Report 2005-123 All Recommendation Responses

Report 2005-123: Department of Corporations: It Needs Stronger Oversight of Its Operations and More Efficient Processing of License Applications and Complaints (Release Date: January 2007)

Recommendation #1 To: Corporations, Department of

To strengthen its operational oversight, Corporations should seek legislative authority allowing it to set fees by regulation. This legislative authority should require that Corporations annually assess its fee rates and establish fees that are reasonably related to its cost of providing the services supported by its fees. Corporations should also factor in the amount of any excess reserves when conducting its annual assessment.

1-Year Agency Response

Corporations submitted a placeholder bill, Assembly Bill 1516, which would have allowed the commissioner to adjust fees to reflect the actual cost of regulatory services for each law and program. However, the Legislature chose to maintain the existing structure outlined in statute.

Corporations currently has statutory authority to make the adjustments necessary to eliminate deficits in some programs and indicated it has done so to the extent possible. For those programs where there is a cap on the assessed fee that limits its ability to make adjustments, Corporations stated it has adjusted the fee to the extent it could to eliminate the deficit in two fiscal years. Additionally, Corporations stated it would annually review its other rates to determine if the fees are sufficient to support program activities. Corporations also stated it would request a fee adjustment from the Legislature for programs that have fees set in statute and have a deficit or surplus. Finally, Corporations has completed its review of the reimbursement rate for examinations performed and the appropriate adjustments have been made. (See 2009-406, p. 30)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Subsequent to the original publication of this response, the state auditor considered this recommendation to be fully implemented.

Recommendation #2 To: Corporations, Department of

To improve the efficiency and effectiveness of its system for collecting actual performance measure information, Corporations should consider assessing the need for new automated data systems or determining whether its current systems are capable of collecting the necessary information.

Annual Follow-Up Agency Response From January 2010

The DOC assessed its current systems and determined that a new information technology system was needed to provide management with program information and increaseefficiencies in its licensing and regulatory programs. DOC submitted a Feasibility Study Report (FSR) to obt ain a new information technology system. Both the Department of Finance and the Office of the Chief Infor mation Officer approved it in the fiscal year 2009/2010 budget process. (See 2009-041 p. 106)

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Recommendation #3 To: Corporations, Department of

To improve the efficiency and effectiveness of its system for collecting actual performance measure information, Corporations should ensure the accuracy and completeness of the information in its automated systems by requiring staff to enter the information and requiring supervisors to review it periodically. For data not currently available in automated format, Corporations should develop stronger procedures to ensure that staff accurately report and supervisors review the information. To make better use of staff time, Corporations should consider calculating and reporting performance measures quarterly, rather than monthly, until it has a more efficient data collection system.

1-Year Agency Response

Corporations indicated it has implemented procedures that require staff to confirm the accuracy of information posted in its automated systems prior to exiting the system. Further, Corporations stated that under its new procedures managers or supervisors will review source documents on a sample basis and ensure that information on the source documents matches information in the electronic file. Managers and supervisors will also review their automated systems monthly for blank fields and request that staff research and complete the data fields with the appropriate information. Further, Corporations indicated that managers will counsel and provide training to employees who consistently make errors when posting information to the automated systems.

Additionally, Corporations stated that it modified its procedures that previously allowed more than one complaint file to be created in the data system for the same complaint. Among other things, these procedures require a supervisor to review the listing of complaints for duplicate files. Additional procedures are also being developed for the review of other data related to complaints. Finally, Corporations stated that its legal counsel will perform a monthly review of the data fields in the Enforcement Case Management System to ensure that all fields are completed and any deficiencies will be discussed with the assigned counsel and the correct information will be posted in the system. (See 2009-406, p. 31).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #4 To: Corporations, Department of

To ensure that it has identified all necessary performance measures and appropriately focused its current performance measures, Corporations should continue to assess the reasons for performance deficiencies and add or adjust performance measures as needed. For example, inefficiencies in the call center apparently caused the enforcement division to appear slow in responding to complaints. Adding a performance measure of the call center's timeliness in reporting complaints to the enforcement division would immediately pinpoint the cause for delays.

1-Year Agency Response

Corporations indicated that the Securities Regulation Division (securities division) has completed an initial review of performance measures to identify deficiencies and determine what caused the deficiencies and develop corrective action plans to meet performance measures. The securities division will also re-evaluate performance measures, baselines and targets for appropriateness, and accuracy. Managers will evaluate and report quarterly to executive staff performance deficiencies and their corrective action plans.

The Financial Services Division (financial division) will review and monitor processing times and compare them with benchmarks on a monthly basis. Further, the financial division will develop corrective measures to address any issues identified and develop new, more appropriate measures that are achievable. (See 2009-406, p. 31)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Subsequent to the original publication of this response, the state auditor considered this recommendation to be fully implemented.

Recommendation #5 To: Corporations, Department of

To ensure that the outreach unit can effectively measure its success, Corporations should ensure that it collects all of the necessary data and establishes reasonable benchmarks.

6-Month Agency Response

According to Corporations, in January 2007, the outreach unit developed a monthly reporting form that will capture the number of seniors program partners and training kits distributed. Corporations also stated that the outreach unit also revised existing performance measures and benchmarks based on relevancy and accuracy. The outreach unit eliminated six of the existing 12 performance measures and replaced them with four new performance measures. Data will be collected monthly and measured against the benchmarks. (See 2008-406, p. 52)

California State Auditor's Assessment of 6-Month Status: Fully Implemented

Recommendation #6 To: Corporations, Department of

To ensure that all applications are reviewed promptly and sufficiently, Corporations should continue to monitor the progress of applications through the review and approval process to identify any that have stalled, and investigate the reason for the delay.

1-Year Agency Response

Corporations stated that it reviewed its procedures for processing applications submitted to its securities division in order to streamline the process to focus on the most critical factors in an application. According to Corporations, this process, along with hiring a retired annuitant, has eliminated the securities division's backlog of applications pending review. (See 2009-406, p. 33)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #7 To: Corporations, Department of

To ensure that all applications are reviewed promptly and sufficiently, Corporations should follow the law in notifying applicants once their applications are complete.

1-Year Agency Response

Corporations stated that the financial division has revised its procedures for processing applications to include having staff notify supervisors when an application has stalled. The reason for the stall will be determined and corrective action taken. Managers will also review a log or aging schedule to determine if any applications have stalled. These revised procedures will be written and included in an applications procedures manual for the financial division. Further, Corporations indicated that it has developed and will maintain the data necessary to calculate the number of days it takes to process applications. (See 2009-406, p. 33)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #8 To: Corporations, Department of

To ensure that all applications are reviewed promptly and sufficiently, Corporations should follow up with applicants that do not promptly respond to deficiency notices.

1-Year Agency Response

According to Corporations, it has revised the letter it sends to applicants notifying them that their application has been approved. The revised letter will now include both a reference that the application is complete and has been approved. Corporations also stated that it has developed a tracking mechanism that notifies staff at established intervals that an applicant has not responded to a deficiency notice. Staff will prepare a follow-up letter notifying the applicant that Corporations will close the application if the requested information is not received by a given date. A second notice will be sent if the information is not received and, if no response is provided, Corporations will close the application. (See 2009-406, p. 33)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #9 To: Corporations, Department of

To ensure that all applications are reviewed promptly and sufficiently, Corporations should assess whether it needs additional staff to process applications.

Annual Follow-Up Agency Response From January 2010

The Department has assessed the need for additional staff to process applications and determined that it will not seek additional staff at this time. The DOC will continue to monitor the processing of applications and will redirect staff when necessary. If the DOC determines in the future that additional staff is necessary, it will seek additional resources through the budgetary process. (See 2009-041, p. 106)

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Recommendation #10 To: Corporations, Department of

To ensure that all applications are reviewed promptly and sufficiently, Corporations should maintain all necessary data in its information management systems so that it can effectively calculate the number of days it takes to process applications.

1-Year Agency Response

Corporations stated that it has developed policies and procedures for ensuring that all applications received are logged for date of receipt, date approved/license issued, and the number of days for completion. The policies and procedures also require documenting the reasons for any extraordinary issues that delay processing. (See 2009-406, p. 33)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #11 To: Corporations, Department of

To improve the efficiency of its complaint-handling process, Corporations should develop procedures to track the progress of complaints to ensure that they continue to move through the process without unnecessary delay.

6-Month Agency Response

Corporations stated it established a complaint team in August 2006 that revised the processing of complaints. As a result, Corporations stated that the time to respond to a complaint has been shortened. The complaint team also developed a monthly report that tracks the number of complaints received, the backlog of complaints, responses to complainants, and the average number of days it takes to process complaints. Additionally, Corporations stated that the enforcement division has developed plans and goals that involve completing case investigations and either taking action or closing a case, as appropriate. (See 2008-406, p. 55)

California State Auditor's Assessment of 6-Month Status: Fully Implemented

Recommendation #12 To: Corporations, Department of

To improve the efficiency of its complaint-handling process, Corporations should monitor its newly established complaint-referral process and develop procedures, if necessary, to decrease the length of time it takes to refer cases to the appropriate division.

6-Month Agency Response

Corporations stated it will continue to monitor its complaint-referral process to look for additional ways to decrease the timeframes for processing complaints. Additionally, an executive staff member will review the complaint-referral procedures and protocols and provide recommendations to the commissioner on how to improve the process. (See 2008-406, p. 55)

California State Auditor's Assessment of 6-Month Status: Fully Implemented

Recommendation #13 To: Corporations, Department of

To improve the efficiency of its complaint-handling process, Corporations should review its existing complaint records and eliminate duplicates and correct any inaccurate fields. Further, Corporations should maintain accurate and complete data to ensure that the information systems can be used more effectively as management tools.

Annual Follow-Up Agency Response From January 2010

In addition to obtaining a new information technology system that will provide accurate and complete data, the managers in the various program areas continue to review data fields in their respective information systems for blank fields and incorrect information. For example, managers also utilize return mail to update licensee information in their information systems. (See 2009-041, p. 106)

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Recommendation #14 To: Corporations, Department of

Corporations should develop a plan to conduct examinations of licensees in accordance with state law and its own internal policy. Further, Corporations should establish clear guidance and response time frames for following up on deficiencies identified in examinations.

1-Year Agency Response

Corporations stated that it has identified the number of licensees that need to be examined based on statutory requirements or internal policy, as well as determined the average hours per exam. Based on this information, Corporations received additional examiner and enforcement positions in the fiscal year 2007-08 budget and requested additional examiner and enforcement positions in the fiscal year 2008-09 budget. Corporations will continue to evaluate current staffing levels to determine whether sufficient staff exists to perform the required exams. If staffing levels are insufficient after staff redirections from other programs, Corporations will pursue additional staffing through the budget process. Corporations also indicated that it developed procedures and a risk-based process to review enforcement actions taken to determine compliance by licensees, to evaluate the enforcement action, and to identify high-risk candidates for follow-up nonroutine examinations. (See 2009-406, p. 36)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

All Recommendations in 2005-123

Agency responses received after June 2013 are posted verbatim.