A lack of investment in crucial technology systems is to blame for material weaknesses identified last year in the U.S. Securities and Exchange Commission's financial statements, top SEC officials said in testimony prepared for delivery to lawmakers on Thursday.

The weaknesses, identified in a November 2010 report by the Government Accountability Office, were uncovered in the SEC's information systems and financial reporting and accounting process during an audit of the agency's fiscal 2010 and 2009 financial statements.

The findings were an embarrassment for the agency, which regulates the capital markets and oversees the board that sets U.S. accounting standards.

These material weaknesses are unacceptable, the SEC's top division directors said in prepared testimony that was viewed by Reuters. They said the root causes of the problems stemmed from years of underinvesting in financial system technologies.

The problems identified by the GAO could be an issue raised by Republicans on Thursday during three separate hearings looking at the SEC's fiscal 2012 budget request and various management issues.

SEC Chairman Mary Schapiro is slated to testify at two hearings, while the SEC's top division directors will testify before a House Financial Services panel in the morning.

The agency is asking Congress for a large boost in its budget to implement numerous provisions in the Dodd-Frank financial reform law. But some Republicans are looking to slash the SEC's funding, both out of concern about key provisions in Dodd-Frank and to punish the agency for a series of mistakes, including its failure to detect Bernard Madoff's Ponzi scheme.

In written testimony, top SEC staff urge Congress to approve a request by President Barack Obama to boost the agency's budget. They note that the SEC's 2012 budget will be deficit neutral because Dodd-Frank requires the agency to offset its funding with the fees it charges the financial industry.

As far as the problems with the SEC's financial statements are concerned, staff will testify that the agency is committed to investing the time and resources to implement a long-term, comprehensive solution.

Staff said the SEC plans to migrate its financial systems to the Department of Transportation rather than creating new systems. They note that other agencies have taken similar steps and come up with very positive results.

The switch should be completed by April 2012, they said.

Top agency officials slated to testify at the hearings include enforcement director Robert Khuzami, corporation finance director Meredith Cross, trading and markets director Robert Cook, compliance inspections and examinations director Carlo di Florio, and investment management director Eileen Rominger.

(Reporting by Sarah N. Lynch; Editing by Phil Berlowitz and John Wallace)

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