The Securities and Exchange Commission reportedly agreed to pay a $70 million fine to settle GAO charges that, for at least 7 years, significant accounting weaknesses had led to material misstatements in the Agency's financial statements - that's $10mn for each year.  No individuals were charged in the investigation.

Speaking on the condition of anonymity, an SEC official said that the Commission’s financial records had been in disarray since at least 2004, when it first began producing audited statements.  Things were so bad, the official noted, that some of the agency’s most fundamental tasks were in disarray - e.g., accurately tracking income from fines, filing fees and returning ill-gotten profits."

Fortunately, the above scenario turned out to be a bad daydream - well, not exactly. 

Besides, an auditor from the Government Accountability Office concluded, "A reasonable possibility that a material misstatement of SEC’s financial statements would not be prevented, or detected and corrected on a timely basis.”  The auditor also said the SEC would not be accused of 'cooking its books', and the mistakes were corrected before its latest financial statements were completed.

The New York Times continued its report, noting that basic accounting continually bedevils the agency responsible for guaranteeing the soundness of American financial markets - which could prove especially awkward just as the SEC is saying it desperately needs money to increase its regulatory power.  [C-I Note:  i.e., throwing good money after bad!"]

    Government Accountability Office Audit. The financial reporting difficulties at the SEC have ominous implications for investors - e.g., the Commission's technology systems lack the ability to perform sophisticated analysis of large batches of financial material.  As a result, a Congressional report says, SEC analysts sometimes resort to printouts, calculators and pencils (with erasers).  Furthermore, SEC computers were so strained by the crush of data that it took 3 months to figure out what had happened on one critical trading day in 2010 - May 6th, the day of the "Flash Crash." 

To continue reading, go to:  [The New York Times, 2/2, "S.E.C. Hurt by Disarray in its Books"]