By Melissa J. Anderson

Last week the Federal Reserve’s Board of Governors released its first ever annual report on its new Office of Minority and Women Inclusion [PDF], which is part of the Fed’s new Office of Diversity and Inclusion. ODI was established as part of section 342 of Dodd Frank.

The report details the office’s efforts to diversify its own workforce, as well as how it is handling its mandate to establish diversity rules for the firms and organization it regulates.

What is most interesting about the report, is that it discusses the challenges and successes of a diversity office created from the ground up and run by economists – as made evident by the discussion of its systems of measurement and analysis. Financial firms are still waiting on the Fed to provide clear diversity regulations, and the report could be seen as a blueprint for how they will be expected to operate their own offices of diversity.

Diversity in the Fed

Overall, the Fed’s employees are demographically similar to that of the rest of the federal workforce. The Wall Street Journal’s Kristina Peterson writes:

“In 2011, just under 46% of the board’s 2,274 employees were female, 26% were African-American and 4% were Hispanic. That’s roughly in line with the federal government, whose civilian work force in 2008 was 44% female, almost 18% black and nearly 8% Hispanic, according to the latest Census figures, which don’t include postal workers.”

But the same doesn’t hold true for officials, executives, and senior managers. She continues, “Of those 343 employees, around 41% are women, 10% are African-American and just over 2% are Hispanic. At this level, almost 50% are white men.”

The Fed recognizes this shortcoming in the report and says it is working to increase diversity at every level, by broadening its recruiting pool and utilizing executive search firms. One of the key challenges, it says, as a dearth of minority candidates with economics PhDs. It is partnering with the professional organizations to find qualified candidates.

The report also outlines the Fed’s policy in working with diverse suppliers. Last year, its procurement contracts amounted to $125,070,569, with 12.3 percent going to minority and women owned businesses.

One big challenge, the report says, is that many diverse businesses do not provide the kinds of products the agency needs to buy.

“As an initial hurdle, the Board’s total procurement expenditure is small relative to other federal agencies, and the specific mission of our agency dictates the type of products and services purchased. In particular, the Board spends a significant amount of its overall contracting dollars on purchases of economic data, which are generally not available from minority- or women-owned firms.”

Otherwise, the report acknowledges that the Fed would like to do better and is working to help diverse suppliers overcome challenges around documentation requirements, which are often perceived as burdensome by companies that have never worked with a federal agency before.

Regulated Agencies

Finally, the report discusses the Fed’s efforts at establishing diversity standards for the financial firms it regulates, another mandate set down by Dodd Frank. It explains that because these firms are regulated by so many overlapping groups, it is working with other organizations to create comprehensive guidelines.

In order to do so, the agency convened a meeting in February with about ten industry groups to hash out challenges and expectations. “Based on the feedback received, the financial regulators will establish a schedule of roundtable discussions with financial institutions and other regulated entities to further develop standards for the diversity policies and practices of regulated entities,” says the report.

While progress in this area may seem paltry (and basically amounts to holding a meeting about future meetings), the office is only a year old and had its own organizational wrinkles to iron out. But considering the details provided in the report, diversity officers at financial organizations may be able to glean what the ODI and OMWI will expect to see moving forward.