The U.S. Government Accountability Office is recommending a series of changes for the U.S. Securities and Exchange Commission’s enforcement division, including that it overhaul certain management structures, reconsider penalty policies and review its resource allocations.

It its latest report on the SEC’s enforcement office, the GAO reports that the regulator has implemented several of the recommendations it handed down in 2007 — namely, that it establish procedures for approving new investigations and for operating its new investigation management information system; that it consider procedures for closing inactive cases; and that it improve management of the program that returns funds to harmed investors. However, it has a fresh set of recommendations for the SEC.

The GAO says that the SEC’s new office of collections and distributions has a dual reporting structure that has slowed its work and confused its staff; and it calls for the commission to adopt a new structure for this office.

Additionally, it recommends that the SEC review the resources dedicated to enforcement and assess the impact of the division’s internal case review process; examine whether a corporate penalty policy it adopted in 2006 is achieving its intended goals; and, it says that it should take steps to ensure appropriate staff participation in policy development and review.

On the question of enforcement resources, the report notes that overall enforcement resources have been relatively stable in recent years, but that the number of investigative attorneys decreased by 11.5% from 2004 through 2008.

“Enforcement management said resource levels have allowed them to continue to bring cases across a range of violations, but both management and staff said resource challenges have delayed cases, reduced the number of cases that can be brought, and potentially undermined the quality of some cases,” the GAO report stated.

Also, the GAO reported that the enforcement staff told it that a burdensome system for internal case review has slowed cases and created a risk-averse culture: “Enforcement management has begun examining ways to streamline case review, but the focus is process-oriented and does not give consideration to assessing organizational culture issues.”

The GAO also found that enforcement division staff — including management, investigative attorneys, and others — agreed that corporate penalty polices that were adopted in recent years “have delayed cases and produced fewer, smaller penalties.” It also identified other concerns with these policies, including the perception that SEC had “retreated” on penalties and that they made it more difficult for investigative staff to obtain investigation orders.

Additionally, it said: “Our review also showed that in adopting and implementing the penalty policies, the commission did not act in concert with agency strategic goals calling for broad communication with, and involvement of, the staff. In particular, enforcement had limited input into the policies the division would be responsible for implementing. As a result, enforcement attorneys reported frustration and uncertainty in application of the penalty policies.”

The report noted that the SEC has reviewed the GAO recommendations, agrees with them and said officials are taking steps to implement them.

“Specifically, the SEC chairman said the agency will evaluate alternative organizational structures for OCD; conduct a comprehensive review of enforcement’s investigation processes, use of resources, and organizational culture; review whether the commission’s 2006 corporate penalty policy is achieving its intended goals; and take steps to ensure that the commission better involves, and communicates with, enforcement staff in managing the enforcement program.”