Kusserow on Compliance: Time for Compliance Program evaluation

  1. Have a 2021 workplan focusing on improving the Compliance Program
  2. Not having independent evaluations is evidence of lack of program effectiveness
  3. DOJ & OIG: Identifying & addressing weaknesses evidences program effectiveness

With 2020 coming to an end, it is time to look forward to the New Year and plan ways to identify areas for improvement of the Compliance Program, building off of results of independent evaluations. Both the OIG and DOJ stress the importance of evidencing Compliance Program (“CP”) effectiveness and that all programs are in progress, never completed. They see compliance officers identifying weakness and gaps that lead to improvements as positive evidence of an effective program. The DOJ “Evaluation of Corporate Compliance Programs” notes that there will always be ways the program can be improved and enhanced. The DOJ, in its 2020 Compliance Program Evaluation Guidelines noted: “One hallmark of an effective compliance program is its capacity to improve and evolve. The actual implementation of controls in practice will necessarily reveal areas of risk and potential adjustment.”  The DOJ highlights the importance of effective implementation and evaluation measures” to determine whether the compliance program a “paper program” or one that is fully “implemented, reviewed, and revised, as appropriate, in an effective manner.” DOJ prosecutors are directed to ask: Does the company evaluate periodically the effectiveness of the organization’s compliance program?” Regular, rigorous, and consistent review of compliance programs is now the expectation.  The OIG calls for ongoing monitoring and independent ongoing auditing of Compliance Programs to evidence continuous improvement.

There are three general ways for independent evaluations: (1) a complete compliance program evaluation; (2) a compliance program gap analysis; or (3) an independently developed and administered employee survey of compliance knowledge, attitude and perceptions.

  1. Compliance Program effectiveness evaluations is recognized by experts as by far the best method to evidence how well the program is functioning. It measures outcome by conducting a 360-degree evaluation that includes: (a) full document examination and review; (b) on site review and testing of operations in action; and (c) interviews of Board members, executives, selective key staff, and focus group meetings. If done properly, the resulting reports with be 60 to 100 pages that include findings, observations, along with recommendations and suggestions for program improvement.
  2. Compliance program gap analysis is about half of the cost or less than a full compliance program evaluation, but the reduction of costs is matched by the diminished value of results. It is primarily a document “checklist” review, focusing on output metrics, rather than outcome metrics related to program effectiveness. It is best used with organizations with new or incomplete programs, desiring assistance in identifying elements needed to complete development of their program.  It can identify gaps for inexperienced compliance officers but lacks details by which this can be accomplished.
  3. Independently developed, validated, and administered compliance surveys of employees is the least expensive means, at a fraction of the cost for either of the two other methods, for evidencing and benchmarking compliance program effectiveness. The use of surveys has long been advocated by regulatory bodies, including in the Federal Sentencing Guidelines, OIG Compliance Program Guidance and DOJ guidelines. These organizations advise using surveys of employees to gauge how well the program is functioning. Surveys that are anchored in a large database of organization, permit benchmarking an organization to the universe. Compliance knowledge surveys test knowledge of the compliance program structure and operations and can provide very credible empirical evidence of the advancement of program knowledge, understanding and effectiveness. Compliance culture surveys focuses on employee beliefs, attitudes, and perception concerning compliance, useful in measuring the extent to which individuals, coworkers, supervisors, and leaders demonstrate commitment to compliance. Both types of surveys should be considered as they are useful in benchmarking and measuring change in the compliance environment over a period and provide different dimensions and perspectives on a compliance program.

For more information on the difference in scope of work between a full compliance program evaluation and a gap analysis, send your queries to Richard Kusserow at rkussserow@strategicm.com.

 

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on LinkedIn.

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Copyright © 2020 Strategic Management Services, LLC. Published with permission.