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FCA Examination Manual
ModuleGeneral
SectionWorkpapers
NumberEM-125
Date Published06/1994

Introduction


Workpapers are the primary documentation for the examination process. They include printed and electronically stored information prepared or obtained during the process, and are useful for:


This section provides general guidance on workpaper preparation, organization, and retention. Pro forma workpapers are provided to all examiners separate from this manual.

Workpaper Preparation

Workpapers prepared during the examination process typically include many different types of documents. Emphasis tends to be on workpapers drafted by FCA examiners, such as off-site activity reports; planning documents; meeting and discussion memoranda; completed pro forma workpapers; analysis memoranda; leadsheets; and referenced Reports of Examination. However, useful workpapers can also be obtained from other sources to provide support for examination conclusions. Most commonly, this will consist of correspondence and reports from the institution, and photocopies of institution documents.

The extent of workpaper documentation should vary based on factors such as examination scope, risk present in the institution, and experience level of examiners. At a minimum, workpapers should demonstrate completion of each examination objective and substantiate all conclusions reached in the Report of Examination.

Examiners should analyze and summarize pertinent information gathered during examination work. These tasks are often best achieved through a leadsheet. A leadsheet may be prepared for each examination objective, although several objectives may be addressed together. Typically, the leadsheet is prepared by the examiner assigned overall responsibility for accomplishing the objective, thus ensuring accountability for work performed. Leadsheets promote examination effectiveness by simplifying the report writing process and ensuring a logical, systematic, and organized documentation process. Refer to Supplement 2 of this module for an example of a standard leadsheet format.

It is essential that workpapers thoroughly document institution management's response to examination conclusions when material weaknesses exist. The documentation should focus on whether management agrees with the examiner's conclusions (and reasons for any disagreement), management's explanation of why the weaknesses occurred, and any corrective actions that will be taken. This information can be documented in the leadsheet or in a separate memorandum, and should include the name of the institution director or manager who responded. Other information obtained in management discussions should be documented based on relevance to the examination or usefulness during future monitoring and/or examination activities.

Examination efficiency can be enhanced by the use of pro forma workpapers. Pro forma workpapers are especially beneficial to examiners in completing repetitive or process-oriented tasks in the loan review and compliance areas. The regions, field offices, and individual examiners may also develop pro forma workpapers as needed to meet examination needs.

Workpapers should be clear and accurate, thus providing a reliable representation of the examiner's analysis, findings, and conclusions regarding conditions existing in the institution. Care should also be taken to ensure workpapers are legible and neat. Whenever possible, workpapers should be prepared on standard-size (8-1/2" x 11") paper. Only one side of the paper should be used, and all temporarily-affixed notes should be permanently attached. Upon completion, all examiner-prepared workpapers must be signed and dated by the preparer.

Workpaper File Organization

Workpapers should be logically organized, numbered, and bound upon completion of examination work to
facilitate quality assurance processes and future use. Because examinations typically produce sizable quantities of information, care should be taken to file only those documents that are relevant to the work performed. As a general rule, if a workpaper is needed to support work performed within an examination objective or to support a conclusion in the Report of Examination, it should be maintained in the workpaper files. Additionally, documents resulting from the quality assurance process should be retained in either the workpaper or permanent files. Files should not be overburdened with irrelevant material.

The method and sophistication of the numbering and bundling system used is at the discretion of the examiner-in-charge (EIC). The system will usually correspond to the complexity of the examination and volume of workpapers accumulated. Typical methods of numbering and bundling workpapers include separation by CAMEL factor or by examination objective. Whatever method is used, examiners should ensure information is readily accessible for internal or, in the event of an enforcement action, external review.

After workpapers are numbered and bound, an indexing system should be included to aid in locating information. Indexes can be constructed for workpaper packages independently (specific index) or in aggregate (master index). Normally, an independent indexing system is warranted when packages contain extensive information. If such an index is used, the workpaper file should also contain a master index showing the general contents of all related workpaper files.

The cover of each workpaper file should be clearly labeled. Each label should contain at least the following information:

Permanent File Organization

Workpapers of a more permanent nature or considered to be of continuing usefulness should be placed in the permanent files. Such information should have value during ongoing monitoring or for future examination activities. The EIC should use judgment in determining the content and organization of permanent files to ensure information is relevant and easy to locate. In some instances, it will be appropriate to maintain copies of a document in both the permanent and workpaper files (for example, scope selection worksheets and the most recent on-site activity plan). To help maintain current and complete files, the EIC should ensure the permanent files are reviewed, purged, and updated as needed and upon Report of Examination issuance. Refer to Office of Examination (OE) Operations Directive No. 7 for guidance on permanent file organization and content.

Workpaper Security and Retention

Examination workpapers maintained in permanent and workpaper files should be safeguarded and retained to satisfy legal and administrative time requirements in accordance with OE Operations Directives and FCA Policies and Procedures. At a minimum, the workpaper files supporting the two most recent Reports of Examination for each direct-lender institution should be retained at the field office. For Federal Land Bank Associations, only the workpaper files supporting the most recent Report of Examination need to be retained at the field office. Permanent files should be maintained for all institutions by the field office assigned responsibility.

Electronic workpapers require additional measures to alleviate safekeeping concerns. To minimize risk, computer diskettes and one or more backup copies should be stored and safeguarded separately. Hard copies of electronic workpapers can be generated for further risk control.

Workpapers are the property of FCA and should be safeguarded at all times to prevent unauthorized access. It is the responsibility of the EIC to ensure workpapers are secured at all times during the course of on-site work.

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