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US Government agency violated federal accounting law, GAO reports

[JURIST] The US Government Accountability Office (GAO) [official website] on Thursday found that the Commodity Futures Trading Commission (CFTC) [official website] violated [report, PDF] federal law through its handling of multi-year lease costs for its offices. CFTC was authorized by Congress to enter into multi-year leases, but it was obligated to record an obligation equal to the government's total liability. The report states that, "while CFTC included availability of funds clauses in the leases in an attempt to manage its liability, these clauses were not worded or exercised properly and were therefore ineffective" and that the GAO concludes that the commission violated a recording statute. GAO's report calls on the CFTC to change [Dow Jones News report] its internal accounting systems in order to adhere to federal recording requirements. GAO also called on [Reuters report] the CFTC to determine for itself whether it had violated the Anti-Deficiency Act and to report any violations if they existed. The Anti-Deficiency Act [materials] prohibits government agencies from incurring obligations and spending federal funds in excess of the amounts available.

Republicans in Congress requested that the GAO investigate the CFTC and the lawmakers have refused to fully grant past requests from President Barack Obama [official website] to fund the CFTC because of the commission's rule-making on over-the-counter derivatives market. The report follows documents released last month that asserted that CFTC, the agency entrusted to police the complex derivatives markets, was "struggling to keep its own books in order" [Reuters report]. In an audit by KPMG LLP, CFTC's outside auditor, the auditor maintained [WSJ report] that the agency understated its obligations by $212 and $194 million in 2014 and 2015, respectively. CFTC maintained that it did not agree with KPMG and that it would wait for the GAO to investigate before addressing the issue. In light of the issue, KPMG withdrew [CFO report] nearly a decade of financial opinions about CFTC's accounts. Calls were made in February 2015 for the GAO to look into accounting issues by CFTC. Concerns over KPMG's handling [Reuters report] of the agency's accounts have grown because the auditor has handled the financial statements since 2005.

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