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Compliance: Watchdog SEC Struggles with Internal Bookkeeping
While the SEC is tasked with being the watchdog of corporate America’s financial reports, their own books appear to be a bit of a mess. A report by the General Accountability Office (GAO) is reporting serious problems in the recordkeeping at the SEC over each of the last seven years. The GAO report faults the SEC with not accurately tracking SEC revenues received from fines and filing fees.
The New York Times quotes the GAO auditor as saying that “a reasonable possibility exists that a material misstatement of S.E.C.’s financial statements would not be prevented, or detected and corrected on a timely basis.” Much of the problems with the internal reporting was independently, but belatedly corrected. And the problems involved basic accounting mistakes.
The last decade has seen financial crisis and scandals in industries that are under the watch of the SEC. Enforcement of Sarbanes-Oxley and Dodd-Frank are requiring the SEC to take on an ever-increasing role in financial oversight. While this year’s budget for the SEC has been frozen, last year it saw a 15 percent increase, and since 2000, the SEC budget has increased by a factor of three. The current budget of the agency is $1.1 billion with a workforce of 3700 employese.
The agency though says that it is short of manpower and would like to be able to hire an additional 800 workers to help with the enforcement of Frank-Dodd. The technology and computing capabilities of the agency are primitive. When the agency investigated the 2010, May 6th “Flash Crash” crisis, it took the agency three months to analyze the data from that trading session using printouts and pencils.
