CFPB: OIG’s Wordy, Pusillanimous Audit Report (2015-MO-C-002) Mostly Non-Responsive to Congressional Questions; Failed to Assess Whether CFPB Practices Contribute to Systemic Discrimination

The Office of the Inspector General (OIG) for the Consumer Finance Protection Board (CFPB) recently issued an audit report stating that the CFPB can enhance its diversity and inclusion efforts. I am deeply disappointed with this report as it dares to be self-satisfied and committed to the status quo of the CFPB’s operations. The reality is that the report was produced by external agency forces, the American Banker article and the Democratic members of the House Financial Services Committee (see pages 64-65 of the report), not through the ongoing work of the CFPB’s OIG.

Overall, however, with current circumstances going on in the nation, such as the events in Ferguson, Missouri (and the significant systemic discrimination practiced there), this is the time for more in-depth investigation than is present is this very light, analytically speaking, yet very lengthy and wordy, report from the OIG.

Furthermore, the OIG’s audit report is a public document, yet it is written in a way that the findings could only be understood by a CFPB insider. This outcome is problematic because the taxpayer must be able to understand on what programs tax dollars are being spent, for what reason, and with what effect. For example, a thorough explanation of the performance appraisal process (before and after the American Banker article), including its attendant policies and management’s actions with it, would have been helpful to the reader.

The third-party report, produced by DCI Consulting (pages 75-101), however, is more responsive to examining structural discrimination at the CFPB through its practices. (This blog post is focused on the OIG-authored portion of the report.)

The report’s self-satisfaction comes from the report’s authors use of CFPB operations when it may well be those operations that themselves contribute to the problems with diversity and inclusion. The CFPB’s OIG does not even assess this possibility, even though the American Banker article already pointed out issues with the performance evaluation process. Given the changes that have occurred, with the leadership of Director Richard Cordray and some members of Congress, well before the issuance of the report, the OIG should have performed this assessment. Its absence is notable. (It is exasperating that Director Cordray must lead all of the change himself, without reliance on the well-paid (perhaps overpaid) high-level management staff.)

[Author’s note: A mere mention that the OIG-authored report’s scope is (severely) limited and then producing a recitation of the Office of Personnel Management’s definition of workforce diversity and inclusion seems to be a convenient escape hatch (page 2), one that I refuse to grant to this unacceptable audit report.]

Hearings of the House Financial Services Committee, Oversight and Investigations Subcommittee, CFPB, 2014
Date Title of Hearing Witnesses Hearing Report Number
4/2/2014 Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau Ms. Angela Martin and Ms. Misty Raucci 113-72
5/21/2014 Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau, part 2 Mr. Benjamin Konop and Ms. Liza Strong 113-81
6/18/2014 Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau, part 3 Mr. Ali Naraghi and Mr. Kevin Williams 113-85
7/30/2014 Allegations of Discrimination and Retaliation and the CFPB Management Culture The Honorable Richard Cordray 113-96

Moreover, the basis of the report being an audit report and not an analytical report makes it non-responsive to the questions presented by the American Banker article and the questions from the members of the congressional committee. The issue of diversity and inclusion is not a matter found in financial documents and spreadsheets. It is found in examining agency activities and evaluating them with the applicable laws and regulations. Appendix B (pages 66-68) demonstrates the extremely thin foundation for the report.

The overall goal of the audit report was to collect various elements, then “judgmentally” select a point from one of them to use as a test against a CFPB human-resources-related activity. This method is non-responsive to the questions posed by the congressional committee because the issue of whether the activity itself is causing the problem is left unquestioned and unanswered. With this approach, I find it difficult to see why a CFPB employee would report anything regarding diversity, inclusion, or systemic discrimination to this OIG.

The report authors merely searched for whether there were controls to prevent or detect bias or discrimination. A laudable goal, but the methods used to determine such controls are inadequate. For example, the report cites exit survey data (page 54), and that the report authors found a low level of people leaving reported discrimination as a factor. The CFPB’s Office of Minority and Women Inclusion, or OMWI, stated that its goal is to reduce the perceptions of discrimination and discrimination to zero.

Consumer Finance Protection Bureau’s Exit Survey Data, March 2012 – September 2013
Separations during period 225
Employees that submitted survey 96
Employees that did not submit a survey 129
Percentage taking survey 0.4267
Percentage not taking survey 0.5733

The exit survey alone is insufficient to be a control because the exiting employee simply has no obligation to provide such information to the CFPB. Second, to assess employee perceptions at the time of departure is insulting to the employee and shows a definite lack of effort by the organization to ensure that it is acting fairly and equitably. Third, no mention is made about the effect of so many people electing not to provide exit surveys and its effect on the relevancy of data derived from such a survey.

As a result of the CFPB’s OIG being unable to address issues of systemic discrimination, the CFPB and the Federal Reserve Board should be expected to review these issues more vigorously and be directly accountable to the Congress for successful implementation and compliance with all of the civil rights laws and regulations as well as the federal merit principles.

Authors of CFPB OIG Audit Report, 2015-MO-C-002
Name Title
Anna Saez OIG Manager
Ed Fernandez Senior Auditor and Project Lead
Victor Calderon Senior Forensic Auditor
Saurav Prasad Senior Auditor
Amanda Sundstrom Auditor
Megan Taylor Auditor
Dennis N. Wolley Jr. Audit Intern
Timothy Rogers Senior OIG Manager for Management and Operations
Melissa Heist Associate Inspector General for Audits and Evaluations