Low staffing may hurt federal financial oversight

Low staffing levels at the federal agencies that oversee billions of dollars in investments and international trade may be hurting the government's ability to prevent financial crimes and to enforce trade agreements, officials said at a Senate hearing Tuesday.

General Accounting Office reviewers said the Securities and Exchange Commission's staff can't keep up with an increased workload. And while the Commerce Department, the Office of the U.S. Trade Representative and Agriculture Department have beefed up their workforces to handle trade issues over the past two years, the GAO reviewers said it is too early to tell whether those increases were enough.

"Workload and staffing imbalances have affected most aspects of SEC's regulatory and supervisory activities, from its in-house technological capabilities to its ability to take enforcement actions against market participants," said Richard Hillman, GAO's director of financial markets and community investment, at a hearing before the Senate Governmental Affairs Subcommittee on Oversight of Government Management, Restructuring and the District of Columbia.

For example, the number of corporate filings increased almost 60 percent over the past decade, but the number of SEC employees who review those filings increased only 29 percent. The percentage of corporate filings that received some type of review fell from 21 percent in 1991 to 8 percent in 2000. In 2001, the SEC reviewed 16 percent of the filings, about half its goal for the year, Hillman said.

Sen. George Voinovich, R-Ohio, asked SEC Executive Director Jim McConnell whether the SEC would have been able to prevent or predict the Enron scandal if the agency had more staff.

"We don't really know," McConnell answered, saying a top to bottom review of the agency and the processes it enforces is necessary. "We need to examine very closely how our disclosure system works."

On top of its increasing workload, the SEC has had some of the worst retention problems in government, losing a third of its key staff in a period of three years to higher-paying federal agencies and private sector companies and suffering chronic vacancies among the ranks of its attorneys and accountants. Congress recently gave the SEC authority to increase pay for its workers, but the Office of Management and Budget hasn't yet authorized funding for the pay hikes.

Officials at Commerce, Agriculture and the Office of the U.S. Trade Representative said their staffing levels are about right for their workloads after several recent staffing increases, but Sen. Richard Durbin, D-Ill., said he worried that employment levels weren't keeping up with an increasing number of trade agreements.

If agencies don't have enough staff to enforce agreements, then maybe the government should slow down on inking new ones, Durbin said.

Grant Aldonas, undersecretary for international trade at the Commerce Department, said the agency plans to hire 73 new people in fiscal 2003 to keep up with the Bush administration's push for new trade agreements. "The President and [Commerce Secretary Donald Evans] believe that promises made are promises kept," Aldonas said.

Voinovich noted that pay compression in the Senior Executive Service and the lack of comparability between private sector and federal salaries is a source of staffing woes across government, including the financial oversight agencies. The agency officials agreed.