The Securities and Exchange Commission is saying that material weaknesses in its financial statement controls can be traced to the lack of money it has for technology upgrades.

The Government Accountability Office identified material weaknesses in the SEC’s internal controls in a report last November, and SEC officials testified Thursday to explain the deficiencies, according to Reuters. The prepared testimony of a group of SEC officials, including enforcement division director Robert Khuzami, is available on the House Financial Services Committee Web site.

“In November 2010, the SEC completed its Performance and Accountability Report, the equivalent of a company’s annual report,” said the testimony. “A GAO audit found that the financial statements and notes included in the report were presented fairly and in conformity with U.S. GAAP. It also, however, identified two material weaknesses in internal controls over financial reporting: one in information systems, and a second in financial reporting and accounting processes. The root causes of these weaknesses are gaps in the security and functionality of the agency’s financial system, resulting from years of underinvesting in financial system technologies. These material weaknesses are unacceptable. Rather than try and solve each particular deficiency in piecemeal fashion, the agency has committed to investing the time and resources to implement a long-term, comprehensive solution. To avoid the development risks of creating new technology and systems, the SEC is switching to a Shared Service Provider approach, migrating the agency’s financial system to the Department of Transportation. Other agencies, including GAO, have migrated to DoT, and they have had very positive results, with clean audits free of material weaknesses. This will be a significant undertaking, which, assuming adequate funding, will culminate in the cutover to the new system in April 2012.”

However, the SEC may not get the money to improve its technology systems as Congress appears to be in budget-cutting mode, for the time being at least. Hopefully, with or without the technology upgrade, the SEC will be able to sort out its financial control problems and improve its enforcement activities.