The Division of Supervision and Consumer Protection (“DSC”) appreciates the opportunity to respond to the Office of the Inspector General’s (“OIG”) draft report regarding DSC’s Risk-focused Compliance Examination Process. The overall objective of the audit was to “determine whether the DSC’s risk-focused compliance examination process results in examinations that are adequately planned and effective in assessing financial institution compliance with consumer protection laws and regulation. We appreciate and concur with the report’s favorable finding with respect to DSC’s compliance with existing policies and procedures. The report contains one recommendation to clarify and reinforce requirements and documentation. It states:
DSC RESPONSE:
DSC agrees with the recommendation and issued an RD memorandum on August 18, 2005, entitled Revised Compliance Examination Procedures (applicable sections attached). The guidance, which was effective on the date of issuance, was distributed to all DSC personnel on August 31, 2005.
The enhancements implemented through this memorandum reinforce current guidance and fully address your recommendation. Therefore, no further DSC action is necessary.
In the revised guidance, the following relevant Chapters apply to the recommendation:
Review and Analysis chapter: The “Review and Analysis” chapter of the revised procedures requires examiners to “review the preliminary Risk Profile and Scope Memorandum developed at the beginning of the examination and edit it as needed to reflect the…actual scope of the examination.” Moreover, the procedures contained in the “Developing a Scope Memorandum” section of this chapter were expanded to enhance documentation pertaining to changes in the scope of the examination, spot-checks of regulations, and cross-references to additional information available in Examiner Summaries.
Documenting the Examination chapter: The “Documenting the Examination” chapter has also been revised to reinforce the requirement to document in the Scope Memorandum the spot-checking activity performed by the examiner. In addition, the procedures expand on what is meant by “identify the scope of work performed” by adding a requirement to include in the Examiner Summary a description of the examination procedures used to conduct the examination, or, alternatively, to file in the workpapers a marked-up copy of the examination procedures used during the review.
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