SEC's Own Books are A Mess

From Megan McArdle.

"The SEC is in charge of enforcing accounting standards against public companies--they're the ones who go after you if your CFO gets too creative with the balance sheet. So it's more than a little disturbing to hear that according to its auditor, the SEC can't get a handle on its own finances:

Since the commission began producing audited statements in 2004, the Government Accountability Office has faulted its reporting almost every year. Last November, the G.A.O. said that the commission's books were in such disarray that it had failed at some of the agency's most fundamental tasks: accurately tracking income from fines, filing fees and the return of ill-gotten profits.

"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," the auditor concluded.

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.

This is not an issue of malfeasance; it's an issue of competence. But give that the competence at issue is supposed to be, um, the core competence of the SEC, this is a mite worrisome."