CFPB Slapped Down For Accounting Deficiencies

Little GirlHow embarrassing! After galloping into town with six shooters blazing, the new sheriff, err, correction, the CFPB, or as they like to refer to themselves – in J. Edgar terms – “the Bureau,” just got ignominiously shot down. It seems that the uber-regulator charged with single-handedly protecting American consumers from themselves, has a little housekeeping of its own.  [It must be kinda hard to finger-wag at private financial service companies over their accounting records, when your own books are in disarray ~PCQ].  

Dodd-Frank requires the Bureau to annually prepare financial statements, and charges the Government Accountability Office (“GAO”) with responsibility to audit these statements. Well, don’tcha know…the GAO has identified two “significant deficiencies”[1] in the Bureau’s 2012 and 2013 financial statements.  Oops! Quoting the Wall Street Journal’s article on the issue:

The GAO found that the CFPB did not effectively design or implement (1) internal control over its year-end accrual process to ensure accounts payable amounts recorded were complete and accurate, and (2) policies and procedures to ensure accurate and complete recording of its property and equipment transactions in the general ledger.  According to the GAO, the CFPB did not record or erroneously recorded approximately $4.2 million in accounts payable transactions and erroneously recorded approximately $7 million in property and equipment transactions.

In the report, the GAO states that “[t]hese deficiencies increase the risk that CFPB may not detect and correct errors in time to prevent misstatement of the financial statements.”

With egg still dripping from face to letter, “Director Cordray indicated that the CFPB concurred with the GAO’s recommendations and “has implemented or is in the process of implementing actions that address issues” identified by the GAO in its audit.

The Take- Away.  Physician heal thyself.

[1] According to the GAO’s list of progressive disciplinary blunders, “A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.”  Hmm. The stockade but not the gallows. Whew!