Summary

In response to a congressional request, GAO evaluated the Securities and Exchange Commission's (SEC) Electronic Data Gathering, Analysis and Retrieval System (EDGAR) to determine whether SEC is ready to proceed with acquisition of an operational system.

Federal securities laws require companies to file an annual report that provides a comprehensive overview of the state of their businesses. EDGAR is designed to automate the filing, processing, and dissemination of these documents. Although SEC initiated a rulemaking process to obtain public comments on the proposed reporting requirements for filers, it will not complete the process until 1987, and will not know the extent of filer opposition to and exemption from the requirements. SEC intends to recover the costs of developing and operating the receipt portion of the system from user fees. Federal law limits fees for furnishing information to no more than the cost of providing the information plus a reasonable contractor profit. GAO believes that SEC should not include its costs in fees to public users, but should finance them through appropriated funds, because financing through user fees would bypass intended congressional oversight and control. The SEC analysis did not include accurate hardware or software development estimates for expanding EDGAR to the operational system environment. In addition, SEC did not base its estimates of the quantitative benefits on economically feasible assumptions and did not demonstrate that the benefits outweigh the estimated costs. Although SEC believes that sufficient qualitative benefits would accrue to filers, investors, and itself, it did not describe how the benefits would accrue. GAO questions the advisability of proceeding with the implementation without the benefit of better cost estimates and benefits.