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 System and Reserve Bank Oversight," 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 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.
Most recently, the OIG has focused significant resources on oversight of the Board's pandemic response efforts. Specifically, the OIG has identified a new management challenge that has arisen due to the creation of the Board's new emergency lending programs and facilities and updated three previously identified challenges to account for new aspects presented by the pandemic. The OIG also initiated an audit and a monitoring effort, with other audits planned, in key risk areas and opened investigations of alleged fraud related to these programs.
During 2020, the OIG issued 14 reports (table C.1). In addition, the OIG issued to the Board and to the CFPB 18 memorandums on information technology and management and operations issues. Because of the sensitive nature of some of the material, 14 of these memorandums are nonpublic. The OIG also conducted follow-up reviews to evaluate actions taken on recommendations for corrective action. Regarding the OIG's investigative work related to the Board and the CFPB, 70 investigations were opened and 14 investigations were closed during the year. OIG investigative work resulted in 21 arrests, 12 criminal complaints, 15 criminal informations, 15 indictments, 13 convictions, and 4 prohibitions from the banking industry, as well as $7,767,550 in criminal fines and restitution and $3,011,250,000 in civil judgments. The OIG also issued a review on the CFPB's budget and funding processes and two semiannual reports to Congress. The OIG performed approximately 37 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 C.1. OIG reports issued in 2020
|Report title||Month issued|
|Federal Financial Institutions Examination Council Financial Statements as of and for the Years Ended December 31, 2019 and 2018, and Independent Auditors' Reports||February|
|The Bureau's Office of Enforcement Has Centralized and Improved Its Final Order Follow-Up Activities, but Additional Resources and Guidance Are Needed||March|
|The Board Should Finalize Guidance to Clearly Define Those Considered Senior Examiners and Subject to the Associated Postemployment Restriction||March|
|Board of Governors of the Federal Reserve System Financial Statements as of and for the Years Ended December 31, 2019 and 2018, and Independent Auditors' Reports||March|
|The Board's Oversight of Its Designated Financial Market Utility Supervision Program Is Generally Effective, but Certain Program Aspects Can Be Improved||March|
|The Board Can Enhance Certain Aspects of Its Enforcement Action Monitoring Practices||March|
|The Board Can Strengthen Its Oversight of the Protective Services Unit and Improve Controls for Certain Protective Services Unit Processes||March|
|The Board Can Further Enhance the Design and Implementation of Its Operating Budget Process||March|
|The Board Can Improve Its Contract Administration Processes||March|
|Independent Accountants' Report on the Bureau Civil Penalty Fund's 2019 Compliance With the Improper Payments Information Act of 2002, as Amended||April|
|The Bureau Can Improve Its Periodic Monitoring Program to Better Target Risk and Enhance Training for Examiners||June|
|The Board's Approach to the Cybersecurity Supervision of LISCC Firms Continues to Evolve and Can Be Enhanced||September|
|2020 Audit of the Board's Information Security Program||November|
|2020 Audit of the Bureau's Information Security Program||November|
Government Accountability Office Reviews
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, as well as the Coronavirus Aid, Relief, and Economic Security Act of 2020, directs the GAO to conduct additional audits with respect to these operations. In 2020, the GAO completed 16 projects that involved the Federal Reserve (table C.2). Twenty-one projects were ongoing as of December 31, 2020 (table C.3).
For more information and to view GAO reports, visit the GAO's website at https://www.gao.gov.
Table C.2. GAO reports issued in 2020
|Report title||Report number||Month issued|
|Counternarcotics: Treasury Reports Some Results from Designating Drug Kingpins, but Should Improve Information on Agencies' Expenditures||GAO-20-112||January|
|Countering Illicit Finance and Trade: U.S. Efforts to Combat Trade-Based Money Laundering||GAO-20-314R||January|
|Economic Sanctions: Treasury and State Have Received Increased Resources for Sanctions Implementation but Face Hiring Challenges||GAO-20-324||March|
|Trade-Based Money Laundering: U.S. Government Has Worked with Partners to Combat the Threat, but Could Strengthen Its Efforts||GAO-20-333||May|
|COVID-19: Opportunities to Improve Federal Response and Recovery Efforts||GAO-20-625||June|
|Financial Company Bankruptcies: Congress and Regulators Have Updated Resolution Planning Requirements||GAO-20-608R||July|
|Retirement Security: DOL Could Better Inform Divorcing Parties About Dividing Savings||GAO-20-541||August|
|COVID-19: Brief Update on Initial Federal Response to the Pandemic||GAO-20-708||August|
|Critical Infrastructure Protection: Treasury Needs to Improve Tracking of Financial Sector Cybersecurity Risk Mitigation Efforts||GAO-20-631||September|
|COVID-19: Federal Efforts Could Be Strengthened by Timely and Concerted Actions||GAO-20-701||September|
|Anti-Money Laundering: Opportunities Exist to Increase Law Enforcement Use of Bank Secrecy Act Reports, and Banks' Costs to Comply with the Act Varied||GAO-20-574||September|
|Financial Audit: Bureau of the Fiscal Service's FY 2020 and FY 2019 Schedules of Federal Debt||GAO-21-124||November|
|Consumer Privacy: Better Disclosures Needed on Information Sharing by Banks and Credit Unions||GAO-21-36||November|
|COVID-19: Urgent Actions Needed to Better Ensure an Effective Federal Response||GAO-21-191||November|
|Federal Reserve Lending Programs: Use of CARES Act-Supported Programs Has Been Limited and Flow of Credit Has Generally Improved||GAO-21-180||December|
|Financial Stability: Agencies Have Not Found Leveraged Lending to Significantly Threaten Stability but Remain Cautious Amid Pandemic||GAO-21-167||December|
Table C.3. Projects active at year-end 2020
|Subject of project||Month initiated||Status|
|Macroprudential regulation||August 2019||Closed 1/28/2021|
|Compliance with the National Flood Insurance Program mandatory purchase requirement||September 2019||Open|
|Debt held by older Americans||September 2019||Open|
|U.S. efforts to combat trade-based money laundering (continued)||January 2020||Open|
|HMDA exemptions||June 2020||Open|
|Women in financial services||June 2020||Open|
|CFPB's enforcement of fair lending||July 2020||Open|
|Alternative data in mortgage lending||July 2020||Open|
|FinCEN's Customer Due Diligence Rule||August 2020||Terminated 1/29/2021|
|The housing finance system in the pandemic||August 2020||Open|
|CARES Act provisions to assist mortgage borrowers and renters||September 2020||Federal Reserve removed as agency participant 3/31/2021|
|Welfare of federal working dogs||September 2020||Open|
|Access to banking services||October 2020||Open|
|Treasury's debt management response to the COVID-19 pandemic||October 2020||Open|
|HMDA loan volume thresholds||October 2020||Open|
|FIRREA title XI appraisal requirement exemptions||October 2020||Open|
|Financial regulator privacy practices||October 2020||Open|
|Monitoring and oversight of response to COVID-19 pandemic (January 2021 report)||October 2020||Closed 1/28/2021|
|Monitoring and oversight of response to COVID-19 pandemic (March 2021 report)||October 2020||Closed 3/31/2021|
|CARES Act report on loans, guarantees, and other investments (2021 report)||December 2020||Open|
|Native American Direct Loan program||December 2020||Open|