ALEXANDRIA, Va.-The primary person charged with holding NCUA "accountable" for the past eight years has retired. William DeSarno, who has served as the agency's inspector general, has overseen numerous reviews of NCUA's internal operations during his total 16 years at NCUA. Below, DeSarno shares his insights on what the inspector general does, how the office works, what he considers some of its keenest insights and more.
CU Journal: For credit unions unsure of the role of the Inspector General at NCUA, please describe what the job entails and how the IG goes about performing a review.
DeSarno: Inspectors General (IGs) serve a unique role in federal agencies. Created originally by the Inspector General Act of 1978, IGs are responsible for conducting audits and investigations, promoting economy, efficiency and effectiveness within their respective agencies, and detecting and preventing fraud and abuse in programs and operations. While IGs receive general supervision from the heads of their respective agencies, the agency head may not prevent or prohibit the IG from initiating, carrying out or completing any audit or investigation. With respect to audits, the NCUA Office of Inspector General conducts or supervises certain statutorily mandated audits each year, such as NCUA's financial statement audits and the annual review of the agency's information security systems.
The NCUA OIG also conducts audits requested specifically by the Congress. In recent years our office conducted Material Loss Reviews required by the FCU Act. The act requires the OIG to conduct MLRs and prepare a report whenever a credit union incurs a loss of $25 million or more to the National Credit Union Share Insurance Fund. We also conduct self-initiated audits or reviews of agency programs we believe are of greatest importance to NCUA.
In initiating an OIG audit or review, we generally notify NCUA management and affected offices of the review and set the review objectives. We then hold an entrance conference with the relevant agency officials to explain our objective and scope of work. The work itself involves a significant amount of data gathering, interviews with appropriate NCUA employees and contractors, and analysis of pertinent information. Once a draft report is prepared, we share it with responsible agency officials to ensure we have not overlooked any significant elements and to solicit agency comments on our findings and recommendations. Once we have incorporated the agency's comments in our report, we issue the report and post it to our web site within three business days of issuance.
CUJ: You have held IG posts at several other government agencies. How similar and how different were the roles, and what was involved at other agencies?
DeSarno: An audit is an audit regardless of the program or activity under review. However, my role here at NCUA has also differed greatly in some respects. Because NCUA is a very small agency, the OIG role is frequently more "hands on." That is, unlike at a larger agency, we interact more frequently and more closely with NCUA managers at all levels. Significantly, we work closely with NCUA senior managers to ensure that the agency fully understands our recommendations and we track its implementation efforts. We invite management to engage in an open dialogue in those instances when it agrees with our recommendations, but feels it has a better way to accomplish the intent of our recommendations. Our success is closely linked to the agency's implementation of our recommendations.
CUJ: How does one come to be involved in this particular career, and what traits make for a good IG?
DeSarno: That's an interesting question. I did not begin my career thinking about working in the IG community. I majored in accounting at college and immediately was drawn to the auditing profession. I interned with one of the "Big 8" CPA firms in New York during my senior year, but decided that I wanted to work for the federal government in Washington. I think I was influenced by President Kennedy's famous line "Ask not what your country can do for you but what you can do for your country." The transition from GAO to the IG community was a natural one. There are about 70 offices of Inspectors General in the federal government and there is a lot of movement among staff between offices. This tends to build strong working relationships and a sense of community.
To be a good IG, you first have to be a good manager. Surround yourself with a good staff and let them do their jobs, providing guidance but not getting in the way. A good IG also must know when to pick battles. You must know when to stand your ground and not sacrifice your principles.
CUJ: The nature of the IG position, its need for independence, and reports/reviews that are often critical, would seem to require a careful balance. Given that you work within the agency, how do you go about ensuring it doesn't become adversarial, and what kind of feedback do you get, if any, from those whose work is the subject of IG investigations?
DeSarno: Independence is the hallmark of the IG profession. The NCUA IG works very hard to maintain independence without sacrificing effectiveness. You are correct in that it requires a very careful balance. We go out of our way to solicit input and seek feedback from the NCUA Board and NCUA senior managers on what work they think we should do. That does not mean we do everything they ask; often we do things they very specifically did NOT ask for.
In the final analysis, I believe the agency knows we are fair, even when we disagree. We share common ground in wanting the agency to operate as effectively as possible while carrying out our respective responsibilities with the utmost integrity. As the OIG, we lay out the facts and then strive to see the issues from all sides. As such, even when we are critical, we try to take a constructive approach.
Investigations are another matter. Audits are aimed at programs and operations, but Investigations have individuals as the subject of each case. If we receive an allegation of wrongdoing on the part of an NCUA employees, and if there is a basis for the allegation, we conduct an investigation. We prepare an investigative report whether the allegation is substantiated or not. Our investigative reports present the facts and state what violations occurred, if any. We do not recommend what actions NCUA should take. That is entirely up to the agency.
CUJ: Of the work you've done at NCUA, what lessons learned/recommendations made do you believe have been particularly effective?
DeSarno: The recommendations resulting from our MLRs have been particularly effective. We prepared a Capping Report in November 2010 summarizing the first 10 material loss reports we issued. This capping report summarized the significant findings from our reviews and analyzed the major issue areas common among each of the failures. The report then made 12 recommendations to help prevent similar failures in the future. This report was embraced by the NCUA Board and senior management; all recommendations adopted, and NCUA has used this report as a teaching tool for its examiners.
CUJ: What advice/recommendations would you have for those who will follow you?
DeSarno: I would advise my successor to follow the course we have set for the past eight years. Stepping into the role of NCUA IG requires a careful balance of independence, managerial acumen, diplomacy and judgment. Do not make decisions in a vacuum. Listen to your advisors. Weigh your options. Consider the consequences of your decision, but do what you know is right. Then move on and don't look back.
