U.S. Senate Committee on Agriculture, Nutrition & Forestry Senator Pat Roberts (R-KS) called attention to an audit report on the CFTC’s financial statements that was released by the CFTC Office of Inspector General (“OIG”). In a letter to CFTC Chair Timothy E. Massad, Senator Roberts claimed that the report showed “multiple transgressions” and raised “serious questions about the CFTC’s leasing and accounting practices that go beyond issues relating to the regional offices.”
Conducted by independent certified public accounting firm KPMG LLP, the audit report:
- identified “material weaknesses in internal control over financial reporting and non-compliance with applicable laws and regulations”;
- alleged that the CFTC’s “errant accounting practices conflict with U.S. generally accepted accounting principles . . . and have culminated in the improper recording of its lease obligations”; and
- found that the CFTC’s FY 2015 and 2014 financial statements “understate obligations in the hundreds of millions of dollars.”
Senator Roberts noted that a 2011 SEC OIG report, titled “Improper Actions Relating to the Leasing of Office Space,” contained similar results concerning CFTC leasing practices. He stated: “considering the similarity between the agencies, the similarity of the issues, the public Congressional inquiries and the gravity of errant accounting, I am bewildered as to how [the] CFTC finds itself in this current state of affairs.” He expressed the additional concern that “the manner in which [the CFTC] is accounting for its leases is at odds with proper Senate appropriation procedure. Obligating funds and indebting the federal government without possessing the appropriated funds is a serious matter.”
Senator Roberts requested that the CFTC submit “prompt responses” to a set of inquiries by February 17, 2016 so that he could gain “a clearer perspective of the circumstances surrounding how and why [the] CFTC’s errant accounting practices have materialized.”
Lofchie Comment: The irony of CFTC Commissioner Bowen’s call for harsher enforcement penalties is that it comes at a time when the CFTC itself is being challenged for, in this instance, accounting misconduct. This is not to suggest there has been any material wrongdoing by the CFTC, though in light of the current enforcement culture, it does not seem to matter whether a failure is material or intentional. Current enforcement culture seems to be: however harsh the penalty might be, it cannot be harsh enough.