Failed Bank Review, The First State Bank, Barboursville, West Virginia

This is the accessible text file for FDIC OIG report number FBR-21-001 entitled 'Failed Bank Review, The First State Bank + Barboursville, West Virginia'.

This text file was formatted by the FDIC OIG to be accessible to users with visual impairments.

We have maintained the structural and data integrity of the original printed product in this text file to the extent possible. Accessibility features, such as descriptions of tables, footnotes, and the text of the Corporation’s comments, are provided but may not exactly duplicate the presentation or format of the printed version.

The portable document format (PDF) file also posted on our Web site is an exact electronic replica of the printed version.

[FDIC OIG logo]

November 2020

FBR-21-001

Failed Bank Review

The First State Bank plus Barboursville, West Virginia

Date: November 24, 2020

Memorandum To: Doreen R. Eberley, Director, Division of Risk Management Supervision

From: Terry L. Gibson, /Signed/, Assistant Inspector General for Program Audits and Evaluations

Subject: Failed Bank Review Memorandum plus The First State Bank plus Barboursville, West Virginia plus FBR-21-001

Background

On April 3, 2020, the West Virginia Division of Financial Institutions (WVDFI) closed the First State Bank (FSB) and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. FSB was a locally owned, state-chartered nonmember bank located in Barboursville, West Virginia, that the FDIC first insured on May 14, 1934. FSB was wholly owned by First Bancshares, Inc., a single bank holding company. The bank President and Chief Executive Officer’s (CEO) family controlled 82 percent of Bancshares’ common stock and Bancshares’ Employee Stock Ownership Plan (ESOP) owned the remaining 18 percent of common stock.

According to the FDIC’s Division of Finance, the estimated loss to the Deposit Insurance Fund was $47 million or 30 percent of the bank’s $156 million in total assets. The WVDFI took possession and closed FSB, because it had experienced longstanding capital and asset quality issues, was substantially impaired (as of March 11, 2020),1 and had become insolvent.2

This Memorandum examines whether the subject bank failure warrants an In-Depth Review.3

Footnote: 1 The WVDFI Commissioner deemed FSB’s equity capital level substantially impaired on March 11, 2020.

Footnote: 2 According to W. VA Code §31A-7-2(e), (f), a financial institution is insolvent when it is unable to pay its debts to its depositors and other creditors in the ordinary and usual course of business or when it is in a state of balance sheet insolvency (the assets of the financial institution are less than its liabilities, exclusive of capital). W. VA Code §31A-7-4(a) mandates that the Commissioner appoint a receiver whenever the Commissioner ascertains that a financial institution is insolvent.

Footnote: 3 When the DIF incurs a loss under $50 million, the Federal Deposit Insurance Act requires the Inspector General of the appropriate federal banking agency to determine the grounds identified by the state or federal banking agency for appointing the FDIC as receiver and whether any unusual circumstances exist that might warrant an in-depth review of the loss. Section 38(k)(5) of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. § 1831o(k)(5).

Causes of Failure

Based on our review, we believe that the failure occurred because of a critically deficient Board of Directors (Board) and poor management oversight. Management was unable to correct deficiencies noted in prior FDIC and WVDFI examinations, resolve problem assets, address the terms of an FDIC Consent Order in a timely manner, and obtain sufficient capital to operate the bank as a going concern.4 The bank’s President and CEO was a dominant policy-making official primarily responsible for strategic planning, regulatory responses, and raising capital. He exerted considerable influence over family members who comprised a large portion of the bank’s executive staff. Prior to FSB’s closing, the FDIC was considering various actions against management, including a Prompt Corrective Action (PCA)5 dismissal against the bank President and CEO.

The bank’s high level of problem assets and management’s inability to resolve them ultimately eroded earnings and depleted the bank’s capital.6 Financial institutions deemed less than Well Capitalized are subject to certain restrictions, including the use of brokered deposits under Section 29 of the FDI Act and Part 337.6 of the FDIC Rules and Regulations. Consequently, as the bank’s earnings position eroded, its capital position became critically deficient, directly impacting the viability of the bank. By December 31, 2019, FSB’s capital levels became too low to allow for continued operations.

FDIC Supervision

According to the FDIC’s Supervisory History, FSB’s primary lending focus was residential rental properties and subdivision development. At the beginning of the economic recession in 2008, FSB began to expand its commercial lending program, but did so without proper underwriting, expertise, and oversight. Accordingly, examiners downgraded the Asset Quality component to a “3” rating7 during the examination in September 2008.

FSB received Composite 2 ratings from 1994 until 2012. On November 26, 2012, the State examination downgraded the bank to a Composite “3” rating. At that time, examiners deemed Board and management oversight less than satisfactory. The Board and management failed to adequately identify, manage, monitor and control risk within the bank, and failed to address previously identified concerns regarding credit underwriting and administration practices. During this same examination, the WVDFI also uncovered a potential loan fraud scheme perpetrated by a former Vice President and Commercial Loan Officer. This former Vice President and Commercial Loan Officer was indicted in September 2013 on six counts of bank fraud and the misapplication of bank funds.8 While the fraud scheme contributed to FSB’s financial deterioration, deficient Board oversight and weak risk management were the primary factors.

Footnote: 4 In conducting this review, we assessed key documents related to the bank’s failure, including the Division of Risk Management Supervision’s (RMS) Supervisory History, the Division of Resolutions and Receiverships’ Failing Bank Case, and examination reports issued from 2015 to 2019. This review does not constitute an audit conducted in accordance with Generally Accepted Government Auditing Standards.

Footnote: 5 Section 38 of the Federal Deposit Insurance Act provides the FDIC with the authority to resolve the problems of insured depository institutions at the least possible long-term loss to the Deposit Insurance Fund. The Act authorizes the FDIC to take actions based on five capital levels for banks ranging from Well Capitalized to Critically Undercapitalized. 12 U.S.C. 1831o.

Footnote: 6 As of March 31, 2019, FSB’s Adversely Classified Items (ACI) coverage ratio was 641 percent. The ACI coverage ratio is a calculation of Adversely Classified Items divided by Capital plus the Allowance for Loan and Lease Losses (ALLL). The ACI coverage ratio is a measure of the credit risk and ability of capital to protect against that risk. A higher ratio indicates exposure to poor quality assets and less ability for the bank’s capital to absorb any losses associated with those assets.

Footnote: 7 Financial institution regulators evaluate a bank’s performance in six components represented by the CAMELS acronym: Capital adequacy, Asset quality, Management capabilities, Earnings sufficiency, Liquidity position, and Sensitivity to market risk. Examiners assign each CAMELS component and an overall, composite score, a rating of “1” (strong) through “5” (critically deficient), with “1” having the least supervisory concern and “5” having the greatest concern.

Footnote: 8 The former Vice President and Commercial Loan Officer ultimately plead guilty. He was sentenced on September 14, 2014 to five years in prison and ordered to pay $1.42 million in restitution.

Between 2013 and 2015, examiners found that the overall condition of the bank continued to worsen. By January 2015, the FDIC and WVDFI considered FSB to be deficient, thus downgrading its composite rating from a “3” to a “4.” The examiners noted that poor management oversight remained prevalent, losses from the fraud scheme continued to surface, and credit underwriting weaknesses were persistent. To address the issues identified in the examination, the FDIC and WVDFI issued a Consent Order that became effective on November 10, 2015. The Consent Order required among other things that FSB’s Board increase its participation in the affairs of the bank and the bank maintain a leverage ratio9 of no less than 8 percent and a total capital ratio10 of no less than 12 percent. The Consent Order also restricted FSB from accepting or renewing brokered deposits and prohibited payments and dividends to its holding company.

In 2016, the examiners found that the institution continued to deteriorate and represented a significant regulatory concern. Capital and earnings were critically deficient and FSB’s sensitivity to market risk remained elevated due to its overall financial condition. As a result, examiners downgraded the composite rating of FSB from a “4” to a “5”.

In 2017, examiners determined FSB was noncompliant with the Consent Order and downgraded the Management component from a “4” to a “5” due to the bank’s inability to generate additional capital and bring material improvements to the overall condition of FSB. In 2018, examiners identified that FSB remained substantially noncompliant with the Consent Order, noting that its inability to address the provisions of the Consent Order had resulted in the continuing deterioration of FSB’s already critical financial condition and threatened the viability of the bank. FSB’s capital category for PCA purposes fell to Undercapitalized in September 2018, requiring the bank to establish a Capital Restoration Plan and submit it to the FDIC for approval.11

In May 2019, the FDIC conducted a joint visit with the WVDFI, concluding that FSB remained critically deficient and was a serious supervisory concern. Examiners determined that operating losses continued to erode already deficient capital levels, resulting in a Significantly Undercapitalized designation. In September 2019, the FDIC and WVDFI conducted a joint examination, which reflected that the overall condition continued to be critically deficient. Based on the examination findings, the examiners considered the institution to be Critically Undercapitalized for PCA purposes. Additionally,
examiners determined that FSB had never achieved compliance with the capital provisions of the Consent Order and that a capital injection of at least $9.8 million was required to do so. On April 3, 2020, the WVDFI closed FSB and appointed the FDIC as receiver.

Footnote: 9 The leverage ratio is the ratio of the FDIC-supervised institution's tier 1 capital to the FDIC-supervised institution's average total consolidated assets as reported on the FDIC-supervised institution's Call Report minus amounts deducted from tier 1 capital under 12 C.F.R. § 324.22(a), (c), and (d). 12 C.F.R. § 324.10.

Footnote: 10 The total capital ratio is the ratio of the FDIC-supervised institution's total capital to standardized total risk-weighted assets. 12 C.F.R § 324.10.

Footnote: 11 FSB submitted its Capital Restoration Plan to the FDIC on December 17, 2018. The FDIC rejected the plan on February 1, 2019 noting that it did not contain sufficient information to support the capital ratios provided, did not appear realistic, and did not reconcile with FSB’s 2019 budget. The FDIC requested that FSB submit a revised plan within 30 days.

Conclusion

FSB was the victim of an employee fraud scheme discovered in 2012 that impacted its financial condition. However, as identified in multiple FDIC examinations conducted from 2012 through 2019, the Board’s oversight of the bank was also deficient and the bank’s risk management practices were poor. FSB’s Board and management failed to execute actions and address recommendations to improve FSB’s safety and soundness, its capital levels and liquidity continued to decline, and the bank ultimately failed. We concluded that no unusual circumstances exist that warrant an In-Depth Review of the loss.
"
"FDIC Conference-Related Activities and Expenses"+"9"+"24"+"r-12-005EV"+""+" 12-005EV.pdf"+"2012"+"EVAL-12-005"+"38"+"14973"+"This is the accessible text file for FDIC OIG report number EVAL-12-005
entitled 'FDIC Conference-Related Expenses and Activities' .

This text file was formatted by the FDIC OIG to be accessible to users with visual impairments.

We have maintained the structural and data integrity of the original printed product in this
text file to the extent possbile. Accessibility features, such as descriptions of tables,
footnotes, and the text of the Corporation’s comments, are provided but may not exactly duplicate
the presentation or format of the printed version.

The portable document format (PDF) file also posted on our Web site is an
exact electronic replica of the printed version.

Office of Audits and Evaluations
FDIC Conference-Related Expenses and Activities
Report No. EVAL-12-005

March 2012

Executive Summary

Why We Did The Evaluation

Why We Did The Evaluation

The FDIC sponsors divisional and office-wide conferences for FDIC employees, and periodically

other
agency participants, to provide information about emerging issues, divisional priorities and

initiatives,
group training, and networking opportunities. In September 2011, the Office of Management and

Budget
(OMB) instructed agencies and departments to review policies and controls associated with
conference-related activities and expenses (OMB memorandum M-11-35). While the FDIC is not
required to follow the OMB guidance, the Acting Chairman requested that we review the FDIC’s

policies
and controls associated with conference-related activities and expenses to assist the Corporation

in
complying with the spirit of the instructions.

The objective of our evaluation was to assess the FDIC’s policies and controls associated with
conference-related activities and expenses. We generally focused our assignment on conferences

that
were conducted from October 1, 2010 through September 30, 2011. To meet our objective, we

selected
for review a sample of eight conferences, which accounted for substantially all of the

conference-related
costs the Corporation incurred during that period. We interviewed conference planners and

assessed
conference costs and supporting documentation against the FDIC’s conference policy. We also

reviewed
conference-related regulations applicable to other government agencies, and obtained conference

policies
and interviewed representatives from several other agencies to identify other agency practices.

Background

The FDIC periodically sponsors conferences, meetings, and symposiums, collectively referred to as
“conferences.” The FDIC uses conferences to deliver a common message or strategy to all

attendees,
provide updates on policies and procedures or changes in operations, and to show appreciation for

staffs’
hard work. Conferences provide the FDIC’s distributed work force networking opportunities, time

to
catch up with fellow employees, and help to foster camaraderie and improve morale.

Notwithstanding these benefits, conference fees can be significant and should be monitored to

ensure that
related activities and expenses are appropriate and allowable. At our request, the FDIC provided

us with
documentation indicating that, from October 2010 through September 2011, the Corporation incurred
about $3.9 million in conference-related costs for 6,005 attendees.

Most government agencies are required to follow the Federal Travel Regulation (FTR) promulgated

by
the General Services Administration (GSA) and other regulations. The FTR details agency
responsibilities for conference planning, allowable per diem rates, and expectations for

minimizing
conference costs. As an independent agency, the FDIC is not required to follow conference

spending
criteria applicable to most other government agencies. Instead, as have other independent

agencies we
contacted during our review, the FDIC established its own internal policies for planning and

conducting
conferences.

FDIC division and office directors may approve proposals for smaller, inexpensive, on-site

conferences;
however, the Chief Financial Officer (CFO) must generally approve conferences with more than
100 attendees or conferences held at off-site locations. The FDIC has professional conference

planning
services available within the Division of Administration’s Special Services Unit, and a

contracted travel
agency that divisions and offices may elect to use to plan conferences.

Evaluation Results

The FDIC generally complied with its conference policies. Based on our review of eight

conferences,
FDIC conference planning officials prepared required budgeting and approval documents, ensured

that
conferences were approved at the appropriate management level, and obtained multiple bids from
hotels/conference centers and considered travel costs and other factors required by policy when

making
best value determinations for conference sites.

We did identify two compliance exceptions:

- Meals expenses for a dinner and a reception exceeded FDIC policy limits—200 percent of GSA per
diem rates—and were not justified or approved as required. The total amount of cost above the

FDIC
policy limit was $5,801.

- The FDIC held a dinner/reception for 800 FDIC employees and spouses for which a substantial
amount of the expenses related to food and beverages was allowable under FDIC policy, while the
remainder—estimated by management to be about $5,200—constituted entertainment expense and
was not allowable.

We also concluded that opportunities exist to strengthen conference-related policy and controls

and to
reduce conference expenses. Doing so would be consistent with the spirit of the aforementioned

OMB
memorandum, FTR provisions and other regulations, and a recent Executive Order aimed at reducing
conference and other agency expenses. These areas include:

- Strengthening the conference approval process;
- Centralizing conference planning and requiring the involvement of the Special Services Unit for
conferences exceeding a certain dollar threshold;
- Exploring ways to make greater use of FDIC facilities to host conferences when the use of such
facilities is cost effective;
- Strengthening controls over meals expenses;
- Reiterating and clarifying corporate policy related to entertainment expenses;
- Reviewing corporate policy related to external speakers; and
- Ensuring that all conference-related expenses are captured in the conference closeout and

evaluation
process.

At the time of our review, the FDIC was reassessing its conference policy and had informally

established
interim measures aimed at ensuring conferences are cost effective.

Management Comments

After we issued our draft report, FDIC management provided additional information and informal
comments for our consideration, and we revised our report to reflect this feedback, as

appropriate. The
FDIC also revised and reissued FDIC Circular 1010.2, Conference, Meeting, and Symposium Planning
Policies, Procedures, and Approval Requirements for Using FDIC Funds for These Activities,

effective
March 22, 2012. We reviewed the revised policy and concluded that the policy adequately addressed
each of the opportunities for improvement raised in this report. The Deputy to the Chairman and

CFO
provided a written response to our draft report, dated March 28, 2012. The response indicated

that in
addition to addressing our opportunities for improvement, the Corporation made other revisions to

the
conference policy based on its own evaluation of other agencies’ best practices and benchmarks.

As with
the revised policy, the Corporation’s written response adequately addressed the issues raised in

our report.

[End of Executive Summary]

CONTENTS

OBJECTIVE AND SCOPE

BACKGROUND

EVALUATION RESULTS

Opportunities for Strengthening Existing Controls and Reducing
Conference Expenses

Strengthening the Conference Approval Process

Centralizing Conference Planning and Involving the Special Services Unit for Conferences

Exceeding a Certain Dollar Threshold

Exploring Ways to Make Greater Use of FDIC Facilities When Cost Effective

Strengthening Controls over Meals Expenses
Reiterating and Clarifying Corporate Policy Related to Entertainment Expenses

Reviewing Corporate Policy Related to External Speakers

Capturing All Conference-Related Expenses in the Conference Closeout and Evaluation

Process

CORPORATION COMMENTS AND OIG EVALUATION

APPENDICES
1. Objective, Scope, and Methodology 13
2. Corporation Comments 14

TABLES
1. FDIC Conferences Reviewed – October 1, 2010 through September 30, 2011
2. Analysis of Travel Voucher Coding

[End of Contents]

ACRONYMS

CFO Chief Financial Officer
DCP Division of Depositor and Consumer Protection
DOA Division of Administration
DOJ Department of Justice
FAR Federal Acquisition Regulation
FDIC Federal Deposit Insurance Corporation
FTR Federal Travel Regulation
GAO Government Accountability Office
GSA General Services Administration
NFE New Financial Environment
OIG Office of Inspector General
OMB Office of Management and Budget
RMS Division of Risk Management Supervision
SSU Special Services Unit

[End of Acronyms]

[FDIC OIG letterhead, FDIC logo, Federal Deposit Insurance Corporation, Office of Inspector

General, 3501 Fairfax Drive, Arlington, Virginia 22226]

DATE: March 30, 2012

MEMORANDUM TO: Martin J. Gruenberg, Acting Chairman /Signed/

FROM: Jon T. Rymer, Inspector General

SUBJECT: FDIC Conference-Related Activities and Expenses (Report No. EVAL-12-005)

The Federal Deposit Insurance Corporation (FDIC) sponsors divisional and office-wide
conferences for FDIC employees, and periodically other agency and financial industry
participants, to provide information about emerging issues, divisional priorities and

initiatives,
group training, and networking opportunities. In September 2011, the Office of Management
and Budget (OMB) instructed agencies and departments to review policies and controls
associated with conference-related activities and expenses (OMB Memorandum M-11-35).1
While the FDIC is not required to follow the OMB guidance, you requested that we review the
FDIC’s policies and controls associated with conference-related activities and expenses to assist
the Corporation in complying with the spirit of the instructions. In doing so, we also considered
the President’s November 2011 Executive Order promoting efficient spending and requiring
agencies to make all appropriate efforts to host conferences in space controlled by the federal
government when practicable and cost effective.

Footnote 1: OMB Memorandum M-11-35, Eliminating Excess Conference Spending and Promoting

Efficiency in Government,
dated September 21, 2011.

OBJECTIVE AND SCOPE

The objective of our evaluation was to assess the FDIC’s policies and controls associated with
conference-related activities and expenses. We addressed this objective in two ways: we
assessed the FDIC’s compliance with its conference policies and procedures as they existed
during the period relevant to our review, and we separately considered other government
regulations and practices to identify, for management’s consideration, opportunities to

strengthen
FDIC policies. We generally focused our review of the FDIC’s compliance with its existing
policies on conferences that were conducted from October 1, 2010 through September 30, 2011.
In doing so, we selected a sample of conferences, interviewed conference planners, and assessed
conference costs and supporting documentation against the FDIC’s conference policy and its
policy for the purchase and consumption of food and beverage using corporate funds.

With respect to the second component of our assessment, during the course of our review, we
provided management with conference-related regulations applicable to other government
agencies and other agency practices that we had identified. In addition, we reference certain of
those regulations and practices later in the report in the context of possible opportunities for
reducing future conference expenses.

We performed our evaluation from October through December 2011 in accordance with the
Council of Inspectors General on Integrity and Efficiency’s Quality Standards for Inspection and
Evaluation. Appendix I includes additional detail on our objective, scope, and methodology.

BACKGROUND

The FDIC periodically sponsors conferences, meetings, and symposiums, collectively referred to
as “conferences,” that range from local gatherings involving less than 100 participants to large
off-site conferences involving 700 employees and requiring long-distance travel. The FDIC uses
conferences to deliver a common message or strategy to all attendees, provide updates on
policies and procedures or changes in operations, and show appreciation for staffs’ hard work.
In addition to delivering a single message and providing learning opportunities, conferences
provide the FDIC’s distributed work force networking opportunities, time to catch up with fellow
employees, and help to foster camaraderie and improve morale.

Notwithstanding these benefits, conference fees can be significant and should be monitored to
ensure that related activities and expenses are appropriate and allowable. Conference expenses
and activities can also present reputational risk for the Corporation if the public perceives

that
expenses are unwise or excessive. At our request, the FDIC provided us with documentation
indicating that, from October 2010 through September 2011, the Corporation incurred
$3,877,845 in conference-related costs for 6,005 attendees.2 For purposes of our evaluation, we
selected a sample of eight conferences representing 96 percent of those costs. Each of these
conferences was approved during 2010. Table 1 below presents information about the
conferences that we reviewed.

Footnote 2: As noted in Table 1, and discussed later in the report, FDIC policy does not require

and FDIC divisions and offices
did not consistently capture all actual costs associated with the conferences. As a result,

certain costs incurred were
estimated or not readily determinable.

Table 1: FDIC Conferences Reviewed – October 1, 2010 through September 30, 2011

Row 1
Description of Conference: New York Regional Training Conference
Location: Boston, MA
Duration: 5 days
Attendees: 598
Cost: $1,255,999a

Row 2
Description of Conference: Chicago Regional Training Conference
Location: Nashville, TN
Duration: 5 days
Attendees: 642
Cost: $1,260,089a

Row 3
Description of Conference: FDIC/Department of Justice (DOJ) Financial Crimes Conference
Location: San Diego, CA
Duration: 5 days
Attendees: 348
Cost: $644,053a

Row 4
Description of Conference: Interagency Accounting Conference
Location: Anaheim, CA
Duration: 3 days
Attendees: 174
Cost: $273,871a

Row 5
Description of Conference: Minority Depository Institutions Conference
Location: New York, NY
Duration: 3 days
Attendees: 275
Cost: $200,097a

Row 6
Description of Conference: Division of Resolutions and Receiverships All Managers Meeting
Location: The FDIC’s Seidman Center Arlington, VAb
Duration: 2 days
Attendees: 266
Cost: $41,438c

Row 7
Description of Conference: Mortgage Symposium
Location: The FDIC’s Seidman Center Arlington, VA
Duration: 2 days
Attendees: 305
Cost: $37,035c

Row 8
Description of Conference: 2011 Litigation and Resolutions Conference
Location: The FDIC’s Seidman Center Arlington, VA
Duration: 3 days
Attendees: 250
Cost: $27,198c

Row 9
Description of Conference: Total
Location:
Duration:
Attendees: 2,858
Cost: $3,739,780

Source: OIG analysis of conference-related documentation and reports.
a Reflects all costs reported on conference closeout forms.
b The L. William Seidman Center at Virginia Square has an office building with office space,

training, and
conference facilities for FDIC employees, and a residence building for students and instructors

attending classes
or conferences at the Center.
c Reflects the cost of meals only, according to invoices from the FDIC’s food services

contractor. Airfare and
per diem expenses are not included.
[End of Table 1]

The largest conferences at the FDIC are the Division of Risk Management Supervision
(RMS)/Division of Depositor and Consumer Protection (DCP) regional training conferences.
The FDIC has 90 field and territory offices that house FDIC bank examiners and associated
support staff. The field offices are organized into six regional offices. Each regional office
periodically holds a regional training conference where all of the field examiners in a region
meet in a single location for 5 days to discuss divisional priorities, emerging issues, and risks
facing the banking industry. Historically, regional training conferences were held every 3 years.
However, during the recent financial crisis, these conferences were suspended due to agency
workload. In 2010, the FDIC Chairman approved resuming regional conferences at a rate of 2 to
3 conferences per year and frequency of 3 years between each regional conference. The most
recent regional conference held prior to 2011 took place in June 2008, in Kansas City. Three
others were held in 2007. The New York and Chicago regional conferences were last held in
August 2005 and May 2006, respectively.

As an independent agency, the FDIC is not required to follow conference spending criteria
applicable to most other government agencies. Instead, as have other independent agencies we
contacted during our review, the FDIC established its own internal policies for planning and
conducting conferences. The FDIC issued Circular 1010.2, Conference, Meeting and
Symposium Planning Policy and Procedures, dated October 31, 2007, to establish policy,
procedures, and guidelines for planning and conducting conferences, meetings, or symposiums
and to establish methods to measure their benefit to participants. The FDIC also issued
Circular 2410.9, Policies Governing the Purchase of Food and Alcoholic Beverages Using
Corporate Funds; and the Consumption of Alcoholic Beverages in FDIC Buildings, dated
December 22, 2003.

FDIC division and office directors may approve proposals for smaller, inexpensive, on-site
conferences; however, the Chief Financial Officer (CFO) must generally approve conferences
with more than 100 attendees or conferences held at off-site locations. The FDIC has
professional conference planning services available within the Division of Administration
(DOA) and a contracted travel agency that divisions and offices may elect to use to plan
conferences.

With respect to the second component of our review, most other government agencies are
required to comply with the following criteria when planning and conducting conferences:

- 41 CFR Parts 301-11 and 301-74, Federal Travel Regulation, Conference Planning,
promulgated by the General Services Administration (GSA). The Federal Travel Regulation
(FTR) details agency responsibilities for conference planning, allowable per diem rates, and
expectations for minimizing conference costs.

- The Government Accountability Office’s (GAO), Principles of Federal Appropriations Law,
which presents basic reference work covering those areas of law in which the Comptroller
General has rendered a decision, including the availability of appropriations for specific
purposes.

- The Federal Acquisition Regulation (FAR), which provides guidance on selected costs that
are not allowable under FAR-based federal contracts.

As mentioned previously, the FDIC is not required to follow these regulations or guidance.
However, these regulations provided a point of reference for conference spending expectations in
most other government agencies, and we present references to the FTR, FAR, and other guidance
in the context of possible opportunities for reducing future conference expenses.

EVALUATION RESULTS

Except as described below, FDIC officials generally complied with the Corporation’s conference
policy. Based on our review of eight conferences, FDIC conference planning officials prepared
required budgeting and approval documents, ensured that conferences were approved at the
appropriate management level, obtained multiple bids from hotels/conference centers, and
considered travel costs and other factors required by policy when making best-value
determinations for conference sites.

We did, however, identify two compliance exceptions:

- The cost of a meal and a reception associated with the Chicago Regional Training
Conference exceeded the FDIC’s policy limit of 200 percent of per diem, were not included
on the Conference Request form, and were not justified or approved as required. The total
amount of cost above the FDIC policy limit was $5,801.

- At the Chicago Regional Training Conference in Nashville, Tennessee, the FDIC paid
$106,400 to rent out a dining and entertainment establishment and provide dinner, beverages,
and entertainment for 650 FDIC employees and 150 spouses/significant others. While a
substantial amount of the expenses for this event was allowable under FDIC policy, the
remainder—estimated by management to be about $5,200—constituted entertainment
expense and was not allowable.

Based on our review of both the FDIC’s policy and other agencies’ guidance, we determined that
opportunities exist to strengthen conference-related policy and controls, and, in turn, reduce
conference expenses. Doing so would be consistent with the spirit of 2011 OMB guidance, other
federal regulations and guidance, and a recent Executive Order aimed at reducing conference and
other agency expenses. These opportunities are outlined below. During our review, the FDIC
was reassessing its conference policy and had informally established interim measures aimed at
ensuring conferences are cost effective.

Opportunities for Strengthening Existing Controls and Reducing Conference
Expenses

While most conference expenses complied with corporate policies, we identified opportunities
where the FDIC could improve controls or could revisit existing policy relative to federal
regulations and guidelines to reduce conference expenses. These opportunities include the
following:

Opportunity 1
Strengthening the Conference Approval Process

- Observation

FDIC policy (Circular 1010.2, Conference, Meeting and Symposium Planning Policy and
Procedures) requires conference organizers to submit form FDIC 2600/22, Conference
Request, to provide estimated conference costs to approving officials for all conferences.
The form requires inclusion of projected expenses for meeting and hotel rooms, meals,
conference speakers, travel costs, and miscellaneous expenses.

We found that conference organizers generally prepared the Conference Request form and
obtained approval for each conference at the appropriate management level. Conference
planners for one conference, the 2011 Litigation and Resolutions Conference, were not aware
that the Conference Request form was required for on-site conferences and did not prepare
the form for the division director’s review.

The Conference Request form requires cost information for several categories of meals
(breakfast, lunch, dinner, breaks) and receptions (with and without alcohol). For each meal
category, the form requires a per person cost, the number of people participating, and the
number of times that the meal will be provided during the conference.

- Suggested Action

The Conference Request form could be expanded to include more detailed information about
conferences to provide approving officials with greater assurance that there will be no policy
exceptions. The Conference Request form is completed early in the conference planning
process, thus, some of this information may not be available at that time. However,
conference organizers could submit additional conference details to the approving officials
(division directors or the CFO) as those details become available and prior to entering into
binding contracts. Such details could include conference agendas, including events and
activities; information about speakers or reception locations; and additional or updated cost
estimates. Several FDIC planners for conferences that we reviewed also indicated that the
Conference Request and Conference Closeout forms could be improved.

Opportunity 2

Centralizing Conference Planning and Involving the Special Services Unit for Conferences
Exceeding a Certain Dollar Threshold

- Observation

Circular 1010.2 briefly discusses conference planning services and notes that divisions and
offices planning an FDIC-sponsored conference may elect to use professional conference
planning services provided by the FDIC contracted travel agency (SATO) or conference and
meeting planners within DOA’s Special Services Unit (SSU).

Divisions and offices used the SSU to some extent for seven of the eight conferences that we
reviewed. RMS did not use the SSU for the New York Regional Training Conference but
did use SATO. In instances where the SSU was used, the unit largely served as a facilitator,
meaning that SSU basically did what was requested by the conference planners. We also
noted that program officials involved in conference planning do so infrequently.

- Suggested Action

For conferences exceeding a certain dollar threshold, the FDIC could change and increase
SSU’s role to more of an advisor or coach to assist divisions and offices through the entire
conference planning, delivery, and closeout process. Doing so may reduce the level of effort
required of divisional conference planners and approving executives and would create greater
consistency between divisional conference efforts, highlight proposed expenses or activities
requiring greater attention from management, and ensure that all conference-related expenses
are captured.

In addition, it may be useful for the SSU to develop a “how-to-guide” to walk conference
organizers through the planning process, policy limits and requirements, sources for speakers
or other activities, and any other considerations or pitfalls of which conference planners
should be aware.

Opportunity 3

Exploring Ways to Make Greater Use of FDIC Facilities When Cost Effective

- Observation

Circular 1010.2 states that FDIC facilities should always be given first consideration when
planning conferences. The Circular notes that Virginia Square can house up to 500
conference attendees. If it is determined that Virginia Square does not represent a feasible
option, a written explanation must be completed, alternative dates should be examined, and
cost comparisons should be completed on form FDIC 2600/22, Conference Request.

Five of the eight conferences that we reviewed were held at off-site locations. Each of those
conferences included a written justification for not holding the conference at Virginia Square.
The justifications noted that Virginia Square could only seat up to 220 persons, classroom
style, and that Virginia Square breakout rooms were too small to accommodate breakout
sessions. While it was difficult to make direct cost comparisons between on- and off-site
conferences, it would seem that conferences held at Virginia Square would be significantly
less costly than those held at off-site locations due to lower expenses for meals, meeting
rooms, audio visual equipment and set-up, and lodging.

DOA noted that the Virginia Square auditorium is frequently reserved by internal groups
such as Corporate University or external groups such as the Federal Financial Institutions
Examination Council or other government agencies and that it is sometimes difficult to find
availability for internal conferences. Moreover, in some cases, a limiting factor is the
availability of lodging at the adjacent Seidman Center. Even if the Virginia Square
auditorium is available, the cost of reserving additional rooms at nearby hotels may eliminate
the cost benefit of using Virginia Square as a conference site.

Further, RMS officials noted that it would be impractical to break up the regional
conferences into multiple sessions and indicated that doing so would be cost-prohibitive.
RMS also stressed the benefit and importance of delivering a single message to its distributed
workforce through the regional conferences, particularly when the conferences are only held
once every 3 years. Nevertheless, these officials indicated that the FDIC was looking at
other options in light of the cost, scrutiny, and reputational risk associated with such large
conferences.

- Suggested Action

The FDIC should: (1) explore ways to make greater use of FDIC facilities for conferences
by reconfiguring conference seating arrangements (to achieve more than a 220-person
capacity limit), reevaluating the number of required attendees, or breaking up conferences
into multiple sessions (e.g., two sessions of 220 participants); (2) revisit its practices for
reserving the Virginia Square auditorium to ensure internal conference needs have been
adequately considered before making the auditorium available to external groups; and
(3) consider making greater use of technology, such as video teleconferencing, in
determining how to deliver conference messages to participants.

Opportunity 4

Strengthening Controls Over Meals Expenses

- Observation

Circular 2410.9 allows the use of corporate funds for the purchase of food and beverages.
The Circular states, among other things, that: (1) FDIC officials should be careful not to
select types and amounts of foods and beverages that could reasonably be perceived as
extravagant. (2) Total per-person cost for corporate-funded meals (including alcoholic
beverages, excluding tax and tip) should generally not exceed two times the allowable per
diem for that meal at that location. (3) Written justification to the approving official is
required for any overages.

Based on our testing of eight FDIC conferences, we determined that most of the meals
provided at the New York Regional Training Conference, Chicago Regional Training
Conference, and FDIC/DOJ Financial Crimes Conference exceeded per diem by more than
200 percent. An FDIC official indicated that form FDIC 2600/22, Conference Request, had
been submitted and approved and served as the written justification for exceeding
200 percent of per diem for these meals. However, we noted that the forms did not include a
justification, per se, instead they only showed a per person and aggregate cost estimate for
each meal. RMS officials indicated that, in the case of the New York and Chicago Regional
Training Conferences, the conference meals expense was offset to some extent by the hotels
providing discounted prices on rooms or other services such as audio visual equipment
set-up.

As noted earlier, we did identify two examples of meal costs exceeding per diem limits—by
a total of $5,801—that were not included on the Conference Request Form and for which
there was no other type of written justification and approval. Regional conferences generally
include an executive dinner for FDIC executives and special guests (conference speakers or
guests from other agencies). These meals provide an opportunity for FDIC officials to
interact with state supervisors or officials from other regulatory agencies. The Chicago
Regional Training Conference in Nashville included an executive dinner that averaged $243
per person for 37 attendees ($195 not including tax and gratuity). The limit for per diem
dinner costs in Nashville, per Circular 2410.9, was $68 ($34 x 200 percent); thus, the meal
costs exceeded the FDIC policy limit by $4,699.

Second, in the case of the Chicago Regional Training Conference, the conference planning
committee held a planning reception in Nashville about 8 months before the conference
began. This reception cost $168 per person for 19 attendees ($126 not including tax and
gratuity). As noted above, the FDIC policy limit was $68. As a result, the cost of the meals
exceeded the FDIC policy limit by $1,102.

We did not see any instances where conference attendees inappropriately claimed per diem in
addition to conference-provided meals. As a result, in cases where the meal expense
exceeded 200 percent of the per diem rate, the net additional cost to the Corporation was the
difference between the actual cost of the meal and 200 percent of per diem. As an example,
if the breakfast per diem rate in a city was $10.00, and the actual cost of the breakfast was
$30.00, the net additional cost to the Corporation above the 200-percent policy limit amount
would be $10.00 ($30.00 - $20.00) per person times the number of attendees. We estimate
that meals expenses above the 200-percent per diem limit at the New York and Chicago
Regional Training Conferences and the FDIC/DOJ Financial Crimes Conference increased
the overall cost of those conferences by about 8.2 percent.

- Suggested Action

The FDIC should revisit Circulars 1010.2 and 2410.9 and other controls related to meals
expenses to ensure they are reasonably consistent with other federal agency guidance and
practices, they clearly establish limits appropriate for the Corporation, and that the
Conference Request form or some other form of documentation adequately provides analysis
and justification for meals exceeding the per diem limit. As noted previously, the GSA FTR
is applicable to most government agencies but not the FDIC. However, as a point of
reference, the FTR limits conference per diem rates to 100 percent of the meals portion and
125 percent of the lodging portion, respectively, of the GSA per diem rate applicable to the
conference location. In addition, most of the agencies that we contacted have some limit on
lodging and meals expenses.

Opportunity 5

Reiterating and Clarifying Corporate Policy Related to Entertainment Expenses

- Observation

Circular 1010.2 states that expenses for entertainment are not allowable. At the discretion of
the division or office director, contributions from participants may be used for entertainment,
provided the contributions are made voluntarily and the entertainment selected is appropriate
for a diverse, professional audience. Outside speakers and guest lecturers are not considered
entertainment and are therefore not included in this category.

At the Chicago Regional Training Conference in Nashville, the FDIC paid $106,400 to rent
out a dining and entertainment establishment and provide dinner, beverages, and
entertainment for 650 FDIC employees and 150 spouses/significant others. The $133 per
person charge also included transportation from the hotel and security at the establishment.

While a substantial amount of the costs for this event was for food, beverages, security, and
transportation and were allowable under FDIC policy, the remainder constituted
entertainment expense and was not allowable. In that regard, during our evaluation, FDIC
management estimated the cost of the entertainment at about $5,200. Further, FDIC officials
indicated that the billing for the event consisted of a per-person, all-inclusive charge, and the
establishment was not able to itemize the cost related to entertainment expense. RMS
officials told us that, given the number of conference attendees, this establishment presented
the best value for the Corporation among the limited number of suitable venues that were
available in the area.

RMS also hired live entertainment at two other regional training conference receptions. In
both cases, RMS employees paid for the entertainment, as allowed by FDIC policy, and did
not use corporate funds.

- Suggested Action

The FDIC should reiterate Circular 1010.2 provisions related to paying for entertainment
expenses and further define examples of what constitutes entertainment expenses. With
respect to other agency policy and practices, the FAR does not allow payment of government
funds under a contract for entertainment expenses. GAO’s Principles of Federal
Appropriations Law also does not generally allow the use of appropriated funds to pay for
entertainment expenses. Several non-appropriated agencies told us that their agency will pay
for entertainment expenses on rare occasions. Such entertainment has to be directly relevant
to the purpose of the conference or meeting—an example given was for a song or dance
performance associated with a diversity event.

Opportunity 6

Reviewing Corporate Policy Related to External Speakers

- Observation

Most conferences had in-house speakers or cost-free speakers from other agencies. The
Chicago and New York Regional Training Conferences also had external speakers. External
speaker fees were $33,500 at the Chicago Regional Training Conference and $36,500 at the
New York Regional Training Conference. Individual speaker fees at these two conferences
ranged from $1,500 to $15,000.

In the case of both conferences, aggregate estimated speaker fees were included on the
Conference Request forms and, therefore, had been approved. RMS conference planners
indicated that speaker topics were related to the banking industry, the FDIC’s mission, or
worklife issues. We observed internal speaker topics were generally related to banking
topics or RMS/DCP initiatives. External speaker topics included themes related to work
stress, tools for success, and nutrition.3

Footnote 3: We determined speaker topics by reviewing conference agendas. In some cases,
conference agendas did not specify speaker topics.

- Suggested Action

Circular 1010.2 is largely silent regarding the use and payment of external speakers. The
FDIC should clarify provisions in the Circular to ensure that conference speakers and topics
are aligned with FDIC goals and values and that external speaker fees are reasonable.
As it relates to other agency policy and practices, we did not identify specific provisions in
the FAR or FTR governing external speakers, and other agency officials we interviewed
indicated they generally ensured that speakers were “appropriate.”

Opportunity 7

Capturing All Conference-Related Expenses in the Conference Closeout and Evaluation
Process

- Observation

Circular 1010.2 requires conference planners to develop a comparison of actual to estimated
costs within 60 calendar days of conference completion. Conference attendees are supposed
to code their travel costs to a specific conference code, and conference planners use the New
Financial Environment (NFE) to identify travel-related conference costs. We found that
conference attendees did not always properly code their travel vouchers, and we identified
discrepancies between the number of actual conference attendees and travel costs captured
within NFE. As a result, conference closeout forms underestimated actual conference costs.
Table 2 presents information about the proper coding for three conferences.

Table 2: Analysis of Travel Voucher Coding

Row 1
Conference: FDIC/DOJ Financial Crimes Conference (San Diego)*
FDIC Attendees: 288
Vouchers Properly Coded: 125
Estimate of Vouchers Not Properly Coded: 163 (56%)

Row 2
Conference: Chicago Regional Training Conference (Nashville)
FDIC Attendees: 642
Vouchers Properly Coded: 542
Estimate of Vouchers Not Properly Coded: 100 (16%)

Row 3
Conference: New York Regional Training Conference (Boston)
FDIC Attendees: 598
Vouchers Properly Coded: 484
Estimate of Vouchers Not Properly Coded: 114 (19%)

Source: OIG analysis of data from the FDIC’s Electronic Travel Voucher System.
* The Legal Division adjusted the conference closeout form to account for the travel cost
related to travel vouchers that were not properly coded.
[End of Table 2]

It may be unreasonable to expect all conference attendees to properly code their travel
vouchers. Because this is a cost allocation issue that does not affect overall corporate
spending, a simple proration of conference costs over the percentage of total vouchers that
were not properly coded should suffice for calculating actual travel costs.

We also noted that Circular 1010.2 does not specify what conference expenses management
wishes to capture on the closeout form. In addition, a closeout form is not required for
conferences approved at the divisional level. Accordingly, a few conferences in our sample
did not have closeout forms even though these conferences had several hundred attendees.

- Suggested Action

The FDIC should consider (1) additional means to ensure that conference attendees properly
charge travel costs associated with conferences and (2) clarifying instructions for closeout
forms to ensure they include the following expenses:

- Portions of expenses (e.g., speaker fees) paid by FDIC divisions other than the
sponsoring division.
- Executive dinners.
- Conference planning expenses.
- Non-FDIC participants (spouses/significant others).

CORPORATION COMMENTS AND OIG EVALUATION

After we issued our draft report, FDIC management provided additional information and
informal comments for our consideration, and we revised our report to reflect this feedback, as
appropriate. The FDIC also revised and reissued FDIC Circular 1010.2, Conference, Meeting,
and Symposium Planning Policies, Procedures, and Approval Requirements for Using FDIC
Funds for These Activities, effective March 22, 2012. We reviewed the revised policy and
concluded that the policy adequately addressed each of the opportunities for improvement raised
in this report. The Deputy to the Chairman and CFO provided a written response to our draft
report, dated March 28, 2012. The response is presented in its entirety in Appendix II. The
written response indicated that in addition to addressing our opportunities for improvement, the
Corporation made other revisions to the conference policy based on the FDIC’s own evaluation
of other agencies’ best practices and benchmarks. The response also encouraged the OIG to
review compliance with the revised policy at an appropriate time in the future. As with the
revised policy, the Corporation’s written response adequately addressed the issues raised in our
report.

Appendix I

OBJECTIVE, SCOPE, AND METHODOLOGY

Objective

The objective of our evaluation was to assess the FDIC’s policies and controls associated with
conference-related activities and expenses. We addressed this objective in two ways: we
assessed the FDIC’s compliance with its conference policies and procedures as they existed
during the period relevant to our review, and we separately considered other government
regulations and practices to identify, for management’s consideration, opportunities to

strengthen
FDIC policies. We generally focused our assignment on conferences that were conducted from
October 1, 2010 through September 30, 2011.

We performed our evaluation from October through December 2011 in accordance with the
Council of Inspectors General on Integrity and Efficiency’s Quality Standards for Inspection and
Evaluation.

Scope and Methodology

To accomplish our objective, we:

- Obtained cost and attendee information about FDIC conferences held from October 2010
through September 2011.
- Reviewed FDIC conference planning policy and policy pertaining to meals and alcoholic
beverages at corporate-sponsored events.
- Gained an understanding of the FDIC offices and officials involved in planning and
approving conferences and the internal controls over the conference planning and approval
process.
- Reviewed conference planning and expense documentation for conferences selected for
detailed review.
- Interviewed corporate officials responsible for reviewing and approving conference requests
and conference-related contracts and expenses.
- Interviewed conference planners associated with conferences that we selected for detailed
review.
- Assessed compliance of conference expenses against policy requirements.
- Reviewed conference-related regulations applicable to other government agencies. Where
possible, we obtained and reviewed conference policies from other agencies and interviewed
representatives from other agencies to identify other agency practices that may be of interest
and assistance to the FDIC as it seeks to enhance its current policy.

We reviewed a judgmental sample of eight conferences. These conferences represented
96 percent of FDIC conference expenses (based on information provided to us by the FDIC as
discussed earlier in the report) from October 1, 2010 through September 30, 2011.4

Footnote 4: Because this is a judgmental sample, the results of our testing cannot be projected

to
the universe of conferences held at the FDIC.

Appendix II

CORPORATION COMMENTS

[FDIC letterhead, FDIC logo, Federal Deposit Insurance Corporation, Deputy to the Chairman and

CFO,
550 17th Street NW, Washington, D.C. 20429-9990]

MEMORANDUM TO: Jon T. Rymer, Inspector General

FROM: Steven O. App, Deputy to the Chairman and Chief Financial Officer /Signed/

SUBJECT: Management Response to the Draft Report Entitled, Evaluation of FDIC Conference-Related
Activities and Expenses (Assignment No 2011-099)

This memorandum is in response to the subject draft evaluation report dated February 2,
2012. We appreciate this comprehensive and timely report addressing the Acting Chairman’s
request that the Office of Inspector General (OIG) review the Federal Deposit Insurance
Corporation’s (FDIC’s) policies and controls associated with conference-related activities and
expenses. While the FDIC as an independent agency is not required to follow the recent,
referenced OMB and Executive Order guidance on conferences; the information contained in the
draft evaluation report will facilitate the FDIC’s ongoing cost reduction efforts in compliance
with the spirit of these instructions.

We acknowledge the positive, overall evaluation results; namely, that the FDIC generally
complied with its operating policies for over 99 percent of the total $3.9 million in conference
expenditures over the evaluation period. Nevertheless, we are concerned over the two noted
compliance exceptions related to meal expenses and entertainment, which occurred in
conjunction with the Chicago Regional Training Conference. Improved control procedures have
been implemented to effectively eliminate such departures from FDIC policies going forward.

With most conference expenses being in compliance with existing policies, the FDIC’s
focus has been primarily prospective in nature. To this end, as noted in the OIG draft evaluation
report, the FDIC began the process of reassessing its conference policy in the Fall of 2011,
established interim measures to ensure all future conferences are more economical, and issued
the revised conference policy in March 2012.

The OIG offered seven opportunities to further strengthen existing controls and reduce
conference expenses. The FDIC agrees with all of these items and incorporated the suggested
actions into its revised Conference Operating Circular (1010.2). In addition to addressing the
Inspector General’s suggestions, we made other revisions to the conference policy based on our
own evaluation of other agencies best practices and benchmarks. Overall, the collective
adoption of these actions positions the FDIC to both strengthen its internal approval processes

to
avoid policy compliance exceptions going forward and, significantly, continue to lower its
overall conference expenses.

The specific actions taken to address each of these opportunities are briefly described below and
we would encourage the OIG to review compliance with our revised Conference Operating Circular at
an appropriate point in the future.

Opportunity 1 – Strengthening the Conference Approval Process
The FDIC has revised Form FDIC 2600/22 to better reflect the requirements of the updated

conference
circular. The FDIC has expanded the form to ensure clear and complete reporting of all

conference
expenses. The form will be mandatory for all conferences exceeding a selected cost threshold.
Additionally, between the time a conference has been approved and the actual time of the

conference,
Division/Office directors must submit an interim form updating/validating the estimates.

Opportunity 2 – Centralizing Conference Planning and Involving the Special Services Unit for
Conferences Exceeding a Certain Dollar Threshold
For all conferences exceeding a defined cost threshold, the conference planners must contact and
involve the Division of Administration’s (DOA) Special Services Unit (SSU) for assistance in
conference planning. SSU has also developed a “How to Guide” for planning conferences.

Opportunity 3 – Exploring Ways to make Greater Use of FDIC Facilities When Cost Effective
FDIC conferences will utilize FDIC facilities, Federal facilities, Government public buildings,
or universities whenever possible and more economical. For all conferences that do not take
place at an FDIC facility, conference organizers must work with the Acquisition Services Branch
of DOA to obtain and present the three best alternative proposals. Additionally, the use of
technology (video conferencing, teleconferencing, web conferencing, etc.) is encouraged whenever
possible.

Opportunity 4 – Strengthening Controls Over Meals Expenses
The FDIC’s new policy states that meal expenses shall adhere to 125 percent (or less) of the GSA
per diem rates and that any exceptions must be approved by the Chairman or his designee.

Opportunity 5 – Reiterating and Clarifying FDIC Policy Related to Entertainment Expenses
The conference policy states that all entertainment expenses as defined in the circular
(e.g., musicians, other performers, performance instructors, etc.) are prohibited.

Opportunity 6 – Reviewing FDIC Policy Related to External Speakers
All conference planners must ensure that outside speakers address relevant topics and that
their costs are reasonable.

Opportunity 7 – Capturing All Conference-Related Expenses in the Conference Closeout and
Evaluation Process
Post-conference closeouts and evaluations are required for conferences exceeding a defined cost
threshold. The closeout form, FDIC 2600/23, must be completed within 60 calendar days of the
conference completion and must include all conference-related expenses. Reviews of conference
closeout reports will be performed to ensure compliance with the conference policies. The
circular includes provisions addressing the consequences of non-compliance.

[End of Appendix II]

[End of Report]