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From Banking and Finance Law Daily, October 31, 2014

Inspector General sees challenges ahead for CFPB

By Colleen M. Svelnis, J.D.

The Office of Inspector General has identified major management challenges that the Consumer Financial Protection Bureau must address as it continues to improve the efficiency and effectiveness of its supervisory activities. The OIG’s List of Major Management Challenges Facing the Consumer Financial Protection Bureau cites the following as the most important issues the Bureau needs to address in the following year:

  1. improving the operational efficiency of supervision;

  2. building and sustaining a high-performing workforce;

  3. implementing new management operations;

  4. providing for space needs; and

  5. ensuring an effective information security program.

Timeliness. According to the report, the CFPB has not met its goals for the timely issuance of examination reports this year, and a “considerable” number of draft examination reports have not been issued. The OIG states that delays in issuing examination reports can leave supervised institutions uncertain about the CFPB’s feedback on the effectiveness of the institutions’ compliance programs or processes, which could then delay the implementation of required corrective actions. The report recommends that improving the program’s operational effectiveness should be a focus of management’s attention as the agency works to:

  • clear a considerable number of draft examination reports that have yet to be issued;

  • improve its reporting timeliness;

  • ensure the timely recording of data in its tracking system; and

  • formalize the process for scheduling and tracking examiner hours.

The CFPB responded that it has taken a series of actions to improve its timeliness and reduce the number of examination reports that have not been issued. Additionally, it has “created standard report templates, created an expedited report review process for low-risk reports, and updated the management dashboard to include forward-looking metrics.”

SES. The OIG determined that the CFPB has not established standards for the timely input of data in the Supervisory Examination System (SES), which it uses to monitor and track on a weekly basis its examination teams’ progress toward completing key milestones. The report says that examination milestones were not entered in a timely manner in at least one-fourth of the instances for each of the seven key examination milestones reviewed.

The CFPB has drafted and circulated for comment a policy covering the timely input of data into SES, establishing time parameters for when data should be entered, and holding examiners accountable for adhering to those parameters, according to the listing.

Tracking hours. CFPB does not have a formalized policy for scheduling or tracking staff member hours on examinations. Further, the report found that the four regions do not have a consistent approach for forecasting and scheduling examiner workloads.

The CFPB responded that it is currently conducting an internal analysis to evaluate processes for coordinating examination staff scheduling across regions. After this is complete, the CFPB plans to convene an examiner workgroup to review the results and to propose enhancements to those processes for managing staff members’ workloads and identifying future staffing requirements. Additionally, the bureau has begun to track examination hours and will develop an associated policy.

Building and sustaining workforce. The OIG says that the CFPB will need to strengthen workforce planning, establish appropriate training and development programs, implement an effective performance management system, and put in place a comprehensive diversity and inclusion program. These are necessary to build and sustain a high-performing workforce and advance the agency’s performance, according to the listing. The report also notes that the CFPB must develop an effective human capital infrastructure. The OIG acknowledges that the CFPB had to quickly build its workforce as a new agency—employees were hired at a rapid pace to meet statutory requirements under the Dodd-Frank Act. Areas the OIG has targeted for improvement include streamlining the application process and continuing to develop targeted outreach programs and communications to champion the benefits of careers at the CFPB.

The CFPB states that it has several ongoing initiatives related to workforce planning, recruitment, and retention, including implementing a new position management process, and creating a workforce planning handbook for leadership and hiring managers. The bureau has also partnered with diversity and professional groups as part of its recruitment efforts.

Management operations. The listing states the importance of establishing appropriate internal controls, including policies and procedures that clearly define roles and responsibilities. Additionally, the OIG says that effectiveness measures should continue to be an area of focus for the CFPB as the organization grows. Key program areas that the bureau should focus on, according to the report, include the Civil Penalty Fund (CPF) and the Consumer Complaint Database (CCD).

The CFPB has contracted with third-party administrators to identify, locate, and notify victims and has begun distributing payments from the CPF to victims. With regard to the CCD, the bureau has taken steps to improve the reliability and timeliness of data in the CCD, as well as to protect sensitive personal information.

Headquarters renovation. The CFPB is undertaking a major capital improvement plan to make workplace and energy-efficiency improvements, including upgrades to the building infrastructure, as well as replace aging mechanical and electrical systems. To help mitigate risks during the renovation, the bureau has entered into a memorandum of understanding and obligated funds on a reimbursable work agreement with the U.S. General Services Administration to manage the construction contracts.

Information security. The OIG identified information security as a major challenge due to the advanced, persistent threat to government information technology (IT) infrastructure, and said that the CFPB must continue improving its information security program. The report identified opportunities to ensure that Federal Information Security Management Act of 2002 requirements are met. The CFPB responded that it has developed its information security policy and strategy and is developing an enterprise architecture that will include security architecture to help guide agency investments in information security.

The CFPB must transition its IT from the Department of Treasury, upon which it has been relying for certain information security program services and systems, including remote access, security awareness training, and incident reporting. The bureau has developed a phased approach to the transition and is in the process of defining its enterprise architecture.

Personally identifiable information. The report says that the CFPB must continue to ensure that sensitive privacy information is adequately protected within the systems it owns and maintains and within those maintained on its behalf by contractors and other entities.

The CFPB has designated a Chief Privacy Officer, who is responsible for privacy compliance and operational activities. The bureau has also developed privacy and breach notification policies, systems of records notices, and privacy impact assessments of various systems that collect or store personal information.

MainStory: TopStory CFPB

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