Thank you, Chair Gensler. Thank you to the board members and staff from the Public Company Accounting Oversight Board (“PCAOB” or the “Board”) who are here today.

In creating the PCAOB in the Sarbanes-Oxley Act, Congress entrusted the Commission with oversight and approval of the PCAOB’s budget and accounting support fee – and for good reason.[1] Let’s be very clear who ultimately pays for the PCAOB; it is not the issuers and broker-dealers against whom the fees are assessed, but rather it is the shareholders and customers of those entities. Unlike the Commission, the PCAOB’s budget is not subject to the Congressional appropriations process.

Given this important public oversight responsibility of the Commission, one would think that the commissioners would receive sufficient information to evaluate whether the budget and accounting support fee are appropriate in light of the PCAOB’s mission and performance. Unfortunately, for my review of the 2024 PCAOB budget, that information, although requested, was not provided.

In the early 2010s, the PCAOB annually requested double-digit percentage increases in their budget,[2] which raised concerns about the size of its budget should similar increases continue into the future. However, by the mid-2010s, the large year-over-year budget increases had dissipated, including a couple of years where the budget declined year-over-year.[3] When considering the PCAOB’s 2017 budget, then-SEC Chair Mary Jo White observed that PCAOB board members had asserted that the Board was “nearing a steady-state with the scope of its core programs of inspections, standard-setting, and enforcement.”[4] She then encouraged “the Board to continue to take a hard look at their funding and expenses to identify possible savings and efficiencies that will allow the PCAOB to fully perform its mission, but also give careful consideration to the reasonableness of the level of the accounting support fee that is levied to support it.”[5] Seven years later, we are back to the PCAOB seeking double-digit percentage increases in its budget for now two consecutive years.

Unsurprisingly, a significant factor driving the increase is personnel costs, which account for 74% of the agency’s 2024 budget.[6] Despite my requests, the budget does not detail the number of managerial and non-managerial staff, and their compensation levels, within each of the PCAOB’s divisions and offices. Such information can provide insight on whether resources are being used effectively and efficiently. The data is also helpful to compare changes in the makeup of the PCAOB staff over time.

Comparing the 2017 budget referenced by Chair White to the 2024 budget, there was a $116 million, or 43%, increase in the total budget.[7] The personnel costs increased by approximately $80 million, or 39%. However, headcount between 2017 and 2024 increased by only 70 people, or 8%. Upon reviewing those numbers and percentages, my question is – where is the money going? How is the budget increase being allocated among the PCAOB staff? Despite raising this question early in the budget process, I did not receive any answers.

It is difficult to exercise effective oversight of the PCAOB’s budget without appropriate underlying information. I share the concerns of PCAOB member Christina Ho regarding the lack of “clear justifications” for the budget’s 10% increase from last year.[8] Accordingly, I cannot support today’s recommendation on the 2024 budget and accounting support fee.

Nonetheless, I thank the members and staff of the PCAOB for their work to carry out the PCAOB’s important mission in improving audit quality. I also thank the staff of the Commission’s Office of the Chief Accountant and Office of Financial Management for their efforts in the budget review process.