Statement at Open Meeting on 2016 PCAOB Budget

Commissioner Michael S. Piwowar

March 14, 2016

Thank you, Chair White. Good morning, Chairman Doty, Board Members, and other representatives from the Public Company Accounting Oversight Board (PCAOB or Board).

This is the third time that I have considered the PCAOB budget for approval. Unfortunately, for the first time, I will not be able to vote in favor. Let there be no misunderstanding — I have been clear since receiving the 2016 preliminary budget that the proposed accounting support fee is too high and I have been assured that these concerns were communicated to the Board by our staff.

The accounting support fee is a tax. This tax is assessed by a non-profit corporation under authority granted by Congress. The Commission represents the only safeguard to an otherwise unilateral ability to impose the accounting support fee tax on companies and broker-dealers. Companies and broker dealers are required, under penalty of law, to pay money to the Board for the privilege of merely existing. These costs are not ultimately borne by companies and broker-dealers, but rather their shareholders and customers.

As I have mentioned in prior years, it is important to find a steady state be reached for the Board’s budget and operations. I agree with Board Member Jeannette Franzel’s comments that the Board must “mature as a nimble and agile” organization with a relatively stable size and structure.[1] I am concerned, however, that the five-year projections for further spending represent a mountain of escalating costs.

Five years ago, the Board spent $190 million dollars. Today’s request approaches nearly $258 million and a 12 percent increase in the 2015 accounting support fee from $227 million. Simply stated, a more modest budget should have been presented for 2016.

Furthermore, I object to new language contained in the 2016 budget that could allow increases in total Board compensation through the use of lump-sum merit pay in lieu of a higher base salary. Buried in the 2016 preliminary budget was a brief sentence stating that the Board will expand its practice of providing lump sum merit pay in lieu of increases to base pay. This statement remains in the Board’s final budget submission.

In other areas, I recognize that the Board has made significant progress in the development and integration of economic analysis into the Board’s operations and standard setting. I am pleased with the advances being made by the Board in these areas and strongly support the efforts of the Board to make further improvements.

I have no questions.