Statement on Consideration of 2008 Budget

The 2008 budget that we are considering today would permit the Board to spend $144.6 million, and to end next year with a staff of 507. The proposed budget represents an increase in authorized spending of about $8.2 million, or 6 percent, from the 2007 budget of $136.4 million. I support the proposed budget, and would like to briefly highlight several things that may help to place it in context.

$144.6 million is a substantial sum of money, and it is certainly fair to ask why we need funding at that level. While there has already been considerable discussion addressing that question, I would emphasize two points.

• First, the Board’s most important resource is its people, and personnel costs are over 71 percent of our 2008 budget. We work in a sophisticated field in which there is tremendous competition for talent. We have set high standards as to whom we will employ, particularly in terms of the auditing experience levels of our inspections staff. Attracting, compensating, and retaining talented people, particularly veteran auditors, require significant resources. Necessarily, the budget reflects those costs.
• Second, $65.3 million of the proposed 2008 budget, or 45 percent, would be directly allocated to the Division of Registration and Inspections. Other components of the budget, particularly the Office of Research and Analysis and IT, use the majority of their resources in direct support of inspections. Enforcement serves as the shot-gun-behind-the-door in situations where inspections recommendations alone are not adequate to protect investors and promote quality auditing. That program accounts for another $10.6 million of the budget. In enacting the Sarbanes-Oxley Act, Congress envisioned an oversight process driven largely by an active and timely auditor inspections program. With around 1,000 domestic and foreign firms that must be inspected, fulfilling that vision requires significant resources.

Conversely, a question might also be raised as to whether this budget is adequate, especially given the breadth of our responsibilities and the rapid pace of change in financial reporting. As compared to the 2007 budget, the 2008 budget would actually reflect a decrease in authorized staffing of about 12 positions. Those concerned about our ability to get our work done in a timely and effective manner might ask whether we should be seeking still more in 2008.

Of course, none of us can foresee the future, and it is certainly possible that factors that we do not fully anticipate today will cause us to need more resources during 2008 than this budget provides. However, I view this budget as consistent with our ability to do the job Congress has assigned to us, based on the 2008 environment as best we can project it today. Indeed, it is consistent with a significant level of growth. Specifically, we are now projecting that we will actually spend only about $127.5 million during 2007 and will end the year with 476 people on board. Therefore, the 2008 budget reflects a spending increase of about $17.1 million, or about 13 percent, over actual 2007 spending, and an increase of 31 people, or about 6.5 percent of our actual 2007 staffing. I think this is consistent with our ability to recruit and with our ability to effectively and efficiently deploy additional staff.

In summary, I believe that the proposed 2008 budget would give the Board the resources it needs to fulfill its statutory responsibilities, and I support it.