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Government watchdog faults U.S. SEC’s accounting of its own books

WASHINGTON (Reuters) – The top U.S. securities regulator tasked with policing how public companies report their financial statements goofed up its own books last year, including a $4.4 million overstatement of the money it was owed from enforcement actions, a new watchdog report has found.

The U.S. Government Accountability Office released a new report on Thursday which faulted the Securities and Exchange Commission for having both “continuing and new deficiencies” in its financial reporting controls over its fiscal year 2014 financial statements.

The last day of 2014 fiscal year was Sept. 30, 2014.

In particular, the GAO said the SEC’s controls over how it accounts for penalties and disgorgement, or the ill-gotten gains it collects from defendants in civil cases, needs major improvements.

The GAO said the SEC recorded “certain disgorgement and penalty receivables to incorrect customer numbers in the general ledger.”

Problems with how it recorded penalties and disgorgement is what led to the $4.4 million overstatement in gross accounts payable, the GAO added.

The mistake stayed on the SEC’s books “for several months,” the GAO said, “until SEC found and corrected the error.”

“This significant internal control deficiency may adversely affect the accuracy and completeness of information used and reported by SEC’s management,” the GAO said.

The GAO called for a total of eight new recommendations to address deficiencies in the SEC’s accounting, including a call for the development of control procedures that lay out the steps the SEC should take to review and classify the money it collects.

SEC Chair Mary Jo White, in an April 23 letter to the GAO, said the agency is “committed to strong financial reporting” and that her agency is “working diligently to address findings related to disgorgement and penalties.”

She added the proposals by the GAO are useful, and that the SEC is working to implement the recommendations.

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