Senate committee chairman asks CFTC to explain major accounting error
By Lisa Lambert and Suzanne Barlyn
WASHINGTON/NEW YORK (Reuters) - Senate Agriculture Committee Chairman Pat Roberts has asked for a full explanation from the U.S. Commodity Futures Trading Commission for an accounting error that led auditor KPMG to withdraw nearly a decade of financial opinions about the agency’s accounts.
The Republican senator "has already begun inquiries at the CFTC for a full accounting" of the problem, a spokesperson for the committee, which provides Congressional oversight of the U.S. derivatives regulator, told Reuters on Wednesday.
The request comes after Reuters exclusively reported on Tuesday that KPMG [KPMG.UL] had taken the drastic action after learning of the significant material error, and that the auditor estimated the CFTC had understated liabilities by $194 million in the year to Sept. 30, 2015, and $212 million the previous year.
The error, concerning how the regulator accounted for lease payments for its offices from fiscal years ending in 2005 through 2014, was caused by the CFTC’s "weaknesses in internal control," including lack of measures to detect or correct material problems in its financial statements, KPMG said in documents reviewed by Reuters.
CFTC spokesman Steven Adamske, who said the agency is waiting for the Government Accountability Office (GAO) to rule on how the leases should be reported, declined to comment on Roberts’ intervention. On Tuesday, he said the agency sees the error as a technical accounting issue that does not affect current lease payments or its obligation to creditors.
The issue is adding to tensions between the CFTC, which was given broad powers to regulate the derivatives market in the aftermath of the financial crisis, and Republican lawmakers who have criticized it for creating unnecessary regulatory burdens.
The problem is coming to light during an election year in which Wall Street oversight is a hot topic for candidates in both political parties.
It could cast a spotlight on the time that Gary Gensler was chairman of the CFTC between May 2009 and January 2014. Gensler, a former Goldman Sachs GS.N executive, is currently chief financial officer for Hillary Clinton’s campaign to be the Democratic presidential candidate in November’s election. Continued...