To: Mr. Al Fedoruk, Baltimore Home Investments Ltd.
From:
Date: July 12, 2014
Subject: Controls issues, analysis, and recommendations for your business.

With reference to our meeting of July 6th, based upon the information you provided regarding Baltimore Home Investments Ltd. (BHIL), and in light of the analysis to follow, it is evident that a myriad of control deficiencies was the root cause that enabled unscrupulous individuals to unlawfully wrest control of BHIL from you. In order to aid in the prevention of such a disaster occurring in the future, this memo will focus on detailing the control deficiencies, generating alternatives for future application, and evaluating the alternatives in preparation for providing recommendations.

Overview and Problem Identification

While directly running BHIL, the primary methods of control employed were action and results controls. Action controls, which make behaviors themselves the focus of controls, included:

1) direct handling of leads generated by telemarketers for distribution to loan officers; 2) direct monitoring of loan officers by tracking the number of credit inquiries each requested; 3) monitoring of loan status for final approval and the resulting revenue due; 4) receiving funds directly from proceeds and in the form of a brokers’ check mailed overnight to BHIL’s office or by direct wire transfer to BHIL’s general account; 5) monitoring Joe Carlson’s work habits.

Results controls, which center on rewards for results, focused on:

1) telemarketer lead generation performance; 2) telemarketer performance bonuses; 3) loan officer fees earned; 4) loan officer performance, specifically the loan application/lead ratio, credit inquiries requested, and the fallout ratio; 5) prior to his dismissal, the profit-sharing agreement with Joe