Today it was announced that the Securities and Exchange Commission (SEC) had a material weakness in the internal controls over its financial reporting. The SEC avoided a big fat "E" last year via its remediation of internal control problems, but this year the SEC's material weaknesses included control deficiencies related to its accounts receivable balances, "period-end closing process, accounting for transaction fee revenue, and preparation of financial statement disclosures."
Now, since the SEC implements and enforces the provisions of Sarbanes-Oxley 404 (which requires management to report on its internal controls over financial reporting), how can this inept organization possibly be trusted to oversee that which it can't manage within its own organization?
Non-compliance with 404 has been disastrous for private companies that have had material weaknesses (massive stock declines and even bankruptcy), however, the SEC, which is not subject to market forces, has responded with this: "During fiscal year 2007, SEC improved its controls over the accuracy, timeliness, and completeness of the disgorgement and penalty data and used a much improved database for the initial recording and tracking of these data." Ummm, so? This is like throwing fluff at a charging rhino.