COMPLIANCE REVIEW REPORT 

DEPARTMENT OF BUSINESS OVERSIGHT 

 

 

 

 

 

 

 

 

Compliance Review Unit 

State Personnel Board 

July 13, 2016 

TABLE OF CONTENTS 

 
Introduction ..................................................................................................................... 1 
Executive Summary ........................................................................................................ 1 
Background ..................................................................................................................... 2 
Scope and Methodology .................................................................................................. 3 
Findings and Recommendations ..................................................................................... 4 
Examinations ............................................................................................................. 4 
Appointments ............................................................................................................. 6 
Equal Employment Opportunity ................................................................................. 8 
Mandated Training ..................................................................................................... 9 
Departmental Response ................................................................................................ 10 
SPB Reply ..................................................................................................................... 10 

INTRODUCTION 

Established by the California Constitution, the State Personnel Board (the SPB or 
Board) is charged with enforcing and administering the civil service statutes, prescribing 
probationary periods and classifications, adopting regulations, and reviewing 
disciplinary actions and merit-related appeals. The SPB oversees the merit-based 
recruitment and selection process for the hiring of over 200,000 state employees. These 
employees provide critical services to the people of California, including but not limited 
to, protecting life and property, managing emergency operations, providing education, 
promoting the public health, and preserving the environment. The SPB provides 
direction to departments through the Board’s decisions, rules, policies, and consultation. 

Pursuant to Government Code section 18661, the SPB’s Compliance Review Unit 
(CRU) conducts compliance reviews of appointing authority’s personnel practices in five 
areas: examinations, appointments, equal employment opportunity (EEO), and personal 
services contracts (PSC’s), and mandated training to ensure compliance with civil 
service laws and board regulations. The purpose of these reviews is to ensure state 
agencies are in compliance with merit related laws, rules, and policies and to identify 
and share best practices identified during the reviews. The SPB conducts these reviews 
on a three-year cycle. 

The CRU may also conduct special investigations in response to a specific request or 
when the SPB obtains information suggesting a potential merit-related violation. 

EXECUTIVE SUMMARY 

The CRU conducted a routine compliance review of Department of Business Oversight 
(DBO) personnel practices in the areas of examinations, appointments, and EEO from 
June 1, 2015, through February 29, 2016, and mandated training from February 28, 
2014, through February 29, 2016. There were no PSC’s executed during the 
compliance review period. The following table summarizes the compliance review 
findings. 

Area 

Finding 

Severity 

Examinations 

Examinations Complied with Civil Service 
Laws and Board Rules 

In Compliance 

Appointments 

Appointments Complied with Civil Service 
Laws and Board Rules 

In Compliance 

Area 

Finding 

Severity 

Equal Employment 
Opportunity 

Equal Employment Opportunity Program 
Complied with Civil Service Laws and Board 
Rules 

In Compliance 

Mandated Training 

Mandated Training Complied With Statutory 
Requirements 

In Compliance 

 

A color-coded system is used to identify the severity of the violations as follows: 

. Red = Very Serious 
. Orange = Serious 
. Yellow = Non-serious or Technical 
. Green = In Compliance 

 
BACKGROUND 

The DBO serves as the state’s primary regulator of financial service providers. At the 
end of 2014, the DBO licensed and supervised more than 360,000 individuals and 
businesses. Its regulatory purview extends over banks, credit unions, payday lenders, 
mortgage lenders and servicers, escrow companies, broker-dealers, financial advisers, 
and money transmitters (Western Union, PayPal, and others). 

The DBO has two primary regulatory responsibilities: to protect consumers and to 
protect the health of financial service markets. In carrying out its duties, the DBO often 
must perform a balancing act – ensure the marketplace remains fair for consumers, but 
not wield such a heavy hand that consumers suffer reduced access to lending and other 
financial services. 

The statutes that govern the DBO’s regulatory authority and its licensees are found in 
the Financial Code and Corporations Code. The DBO’s FY 2015-16 budget totaled 
$89.6 million and authorized 618 positions, including 369 examiner positions. The DBO 
is funded entirely with special funds derived mainly from fees paid by licensees. 

The DBO was formed July 1, 2013, from the merger of the Department of Corporations 
(DOC) and Department of Financial Institutions (DFI). The DOC and DFI each had 
existed for more than 100 years. 

 

SCOPE AND METHODOLOGY 

The scope of the compliance review was limited to reviewing DBO examinations, 
appointments, EEO program, and mandated training from May 1, 2015, through 
January 31, 2016. The primary objective of the review was to determine if DBO 
personnel practices, policies, and procedures complied with state civil service laws and 
board regulations, and to recommend corrective action where deficiencies were 
identified. 

A cross-section of DBO examinations and appointments were selected for review to 
ensure that samples of various examinations and appointment types, classifications, 
and levels were reviewed. The CRU examined the documentation that the DBO 
provided, which included examination plans, examination bulletins, job analyses, 
511b’s, scoring results, notice of personnel action forms, vacancy postings, application 
screening criteria, hiring interview rating criteria, certification lists, transfer movement 
worksheets, employment history records, correspondence, and probation reports. 

The review of the DBO EEO program included examining written EEO policies and 
procedures; the EEO Officer’s role, duties, and reporting relationship; the internal 
discrimination complaint process; the upward mobility program; the reasonable 
accommodation program; the discrimination complaint process; and the Disability 
Advisory Committee (DAC). 

The DBO did not execute any PSC’s during the compliance review period. 

In addition, the DBO mandated training program was reviewed to ensure all employees 
required to file statements of economic interest were provided ethics training, and that 
all supervisors were provided supervisory and sexual harassment prevention training 
within statutory timelines. 

On June 22, 2016, an exit conference was held with the DBO to explain and discuss the 
CRU’s initial findings and recommendations. The CRU received and reviewed the DBO 
written response on June 29, 2016, which is included in this final compliance review 
report. 

FINDINGS AND RECOMMENDATIONS 

Examinations 

Examinations to establish an eligible list must be competitive and of such character as 
fairly to test and determine the qualifications, fitness, and ability of competitors to 
perform the duties of the class of position for which he or she seeks appointment. (Gov. 
Code, § 18930.) Examinations may be assembled or unassembled, written or oral, or in 
the form of a demonstration of skills, or any combination of those tests. (Ibid.) The 
Board establishes minimum qualifications for determining the fitness and qualifications 
of employees for each class of position and for applicants for examinations. (Gov. Code, 
§ 18931.) Within a reasonable time before the scheduled date for the examination, the 
designated appointing power shall announce or advertise the examination for the 
establishment of eligible lists. (Gov. Code, § 18933, subd. (a).) the advertisement shall 
contain such information as the date and place of the examination and the nature of the 
minimum qualifications. (Ibid.) Every applicant for examination shall file an application in 
the office of the department or a designated appointing power as directed by the 
examination announcement. (Gov. Code, § 18934.) Generally, the final earned rating of 
each person competing in any examination is to be determined by the weighted average 
of the earned ratings on all phases of the examination. (Gov. Code, § 18936.) Each 
competitor shall be notified in writing of the results of the examination when the 
employment list resulting from the examination is established. (Gov. Code, § 18938.5.) 

During the period under review, the DBO conducted 11 examinations. The CRU 
reviewed seven of those examinations, which are listed below: 

Classification 

Exam Type 

Exam 
Components 

Final File 
Date 

No. of 
Apps 

CEA (Career Executive 
Assignment) A, Deputy 
Commissioner of 
Administration 

CEA 

Statement of 
Qualifications 
(SOQ)1 

12/11/2015 

13 

CEA B, Deputy 
Commissioner of Banks 

CEA 

SOQ 

7/23/2015 

5 

1 
In a statement of qualifications (SOQ’s) examination, applicants submit a written summary of their 
qualifications and experience related to a published list of desired qualifications. Raters, typically subject 
matter experts, evaluate the responses according to a predetermined rating scale designed to assess 
their ability to perform in a job classification, assign scores and rank the competitors in a list. 

Classification 

Exam Type 

Exam 
Components 

Final File 
Date 

No. of 
Apps 

Corporation Examiner 

Departmental 
Promotional 

Education and 
Experience 2 

9/24/2015 

20 

Corporation Examiner IV 
(Specialist/Supervisor) 

Departmental 
Promotional 

Training and 
Experience 
(T&E)3 

10/20/2015 

64 

Financial Institutions 
Examiner 

Open 

Written4 

8/27/2015 

78 

Financial Institutions 
Manager 

Departmental 
Promotional 

Qualification 
Appraisal 
Panel5 

6/4/2015 

26 

Supervising Corporation 
Examiner 

Departmental 
Promotional 

T&E 

6/9/2015 

41 

2 
In an education and experience examination, one or more raters reviews the applicants’ Standard 678 
application forms, and scores and ranks them according to a predetermined rating scale that may include 
years of relevant higher education, professional licenses or certifications, and/or years of relevant work 
experience. 

3 
The training and experience (T&E) examination is administered either online or in writing, and asks the 

applicant to answer multiple-choice questions about his or her level of training and/or experience 

performing certain tasks typically performed by those in this classification. Responses yield point values. 

4 
A written examination is a testing procedure in which candidates’ job-related knowledge and skills are 
assessed through the use of a variety of item formats. Written examinations are either objectively scored 
or subjectively scored. 

5 The qualification appraisal panel (QAP) interview is the oral component of an examination whereby 
competitors appear before a panel of two or more evaluators. Candidates are rated and ranked against 
one another based on an assessment of their ability to perform in a job classification. 

FINDING NO. 1 – Examinations Complied with Civil Service Laws and Board 
Rules 

 

The DBO administered two CEA, one open, and four departmental promotional 
examinations in order to create eligible lists from which to make appointments. The 
DBO published and distributed examination bulletins containing the required information 
for all examinations. Applications received were accepted prior to the final filing date 
and were thereafter properly assessed to determine whether applicants met the 
minimum qualifications for admittance to the examinations. The DBO notified applicants 
as to whether they qualified to take the examination, and those applicants who met the 
minimum qualifications were also notified about the next phase of the examination 
process. After all phases of the examination process were completed, the score of each 

competitor was computed, and a list of eligible candidates was established. The 
examination results listed the names of all successful competitors arranged in order of 
the score received by rank. Competitors were then notified of their final scores. 

The CRU found no deficiencies in the DBO examinations reviewed during the 
compliance review period. Accordingly, the DBO fulfilled its responsibilities to administer 
those examinations in compliance with civil service laws and board rules. 

Appointments 

In all cases not excepted or exempted by Article VII of the California Constitution, the 
appointing power must fill positions by appointment, including cases of transfers, 
reinstatements, promotions, and demotions in strict accordance with the Civil Service 
Act and Board rules. (Gov. Code, § 19050.) Appointments made from eligible lists, by 
way of transfer, or by way of reinstatement, must be made on the basis of merit and 
fitness, which requires consideration of each individual’s job-related qualifications for a 
position, including his or her knowledge, skills, abilities, experience, and physical and 
mental fitness. (Cal. Code Regs., tit. 2, § 250, subd. (a).) 

During the compliance review period, the DBO made 128 appointments. The CRU 
reviewed 27 of those appointments, which are listed below: 

Classification 

Appointment 
Type 

Tenure 

Time Base 

No. of 
Appts 

Financial Institutions 
Manager 

Certification List 

Permanent 

Full Time 

3 

Attorney III 

Certification List 

Permanent 

Full Time 

2 

Senior Financial 
Institutions Examiner 

Certification List 

Permanent 

Full Time 

2 

Office Technician (Typing) 

Certification List 

Permanent 

Full Time 

2 

Staff Services Manager II 
(Supervisor) 

Certification List 

Permanent 

Full Time 

1 

Systems Software 
Specialist III (Supervisory) 

Certification List 

Permanent 

Full Time 

1 

Administrative Assistant I 

Certification List 

Permanent 

Full Time 

2 

Corporation Examiner IV 
(Supervisor) 

Certification List 

Permanent 

Full Time 

3 

Office Assistant (General) 

Certification List 

Limited 
Term 

Intermittent 

1 

Staff Services Analyst 
(General) 

Certification List 

Limited 
Term 

Intermittent 

1 

Classification 

Appointment 
Type 

Tenure 

Time Base 

No. of 
Appts 

Personnel Specialist 

Mandatory 
Reinstatement 

Permanent 

Full Time 

1 

Corporation Examiner 

Permissive 
Reinstatement 

Permanent 

Full Time 

3 

Staff Services Manager III 

Retired 
Annuitant 

Limited 
Term 

Intermittent 

1 

Limited Examination And 
Appointment Program 
Candidate (Identified 
Class) [LEAP] 

Temporary 
Authorization 
Utilization 

Temporary 

Full Time 

1 

Consumer Assistance 
Technician 

Transfer 

Permanent 

Full Time 

1 

Staff Services Analyst 
(General) 

Transfer 

Permanent 

Full Time 

1 

Financial Institutions 
Examiner 

Transfer 

Permanent 

Full Time 

1 

 

FINDING NO. 2 – Appointments Complied with Civil Service Laws and Board 
Rules 

 

The DBO measured each applicant’s ability to perform the duties of the job by 
conducting hiring interviews and selecting the best-suited candidates. For each of the 
18 list appointments reviewed, the DBO ordered a certification list of candidates ranked 
competitively. After properly clearing the certification lists including SROA, the selected 
candidates were appointed based on eligibility attained by being reachable within the 
first three ranks of the certification lists. 

The CRU reviewed three DBO appointments made to positions via transfer. A transfer 
of an employee from a position under one appointing power to a position under another 
appointing power may be made, if the transfer is to a position in the same class or in 
another class with substantially the same salary range and designated as appropriate 
by the executive officer. (Cal. Code Reg., tit. 2, § 425.) The DBO verified the eligibility of 
each candidate to their appointed class. 

For appointments that are mandatory reinstatements, a state agency or department is 
required to reinstate an employee to his or her former position if the employee is (1) 
terminated from a temporary or limited-term appointment by either the employee or the 
appointing power; (2) rejected during probation; or (3) demoted from a managerial 
position. (Gov. Code, § 19140.5.) However, the following conditions must apply: the 

employee accepted the appointment without a break in continuity of service and the 
reinstatement is requested within 10 working days after the effective date of the 
termination. (Ibid.) The mandatory reinstatement met the conditions allowing for 
mandatory reinstatement. 

The DBO also made one retired annuitant appointment. The individual submitted their 
application and was eligible to be hired as a temporary employee, not to exceed 960 
hours in a fiscal year. 

The CRU found no deficiencies in the DBO appointments reviewed during the 
compliance review period. Accordingly, the CRU found that the DBO appointments 
satisfied civil service laws and board rules. 

Equal Employment Opportunity 

Each state agency is responsible for an effective EEO program. (Gov. Code, § 19790.) 
The appointing power for each state agency has the major responsibility for monitoring 
the effectiveness of its EEO program. (Gov. Code, § 19794.) To that end, the appointing 
power must issue a policy statement committed to EEO; issue procedures for filing, 
processing, and resolving discrimination complaints; issue procedures for providing 
equal upward mobility and promotional opportunities; and cooperate with the California 
Department of Human Resources by providing access to all required files, documents 
and data. (Ibid.) In addition, the appointing power must appoint, at the managerial level, 
an EEO Officer, who shall report directly to, and be under the supervision of, the 
director of the department to develop, implement, coordinate, and monitor the 
department’s EEO program. (Gov. Code, § 19795.) 

Because the EEO Officer investigates and ensures proper handling of discrimination, 
sexual harassment and other employee complaints, the position requires separation 
from the regular chain of command, as well as regular and unencumbered access to the 
head of the organization. 

Each state agency must establish a separate committee of employees who are 
individuals with a disability, or who have an interest in disability issues, to advise the 
head of the agency on issues of concern to employees with disabilities. (Gov. Code, § 
19795, subd. (b)(1).) The department must invite all employees to serve on the 
committee and take appropriate steps to ensure that the final committee is comprised of 
members who have disabilities or who have an interest in disability issues. (Gov. Code, 
§ 19795, subd. (b)(2).) 

 

The CRU reviewed the DBO EEO program that was in effect during the compliance 
review period. Accordingly, the DBO EEO program complied with civil service laws and 
board rules. 

FINDING NO. 3 – Equal Employment Opportunity Program Complied with 
Civil Service Laws and Board Rules 

 

After reviewing the policies, procedures, and programs necessary for compliance with 
the EEO program’s role and responsibilities according to statutory and regulatory 
guidelines, the CRU determined that the DBO EEO program provided employees with 
information and guidance on the EEO process including instructions on how to file 
discrimination claims. Furthermore, the EEO program outlines the roles and 
responsibilities of the EEO Officer, as well as supervisors and managers. The EEO 
Officer, who is at a managerial level, reports directly to the Commissioner of DBO. In 
addition, the DBO has an established DAC which reports to the Commissioner on 
issues affecting persons with disabilities. The DBO also provided evidence of its efforts 
to promote EEO in its hiring and employment practices, to increase its hiring of persons 
with disabilities, and to offer upward mobility opportunities for its entry-level staff. 
Accordingly, the DBO EEO program complied with civil service laws and board rules 

Mandated Training 

Each state agency shall offer at least semiannually to each of its filers an orientation 
course on the relevant ethics statutes and regulations that govern the official conduct of 
state officials. (Gov. Code, § 11146.1) New filers must be trained within six months of 
appointment. (Gov. Code §, 11146.3) 

Each department must provide its new supervisors supervisory training within twelve 
months of appointment. (Gov. Code, § 19995.4, subd. (b) and (c.).) The training must 
be a minimum of 80 hours, 40 of which must be structured and given by a qualified 
instructor. The other 40 hours may be done on the job by a higher-level supervisor or 
manager. (Gov. Code, § 19995.4, subd. (b).) 

Additionally, each department must provide its supervisors two hours of sexual 
harassment prevention training every two years. New supervisors must be provided 
supervisory training within six months of appointment. (Gov. Code, § 12950.1 subd. (a).) 

The CRU reviewed the DBO mandated training program that was in effect during the 
compliance review period. 

FINDING NO. 4 – Mandated Training Complied with Statutory Requirements 

 

The DBO provided ethics training to its 159 new filers within six months of appointment 
and semiannual ethics training to its 296 filers during the two-year calendar year period 
commencing in 2014. The DBO also provided supervisory training to 17 new 
supervisors within 12 months of appointment. In addition, the DBO provided sexual 
harassment prevention training to its 36 new supervisors within six months of 
appointment, and semiannual sexual harassment prevention training to its 102 existing 
supervisors. Thus, the DBO complied with mandated training requirements within 
statutory timelines. 

DEPARTMENTAL RESPONSE 

The DBO would like to thank the State Personnel Board’s Compliance Review Unit for 
undertaking the 2016 DBO compliance review. I have confidence that DBO staff will 
continue to strive to abide by all applicable laws and rules while conducting recruitment, 
appointment, and civil service examination processes and procedures. The Training 
Unit will also continue to timely provide and monitor all mandated training to the DBO 
employees, including managers and supervisors. In addition, the EEO office will 
continue to abide by the requirements, laws, and regulations as it pertains to performing 
the scope of EEO duties. 

Jan Lynn Owen, Commissioner 

SPB REPLY 

The DBO was found to be in compliance in all areas; therefore, no further action is 
required at this time.