[Federal Register Volume 60, Number 139 (Thursday, July 20, 1995)]
[Notices]
[Pages 37443-37446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17781]
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FARM CREDIT ADMINISTRATION
[NV 95-40]
Farm Credit System Building Association Management Operations
Policies and Practices
AGENCY: Farm Credit Administration.
ACTION: Policy statement.
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SUMMARY: On July 7, 1995, the Farm Credit Administration (FCA), by its
Board (Board), adopted a policy statement concerning general parameters
and policies for the operational practices of the Farm Credit System
Building Association (FCSBA) which are supplementary to the FCSBA
Bylaws. The FCSBA was established to provide the facilities and related
services for the FCA and its regional offices. The FCSBA is owned by
the banks of the Farm Credit System (Banks) and is funded by
assessments, commercial tenants, and other income. The FCSBA owns and
operates the FCA McLean, Virginia headquarters and holds the leases and
provides certain services and furnishings for FCA field offices. The
FCA Board has sole discretionary authority under section 5.16 of the
Farm Credit Act of 1971, as amended, to approve the plans and decisions
for such building and facilities. In order to carry out this authority
and to preserve the FCA's arm's-length relationship with the Banks, the
Articles of Association and Bylaws of the FCSBA grant the FCA Board the
responsibility to oversee the affairs of the FCSBA. The Chairman of the
FCA Board shall be responsible for coordinating the FCA Board's
involvement in and responsibilities for the operation of the FCSBA. The
FCSBA President reports to the FCA Board and is generally responsible
within the context of governing policies for all
[[Page 37444]]
activities, necessary to manage FCSBA support to the FCA, manage the
assets of the FCSBA, understand and consider the interests of the
Banks. Specific responsibilities include budget preparation and
execution, planning, financial reporting and control, preparation of
quarterly cashflow projections, supervision of inventory and supporting
schedules for all fixed assets.
EFFECTIVE DATE: July 7, 1995.
FOR FURTHER INFORMATION CONTACT: Floyd Fithian, Secretary to the Farm
Credit Administration Board, Farm Credit Administration, McLean,
Virginia 22102-5090, (703) 883-4000, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION: The text of the Board's policy statement on
the Farm Credit System Building Association Management Operations
Policies and Procedures is set forth below in its entirety:
FCA Board Action on FCS Building Association Management Operations
Policies and Practices
NV 95-40
FCA-PS-68
Effective Date: July 7, 1995.
Effect on Previous Action: Supersedes Policy Statement NV 93-43.
Source of Authority: Farm Credit Act of 1971, as amended (Act) and
the FCS Building Association (FCSBA) Articles of Association and
Bylaws.
The FCA Board hereby adopts the following statement of policy:
The FCSBA was established to provide the facilities and related
services for the Farm Credit Administration (FCA) and its regional
offices. The FCSBA is owned by the banks of the Farm Credit System
(Banks) and is funded by assessments, commercial tenant, and other
income. The original ownership interest of each bank was based on the
bank's assets as a percentage of total Farm Credit System (FCS) assets
on June 30, 1981. The FCSBA owns and operates the FCA McLean, Virginia
headquarters and holds the leases and provides certain services and
furnishings for FCA field offices. The FCA Board has sole discretionary
authority under section 5.16 of the Act to approve the plans and
decisions for such building and facilities. In order to carry out this
authority and to preserve the FCA's arms-length relationship with the
Banks, the Articles of Association and Bylaws of the FCSBA grant the
FCA Board the responsibility to oversee the affairs of the FCSBA.
The purpose of this policy statement is to outline general
parameters and policies for various operational practices of the FCSBA
which are supplementary to the FCSBA Bylaws.
A. FCA Board Responsibilities
Board Responsibilities. As outlined further in this policy
statement, the FCA Board is responsible for items including, but not
limited to, approval of all budgets and subsequent changes in object
class limitations, signature authorities for financial expenditures,
and long term investment decisions. The FCA Board concurs in the
development of performance standards, goals and pay scales for the
FCSBA President as provided by the FCA Chairman. Additionally, the FCA
Board approves certain contracts for services depending upon the
purpose and cost.
Chairman's Responsibilities. The Chairman of the FCA Board shall be
responsible for coordinating the FCA Board's involvement in and
responsibilities for the operation of the FCSBA, including developing
performance standards and pay scales for the President of the FCSBA and
appraising the President's performance with the concurrence of other
FCA Board Members, reviewing periodic financial and operating reports,
providing procedures as necessary concerning for the FCA staff's
relationship with the FCSBA, and reviewing such other matters as the
Chairman may deem advisable for the purpose of bringing such matters to
the attention of the FCA Board. The Chairman may delegate these
responsibilities to one or more FCA staff as he or she deems advisable,
except those responsibilities related to pay and performance.
B. FCSBA President
General Signature Authority. As required by Article V, Section 2 of
the FCSBA Bylaws, in addition to member certificates, the FCA Board
authorizes the President to sign general correspondence and contracts
deemed necessary for the administration of Association activities.
Check signing and countersigning authorizations are outlined in
separate FCA Board Actions.
Duties. The FCSBA President reports to the FCA Board and is
generally responsible within the context of governing policies for all
activities, necessary to manage FCSBA support to FCA, manage the assets
of the FCSBA, understand and consider the interests of the Banks.
Specific responsibilities include budget preparation and execution;
planning; financial reporting and control; preparation of quarterly
cash flow projections; supervision of inventory and supporting
schedules for all fixed assets (furniture fixtures and equipment);
maintenance of management objectives schedules; supervision of the
telecommunications system; the purchase and contracting for all
supplies and services; records management; necessary correspondence;
public relations activities in consultation with the FCA Office of
Congressional and Public Affairs; personnel supervision and evaluation;
the leasing and management of all space in the Farm Credit Building;
site selection and lease negotiation for all FCA Field Offices;
strategic planning; investment management; preparation and
administration of all policies and operating procedures; engineering
oversight; construction management; and preparation of all monthly,
quarterly and annual reports required by the FCA Board. The FCSBA
President shall coordinate these activities with the FCA Liaison as
appropriate or required.
Standard Operating Procedures. In addition to those duties outlined
under Article V, Section 2, of the FCSBA Bylaws and this Policy
Statement, the President is authorized to issue Standard Operating
Procedures (SOPs), as he or she deems appropriate in an effort to carry
out the mission of the FCSBA provided that each SOP is reviewed by the
FCA Board in advance. The President shall maintain all SOPs in a manner
that reflects current and up-to-date policies and practices. SOPs will
be filed with the Secretary to the Board, the FCSBA and others as
requested.
Periodic Reports. The President shall render such periodic reports
and proposals to the FCA Board and Liaison as may be necessary to
facilitate on budgets, assessments, audits, finances, plans,
investments, reserve policy and accounting procedures that support the
needs of the FCA Board and the Banks as owners of the FCSBA. The
President shall normally report at an FCA Board meeting on a quarterly
basis. At a minimum, the report shall include:
(1) A cash statement of operations, an explanation of budget
variances, and a month-to-date cash reconciliation report.
(2) A summary of the status of reserve accounts and investments
including documentation as available demonstrating compliance with
investment policies.
(3) A comprehensive Management Objectives tracking report outlining
the status of issues and projects resulting from a combination of one
or more sources such as audit and examination recommendations, FCA
Board directives, as well as management initiatives.
[[Page 37445]]
(4) Other matters such as insurance, leasing and contract
performance issues which may be timely for the particular reporting
period.
Annual Report. The President shall prepare an annual report on the
operations of the FCSBA. The draft of the report shall be provided to
the FCA Board for its review within approximately 30 days of receiving
the final report from the independent auditors. After FCA Board review,
the report shall be provided to the Banks and may be provided to others
who have an interest in FCSBA affairs. Although other reports to the
Banks may be warranted from time to time, the Annual Report shall serve
as the primary vehicle for reporting information to the FCS. The report
shall include:
(1) A discussion of significant issues and accomplishments.
(2) Audited financial statements and reportable conditions.
(3) A discussion of the previous year's and current year's budget.
(4) A discussion of Basic and Supplemental services provided to FCA
by the FCSBA including an estimate of market and actual values of those
services.
(5) A discussion of non-budgeted expenditures which have been
reimbursed by the FCA.
C. FCA Liaison
Duties. The FCA Director of the Office of Resources Management (or
his/her designee) shall serve as the Agency's liaison with the FCSBA.
The FCA Liaison facilitates and coordinates the Agency's needs with the
FCSBA in such areas as office renovations, internal moves,
telecommunications services, and field office support. The FCA Liaison
provides an internal control function through the countersigning of
certain categories of checks as designated by the FCA Board.
Additionally, the FCA Liaison reviews FCSBA proposals which come before
the FCA Board and provides counsel regarding issues on which the FCA
Board must decide or provide direction. The FCA Liaison is also
responsible for assuring that FCA operations, as appropriate, comply
with FCSBA policies and practices as well as FCA guidance relating to
the FCSBA. Finally, the FCA Liaison shall review monthly cash
reconciliation reports as provided by the FCSBA President and report
irregularities as appropriate.
D. Annual Audit and Management Controls
Annual Audit and Management Controls Review. As provided by Article
IV, Section 9, of the FCSBA Bylaws, the FCSBA shall produce audited
financial statements on an annual basis. A review of material internal
control procedures shall be included in the audit process on a periodic
basis.
E. Financial Management
Budget Philosophy. It is FCA Board policy to ensure that every
effort is made to minimize operating expense without jeopardizing the
Banks' investment in the assets which are managed. Approved budgets are
planned and implemented in consideration of a series of policy
objectives as outlined in this statement and always in an effort to
balance income and expenses without a positive or negative cash flow.
Budget Development Time Frames. FCSBA budgets are prepared on a
calendar year basis. Each June, the FCSBA President shall provide the
proposed budget for the next calendar year to the FCA Board for its
review and comment. With FCA Board concurrence, the proposed budget may
be made available to the Banks for further comment. On or about
September 1, the FCSBA President shall provide the final budget
proposal to the FCA Board for approval.
Operating Revenues. The FCSBA receives annual operating revenues
from (1) Bank assessments, (2) office rental income from private
commercial tenants, (3) other income such as fees and vending charges,
(4) interest income from operating balances, and (5) reserve account
transfers as necessary.
Operating Expenses. Operating expenses are budgeted using the
appropriate object classifications as follows, which may be modified
with FCA Board approval:
FCA Field Office Rent
Taxes and Contract Services
Maintenance and Repair
Utilities
Salaries and Benefits
Professional and Consulting Fees
Property Management Fees
Other Expenses
As a part of the draft budget proposal to the FCA Board each June,
the FCSBA President shall provide an individual expense breakdown for
each item within the object class. This breakdown shall include the
actual expense from the previous year, the estimated expense for the
current year, and the projected expense for the proposed year.
Unanticipated and emergency expenses during the course of the year
as well as expenditures beyond amounts approved for object classes may
be funded out of the operating reserve subject to FCA Board approval.
Capital expenditures funded by transfers from the component reserve
account are shown separately with a breakdown of individual
expenditures.
Operating Reserves. In consideration of liquidity needs as well as
unanticipated expenses, each approved budget shall include the sum
equivalent to 15 percent of the annual operating expense as operating
reserves.
Component Reserve Account. To reserve for capital replacement items
and repairs to the McLean facility, the FCSBA shall maintain a
component reserve account which is separate from operating funds and
reserves. The funding for this account shall be initially based on the
Capital Reserve Study of August 1992, which is to be ``formally''
updated every 3 years by an independent engineering assessment. The
policy objective is to ensure adequate funding, on a net present value
basis, to cover up to a ten year capital repair and replacement program
to be ``informally'' updated, as necessary, with each approved budget.
Assessments. To ensure the maintenance of minimum ``cash on hand,''
FCSBA assessments are based on Bank assets as of June 30, and issued
quarterly consistent with the FCSBA Bylaws. After taking interest,
rental, and other revenue into consideration, budgeted annual
assessments must be sufficient to fund the operations of the FCSBA,
including the ability to hold operating reserves equal to 15 percent of
expenses as well as component reserves consistent with FCSBA policy.
Adjustments to assessments can occur subject to FCA Board approval
when total yearend ``cash and cash equivalents'' exceed or are below
operating and component reserve requirements. Adjustments are normally
considered for third quarter assessments and are based upon the
previous year's audited financial statements. Earnings, if any, are
distributed through this process in lieu of direct payment.
Investments. The FCSBA invests its funds in an effort to achieve
maximum yield consistent with liquidity needs and investment safety.
Operating reserves and other operating ``cash on hand'' may be invested
in short-term money market accounts, certificates of deposits of
federally insured institutions, and short-term instruments of the U.S.
Government or commercial paper rated P-1 or A-1 by Moodys and Standard
and Poors respectively. Operating reserves investment decisions are
made by the FCSBA President consistent with this policy.
Component reserves are invested solely in instruments issued by the
U.S. Government and agencies of the U.S.
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Government. The maturities and amounts of component reserve investments
shall be generally consistent with the anticipated liquidity needs of
the FCSBA capital replacement and repair program. Component reserve
investment decisions will be approved by the FCA Board.
Budgeting for Reimbursable Expenses. The FCA regularly reimburses
the FCSBA for telecommunications and other expenditures on a cost
recovery basis. Because there is no positive or negative financial
impact on the FCSBA, these transactions are handled on a ``net'' basis
and thus not included in the budget.
Budget Execution. The FCSBA President shall administer the annual
budget as approved by the FCA Board. Necessary expenditures during the
course of the year that would exceed the object class budget require
approval by the FCA Board. Exceptions to this policy are made in the
event of emergency or the funding of accrued employee benefits.
Expenditures in these cases will be brought to the FCA Board for
approval within 30 days of occurrence. In considering its approval, the
FCA Board has the option of either adjusting other object classes,
utilizing the operating reserve, or taking other action as it deems
appropriate.
F. Contract Management
General. In accordance with Article IV of the FCSBA Bylaws, it is
the policy of the FCA Board that all contracts issued on or on behalf
of the FCSBA be:
(1) When in excess of $15,000, competitively bid with a minimum of
three bids.
(2) When less than $15,000, and more than $2,500, obtained with a
minimum of three price quotes.
(3) Generally awarded to the lowest bidder meeting contract
specifications except in those instances where the differences in cost
are considered negligible relative to a particular benefit offered by a
higher bid.
(4) Reviewed and approved by the FCA Board when in excess of the
amount of $150,000, or for the purpose of outside auditors, property
managers, or special studies that were not approved during the budget
process.
(5) Retained in file a minimum of three years.
(6) When possible, bid in conjunction with the budget year.
Exceptions. Notwithstanding the above requirements, the FCA Board
has the authority to make exceptions as it deems appropriate to the
circumstances. Additionally, competitive bidding is not required if the
circumstances warrant immediate resolution or are vendor specific to
equipment in which case the FCSBA President will provide the Board with
a detailed report of the surrounding circumstances in 30 days.
Contract Timeframes. Recurring contracts are normally for annual
terms, however, when deemed cost effective, the FCSBA may allow terms
up to three years. Obtaining best and final offers from bidders is
encouraged.
Approval Authorization. The President is authorized to approve
contracts consistent with these guidelines and the FCSBA SOP. The
President may redelegate up to $50,000 of contracting authority to the
building property manager.
Contract Performance. The President shall insure that adequate
systems are in place to measure, administer, and report on the
performance of FCSBA contracts.
G. Asset Management
Personal Property. The FCSBA President shall insure that adequate
methodologies and systems are in place to ensure that FCSBA property is
effectively accounted for on a periodic basis.
H. The FCSBA as a System Institution
Examination. The FCSBA is examined as provided by the Act. The
scope of examination shall be generally consistent with the level of
risk deemed associated with the operating practices of FCSBA
management.
Assessments for Examination. The FCSBA will be charged annually for
assessments consistent with FCA regulation found in 12 CFR 607.4,
``Assessment of Other Institutions.''
Liquidation by System Request. Should the Boards of the Banks
determine, pursuant to Article IX of the FCSBA Articles of Association,
that the FCSBA should be dissolved and liquidated, the Boards, by
appropriate resolution, may request that the FCA Board appoint a
receiver to dissolve and liquidate the FCSBA in accordance with the Act
and the regulations promulgated thereunder.
I. FCSBA Services to the FCA
Basic Services. The FCSBA provides space to the FCA Headquarters in
McLean, Virginia, and leases space on behalf of FCA for its field
offices. Basic services provided to the FCA are similar to what is
typical of rented office space and include, but are not limited to,
such items as utilities, janitorial service, repairs for normal wear
and tear, parking and appropriate landscaping as well as amenities
which are available to all tenants and have the effect of maintaining
property values and/or enhancing rental income.
Supplemental Services. In addition to providing basic services, the
FCSBA will, on a case-by-case basis, provide certain supplemental
support services related to FCA's housing needs under the following
kinds of circumstances:
(1) The FCSBA can provide the service on better terms than the FCA.
(2) The service, if not provided by the FCSBA, could potentially
adversely effect the aesthetic or other value of property, systems,
building infrastructure, the health and safety of occupants, or the
occupancy level of commercial tenants.
(3) The capacity exists for the FCSBA to provide the service within
the context of its employee expertise and/or its overall
responsibilities to all tenants.
(4) By providing the service, an advantage inures to the benefit of
the FCS which would not otherwise occur.
(5) An FCA Board determination that the service will be of
particular benefit to the FCA, the FCS or the public.
As deemed necessary, the FCSBA President shall issue SOP(s)
prescribing operational or other details of FCSBA services provided to
the FCA.
Non-Reimbursable and Reimbursable Services. Whether or not the FCA
will reimburse the FCSBA for a supplemental service will generally be
determined as follows:
(1) Reimbursement is not required for support provided by the FCSBA
when resources are available within FCA Board approved budgets for the
FCSBA and one or more of the criteria for supplemental services
expenditures outlined above have been met.
(2) Unless otherwise determined by an FCA Board action,
supplemental support services requiring resources beyond that available
within the FCSBA budget will require reimbursement.
Reimbursements in excess of $10,000 which occur on an ongoing basis
will require a written Memorandum of Understanding outlining the terms
and conditions of the services provided and reimbursement. One time, or
minor recurring reimbursements may be handled by invoice. Reimbursable
expenses shall be determined on an actual cost basis or a recognized
methodology to achieve the goal of making the FCSBA ``whole'' on the
transaction.
Adopted this 7th day of July, 1995 by order of the Board.
Dated: July 13, 1995.
Floyd Fithian,
Secretary, Farm Credit Administration.
[FR Doc. 95-17781 Filed 7-19-95; 8:45 am]
BILLING CODE 6705-01-P
