Semiannual Report to Congress: April 1, 1998 to September 30, 1998

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Securities and Exchange Commission Office of Inspector General
Semiannual Report to Congress - October 1998

Executive Summary

During this reporting period (April 1, 1998 to September 30, 1998) the Office of Inspector General (Office) issued seven audit reports and two audit memoranda. The audits reviewed: Commission Year 2000 Compliance; Oversight of Self-Regulatory Organization (SRO) Automation; Travel Upgrades; the Property System; Commission Review of SRO Rules; Review of Investment Company Filings; Commissioners' Travel; and Food Service.

Eleven investigations were closed during the period. Three cases were referred to the Commission; two were also referred to the Department of Justice (which accepted one matter and declined prosecution in the other). The subject of one investigation resigned from the Commission during the investigation; the Commission is in the process of terminating the employment of another; an additional person was suspended. Four investigative referrals to Commission management (including two made during this period) remain pending.

Although the Commission is making substantial efforts to ensure that its information systems are year 2000 compliant, it remains a significant problem. The conversion process will entail significant risks and expenditures. We are monitoring the conversion and making recommendations, as appropriate.

Information resources management (IRM) continues to experience significant problems, which will complicate year 2000 efforts. Specifically, systems development contracting, IRM planning, and ADP security remain problem areas. The Office of Information Technology is currently reorganizing and plans to increase the use of outsourcing to improve its performance. The Commission has also established a senior level information technology committee to monitor information technology investments.

Another previously reported significant problem involves controls over the collection of fees. Although statutory changes have eliminated many of the fees most at risk and the Commission has made many improvements in controls over the collection of filings fees, the overall control structure remains inadequate. This condition will remain until a new fee system, which is currently in development, is implemented.

Audit Program

The Office issued seven audit reports and two audit memoranda during the reporting period. The reports contained a total of 74 recommendations, which are summarized below. Management generally concurred with the recommendations.

OVERSIGHT OF SRO AUTOMATION
MAY 18, 1998 AUDIT 268

The Commission issued Automation Review Policy (ARP) statements, in 1989 and 1991, to enhance the automation capabilities of Self-Regulatory Organizations (SRO) and their communication with the Commission on automation issues. The ARP statements are not rules, but rather general statements of policy based on cooperation between the SROs and the Commission.

The statements covered SRO system capacity and assessment, notification of system outages, annual reports on systems, and independent reviews. In 1993 and 1994 the Commission adopted a risk analysis approach for inspections and broadened its coverage to include clearing houses.

The audit objective was to determine whether the Division of Market Regulation implemented the Automation Review Policy program effectively. During the review, we interviewed Commission and SRO staff and reviewed available documentation.

We found that Market Regulation had generally implemented the ARP program effectively. Because of ARP, the Commission was more knowledgeable about automation issues affecting the securities industry than it otherwise would have been. Also, some SRO staff indicated that the ARP program provides SRO management an additional impetus for implementing automation improvements.

We made several operational recommendations, including considering retention bonuses; enhancing training for ARP staff; and improving the risk assessment process.

PROPERTY SYSTEM
SEPTEMBER 25, 1998 AUDIT 271

Under Commission regulations, the Associate Executive Director of Administrative and Personnel Management is the Property Management Officer (PMO) with overall responsibility for managing Commission property. Within the Office of Administrative and Personnel Management (OAPM), the Facilities Branch has day-to-day responsibility for the program, including the maintenance of the property tracking system, known as TRAQ, and performing periodic inventories.

The audit objectives were to determine whether property system controls were adequate and functioning as intended, and whether property records were accurate and reliable. During the audit, we interviewed Commission property staff, conducted an inventory of property located at headquarters and the Operations Center, reviewed property records, and performed tests of the property system.

We found that, although the Commission has taken steps to improve property management over the last several years, property controls and records need further improvement.

The Office of the Executive Director (OED) recently reviewed certain property management procedures, particularly in the regions. The OED intended to convene a task force in September 19981. The task force would issue a new property management regulation and develop a standardized reconciliation process between OAPM and the Office of the Comptroller, among other improvements. We concurred with the OED's intended actions.

Audit recommendations included improving data entry and reconciliation procedures; enhancing controls over property acquired through credit cards; and asking the Board of Survey to make recommendations to correct systemic problems.
______________________________________
1 The task force has met several times since the report was issued.

COMMISSION REVIEW OF SRO RULES
JULY 14, 1998 AUDIT 272

The Commission has statutory authority to review and approve (or disapprove) proposed SRO rule changes based on consistency with the Securities Exchange Act (the Act) of 1934. In carrying out this function, the Commission must comply with specific procedural requirements of the Act, such as timely review of rule proposals and allowing public comment. The Division of Market Regulation's Office of Market Supervision reviews about 400 SRO rule proposals per year.

We reviewed the Commission's process for reviewing SRO rule filings. The primary audit objective was to determine the effectiveness and efficiency of the Commission's review process and verify compliance with the Act.

We reviewed a random sample of 17 rule filings closed during September and October of 1997, and a listing of all open rule filings as of December 16, 1997. Also, we reviewed relevant guidance and interviewed selected Division and SRO officials.

Overall, we found that the Commission's review of SRO rules is efficient and effective and adhered to statutory requirements. In addition, SRO officials complimented Division staff and felt they had improved review timeliness. We identified several potential enhancements to the review process, including improved controls over rule filing documentation, automated tracking of information, and improvements to the flow of rule filing information.

REVIEW OF INVESTMENT COMPANY FILINGS
JUNE 26, 1998 AUDIT 273

The Office of Disclosure and Review, within the Division of Investment Management (Division), reviews investment company (IC) filings, including registration statements and amendments, and proxy statements. The review is intended to ensure full disclosure to investors of the IC's policies, procedures, and risks, and that proposed IC activities are lawful.

Our audit objective was to evaluate the efficiency and effectiveness of the filing review process. During the review, we interviewed Division staff and selected investment companies. Also, we reviewed information from the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system, Division policies and procedures related to disclosure, and selected staff and management performance plans.

We found that the Division has generally implemented an efficient and effective review process for IC filings. However, management controls to assure the continued effectiveness of the process need further enhancement.

We made several recommendations, including developing plans to address the potential impact on workload of recent filing initiatives; updating review guidance and issuing it electronically; ensuring that EDGAR enhancements to identify fund series and classes are made on a timely basis; and performing spot checks of post-effective amendments and semiannual reports to shareholders.

YEAR 2000 STATUS REPORT
AUGUST 24, 1998 AUDIT 285

The Office of Inspector General is continuing to audit the Commission's efforts to make EDGAR and its internal computer systems year 2000 compliant. The period covered by this status report was from May 1996 (when the Commission's year 2000 efforts began) to June 15, 1998. The status report consolidates work from three separate year 2000 audits.

During the period, we interviewed staff; reviewed project plans, status reports, and other relevant documentation; and conducted a survey of offices and divisions remediating PC based systems.

Our objective is to evaluate the progress of the Commission in making EDGAR and its internal systems year 2000 compliant. Since the Commission's efforts are ongoing, we intend to issue several status reports.

For this period, we found that the Commission has taken numerous steps to address the year 2000 issue. Like many other federal agencies, the Commission is having difficulties meeting year 2000 deadlines established by the Office of Management and Budget (OMB). One major reason is long-standing weaknesses in the Office of Information Technology (OIT), which is primarily responsible for year 2000 remediation on mainframe systems. OIT is undergoing a major reorganization to address those weaknesses, simultaneous with the year 2000 remediation efforts.

We made several recommendations to improve the Commission's compliance efforts. The recommendations included hiring a consultant, developing an overall management plan, clarifying the organizational structure, prioritizing critical systems, adding additional skills to the project team, developing a contingency plan for EDGAR testing, and providing additional technical assistance to offices and divisions. OIT had already identified many of these needs and indicated that it is addressing them.

COMMISSIONERS' TRAVEL
MAY 26, 1998 AUDIT 280

Based on its examination of Commission travel policies, the Subcommittee on National Economic Growth, Natural Resources, and Regulatory Affairs (Subcommittee) of the House Committee on Government Reform and Oversight requested that the Office of Inspector General conduct periodic audits of the Commissioners' travel to evaluate compliance with applicable policies and procedures. In response, the Office conducted this audit and an audit of travel upgrades (Audit 281).

Our office evaluated the internal controls of the Commission over the official travel of the Commissioners. We examined the relevant Commission policies and tested all of the Commissioners' travel vouchers processed during the period from October 1, 1997 to March 31, 1998. We tested all 46 trips to determine that the travel was for official business, that it took place over a reasonable period of time given the purpose of the trip, and that the expenses claimed were valid.

The results of our tests indicated that, with respect to the items tested, the Commission complied in all material respects with the internal policies and procedures related to travel by the Commissioners. We made recommendations to improve controls concerning documenting the purpose of trips, timely submission of travel vouchers, and voucher preparation.

TRAVEL UPGRADES
JUNE 5, 1998 AUDIT 281

Based on its examination of Commission travel policies, the Subcommittee on National Economic Growth, Natural Resources, and Regulatory Affairs (Subcommittee) of the House Committee on Government Reform and Oversight requested that the Office of Inspector General conduct periodic audits of the Commission's travel upgrades to evaluate compliance with applicable policies and procedures. In response, the Office conducted this audit and an audit of the Commissioners' travel (Audit 280).

Our objectives were to determine if internal controls over travel upgrades were functioning as intended and if upgrades were being processed in accordance with applicable Commission policies. We also sought to determine if these policies were in compliance with the Federal Travel Regulations (FTR) and the recommendations of the Subcommittee.

We examined applicable Commission policies and a judgment sample of 47 upgrades processed during the period from October 1, 1997 to March 31, 1998. For the items tested, we found that internal controls were generally functioning as intended and upgrades were for the most part processed in accordance with applicable policies. We also found that the Commission's policies complied with the Federal Travel Regulations and the recommendations of the Subcommittee.

We recommended several enhancements to the controls over upgrades and other travel expenditures. The Office of the Comptroller should ensure that its staff reviews lodging requests in accordance with Commission criteria and it should remind travelers that use of a rental car must be approved in advance on the travel authorization. In addition, it should also consult with the Office of Information Technology about a travel web site on the Commission's Intranet.

EDGAR YEAR 2000 COMPLIANCE
MAY 18, 1998 AUDIT MEMORANDUM NO. 8

The EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system collects and disseminates, to investors, a wide range of disclosure documents from public companies. Recently, the Commission awarded a new contract for EDGAR that includes the redesign of the system. Implementation of the redesigned sub-systems will begin in 1999, but will not be completed until after year 2000.

The Office of Inspector General audited the progress made by the Office of Information Technology (OIT) in contracting for EDGAR year 2000 compliance testing. Because of the urgency of the year 2000 issues, we issued an audit memorandum instead of an audit report.

We reviewed the Commission's test plan for EDGAR year 2000 compliance and also asked GAO staff to review the plan. The review identified several issues that need to be addressed.

The Commission's plan for testing EDGAR's year 2000 compliance was not in conformity with the national year 2000 target dates. OIT indicated that adherence to OMB's target dates for EDGAR is not reasonable, since much of current code will be replaced by January 1, 2000. It believes that testing EDGAR code that will not be deployed after 1999 would be inefficient and wasteful.

We recommended that OIT brief senior management and the relevant Commission committees and obtain their acceptance of the risks posed by non-compliance with OMB target dates. We also expressed concern that contractor staff needed to perform the tests may not be available during the test period identified in the plan. We recommended that OIT lock-in necessary contractor staff, as soon as possible, through a binding contract.

FOOD SERVICE
SEPTEMBER 22, 1998 AUDIT MEMORANDUM NO. 9

The Commission has located many support functions in its Operations Center, or its nearby Annex, in Alexandria Virginia. The buildings are located in an industrial park, somewhat distant from restaurants or other sources of food.

We reviewed the food service (currently provided by vending machines) the Commission arranged for staff at the Operations Center and Annex. We observed the food service operations, conducted an employee survey, and interviewed users and others.

Our recommendations included consideration of an on-site deli service and improving vending machine service and management.

Investigative Program

Eleven investigations were closed during the period. Three cases were referred to the Commission; two were also referred to the Department of Justice (which accepted one matter and declined prosecution in the other). The subject of one investigation resigned from the Commission during the investigation; the Commission is in the process of terminating the employment of another; an additional person was suspended. Four referrals to Commission management (including three made during this period) remain pending.

At the close of the period, five investigations were pending. The pending investigations included allegations of abuse of position, conflict of interest, unethical acceptance of gifts, time and attendance abuse, and making false entries to a government computer system. The most significant cases closed during the period are described below.

Misuse of Position

An investigation developed evidence that a Commission employee misled an official at a regulated entity that they would participate in an upcoming examination, despite having a conflict of interest. The subject resigned from the Commission before the investigation was completed.

Investigative Abuse

We investigated allegations that Commission staff had initiated an investigation of securities fraud in retaliation against an individual who had complained to Congress of previous Commission misconduct in another matter. In addition, it was alleged that the staff had misled the individual concerning the nature of the Commission's purpose for a meeting with the staff. The evidence developed in our investigation failed to substantiate either allegation.

Conflict of Interest

We investigated complex allegations concerning the Commission's inquiry into a certain industry practice. The allegations included conflicts of interest, false statements, and conspiracy. We referred one matter to the U.S. Attorney (prosecution was declined).

Misrepresentation

An investigation developed evidence that a staff member misled their supervisor concerning the reason for an extended absence from work. The matter was referred to management which is in the process of taking administrative action.

Travel Fraud

We developed evidence that a professional staff member used their government travel card for personal expenses, obtained reimbursement for personal expenses, and used frequent flyer miles obtained from government travel for personal travel. The subject is making restitution to the government and the Commission is considering administrative penalties.

Significant Problems

No new significant problems were identified, based on work completed during the period.

Significant Problems Identified Previously

Year 2000

During the reporting period, the OIG continued audits on the Commission's efforts to make its systems year 2000 compliant (for details see Audit 285 and Audit Memorandum 8 above). The scope of the audit efforts includes both EDGAR and Commission internal systems.

Year 2000 conversion will cost significant resources and pose material risks for the Commission. The Commission is making substantial efforts to address the problem. However, these efforts are complicated by the on-going reorganization and operational problems in the Office of Information Technology (described below). In addition, the current redesign of the EDGAR system complicates year 2000 testing. We intend to monitor the EDGAR conversion process and are sharing our findings and recommendations with OIT, as they are developed.

Information Resources Management

Audit and investigative work in a prior reporting period identified significant weaknesses in the Commission's implementation of information technology (IT). These weaknesses related to contracting for systems development, information resources planning, and ADP security.

We reported previously that the Office of Information Technology (OIT) has taken numerous positive steps to address these and other problems. Notably, OIT is in the process of outsourcing much of the more routine operational IT activities, with Commission oversight. This restructuring is based on recommendations from a contractor study. As a result of this outsourcing, OIT staff will be able to focus their attention on core agency activities, such as technical architecture, strategic planning, project management, security, and customer support. Moreover, the Commission has implemented a senior level information technology committee to oversee information technology investments. Nevertheless, significant weaknesses remain in the management of information resources.

Collection of Filing Fees

Our previous audit of the collection of filing fees confirmed the Commission's assessment that the management controls were not in material conformance with accounting standards. Although statutory changes have eliminated many of the fees most at risk, and Commission management has made significant progress in correcting the most serious weaknesses, some corrective actions await the implementation of a new computerized collection system. Until these corrective actions are implemented, significant problems will persist and the overall fee collection control structure will fail to provide adequate assurance that accountability over filing fees is adequate.

Access to Information

The Office of Inspector General has received access to all information required to carry out its activities. No reports to the Chairman, concerning refusal of such information, were made during the period.

Other Matters

Executive Council on Integrity and Efficiency

The Office actively participates in the activities of the Executive Council on Integrity and Efficiency (ECIE). The Inspector General regularly attends ECIE meetings, is an active member of the Joint ECIE/PCIE Financial Regulatory Agencies Committee, and serves as the ECIE member of the Integrity Committee of the President's Council on Integrity and Efficiency.

The Counsel and Associate Counsel to the Inspector General are active members of the PCIE Council of Counsels. The Council considers legal issues relevant to the Inspector General community.

PCIE/ECIE Award to Office Staff

During this reporting period, a three person team from our Office received an award from the Executive Council on Integrity and Efficiency. The award recognized the team's work on a proposal to Congress. Developed during a payroll audit, the team recommended that certain senior government officials be paid the same way as federal employees. This change could save many thousands of dollars in administrative expense, at each affected federal agency, with little apparent impact on the senior officials.

Revisions to the OIG Strategic Plan

During the period, the Office significantly revised its 1996 - 2000 Strategic Plan. The plan was revised to be consistent with the relevant provisions of the Government Performance and Results Act.

Our stated mission directly ties the Office's goals and objectives to the Commission's strategic and performance plans. Our mission is to:

"Increase the likelihood that Commission objectives2 are achieved"


_______________________________
2 The Commission's strategic goals are to:
  • Protect investors
  • Maintain fair, honest, and efficient markets
  • Facilitate capital formation

To accomplish this mission, we have adopted the following five goals:

  • Identify and mitigate impediments to achieving Commission objectives (i.e., operational risks)
  • Identify and mitigate impediments to high individual and agency integrity (i.e., integrity risks)
  • Keep the Chairman and Congress fully and currently informed of OIG activities and significant issues
  • Continuously improve OIG staff, work products, and administration
  • Participate with the IG Community in addressing government-wide issues

Questioned Costs

Dollar Value
(in thousands)
      Number Unsupported
Costs
Questioned
Costs

A

 

For which no management decision has been made by the commencement of the reporting period

0

0

0

B

 

Which were issued during the reporting period

0

0

0

   

Subtotals (A+B)

0

0

0

C

 

For which a management decision was made during the reporting period

0

0

0

 

(i)

Dollar value of disallowed costs

0

0

0

 

(ii)

Dollar value of costs not disallowed

0

0

0

D

 

For which no management decision has been made by the end of the period

0

0

0

   

Reports for which no management decision was made within six months of issuance

0

0

0

Recommendations That Funds Be Put To Better Use

      Number Dollar Value
(in thousands)

A

 

For which no management decision has been made by the commencement of the reporting period

0

0

B

 

Which were issued during the reporting period

0

0

   

Subtotals (A+B)

0

0

C

 

For which a management decision was made during the period

0

0

 

(i)

Dollar value of recommendations that were agreed to by management

0

0

 

-

Based on proposed management action

0

0

 

-

Based on proposed legislative action

0

0

 

(ii)

Dollar value of recommendations that were not agreed to by management

0

0

D

 

For which no management decision has been made by the end of the reporting period

0

0

   

Reports for which no management decision was made within six months of issuance

0

0

Reports with No Management Decisions

Management decisions have been made on all audit reports issued before the commencement of this reporting period (April 1, 1998).

Revised Management Decisions

No management decisions were revised during the period.

Agreement with Significant Management Decisions

The Office of Inspector General agrees with all significant management decisions regarding audit recommendations, including "Funds put to Better Use" and "Questioned Costs."

Management Response of The Securities and Exchange Commission Accompanying the Semiannual Report of the Inspector General For the Period April 1, 1998 Through September 30, 1998

Introduction

The Semiannual Report of the Inspector General (IG) of the Securities and Exchange Commission (SEC) was submitted to the Chairman on October 30, 1998, as required by the Inspector General Act of 1978, as amended. The report has been reviewed by the Acting Chief of Staff, General Counsel, Executive Director, and Director of the Division of Enforcement. The management response is based on their views and consultation with the Chairman.

The management response is divided into four sections to reflect the specific requirements listed in Section 5(b) of the Inspector General Act of 1978, as amended.

Section I Comments Keyed to Significant Sections of the IG Report

A.  Audit Program

During the reporting period, the IG issued seven audit reports and two audit memoranda. Management generally agreed with the findings and recommendations in the IG's reports.

In addition to audits performed by the agency's IG, the General Accounting Office (GAO) actively reviewed program and administrative functions of the SEC. A complete listing of all GAO audit activity involving the SEC is attached as Appendix A.

B.  Response to Significant Problems

No new significant problems were identified during this period.

C.  Response to Significant Problems Previously Identified

The IG's semiannual report discusses three significant problems that were previously identified. An update on each problem follows.

Year 2000. SEC management continued to make significant efforts to address the year 2000 problem during the period. For example, we intensified senior management involvement, enhanced project tracking mechanisms, identified the highest priority systems for remediation, finalized the year 2000 project management plan, and began developing an independent verification and validation test plan. A successful year 2000 conversion is the top priority for the Commission's Office of Information Technology and senior management officials.

Collection of Filing Fees. The IG's audit, released in February 1996, confirmed the Commission's previous assessment that the agency's fee and filing system (EFFS) was not materially in conformance with the Federal Managers' Financial Integrity Act. Since the audit was released, significant progress has been made in correcting the most serious weaknesses (i.e., those related to separation of duties, access controls, audit trails, and financial information within the fee system). The separation of duties became even more effective with the transition to mandated electronic filing in May 1996 and the elimination of the user fees collected under the Independent Offices Appropriations Act of 1952 in October 1996.

Some corrective actions will not be fully implemented until the current fee collection system is redesigned. The EFFS redesign requirements have been included with the EDGAR modernization initiative. In light of the interaction between the two systems, this approach is expected to result in technical advantages.

Information Resources Management (IRM). The SEC is continuing to address a broad range of issues in the information technology area. A major restructuring of the agency's Office of Information Technology is partially complete.

As part of the restructuring, the new OIT management team is evaluating the existing OIT workload and examining internal procedures and practices. Policy and planning documents are being reevaluated to ensure consistency with the goals of the restructuring and that they meet legislative and executive branch mandates and guidelines. In addition, the Commission's Office of the Executive Director is continuing to provide close oversight of the information technology program.

D.  IG Recommendations Concerning Use of Funds

None.

E.  Reports with No Management Decisions

Final management decisions have been made on all audits issued prior to the beginning of the reporting period (April 1, 1998).

F.  Revised Management Decisions

No management decisions were revised during the reporting period.

SECTION II Disallowed Costs As of September 30, 1998

      Number Dollar Value
(in thousands)

A.

 

For which final action has not been taken by the commencement of the reporting period

0

$0

B.

 

On which management decisions were made during the reporting period

0

$0

   

Subtotal (A+B)

0

$0

C.

 

For which final action was taken during the reporting period

0

$0

 

(i)

Recovered by management

0

$0

 

(ii)

Disallowed by management

0

$0

D.

 

For which no final action has been taken by the end of the reporting period

0

$0

SECTION III
Funds Put to Better Use
As of September 30, 1998

      Number Dollar Value
(in thousands)

A.

 

For which final action has not been taken by the commencement of the reporting period

0

$0

B.

 

On which management decisions were made during the reporting period

0

$0

C.

 

For which final action was taken during the reporting period

0

$0

 

(i)

Dollar value of recommendations that were agreed to by management

0

$0

 

(ii)

Dollar value of recommendations that management has subsequently concluded should/could not be implemented or completed

0

$0

D.

 

For which no final action has been taken by the end of the reporting period

0

$0

SECTION IV Open Audit Reports Over One Year Old As of September 30, 1998

Audit #

Audit Title

Issued

Funds Put to
Better Use
(in thousands)

Questioned Costs
(in thousands)

Reason Final Action Not Taken

130

Management of the Data Center

11/18/89

$0

$0

Work on the agency's policies and guidelines covering a series of ADP issues was delayed due to a restructuring of the SEC's Office of Information Technology. The restructuring is partially complete, and efforts to satisfy IG audit recommendations have resumed. Several ADP policies are expected to be issued during the next six months.

143

Information Resources Management

3/27/91

$0

$0

Same as above.

151

Review of Microcomputers

4/18/91

$0

$0

Same as above.

159

Audit of Local Area Networks

2/16/93

$0

$0

The remaining pending recommendation concerns the implementation of prior audit and contractor recommendations. Each of the prior recommendations is being addressed under its original report.

196

Authority to Investigate and Litigate

8/16/94

$0

$0

Planning is underway to incorporate the database into a document management system.

201

Controls Over Commercial Databases

6/10/94

$0

$0

Guidelines are being redrafted for the proper and efficient use of external databases.

202

Investor Complaints and Inquiries

9/29/94

$0

$0

Efforts to update the CFR to reflect the current mission of the SEC's Office of Investor Education and Assistance have been delayed due to other priorities.

214

Survey of Information Technology

2/7/95

$0

$0

Efforts to satisfy this audit were delayed due to a restructuring of the SEC's Office of Information Technology. The restructuring is partially complete, and this audit is expected to be satisfied within the next six months.

218

Controls on Negotiated Settlements

9/26/95

$0

$0

Planning is underway to incorporate a recommended settlement database into a document management system.

220

IRM Planning and Execution

3/26/96

$0

$0

Efforts to satisfy this audit were delayed due to a restructuring of the SEC's Office of Information Technology. The restructuring is partially complete, and work has resumed on this audit.

222

Survey of Personnel Management

6/15/95

$0

$0

The remaining open recommendation is pending a decision concerning approval of conference expenses. The decision is expected to be made shortly and a regulation will be issued within the next six months.

225

Collection of Filing Fees

2/8/96

$0

$0

The EFFS redesign requirements have been included with the EDGAR modernization effort, which is expectd to occur over a three-year period.

226

Contingency Plans for PABX and Data Center

7/31/95

$0

$0

Work is continuing on the development of a disaster recovery plan for the telephone system. In addition, various off-site locations are being reviewed to store the plans for the data center and phone system.

234

Collection of Transaction Fees

3/29/96

$0

$0

Procedures are in place to ensure the accurate collection of fees from the NASD. Currently, efforts are focused on (1) establishing similar procedures with the exchanges and (2) documenting and enhancing the SEC's ADP control policies and procedures.

238

International Telephone Service

8/27/96

$0

$0

A policy document is being redrafted. The document is expected to be issued during the next six months.

243

SECOA Local Area Network

3/21/97

$0

$0

Efforts to satisfy this audit were delayed due to a restructuring of the SEC's Office of Information Technology. The restructuring is partially complete, and work has resumed on this audit.

244

Office of Filings & Information Services

3/20/97

$0

$0

The EFFS redesign requirements have been included with the EDGAR modernization effort, which is expected to occur over a three-year period. Meanwhile, controls have been implemented to address the IG's concerns.

250

Enhancing Excellence--Integrity Program

1/22/97

$0

$0

A substantial number of the recommendations have been implemented. Several policy documents are expected to be issued during the next six months.

253

Administrative Proceedings

11/7/97

$0

$0

The IG recommended that action for one recommendation in this audit occur within two years of the issuance of this audit report.

257

Client Server

9/9/97

$0

$0

Efforts to satisfy this audit were delayed due to a restructuring of the SEC's Office of Information Technology. The restructuring is partially complete, and work has resumed on this audit.

260

Value Engineering Program

5/2/97

$0

$0

Guidance has been drafted for the value engineering (VE) program. Currently, suitable VE courses are being identified.

262

Automation of Records Management

9/29/97

$0

$0

Efforts to satisfy this audit were delayed due to a restructuring of the Office of Information Technology. The restructuring is partially complete, and work has resumed on this audit.

265

Salt Lake District Office

9/30/97

$0

$0

A decision is pending concerning an increase in the SLDO's imprest fund.

M5

Screening Prospective Employees

1/19/96

$0

$0

The formal policy for screening employees is expected to be issued within the next six months.

APPENDIX A

General Accounting Office Audit Activity Involving the Securities and Exchange Commission

Reports Issued April 1, 1998 Through September 30, 1998

1.  Social Security Financing: Implications of Government Stock Investing for the Trust Fund, the Federal Budget, and the Economy, AIMD/HEHS-98-74 (April 1998)

2.  Risk-based Capital: Regulatory and Industry Approaches to Capital and Risk, GGD-98-153 (July 1998)

3.  Securities Market Operations: The Effects of SOES on the Nasdaq Market, GGD-98-194 (August 1998)

4.  CFTC Enforcement: Actions Taken to Strengthen the Division of Enforcement, GGD-98-193 (August 1998)

5.  SEC Enforcement: Responses to GAO and SEC Recommendations Related to Microcap Stock Fraud, GGD-98-204 (September 1998)

Audits In Progress as of September 30, 1998

1.  Collection of Fines (233508): A review of the Securities and Exchange Commission, Commodity Futures Trading Commission, and securities and commodities SROs collection of fines and the deterrent effects of fines.

2.  Review of On-line Marketing (233523): A study of efforts to oversee marketing of securities and futures on the Internet.

3.  Year 2000 Computer Problem (511638): A study of the Securities and Exchange Commission's management of the Year 2000 computing problem.

4.  Year 2000 Problems Associated with Electronic Data Exchanges (511434): A government-wide review of efforts to address year 2000 problems associated with electronic data exchanges.

5.  Federal Employees Entering Non-Pay Status (410160): A review to determine the reasons federal employees enter non-pay status and the types and costs of benefits employees in such status receive.

6.  SEC Oversight of SBA Section 7(a) Loans (233543): A review of the secondary market for SBA Section 7(a) loans.

7.  Social Security Reform (233582). A study to review the implementation of individual accounts or personal savings accounts as a component of Social Security Reform.

8.  International Year 2000 Risk (233577). A study of the potential risks associated with the year 2000 computer problem as it relates to the international activities of U.S. financial firms. -->