SEC OKs 6% increase in audit board budget

SEC commissioners voted 3-1 Tuesday to boost the Public Company Accounting Oversight Board’s (PCAOB) funding to US$144.6 million. The 2008 budget includes a 3.3 percent pay raise for PCAOB board members, which will increase the salary of Chairman Mark Olson to about US$654,000. That’s more than four times the annual pay of SEC Chairman Christopher Cox.

The SEC was able to “provide timely input in the budgeting process and to promote changes in it where necessary,” Cox said at a meeting in Washington.

Congress set up the PCAOB to inspect and discipline U.S. auditors after frauds at Enron Corp. and WorldCom Inc. eroded confidence in the accounting industry. The 2002 Sarbanes-Oxley Act gave the SEC broad authority over the board, which it has used to trim spending and influence audit rules.

The audit board’s leaders responded to SEC scrutiny by agreeing to stop tying their salaries to those at the Financial Accounting Standards Board, which writes U.S. accounting rules. The concession ensures PCAOB pay raises won’t accelerate at the same rate as FASBs.

The board also agreed to revise its strategic plan, which was released in May to help establish goals and guide budget requests through 2012. SEC commissioners complained the document lacked adequate benchmarks to measure success and was too general in setting objectives.

SEC Commissioner Paul Atkins voted against the budget, saying concessions offered by the PCOAB didn’t go far enough to offset “disproportionately high” salaries that exceed the pay of President George W. Bush.

“We must not forget that the salaries along with the rest of the board budget are paid by investors,” said Atkins, a Republican.

The SEC has a responsibility to rein in PCAOB pay, because it “truly stands in a stewardship role as the investors’ advocate,” he added.

The audit board is a non-profit regulator funded by levies on publicly traded companies. Its staff aren’t government employees. The 2008 budget increases the pay of the PCAOB’s four board members to about US$532,000. SEC Commissioners will earn US$149,000 next year and Cox will make US$158,500.

Congress, in establishing the PCAOB, specified that pay be competitive with private-sector auditors to help the board attract employees, Olson said at the SEC meeting.

“Even by paying market salaries, it’s not easy to attract the talent that we need,” Olson said. The decision to “not link ourselves to the FASB is appropriate” to respond to SEC concerns over raises, he added.

The SEC had postponed a Dec. 11 vote on the board’s budget to further scrutinize the pay raises and strategic plan.

PCAOB Board Member Charles Niemeier, at a Nov. 19 audit board meeting, said the budget was too tight and may prevent it from hiring enough new inspectors.

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