OIG Calls for Strengthening FDIC Conflict of Interest Training

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WASHINGTON — A report by the Federal Deposit Insurance Corp.’s Office of Inspector General found that the banking regulator could improve its policies to better prevent conflicts of interest between its employees and the companies with which it contracts.

The OIG report released this month indicates that while the FDIC has policies for identifying and responding to conflicts of interest in the agency acquisition process, the internal guidance — contained in the FDIC Acquisition Procedures and Guidelines Manual — does not require employees involved in the acquisition process to explicitly identify potential or actual conflicts of interest but relies on employees to identify and avoid such conflicts themselves.

“APGM requires sound planning for all procurement activities… however, identification and description of conflict of interest risks are not specifically required,” the report notes. “In the absence of additional internal controls throughout the procurement lifecycle, Program Office-level staff and contracting officers may not be prepared to identify, analyze, respond to, and monitor potential or actual conflicts of interest.”

The Office of Inspector General also found that the FDIC Ethics Unit did not establish specific requirements for ethics training beyond initial new employee and annual sessions, but provided additional, tailored ethics training upon request by FDIC program offices.

OIG initiates ethics review of FDIC acquisitions beyond 2022 information report Three agency employees were found to have investments in FDIC-contracted companies that were directly affected by the work they supervised. In February 2023, the OIG received a congressional request to investigate conflicts of interest at the FDIC, and the watchdog assessed the effectiveness of existing regulations and policies between February and August 2024.

The report noted that as a result of media reports of alleged conflicts, two program offices requested and received specialized training to address acquisition-related risks. While such actions reflected the agency’s commitment to internal controls over such conflicts, the inspector noted that they also determined that the need for additional training could justify “additional training for employees related to conflicts of interest in acquisitions … which could reduce the likelihood of ethics violations.”

The Office of the Inspector General of the Financial Services (OIG) has directed the FDIC Chief Operating Officer to identify and document acquisition team members from appropriate departments and develop procedures requiring these team members to complete a conflict of interest certification prior to participating in an acquisition and to submit certifications annually during the acquisition period.

The report further recommends that the agency’s chief administrative officer update the Acquisition Procedures and Guidance Manual. While the manual currently requires “prudent planning” by employees, the OIG suggests that the officer provide more detail, as well as written descriptions of any potential or actual conflicts of interest. The OIG also recommends specialized annual training on acquisition-related conflicts of interest.

The FDIC said it agrees with all eight recommendations and plans to complete all corrective actions by August 31, 2025.

“The FDIC agrees that it is important that government decisions, including those related to acquisitions, be free from personal financial bias,” said Vice President and Chief Operating Officer Daniel Bendler. “The FDIC agrees with all of the recommendations and has proposed corrective actions.”