Statement in Support of the 2025 Budget

Remarks as prepared for delivery

Thank you, Chair Williams.

My reflections today are based on my five decades of work experience which include an intimate familiarity with what it takes to produce a budget that reflects appropriate resourcing to achieve mission objectives. As a five-person Board, we each bring different strengths to the table.

From my senior executive roles at the CFTC and the USDA, along with my role as Director of Air Force Budget Programs, overseeing sensible and responsible budgeting has dominated a significant portion of my career. I have been in the rooms where tough budget discussions entail balancing between what is aspirational and what is achievable. In my discussions with PCAOB staff, I continue to emphasize identifying areas of efficiencies through leveraging technology and reasonable staffing considerations. And, I believe the staff have successfully put forward today a sensible budget that reflects these efforts.

I put my full support behind this 2025 budget, which reflects our staff’s thoughtful approach to allocating resources in support of our public interest and investor protection mission. The PCAOB lives on mission every day. Our mission is the foundation of our Strategic Plan, which then drives our budgeting and allocation of resources. I’d like to reflect on how we have woven this together.

When our current Strategic Plan was voted on by the Board on November 18, 2022, it was a unanimous vote. The five Board members at that time voted in support of the ambitious agenda that we embarked on, which includes our four priorities of modernizing standards, strengthening enforcement, enhancing inspections, and improving organizational effectiveness. We moved forward eyes wide open as to the level of effort and resourcing necessary to accomplish such a bold agenda in support of our public interest mission. It also reflects and incorporates the comments from our stakeholders.

I have said before that our Strategic Plan would not sit on a shelf and collect dust; our staff daily operationalizes the goals and objectives set forth in that Plan. Further, the Strategic Plan continues to shape our annual budget, including this budget for 2025.

Today’s budget before us reflects a modest 3.9% increase from the 2024 Budget, and would fund 945 positions, one position less than budgeted for 2024. With repricing and other inflationary factors, it is unrealistic to expect a steady state budget to be maintained without an increase, even if everything remains the same. This budget reflects our efforts to wisely use our resources by capitalizing on technology improvements and expanding our in-person oversight activities while maintaining an essentially flat headcount to effectively and efficiently achieve our mission-critical goals. Consistent with our history, our biggest asset is our people, which also appropriately means that it is also our biggest cost driver in the budget. Personnel costs represent approximately 75% of our budgeted costs, consistent with our prior budget efforts.   

Given the significance of our personnel costs, I would like to highlight the ways I have directly observed the work of our highly dedicated and technically gifted staff in three of our mission-critical divisions – OCA, DRI, and DEI. This budget directly reflects our faith in the PCAOB staff – our staff who are tirelessly dedicated to our mission of investor protection. The trust in our U.S. capital markets is partially built on the shoulders of our staff’s committed efforts. The names of our staff are mostly unknown to the average investor, but they are doing unseen work to protect the deepest and most liquid capital markets in the world.

Let’s start with the Office of the Chief Auditor. In OCA, our staff of 31 people are responsible for monitoring current or emerging issues, developing a research agenda, and working on all our standard-setting projects. This team also supports the implementation of all our standards and rules through a combination of stakeholder outreach, publishing staff guidance, and other activities to improve the quality of audit services. With our goal of modernizing standards, this technically gifted group of primarily CPAs and lawyers work in teams to bring before the Board all matters involving our standards and rulemaking. With the five standards and two rulemaking projects already adopted by the Board these past two plus years, and the two projects before the Board today, this Board is executing on the first goal in our Strategic Plan to modernize interim standards and rules that have not been revised in decades. There is collectively within this small but mighty office, hundreds of years of technical experience. I have witnessed them present at dozens of conferences and advisory group meetings over several years. Their work supports the development of PCAOB standards and rules, which set the bar for high quality audits.

Let’s discuss the impact of our Division of Registration and Inspections. Over the past three years, I have directly observed our staff in action during our inspections and oversight activities. In particular, I made it part of my personal agenda to observe a sample of inspections and various aspects of our inspections oversight process. I have observed a GNF inspection, an NAF inspection, a non-U.S. inspection, and a BD inspection. By directly observing our inspections staff in the field, I have experienced the technical expertise of our boots on the ground. Our inspectors are laser focused on inspecting to our standards. By observing various inspections, it is clear to me that we appropriately tailor the composition of our teams to the size of the firm and complexity of the issuer or broker-dealer audit. When staffing inspections, DRI takes into consideration accounting, auditing, and industry expertise, as well as language skills, as appropriate. The staffing of our oversight activities is meticulously managed to promote consistency and completeness of our inspections and registration programs. Annually, on average, our 517 DRI staff accomplish the task of managing registration of the 1,545 registered firms, inspecting over 200 audit firms and parts of more than 700 issuer and broker-dealer audits across more than 30 jurisdictions. They are inspecting the audits within our almost $120 trillion U.S. capital markets¹, which is fundamental to maintaining trust.

Our Division of Enforcement and Investigations plays a crucial role in ensuring that audit firms and brokers and dealers adhere to the highest standards of quality and integrity. We have strengthened our enforcement program consistent with our Strategic Plan; it is evident that some audits do not reflect the audit quality that investors deserve. This division of 76 professionals focuses on identifying misconduct that damages investor trust. As you have seen in the press, we sanction for a range of conduct, from audit committee communication failures to exam cheating and noncooperation with our investigators. Providing appropriate resources to this division through our budget ensures that misconduct is sufficiently and consistently investigated and sanctioned to deter future misconduct.  Our enforcement actions are aimed at reinforcing the importance of compliance with auditing standards, promoting transparency, and protecting investors by ensuring that all audits meet the rigorous standards required for accurate and reliable financial reporting.

The PCAOB is more than just three divisions and offices; But I use these as examples of the mission-critical work that motivates the budget before us today. Woven into this budget is the promise of technology to build in efficiencies into our processes minimizing the need for additional headcount. To be effective at our mission, we must appropriately resource our oversight activities through personnel costs, technology enhancements, and streamlined procedures.  To be resource-deficient in any mission critical area could jeopardize the trust that the capital markets place in our work.

I would also like to applaud the contributions of the PCOAB staff in our Office of the Chief Operating Officer, including Jamey McNamara, our COO, Holly Greaves, our CFO, and Jim Hearn, our Budget Officer, and the outstanding budget team, including Yoss Missaghian, Alfredo Azocar, Marcia Saavedra. I would also like to thank Lorene Rosenberg, Chief Strategy Officer. When I arrived, the need existed for expertise specifically focused on long-term planning. Lorene and her team have strengthened our long-term planning process and worked closely with our budget and finance team.

Additionally, thank you to those across the PCAOB’s divisions and offices who have played an integral role in developing our 2025 budget.

Lastly, I would also like to acknowledge the SEC staff, the Chair’s office, and my staff for their assistance and support.