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Practice Guide to Auditing Efficiency

Characteristics of a Regulatory Inspection and Enforcement Function

Regulatory inspection and enforcement functions are found throughout the public sector, at all levels of government. The primary objective of such functions is to ensure compliance with legislation, regulation, and policies.

Typically, inspection and enforcement functions consist of the following major components:

Identification of the regulated population covered by the legislation, regulation, or policy. Stratification of the population according to characteristics such as size, type of industry, or presence of major risk factors is an important step that facilitates the management of inspection and enforcement programs.

A monitoring plan that lays out how compliance in the population covered by the legislation, regulation, or policy will be monitored. This plan should be based on a risk assessment and include inspection strategies (for example, coverage, frequencies) and information requirements (for example, documents submitted by members of the regulated population).

Management plans that cover staffing levels, budgets, and information technology. These plans should include both long-term strategic goals and short-term operational objectives.

Implementation of the plans through performance of inspections, review of documents submitted, and so on.

Making decisions on whether compliance has been achieved or whether action is required per the legislation or regulations. Actions could include sending letters indicating remedial steps to be taken, enforcing penalties, filing charges through the court system, and shutting down non-compliant operations.

Taking action by implementing the decisions noted in the previous step.

Reporting various aspects of program performance including statistics and financial measures.

Follow-up action to ensure violators have completed action requirements.

Continuous improvement and innovation to ensure the program is current and based on good practices.

Figure 1 illustrates how the main components of an inspection and enforcement function are integrated to achieve the program objective. It also shows the components classified into the standard Plan-Do-Check-Act Management Model.

The public sector is responsible for the regulation of a wide variety of economic sectors and activities. In order to enforce applicable regulations, responsible entities must develop effective inspection and compliance programs.

Figure 1

Components of an Inspection and Enforcement Function

Components Inspection Enforcement Function

The following list providesexamples of regulations and standards that are commonly the object of inspection programs:

  • regulations of financial institutions,
  • building standards,
  • labour standards,
  • public health standards (including water quality standards),
  • food safety regulations, and
  • fire safety regulations.

Laws and regulations usually provide enforcement programs with a range of options to deal with non-compliance, depending on the severity of the non-compliance. Options could include:

  • issuing orders to rectify minor deficiencies noted in inspection reports,
  • cancelling a license or permit,
  • shutting down non-compliant operations, and
  • laying criminal charges in the most serious cases.