[Federal Register Volume 83, Number 247 (Thursday, December 27, 2018)]
[Notices]
[Pages 66782-66783]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27978]


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SECURITIES AND EXCHANGE COMMISSION

[Securities Act of 1933 Release No. 10592/December 19, 2018; Securities 
Exchange Act of 1934 Release No. 84877/December 19, 2018]


Order Approving Public Company Accounting Oversight Board Budget 
and Annual Accounting Support Fee for Calendar Year 2019

    The Sarbanes-Oxley Act of 2002, as amended (the ``Sarbanes-Oxley 
Act''),\1\ established the Public Company Accounting Oversight Board 
(``PCAOB'') to oversee the audits of companies that are subject to the 
securities laws, and related matters, in order to protect the interests 
of investors and further the public interest in the preparation of 
informative, accurate, and independent audit reports. Section 982 of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (the 
``Dodd-Frank Act'') \2\ amended the Sarbanes-Oxley Act to provide the 
PCAOB with explicit authority to oversee auditors of broker-dealers 
registered with the Securities and Exchange Commission (the 
``Commission''). The PCAOB is to accomplish these goals through 
registration of public accounting firms and standard setting, 
inspection, and disciplinary programs. The PCAOB is subject to the 
comprehensive oversight of the Commission.
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    \1\ 15 U.S.C. 7201 et seq.
    \2\ Public Law 111-203, 124 Stat. 1376 (2010).
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    Section 109 of the Sarbanes-Oxley Act provides that the PCAOB shall 
establish a reasonable annual accounting support fee, as may be 
necessary or appropriate to establish and maintain the PCAOB. Under 
Section 109(f) of the Sarbanes-Oxley Act, the aggregate annual 
accounting support fee shall not exceed the PCAOB's aggregate 
``recoverable budget expenses,'' which may include operating, capital, 
and accrued items. The PCAOB's annual budget and accounting support fee 
are subject to approval by the Commission. In

[[Page 66783]]

addition, the PCAOB must allocate the annual accounting support fee 
among issuers and among brokers and dealers.
    Section 109(b) of the Sarbanes-Oxley Act directs the PCAOB to 
establish a budget for each fiscal year in accordance with the PCAOB's 
internal procedures, subject to approval by the Commission. Rule 190 of 
Regulation P governs the Commission's review and approval of PCAOB 
budgets and annual accounting support fees.\3\ This budget rule 
provides, among other things, a timetable for the preparation and 
submission of the PCAOB budget and for Commission actions related to 
each budget, a description of the information that should be included 
in each budget submission, limits on the PCAOB's ability to incur 
expenses and obligations except as provided in the approved budget, 
procedures relating to supplemental budget requests, requirements for 
the PCAOB to furnish on a quarterly basis certain budget-related 
information, and a list of definitions that apply to the rule and to 
general discussions of PCAOB budget matters.
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    \3\ 17 CFR 202.190.
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    In accordance with the budget rule, in March 2018 the PCAOB 
provided the Commission with a narrative description of its program 
issues and outlook for the 2019 budget year. In response, the 
Commission provided the PCAOB with economic assumptions and general 
budgetary guidance for the 2019 budget year. The PCAOB subsequently 
delivered a preliminary budget and budget justification to the 
Commission. Staff from the Commission's Office of the Chief Accountant 
and Office of Financial Management dedicated a substantial amount of 
time to the review and analysis of the PCAOB's programs, projects, and 
budget estimates; reviewed the PCAOB's estimates of 2018 actual 
spending; and attended several meetings with management and staff of 
the PCAOB to further develop their understanding of the PCAOB's budget 
and operations. During the course of this review, Commission staff 
relied upon representations and supporting documentation from the 
PCAOB. Based on this review, the Commission issued a ``passback'' 
letter to the PCAOB on November 1, 2018. On November 15, 2018, the 
PCAOB adopted its 2019 budget and accounting support fee during an open 
meeting, and subsequently submitted that budget to the Commission for 
approval.
    After considering the above, the Commission did not identify any 
proposed disbursements in the 2019 budget adopted by the PCAOB that are 
not properly recoverable through the annual accounting support fee, and 
the Commission believes that the aggregate proposed 2019 annual 
accounting support fee does not exceed the PCAOB's aggregate 
recoverable budget expenses for 2019.
    The Commission also acknowledges the PCAOB's updated strategic 
plan, which involved extensive outreach, and encourages the PCAOB to 
continue keeping the Commission and its staff apprised of significant 
new developments during its implementation. In addition, the PCAOB 
should submit its 2018 annual report to the Commission by April 1, 
2019.
    The Commission directs the PCAOB during 2019 to schedule monthly 
meetings with the Commission's staff about the transformation 
initiatives that are expected to have a significant impact on the 2020 
PCAOB budget. In addition, the Commission directs the Board during 2019 
to continue providing quarterly updates to the Commission that describe 
(i) the activities and progress towards the stated goals of the PCAOB's 
Office of Economic and Risk Analysis (``ERA''); (ii) detailed 
information about the state of the PCAOB's information technology 
program as administered by the PCAOB's Office of Information Technology 
(``OIT); and (iii) information about the PCAOB's inspections program as 
administered by the PCAOB's Division of Registration and Inspections 
(``DRI''), consistent with the quarterly updates reflected in the 
Commission's Order approving the PCAOB's annual budget and accounting 
support fee for calendar year 2018 dated January 10, 2018. In addition, 
the quarterly updates should include updates on the transformation 
projects for ERA, OIT, and DRI.
    The Commission understands that the Office of Management and Budget 
(``OMB'') has determined that the 2019 budget of the PCAOB is subject 
to sequestration under the Budget Control Act of 2011.\4\ For 2018, the 
PCAOB sequestered $17.2 million. That amount will become available in 
2019. For 2019, the sequestration amount will be 6.2% or $17.0 million. 
Consequently, we expect the PCAOB will have approximately $0.2 million 
in excess funds available from the 2018 sequestration for spending in 
2019. Accordingly, the PCAOB has reduced its accounting support fee for 
2019 by approximately $0.2 million.
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    \4\ See ``OMB Report to the Congress on the Joint Committee 
Reductions for Fiscal Year 2019'', Appendix page 16 of 17 available 
at https://www.whitehouse.gov/wp-content/uploads/2018/02/Sequestration_Report_February_2018.pdf .
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    The Commission has determined that the PCAOB's 2019 budget and 
annual accounting support fee are consistent with Section 109 of the 
Sarbanes-Oxley Act. Accordingly,
    It is ordered, pursuant to Section 109 of the Sarbanes-Oxley Act, 
that the PCAOB budget and annual accounting support fee for calendar 
year 2019 are approved.

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2018-27978 Filed 12-26-18; 8:45 am]
 BILLING CODE 8011-01-P