To:           Stephen M. Beard,
                 Deputy Assistant Inspector General for Audits

From:       Michael J. Zamorski, Director
                 Division of Supervision and Consumer Protection

Subject:   Response to OIG Draft Report Entitled Division of Supervision and
                Consumer Protection's Process for Identifying Current and Future Skill
                and Competency Requirements (Assignment Number 2004-027)

Thank you for the opportunity to respond to your draft evaluation report about the Division of Supervision and Consumer Protection's (DSC) process for identifying current and future skill and competency requirements. DSC is positioning our workforce to reflect the trends in the financial services sector and therefore, DSC regularly reviews skill set requirements and identifies ways to meet current and future needs. Our specific responses to each of your recommendations follow:

OIG recommendation:

1. Incorporate discussion of the new Corporate Employee Program into the staffing strategy, finalize the staffing strategy, and communicate the staffing strategy to DSC employees and all DSC corporate managers.

DSC Response:

We agree with this recommendation and we have outlined staffing goals which are consistent with Office of Personnel Management (OPM) and Government Accountability Office (GAO) workforce planning guidance. We are currently updating staffing strategies and incorporating the October 2004 Corporate Employee Program strategies outlined by the Chief Operating Officer. We are also including in the strategy, any implications from the Relationship Management Program when it is implemented. We will communicate the updated strategy to our DSC corporate managers and employees by year-end 2005.

OIG recommendation:

2. Validate the National Staffing Model to ensure that it yields accurate results, and begin using the model to estimate staffing needs.

DSC Response:

The National Staffing Model was developed in 2002. Since that time, DSC business processes have changed. In 2003, DSC raised the MERIT guideline thresholds to include institutions with total assets up to $1 billion. In 2004, the Compliance Refocus project modified procedures related to CRA/Compliance examinations.

In 2004, DSC began piloting its Relationship Management program which modifies the risk management examination process and changes the timeframe for examinations (open intervals of a year as opposed to point in time examinations).

Since all of the business process changes directly affect workload and staffing, DSC is modifying the staffing model to accurately reflect these process changes. In addition, it should be noted that there is a significant lag time, due to examination cycles, for noting staffing implications from these new processes.

We partially agree with this recommendation and are in the process of making changes to the model. After the changes are made, we will test the model and determine if it will be a reliable forecasting tool. However, your recommendation to begin using the model may be premature until changes are made and testing results are available. Therefore, we offer the following alternative action. DSC will test the model and evaluate its reliability as a forecasting tool to the extent possible during 2005 and provide a progress memorandum to the Director DSC by year-end 2005. We expect that due to the time lag and change issues previously discussed, DSC may choose to continue to test and refine the model rather than fully implement it in 2005. We believe this action meets the intent of the recommendation to build and implement a staffing model that is appropriate and fully tested.

OIG Recommendation:

3. We recommend that the Director DSC, through consultation with the DOA, evaluate whether DSC would benefit from conducting a formal skills assessment.

DSC Response:

We agree with this recommendation and are working closely with the FDIC Division of Administration (DOA) and the FDIC Corporate University to identify skill sets and necessary training. We have recently initiated the Review of Promotion, Evaluation, and Selection (ROPES) Project that identified specific skill sets for a journeyman level examiner. We will evaluate the ROPES project results to verify the benefits of this assessment by year-end 2005.

OIG Recommendation:

4. We recommend that the Director, DSC, coordinate with the Human Resources Branch and the FDIC's Corporate University to determine the feasibility of using the training server to capture workforce planning information related to competencies, skills, and prior work experiences.

DSC Response:

As with the response to recommendation # 3 above, we agree with this recommendation and will coordinate with FDIC's Corporate University to identify the feasibility of a centralized repository for specialized experience and training of our workforce by year-end 2005.

OIG Recommendation:

5. Document within DSC's Long Term Staffing Strategy the various mechanisms that DSC uses to monitor and measure the success of its human capital and workforce- planning related initiatives and activities and expectations for how DSC should measure the contribution of individual workforce planning initiatives to the achievement of corporate and divisional program goals.

DSC Response:

When all of DSC's new initiatives are in place -- including shifts of workload and staffing toward the areas of large bank and BASEL supervision, terrorist financing and anti -money laundering initiatives, and the corporate employee program we will review our long term staffing strategy. As part of that study, we will address each of the various mechanisms mentioned in the report to determine which will best provide the measurements of the division's progress in workforce planning goals. One of those measurements which DSC expects to be a large measurement tool will be the DSC scorecard. Initial training and updates to scorecard are still taking place but are expected to be completed by year-end. By year-end 2005 we will complete the study and document the mechanisms that measure workforce planning initiatives and achievements.