Auditor General
Thomas H. McTavish, C.P.A.
Auditor General
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Auditor General Thomas H. McTavish, C.P.A. Auditor General |
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| INTRODUCTION | This report, issued in September 1997, contains the results of our performance audit of the Enforcement Division within the Corporation, Securities and Land Development Bureau, Department of Consumer and Industry Services. |
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| AUDIT PURPOSE | This performance audit was conducted as part of the constitutional responsibility of the Office of the Auditor General. Performance audits are conducted on a priority basis related to the potential for improving effectiveness and efficiency. |
| BACKGROUND | The Bureau is responsible for administering various laws, including the Michigan Uniform Securities Act, Debt Management Act, Living Care Disclosure Act, Business Corporation Act, General Corporation Act, Nonprofit Corporation Act, Mobile Home Commission Act, and Land Sales Act. The Division's mission is to enforce the statutory protections afforded investors and consumers under certain statutes administered by the Bureau. The Division reviews and investigates complaints of alleged violations of the Bureau's regulatory statutes. In addition, the Division initiates administrative action or refers cases to local prosecutors or the Attorney General for action. Also, the Division registers broker-dealers, agents, and investment advisors.
The Division had 12 employees as of March 31, 1997. |
| AUDIT OBJECTIVES AND CONCLUSIONS | Audit Objective: To assess the Division's effectiveness and efficiency in enforcing certain regulatory statutes administered by the Bureau.
Conclusion: Our assessment disclosed that the Division was marginally effective in documenting and maintaining documentation of management decisions related to enforcing the regulatory statutes administered by the Bureau. We noted reportable conditions related to a continuous quality improvement process, the monitoring of investigations, a complaint log, the initial review of complaints, and case file documentation (Findings 1 through 5). |
| AUDIT SCOPE AND METHODOLOGY | Our audit scope was to examine the program and other records of the Enforcement Division. Our audit was conducted in accordance with Government Auditing Standards issued by the Comptroller General of the United States and, accordingly, included such tests of the records and such other auditing procedures as we considered necessary in the circumstances.
Our methodology included testing of records for the period October 1, 1993 through March 31, 1997. To establish our audit methodology, we conducted a preliminary survey of the Division's operations, which included discussing Division functions and responsibilities, the Case Management System, Division policies and procedures, and the existence of work backlogs. To assess the Division's effectiveness and efficiency in enforcing certain regulatory statutes administered by the Bureau, we reviewed procedures for documenting the receipt and prioritizing of complaints. We identified and reviewed procedures for monitoring case progress and investigator activity and for documenting case investigations. We tested and analyzed case files for documentation of investigation activities and analyzed documentation supporting the investigators' reporting of time for investigation activities. In addition, we reviewed and tested procedures for processing broker-dealer, agent, and investment advisor registrations. |
| AGENCY RESPONSES AND PRIOR AUDIT FOLLOW-UP | Our report contains 5 findings and 7 recommendations. The Bureau agreed with the recommendations and indicated that it has either complied with or will take steps to comply with all the recommendations.
The Division had complied with 3 of the 5 prior audit recommendations included within the scope of our current audit. The other 2 recommendations are repeated in this report. |
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