The PCAOB on November 23, 2021, voted 3 to 0 to approve its 2022 budget of $310.3 million, an increase of 8 percent over its 2021 budget of $287.3 million.
The increase is significant, but it also follows a modest increase of 0.9 percent in 2021 from the 2020 spending set at $284.7 million.
This year’s budget meeting was unusual because not all five members were present. Two out of the four members appointed on November 8 have not joined the PCAOB as yet.
Present at the meeting were PCAOB Acting Chairperson Duane DesParte and new members Kara Stein and Christina Ho. The rest of the members who have not yet started their new jobs at the PCAOB are Erica Williams, a partner with Kirkland & Ellis LLP, who will become the chairperson; and Anthony Thompson, who has served as executive director and chief administrative officer of the Commodity Futures Trading Commission.
Normally, the PCAOB considers its budget and an updated strategic plan at the same meeting.
But “given the new board has not yet been fully seated, the 2022 budget reflects resources for the PCAOB to carry out its mandated audit oversight responsibilities and to achieve the goals and objectives as set forth in its existing strategic plan,” DesParte said during the meeting. “Once the new board is fully in place, we will be reassessing our strategic goals and objectives and making adjustments in our resources as necessary to support any updated priorities or initiatives.”
Among other things, the additional staffing increase in the Office of Chief Auditor will increase the board’s capacity to standard-setting and research projects, including quality control and data and technology.
“And the funding will support our increased continuing assessment of environmental, social, and assurance matters,” he said.
Stein, who was a strong investor advocate when she served as an SEC commissioner, said that she “very much” supports the targeted increase in the budget.
“I am also very pleased that the budget recommits funds towards investor and other stakeholder outreach, both for events and in particular advisory group activities,” she said. “This is critically important to our mission of protecting investors, and the integrity of the capital markets is having transparent and open communication with different participants in the capital markets.”
Ho, who was most recently Vice President of Government Analytics and Innovation at Elder Research, said that she is especially “interested in working with the board to identify ways to advance data driven-decision making across our program, including inspections, enforcement, and standard-setting.”
The PCAOB sends its budget for the SEC’s consideration by November 30 each year. The commission, which oversees the audit regulatory board, must approve the PCAOB’s budget and standards before they become effective.
PCAOB CFO Holly Greaves said that the increase in 2022 reflects inflation, additional staff for inspections and standard-setting activities, and increased travel costs as travel is expected to resume next year.
The PCAOB halted travel because of the COVID-19 pandemic.
Section 109 of the Sarbanes-Oxley Act of 2002 authorizes the PCAOB to collect accounting support fees from public companies and broker-dealers to fund its operations and supervise public accounting firms.
The audit regulator estimated that the total accounting support fee for 2022 will be $298 million, with $267 million assessed on public companies and $31 million on broker-dealers.
This compares to the total accounting support fee of $264 million for 2021, with $236 million assessed on public companies and $28 million on broker-dealers.
As has always been the case, the largest component of the budget is personnel costs—salaries, benefits, taxes, training, and recruitment. The total spending is expected to be $230.6 million, which represents almost three quarters of the budget.
This figure assumes 891 positions will be filled by the end of 2022. By contrast, the 2021 budget provides for 859 positions.
“This additional staffing is primarily in our inspections function to help make progress on certain international inspections deferred during the pandemic, to increase focus on emerging risk, and to further improve their relevance and timeliness of our inspection reports and other information we share about audit quality,” Greaves said.
The next largest category of spending is $20 million allocated for rent and other facility costs, including capital expenditures. This is 6 percent of the total 2022 budget.
Consulting and professional fees are set for $18.9 million, followed by information technology at 16.6 million.
Travel costs are $15.4 million, and inspections account for the majority of the expenses.
Administrative costs, which includes subscription and library, business insurance, and event costs, make up $8.8 million of the budget.
However, pay for board members will stay flat for the 13th consecutive year. In 2022, the chairman will again earn $672,676, and other members will be paid $546,891. The figures have been constant since 2009.
This article originally appeared in the November 24, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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