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An Audit Report on Inspection Activities at the Department of Licensing and Regulation

July 2013

Report Number 13-041

Overall Conclusion

The State Auditor's Office reviewed processes related to inspection activities for 3 of 11 programs for which the Department of Licensing and Regulation (Department) conducts or oversees inspections. Those three programs—Cosmetology; Boiler Safety; and Elevators, Escalators, and Related Equipment (Elevator Program)—accounted for 78.3 percent of the total number of inspections the Department performed or oversaw in fiscal year 2012.

For all three programs, the Department has designed adequate inspection processes and established criteria to help ensure that it conducts inspection activities in accordance with applicable statutes and administrative rules. However, the Department should improve its monitoring processes.

The Department's inspection processes help ensure that:

- Its policies and procedures for Cosmetology and Boiler Safety inspections include all significant requirements in statute and the Texas Administrative Code, and that inspections are conducted in accordance with those policies and procedures.

- Inspections are reported in a consistent format through the use of report templates.

In addition, the Department ensured that inspectors used the required report templates and that all reports were signed by the inspectors. All Elevator and Boiler Safety inspections audited were conducted by inspectors in good standing with the Department.

However, the Department should significantly improve its processes for monitoring inspection activities. Specifically, the Department should:

- Improve the timeliness of its inspections.

- Strengthen criteria for assessing violations for its Boiler Safety and Elevator programs.

- Implement formal processes for following up on identified violations in a timely manner and verifying that violations were corrected.

- Ensure that details of violations are recorded in its tracking systems to help the Department follow up on those violations and verify that they have been corrected.

In addition, the Department should improve its processes for issuing and tracking registration decals for its Boiler Safety Program and Elevator Program to help ensure that all installed boilers and elevators are accounted for in its systems. Auditors identified a significant number of untracked decals that may include unregistered boilers and elevators. Specifically:

- Of the 87,675 boiler registration decals that the Department has issued since 1991, 13,601 (15.5 percent) are not recorded in the Department's Boiler Certification System or otherwise accounted for by the Department.

- Of the 84,105 elevator registration decals the Department has issued since 1993, 26,861 (31.9 percent) are not recorded in the Department's Texas Umbrella Licensing Information Project (TULIP) system or otherwise accounted for by the Department.

If the Department does not adequately track and account for all registration decals, there is a risk that there are elevators and/or boilers with registration decals that the Department does not know about and cannot ensure are inspected on a regular basis.

The Department also should improve its controls over the Boiler Certification System and TULIP. While the Department has made some progress in addressing issues identified in a previous audit report, it should continue to improve its management of user access and system changes to help ensure that inspection data is secure and reliable.

Contact the SAO about this report.

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