A Growing and Unsustainable Budget

Remarks as prepared for delivery

Thank you, Chair Williams. Last year I voted to support a budget increase of 13% because I recognized the need for talent retention and resource augmentation to achieve the significant expansion of our standard setting, rulemaking, and program activities. In my statement in support of last year’s budget, I laid a marker for greater fiscal stewardship and restraint in the future. 1 Under Chair Williams’ leadership and the staff’s hard work, it is undeniable that we have increased our output substantially as Chair Williams has noted in her statement.

Nonetheless, that does not mean that we should continue to seek year-over-year double digit percentage increases in our budget: (1) without a compelling demonstrated need particularly in light of the significant budget increase we approved last year; and (2) unless it is coupled with a significant effort to streamline for efficiency gains. I have assessed our annual budget totals since 2020, and our budget to date including the proposed 2024 budget has increased by 35%. 2 As a former federal career-level executive who has run large, mission critical operations, I take the budget formulation and execution process very seriously because we are spending taxpayers’ hard-earned money. Although we are not directly funded by taxpayer dollars here, we still have an obligation to investors to exercise strong fiscal stewardship. To put it another way, we should not just seek to “do more with more;” rather, we should first seek to identify where inefficiencies exist and then “do more with less,” whenever possible.

As Chair Williams noted, the Board voted last year to approve a new 5-year strategic plan and an expansive and thoughtful budget that increased funding significantly in every program area, in order to achieve our strategic goals. A year later, we are being asked to approve yet another double-digit increase within our budget. This time without clear justifications, unlike last year. As the PCAOB’s Chief Operating Officer Jamey stated, the proposed 2024 budget of $384.7 million shows an increase from the 2023 Revised Spending Plan of $37.4 million or 11%. That reflects an increase in total personnel costs of approximately $28 million or 11%, which is slightly higher than last year in terms of dollars. Last year’s budget added 35 new positions and this year’s proposed budget seeks to add another 20. 3 In the federal government, federal agencies with new statutory mandates may seek an increase in the number of their full-time equivalent employees, and in some cases where there is a new but time-limited statutory mandate, the same federal agencies will hire additional employees on a temporary or term basis. Here at the PCAOB, we do not have a new statutory mandate that requires the hiring of 20 new employees.   Moreover, while there might be a need in certain PCAOB divisions/offices, I do not believe any such need or programmatic objective warrants the addition of 20 new positions.   

PCAOB has an important mission to protect investors and our employees are mission focused. It is in investors and our employees’ best interest for our budget to be sustainable over time. We are not running a sprint pursuing only quick fixes and short-term goals, but rather a marathon where we must be steady, stalwart, and focused on long-term continuous improvement through the peaks and the valleys, and the storm clouds and the sunshine that the PCAOB will face in the months and years ahead. While Congress has reached another agreement to avoid a government shutdown this year, by keeping federal discretionary spending levels flat. It is only an interim measure until early next year, where our country will face yet another possible federal government shutdown potentially impacting loans to small businesses, student aid and loan programs, and critical research on diseases like cancer and Alzheimer. Although not a government agency, the PCAOB’s double digit year-over-year budget increases appear strikingly out of touch with the broader fiscal environment and are unsustainable over the years to come.

As you can hear, I am torn. Although I cannot support another consecutive double digit increase for the 2024 budget, it would not be fair for me to vote against the whole budget because I oppose the size of the increase or about 10% of it. Because I am committed to the PCAOB’s important mission and our exceptional staff whose hard work includes protecting main street investors, I will support this budget. I urge the PCAOB staff to exercise fiscal discipline and proactively identify efficiency gains that can yield cost savings. I want to give thanks to PCAOB COO Jamey McNamara, CFO Holly Greaves, and Budget Officer Jim Hearn who have worked tirelessly, and I also want to thank the PCAOB Division and Office Directors, and the rest of the PCAOB staff who also worked tirelessly to prepare this budget.

Thank you.