Truly the cobbler's son has no shoes: The Government Accountability Office (GAO) recently released a report that said that the Securities and Exchange Commission (SEC) had "significant" internal control deficiencies in its 2014 financial statement. These deficiencies, said the GAO, "may adversely affect the accuracy and completeness of information used and reported by SEC's management." The biggest weaknesses found by the GAO had to do with the commission's accounting for disgorgements and penalties 

Specifically, the GAO faulted the SEC for insufficient procedures for ensuring funds availability before transferring disgorgement and penalty-related funds to the Treasury; ineffective monitoring of disgorgement and penalty-related cases filed in courts to ensure that all cases that should be recorded as receivables are timely identified; and insufficient safeguarding controls at service providers that collection SEC cash receipts, including payments from violators for disgorgement, penalties, and related interest on the SEC's behalf. The GAO said that it had alerted the SEC to these problems last year. This year's audit, said the GAO, still found the same issues, but also turned up a few new deficiencies as well: the report said the SEC's controls were not effective in timely and accurately recording disgorgement and penalty receivables, timely and accurately recording adjustments to disgorgement and penalty receivables, and reviewing disgorgement and penalty collections for errors. 

The GAO also found a number of non-material weaknesses that it none the less felt warranted attention from the SEC. These include: 

• reinvestment of disgorgement funds;
• maintaining ongoing accuracy of property and equipment inventory records;
• documenting disposal of property and equipment;
• ensuring existence of capitalized bulk purchases;
• identifying and summarizing uncorrected misstatements; and
• information security

The SEC, in its response, said that it is working to address these matters through a number of avenues such as bolstering information security, better identifying uncorrected misstatements, tightening the process for ensuring continued existence of capitalized bulk purchases as part of its annual physical inventory count, improving the process for documenting equipment and property disposal, maintaining better and more accurate property and equipment records, and improving the process for reinvesting disgorgement funds on a timely basis.