By Sarah N. Lynch
WASHINGTON, Feb 13 (Reuters) - The top U.S. audit watchdog
could face steep cuts to its budget if Congress does not come to
an agreement to avert automatic spending cuts, even though it is
a nonprofit that does not receive funding from Congress.
The effect of the automatic spending cuts due to take effect
March 1, known as "sequestration," came up on Wednesday when Jim
Doty, the head of the Public Company Accounting Oversight Board,
appeared before the U.S. Securities and Exchange Commission to
discuss his organization's 2013 budget needs.
PCAOB is funded through fees from public companies and
broker-dealers. But it is listed in the federal budget each
year, and the SEC must vote to approve its budget annually.
This year, the PCAOB is requesting approval from the SEC for
a $245.6 million budget, an increase of about 8 percent from the
2012 budget of $227.7 million.
In preliminary estimates last year of how sequestration
would affect each government agency, the White House Office of
Management and Budget said the SEC's $1.321 billion budget could
be facing a cut of $108 million.
Also included in that document are some organizations that
do not receive congressional appropriations. The PCAOB is listed
as facing a potential $18 million cut, while the Securities
Investor Protection Corp. is listed for a potential $23 million
cut.
The PCAOB was created by the 2002 Sarbanes-Oxley Act in
response to a rash of accounting scandals at companies like
Enron. It serves as the watchdog for auditors of public
companies and broker-dealers, conducting routine inspections,
taking enforcement actions when needed, and setting auditing
standards for the industry.
The SIPC, created by Congress to help customers of failed
brokerages recover their money, is funded by industry fees.
Though it has a $2.5 billion line of credit available from the
federal government, it has never tapped it.
Elisse Walter, the SEC's chairman, said her agency is aware
of the potential impacts to the PCAOB and is prepared to work
with the organization if the looming March 1 cuts go into
effect.
"I would expect that in the event that sequestration occurs
and the PCAOB's 2013 budget is indeed affected, the PCAOB will
work with the commission and commission staff as appropriate
regarding implementation of sequestration," she said.
The sequestration bill passed by Congress, which was in
response to an impasse over raising the nation's borrowing limit
as Democrats and Republicans wrangled over how to address the
deficit, set up a deadline for across-the-board spending cuts
that will take effect unless a deal on the budget is reached.
Stephen Harbeck, the SIPC's president and chief executive,
called the sequestration legislation a "square peg in a round
hole" type of problem.
"The clear intent is to capture government monies, and make
sure they don't get used by the government. We don't do that,"
he told Reuters in an interview late Tuesday.
"Nevertheless, under some readings of the sequestration
legislation, it seems that if you were set up by the government,
you have to do something about this."
He said the SIPC is having discussions about the matter
internally. He declined to say whether the non-profit is forming
a contingency plan, but said it will not have to surrender any
of its assets to the government.
"I am sure that...if this becomes necessary to deal with,
rational minds will prevail and we'll find a way to continue our
operations," he added.
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