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SEC Unable to Manage Even Its Own Books, Report Shows

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ISN'T IT IRONIC? DON'T YA THINK?
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For 2010, the SEC’s budget was $1.1 billion, 15 percent higher than the year before and three times larger than it was in 2000.

Which means going forward it should be well equipped to investigate any financial crimes or accounting irregularities that might crop up across corporate America. That is, except for the embarrassing fact that the SEC is unable to manage even its own books.

The Government Accountability Office has found that the SEC’s own audited statements have contained fundamental accounting errors every year since 2004, when the SEC began producing statements.

The New York Times reports:

The auditor did not accuse the S.E.C. of cooking its books, and the mistakes were corrected before its latest financial statements were completed. But the fact that basic accounting continually bedevils the agency responsible for guaranteeing the soundness of American financial markets could prove especially awkward just as the S.E.C. is saying it desperately needs money to increase its regulatory power.

That has ominous implications for investors. The S.E.C.’s technology systems, for example, lack the ability to perform sophisticated analysis of large batches of financial material. As a result, a Congressional report says, S.E.C. analysts sometimes resort to printouts, calculators and pencils. While investigating the “flash crash” of May 6, 2010, S.E.C. computers were so strained by the crush of data from just one day of trading that it took three months to figure out what had happened.

For now, increasing the SEC’s budget to allow for technology upgrades (no more abacuses!) and the hiring of new employees is pretty much out of the question. Obama’s spending freeze, coupled with increased criticism over the agency’s ineptitude by policymakers, means the SEC will need to fix things the old fashioned way: with a lot of hard work, soul searching, and managerial ingenuity.

Oh, and outsourcing, too. The Times reports that “to address the shortcomings in financial reporting described by the G.A.O., [SEC Chairwoman Mary Schapiro] decided to outsource those tasks to another government agency.”

But is passing the buck to another US government agency really the answer? Lord, no. That’s why we heartily recommend that the SEC embrace what the rest of us have been doing for years: outsourcing all that complicated math to India.

One word, Ms. Schapiro, one word: Indiaoutsourcingaccounting.com.
POSITION:  No positions in stocks mentioned.
TAGS:  SEC, ACCOUNTING    SOURCE:   The New York Times
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