Statement on the PCAOB 2018 Budget and Related Strategic Plan

I support the PCAOB 2018 budget and related strategic plan. This budget of $259.9 million is $8.6 million (or 3.2%) below the Board's 2017 approved budget. It reflects the result of a number of initiatives by the Board to reduce headcount and increase the efficiency of our operations, while still assuring that we are able to meet our statutory mandate. This budget also reflects, in my view, the fact that the Board has now reached relative maturity as a regulatory body.

Today's budget is consistent with the views I have advocated previously regarding the need to focus on finding efficiencies across our organization. Nearly every PCAOB division and office has identified areas where it can take action to operate more efficiently in 2018.

For example, the Division of Registration and Inspections has proposed a year-over-year budget reduction totaling 5.1%; the Division of Enforcement and Investigations has proposed reductions totaling 6.5%; the Office of the Chief Auditor has proposed reductions totaling 3.8%; and the Office of Economic and Risk Analysis has proposed reductions totaling 5.2%. I view these reductions as positive steps forward for the Board in managing our resources.

This year's budget and the studies and analyses that underlie it represent an enormous amount of work by the PCAOB Staff and my fellow Board members to identify additional ways we can more effectively and efficiently operate as we move into 2018 and beyond. I am very grateful for their efforts.

While I am pleased with this year's budget, I nevertheless want to sound a cautionary note. I support budget cuts when they reflect a more efficient use of resources and do not compromise the Board's ability to carry out its mission to protect investors and improve audit quality. I do not support budget cuts for their own sake and would caution against a view that our future budgets should presumptively be on a consistent downward trajectory.

We must balance our budgetary priorities against the important mission Congress has laid at our feet. One reason that audit quality in the U.S. has improved and that the PCAOB has been a global leader in the effort to improve audit quality worldwide is that we have been adequately resourced to conduct a rigorous firm inspection program on a global basis, to maintain a robust enforcement regime, to pursue an active standard setting agenda, and to collaborate with other regulators. In some instances, striking the right balance requires the Board to authorize more money, rather than less, in specific program areas than we have in prior years.

Cybersecurity is one example of this. This year's budget proposes an increase in headcount and resources for the Office of Information Technology to address the evolving cyber risks that the Board, like so many other organizations, faces in today's environment. We must be vigilant in identifying, monitoring, and mitigating cyber threats and the 2018 budget allocates additional resources to allow us to do so. As we see evolving risks to the organization or opportunities to enhance our ability to achieve our mission, our budget must be responsive.

Our budget also must be responsive to the talent environment in which we operate. The vast majority of our budget is dedicated to personnel related expenses. Currently, we operate in a competitive environment, with rising compensation costs across the industry and increases in other personnel-related costs, such as healthcare and benefits. These factors are beyond the Board's control. We must nonetheless realistically account for them in allocating resources for and across our organization. Our staff represents the lifeblood of the PCAOB. Unless we can attract qualified professionals and retain them once they join us, we cannot continue to effectively achieve our mission. Our budget and accompanying corporate policies thus must prioritize our ability to succeed in the labor market and allow us to drive the morale necessary to retain our superb professionals.

In sum, while we must always strive to operate the PCAOB as efficiently as possible, we must keep achievement of the statutory mandate that Congress set for the PCAOB in the Sarbanes-Oxley Act foremost in our view, and our budgets need to provide for the resources necessary to accomplish that mandate.

I want to thank our Staff for their dedication and efforts in preparing this budget, particularly those in the Office of Administration and our division and office leaders. They have worked tirelessly to put us in a position to vote on the budget today. I would also like to thank the SEC for their consideration and input on the 2018 budget. I look forward to a continuing dialogue on budgetary and financial matters with my fellow Board members and the Staff as we move into 2018.