits

The Board of Governors, the Federal Reserve Banks, and the Federal Reserve System as a whole are all subject to several levels of audit and review.

The Board's financial statements and internal controls over financial reporting are audited annually by an independent outside auditor retained by the Board's Office of Inspector General (OIG). The outside auditor also tests the Board's compliance with certain provisions of laws, regulations, and contracts affecting those statements.

The Reserve Banks' financial statements are audited annually by an independent outside auditor retained by the Board of Governors. In addition, the Reserve Banks are subject to annual examination by the Board. As discussed in section 5, "Payment and Settlement Systems," the Board's examination includes a wide range of ongoing oversight activities conducted on site and off site by staff of the Board's Division of Reserve Bank Operations and Payment Systems.

The audited annual financial statements of the Board of Governors, the Reserve Banks, and the Federal Reserve System as a whole are available on the Board's website at https://www.federalreserve.gov/aboutthefed/audited-annual-financial-statements.htm.

In addition, the OIG conducts audits, evaluations, investigations, and other reviews relating to the Board's programs and operations as well as to Board functions delegated to the Reserve Banks. Certain aspects of Federal Reserve operations are also subject to review by the Government Accountability Office.

Office of Inspector General Activities

The Office of Inspector General (OIG) for the Federal Reserve Board, which is also the OIG for the Consumer Financial Protection Bureau (CFPB), operates in accordance with the Inspector General Act of 1978, as amended. The OIG plans and conducts audits, inspections, evaluations, investigations, and other reviews relating to Board and CFPB programs and operations, including functions that the Board has delegated to the Federal Reserve Banks. It also retains an independent public accounting firm to annually audit the Board's and the Federal Financial Institutions Examination Council's financial statements. These activities promote economy and efficiency; enhance policies and procedures; and prevent and detect waste, fraud, and abuse. In addition, the OIG keeps the Congress, the Board of Governors, and the CFPB director fully informed about serious abuses and deficiencies.

During 2019, the OIG issued 14 reports (table 1) and 6 information technology-related memorandums to the Board and the CFPB. Because of the sensitive nature of some of the material, four of the six memorandums are nonpublic. The OIG also conducted follow-up reviews to evaluate actions taken on prior recommendations. Regarding the OIG's investigative work related to the Board and the CFPB, 34 investigations were opened and 33 investigations were closed during the year. OIG investigative work resulted in three arrests, two criminal complaints, five criminal informations, one indictment, six convictions, and one prohibition from the banking industry, as well as $417,838 in criminal fines and restitution. The OIG also issued its listings of major management challenges facing the Board and the CFPB, an OIG Insights paper on organizational governance, and two semiannual reports to Congress. The OIG performed approximately 33 reviews of legislation and regulations related to the operations of the Board, the CFPB, or the OIG.

For more information and to view the OIG's publications, visit the OIG's website at https://oig.federalreserve.gov. Specific details about the OIG's body of work also may be found in the OIG's Work Plan and semiannual reports to Congress.

Table 1. OIG reports issued in 2019
Report title Month issued
The Bureau Can Improve Its Follow-Up Process for Matters Requiring Attention at Supervised Institutions January
Federal Financial Institutions Examination Council Financial Statements as of and for the Years Ended December 31, 2018 and 2017, and Independent Auditors' Reports February
Board of Governors of the Federal Reserve System Financial Statements as of and for the Years Ended December 31, 2018 and 2017, and Independent Auditors' Reports March
The Board Can Take Additional Steps to Advance Workforce Planning March
The Bureau Can Improve Its Risk Assessment Framework for Prioritizing and Scheduling Examination Activities March
Independent Accountants' Report on the Bureau Civil Penalty Fund's 2018 Compliance with the Improper Payments Information Act of 2002, as Amended April
Bureau Efforts to Share Consumer Complaint Data Internally Are Generally Effective; Improvements Can Be Made to Enhance Training and Strengthen Access Approval June
The Bureau Can Improve the Effectiveness of Its Life Cycle Processes for FedRAMP July
The Board Can Enhance Its Internal Enforcement Action Issuance and Termination Processes by Clarifying the Processes, Addressing Inefficiencies, and Improving Transparency September
Independent Accountants' Report on the Bureau's 2019 Compliance with the Digital Accountability and Transparency Act of 2014 September
Leveraging Certain Strategies May Help the Board Timely Implement and Sustain Enterprisewide Workforce Planning September
The Board's Law Enforcement Operations Bureau Can Improve Internal Processes September
2019 Audit of the Bureau's Information Security Program October
2019 Audit of the Board's Information Security Program October

Government Accountability Office Reviews

Federal Reserve System Audits The Federal Banking Agency Audit Act (Pub. L. No. 95–320) authorizes the Government Accountability Office (GAO) to audit certain aspects of Federal Reserve System operations. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 directs the GAO to conduct additional audits with respect to these operations. In 2019, the GAO completed 16 projects that involved the Federal Reserve (table 1). Twelve projects were ongoing as of December 31, 2019 (table 2).

For more information and to view GAO reports, visit the GAO's website at https://www.gao.gov.

Table 1. Reports completed during 2019
Report title Report number Month issued (2019)
Financial Services Regulations: Status of GAO Recommendations to Enhance Regulatory Analyses and Interagency Coordination GAO-20-114R December
Federal Debt Management: Treasury Should Strengthen Policies for Market Outreach and Analysis to Maintain Broad-Based Demand for Securities GAO-20-131 December
Bank Secrecy Act: Examiners Need More Information on How to Assess Banks' Compliance Controls for Money Transmitter Accounts GAO-20-46 December
Financial Audit: Bureau of the Fiscal Service's FY 2019 and FY 2018 Schedules of Federal Debt GAO-20-117 November
Bank Secrecy Act: Agencies and Financial Institutions Share Information but Metrics and Feedback Not Regularly Provided GAO-19-582 September
Reverse Mortgages: FHA Needs to Improve Monitoring and Oversight of Loan Outcomes and Servicing GAO-19-702 September
Federal Rulemaking: Selected Agencies Should Clearly Communicate Practices Associated with Identity Information in the Public Comment Process GAO-19-483 July
Consumer Reporting Agencies: CFPB Should Define Its Supervisory Expectations GAO-19-459 July
Agricultural Lending: Information on Credit and Outreach to Socially Disadvantaged Farmers and Ranchers Is Limited GAO-19-539 July
Private Student Loans: Clarification from CFPB Could Help Ensure More Consistent Opportunities and Treatment for Borrowers GAO-19-430 May
Bank Supervision: Regulators Improved Supervision of Management Activities but Additional Steps Needed GAO-19-352 May
Tax Refund Products: Product Mix Has Evolved and IRS Should Improve Data Quality GAO-19-269 April
Consumer Data Protection: Actions Needed to Strengthen Oversight of Consumer Reporting Agencies GAO-19-196 March
Management Report: Areas for Improvement in the Federal Reserve Banks' Information System Controls GAO-19-304R March
DATA Act: OMB Needs to Formalize Data Governance for Reporting Federal Spending GAO-19-284 March
U.S. Currency: Financial Benefit of Switching to a $1 Coin Is Unlikely, but Changing Coin Metal Content Could Result in Cost Savings GAO-19-300 March
Table 2. Projects active at year-end 2019
Subject of project Month initiated Status
Bank Secrecy Act costs and benefits October 2018 Open
The Foreign Narcotics Kingpin Designation Act January 2019 Closed 1/15/2020
U.S. efforts to combat trade-based money laundering February 2019 Closed 1/29/2020
International trade-based money laundering February 2019 Open
U.S. economic sanctions programs April 2019 Closed 3/11/2020
Collection and use of consumer personally identifiable information June 2019 Open
Review of financial services sector cybersecurity July 2019 Open
Macroprudential regulation August 2019 Open
Pensions divided by divorce August 2019 Open
Leveraged lending August 2019 Open
Compliance with the National Flood Insurance Program mandatory purchase requirement September 2019 Open
Debt held by older Americans September 2019 Open
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Last Update: July 28, 2020