Exclusive - U.S. watchdog finds CFTC violated accounting principles -document | Reuters - Firstpost
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Exclusive - U.S. watchdog finds CFTC violated accounting principles -document | Reuters


WASHINGTON The federal government watchdog has determined that the U.S. Commodity Futures Trading Commission violated government accounting principles by understating its leasing liabilities, according to the results of a year-long investigation reviewed by Reuters.

The finding that the Government Accountability Office is set to release later on Thursday follows a Reuters report last month that KPMG KPMG.UL found a "material" accounting error that led the auditor to withdraw financial opinions on the derivatives regulator.

When the CFTC signed "multiple-year leases, it failed to record an obligation equal to the government's total liability," the non-partisan GAO said in its report.

The agency did include clauses on the availability of funds to its financial reports, but "they were not worded or exercised property and were therefore ineffective," GAO also said.

The error, concerning how the CFTC accounted for multi-year lease payments for its offices, could put the commission in violation of a federal law prohibiting government agencies from obligating or spending federal funds in excess of the amount available, the GAO said.

But the watchdog left it to the CFTC to determine if it ran afoul of the federal anti-deficiency law and then report any violations on its own.

"It is deeply troubling that an agency charged with regulating some of the most complex financial products and markets in the world cannot follow basic accounting standards," Republican Senator John Boozman of Arkansas said in a statement.

Boozman, who chairs the Senate subcommittee on financial services and general government, is one of the lawmakers who asked the GAO to look into the CFTC's accounting in 2015. When the commission collected information for the investigation, it uncovered the errors and notified KPMG.

Boozman said he "will work to strengthen oversight of the agency’s management and ensure sufficient reforms are implemented to prevent future violations."

The CFTC's deputy inspector general told Capitol Hill staffers in an email last month that KPMG found a "material" error and was requesting the withdrawal of nearly a decade of financial opinions, according to a copy of the email reviewed by Reuters.

KPMG estimated the CFTC had understated liabilities by $194 million in the year to Sept. 30, 2015 and by $212 million the previous year.

The chairman of the Senate's Agriculture Committee, Pat Roberts, is also turning up the heat on the agency. In a letter to CFTC Chairman Timothy Massad dated Wednesday, he requested a detailed briefing by Feb. 17 and asked for information about the commission's accounting practices and how closely it monitors its books.

(Reporting by Lisa Lambert and Sarah N. Lynch in Washington, Editing by Soyoung Kim and Bernadette Baum)

This story has not been edited by Firstpost staff and is generated by auto-feed.

First Published On : Feb 5, 2016 04:15 IST

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