Summary: Congress asked us to provide a briefing on the facilities management and budgeting issues of the U.S. Securities and Exchange Commission (SEC) that SEC disclosed to Congress in May 2005, which resulted in SEC's requesting a reprogramming of approximately $48 million of 2005 and 2006 funds. The reprogramming was requested to cover unbudgeted costs related to the construction of new facilities in Washington, D.C., and the improvement of new leased facilities in New York City and Boston. Specifically, our objectives were to provide information on (1) the amount of funding for these projects that was not planned; (2) the reasons for the change in budgeted amounts; (3) the related actions taken by SEC since this budgeting issue was uncovered; and (4) any corrective actions to prevent this issue from recurring.
In May 2005, the SEC disclosed to Congress that it had identified unbudgeted costs of approximately $48 million attributable to misestimates and omissions of budget costs associated with the construction of its new facilities in Washington, D.C. and improvements in its new leased facilities New York City and Boston. SEC estimates that the impact on its 2005 and 2006 budgets for construction costs is $20.2 million and $28.5 million, respectively, for a total of $48.7 million. On June 7, 2005, SEC requested a reprogramming of 2005 funds among object classes to address construction-related needs associated with these offices. Our work identified the following as the primary causes of the misestimates and omissions of amounts in SEC's budget submission: (1) ineffective management controls over budget formulation and review for these projects; (2) an inadequate administrative infrastructure; and (3) the nature of these facilities projects. SEC has taken several actions to address its facilities project management and budget problems.
