63

Sequestration of Public Company

Accounting Oversight Board Funds

The operating funds of the Public Company Accounting Oversight Board are subject to 

sequestration under section 251A of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, because the Board’s funds have consistently been included in the President’s budget, were not exempted from sequestration by Congress, 

and qualify as “budgetary resources” under the Act.

September 13, 2013

MEMORANDUM OPINION FOR THE GENERAL COUNSEL

PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

In March and April 2013, the President ordered the cancellation of 

budgetary resources, known as “sequestration,” after Congress failed to 

enact a bill achieving $1.2 trillion in deficit reduction. See Balanced 

Budget and Emergency Deficit Control Act of 1985, as amended 

(“BBEDCA”), 2 U.S.C. § 901a (2012). Among the entities affected by 

these sequestration orders was the Public Company Accounting Oversight 

Board (“PCAOB” or “Board”), which Congress created “to oversee the 

audit of public companies” after a series of high-profile auditing scandals. 

15 U.S.C. § 7211(a) (2006 & Supp. V 2012); see Free Enter. Fund v. Pub. 

Co. Accounting Oversight Bd., 130 S. Ct. 3138, 3147 (2010). The Board’s 

activities are funded through annual accounting support fees it levies on 

the companies it regulates, with the approval of the Securities and Exchange Commission. 15 U.S.C. § 7219(d). The Board draws no funds 

from the United States Treasury, and by statute its receipts are not “public monies of the United States.” Id. § 7219(c)(1). Since its inception, 

however, the Board has been included in the list of accounts in the President’s budget, and on that basis the Office of Management and Budget 

(“OMB”) designated the Board’s budget account as subject to the cancellations required by BBEDCA section 251A, codified at 2 U.S.C. § 901a.1

 1 See OMB Report to the Congress on the Joint Committee Sequestration for Fiscal 

Year 2013 at 67 (Mar. 1, 2013), http://www.whitehouse.gov/sites/default/files/omb/

assets/legislative_reports/fy13ombjcsequestrationreport.pdf (last visited ca. Sept. 2013); 

OMB Sequestration Preview Report to the President and Congress for Fiscal Year 2014 

and OMB Report to the Congress on the Joint Committee Reductions for Fiscal Year 

2014 at 34 (Apr. 10, 2013, as corrected May 20, 2013), http://www.whitehouse.gov/
37 Op. O.L.C. 63 (2013)

64

The Board has asked us whether OMB was correct to deem the Board’s 

account subject to sequestration under BBEDCA section 251A. In the 

Board’s view, it should not have been included in the President’s budget, 

and therefore the statutory sequestration provisions should not apply to it, 

because it is a private, non-governmental entity that does not use U.S. 

Treasury funds.2 OMB, which submitted a memorandum containing its 

views,3 points out that BBEDCA subjects every account listed in the 

President’s budget to sequestration except for those specifically exempted, and that Congress did not exempt the Board from sequestration. In any 

event, OMB counters that the Board has properly been included in the 

President’s budget based on longstanding budgetary principles.

We conclude that OMB properly designated the Board’s funds as subject to sequestration under BBEDCA section 251A, because Congress was 

aware that the list of accounts in the President’s budget included the 

Board; Congress chose to impose sequestration on all accounts listed in 

the President’s budget; and Congress decided not to include the Board 

among the dozens of accounts exempt from sequestration. We further 

conclude that the Board’s account contains budgetary resources subject to 

cancellation under BBEDCA.

I.

Three different legal regimes are relevant background in understanding the Board’s request for our opinion: (i) the provisions that prescribe 

sequestration, (ii) the organic statute that created the Board, and (iii) the 

principles governing the President’s budget. 

 

sites/default/files/omb/assets/legislative_reports/fy14_preview_and_joint_committee_

reductions_reports_05202013.pdf (last visited ca. Sept. 2013). 

2 See Memorandum for Virginia Seitz, Assistant Attorney General, Office of Legal 

Counsel, and Benjamin Mizer, Deputy Assistant Attorney General, Office of Legal 

Counsel, from J. Gordon Seymour, General Counsel, Public Company Accounting 

Oversight Board, Re: Whether the Public Company Accounting Oversight Board Is 

Subject to Sequestration Under the Balanced Budget and Emergency Deficit Control Act 

of 1985, as Amended by the Budget Control Act of 2011 (Mar. 25, 2013) (“PCAOB

Memorandum”).

3 See Memorandum for Benjamin Mizer, Deputy Assistant Attorney General, Office 

of Legal Counsel, from Thomas S. Lue, Acting General Counsel, Office of Management and Budget, Re: Status of Public Company Accounting Oversight Board Under 

the Balanced Budget and Emergency Deficit Control Act, as Amended (May 17, 2013) 

(“OMB Memorandum”).
Sequestration of Public Company Accounting Oversight Board Funds

65

A.

In the Budget Control Act of 2011, Pub. L. No. 112-25, 125 Stat. 240, 

Congress made various changes to BBEDCA, the most significant of 

which was to create a new sequestration trigger. This trigger, which 

became BBEDCA section 251A, required across-the-board cancellation 

of budgetary resources if a special joint committee failed to propose, and 

Congress failed to enact, legislation that reduced the budget deficit by 

$1.2 trillion by a statutory deadline. See 2 U.S.C. § 901a. Because Congress did not enact such legislation, the President ordered sequestration 

of fiscal year 2013 budgetary resources on March 1, 2013. See Sequestration Order for Fiscal Year 2013 Pursuant to Section 251A of the Balanced Budget and Emergency Deficit Control Act, as Amended, 78 Fed. 

Reg. 14,633 (Mar. 1, 2013). The President further ordered sequestration 

of fiscal year 2014 budgetary resources on April 10, 2013, as required by 

BBEDCA. See Sequestration Order for Fiscal Year 2014 Pursuant to 

Section 251A of the Balanced Budget and Emergency Deficit Control 

Act, as Amended, 78 Fed. Reg. 22,409 (Apr. 10, 2013).

Sequestration under BBEDCA section 251A requires “the cancellation 

of budgetary resources provided by discretionary appropriations or direct 

spending law.” 2 U.S.C. § 900(c)(2) (definition of “sequestration”). The 

statute defines various terms. “Discretionary appropriations” are “budgetary resources provided in appropriation Acts,” while “direct spending” 

refers to budget authority provided by other laws, including entitlement 

authority. Id. § 900(c)(7)–(8).4 “Budgetary resources” means “new budget 

authority, unobligated balances, direct spending authority, and obligation 

limitations,” id. § 900(c)(6), and “budget authority” means “the authority 

provided by Federal law to incur financial obligations . . . including the 

authority to obligate and expend the proceeds of offsetting receipts and 

collections,” id. § 622(2); see id. § 900(c)(1) (incorporating definition of 

“budget authority” in 2 U.S.C. § 622(2)). Section 251A of BBEDCA 

provides that sequestration reductions must be applied to each “account” 

that is not included in a list of exempt accounts in 2 U.S.C. § 905 or 

 4 “Entitlement authority” refers to programs “in which the Federal Government is 

legally obligated to make payments or provide aid to any person who, or State or local 

government that, meets the legal criteria for eligibility.” OMB Circular No. A-11, at 

20-5 (2013). Examples include Social Security, Medicare, Medicaid, and unemployment insurance. See id.
37 Op. O.L.C. 63 (2013)

66

subject to a special sequestration rule set forth in 2 U.S.C. § 906. See id.

§ 901a(7)–(8).5 An “account” is an item specified in an appropriations act 

or, when used to refer to items not provided for in appropriations acts 

(i.e., when referring to direct spending), “an item for which there is a 

designated budget account identification code number in the President’s 

budget.” Id. § 900(c)(11). The statute sets forth a process for OMB to use 

in determining the amount of funds that must be canceled in each nonexempt account. See id. § 901a(2)–(4), (7)–(8).

Section 905 lists several dozen budget accounts and activities exempt 

from sequestration. It identifies each exempt account by name and “the 

designated budget account identification code number set forth in the 

Budget of the United States Government 2010—Appendix, and an activity 

within an account is designated by the name of the activity and the identification code number of the account.” Id. § 905(j). Congress revised the 

list of exempt programs most recently in the Statutory Pay-As-You-Go 

Act of 2010, Pub. L. No. 111-139, 124 Stat. 8. The Board has never been 

listed as exempt from sequestration.

B.

Congress established the Board in the Sarbanes-Oxley Act of 2002, 

Pub. L. No. 107-204, 116 Stat. 745 (“Sarbanes-Oxley”), to oversee 

public company audits “in order to protect the interests of investors and 

further the public interest in the preparation of informative, accurate, 

and independent audit reports.” 15 U.S.C. § 7211(a). Sarbanes-Oxley 

gave the Board significant authority to carry out that function. Public 

accounting firms are required to register with the Board before they 

may conduct an audit of a public company. Id. § 7212(a). The Board 

promulgates binding rules governing the conduct of these registered 

public accounting firms. Id. § 7213. It is also empowered to inspect 

these firms for compliance with its rules and professional standards, id.

§ 7214; to investigate reports of noncompliance, id. § 7215(b); and to 

initiate disciplinary proceedings and sanction companies found to have 

violated its rules, id. § 7215(c). Penalties may include fines of up to 

 

5 To the extent that a budget account contains funds that fall into more than one of 

these four categories, OMB must apply the category with the highest percentage reduction 

to that account. See 2 U.S.C. § 906(k)(2)–(3).
Sequestration of Public Company Accounting Oversight Board Funds

67

$15,000,000 and temporary or permanent revocation of registration 

with the Board. Id. The Board’s sanctions determinations are, however, 

subject to review by the Securities and Exchange Commission (“SEC” 

or “Commission”). Id. § 7217(c). The Commission may also censure 

the Board or relieve it of any of its authority if the SEC concludes that 

doing so is in the public interest. Id. § 7217(d). 

The Board is part of the government for constitutional purposes, and 

its members are officers of the United States who exercise significant 

government authority. See Free Enter. Fund, 130 S. Ct. at 3148. Some 

provisions of Sarbanes-Oxley, however, reflect Congress’s intent to 

confer a measure of independence on the Board. The statute provides that 

the “Board shall not be an agency or establishment of the United States 

government,” and the Board is, except as otherwise provided, afforded 

the treatment of a nonprofit corporation chartered in the District of Columbia. 15 U.S.C. § 7211(b). Sarbanes-Oxley further states that “[n]o 

member or person employed by, or agent for, the Board shall be deemed 

to be an officer or employee of or agent for the Federal Government by 

reason of such service.” Id. Board members are appointed for five-year 

terms by the SEC. Id. § 7211(e)(5).6 With the approval of the Commission, the Board may establish its own budget, id. § 7219(b), and establish 

and collect annual accounting support fees and registration fees that fund 

its activities, id. §§ 7212(f), 7219(d). These fees “and other receipts of 

the Board . . . shall not be considered public monies of the United 

States.” Id. § 7219(c)(1). Finally, the Board is not “subject to procedures 

in Congress to authorize or appropriate public funds.” Id. § 7219(i). 

C.

Federal law requires the President to “submit a budget of the United 

States Government for the following fiscal year.” 31 U.S.C. § 1105(a) 

(2006 & Supp. V 2012). Section 1105 contains a lengthy list of required 

elements of the President’s budget, including “information on activities 

and functions of the Government,” “information on costs and achievements of Government programs,” and “other desirable classifications of 

information.” Id. § 1105(a)(1)–(3). In practice, the determination whether 

 

6 Under the statute as enacted, Board members were removable before the expiration of 

their terms only for good cause, but the Supreme Court ruled the good-cause protection 

unconstitutional. See Free Enter. Fund, 130 S. Ct. at 3147.
37 Op. O.L.C. 63 (2013)

68

to include an item in the budget “is made jointly” by OMB, the Congressional Budget Office (“CBO”), and the Budget Committees of Congress. 

OMB, Budget of the United States Government, Fiscal Year 2014—

Analytical Perspectives 141 (2013).

OMB generally makes budgetary designations in accordance with principles outlined in the 1967 Report of the President’s Commission on 

Budget Concepts. See id. at 123, 141. That report called for the budget to 

“be comprehensive of the full range of Federal activities. Borderline 

agencies and transactions should be included in the budget unless there 

are exceptionally persuasive reasons for exclusion.” Report of the President’s Commission on Budget Concepts 25 (1967) (“1967 Report”). The 

1967 Report concludes, for example, that trust fund activities should be 

included in the budget even though the funds in theory “do not belong to 

the Federal Government” and despite their “partial isolation from the 

budget and appropriations processes,” based on the Federal Government’s 

unquestioned “responsibility for determining the size and shape” of these 

programs, “or for altering or redirecting these programs by appropriate 

changes in legislation.” Id. at 26. Similarly, the 1967 Report concluded 

that the Federal Deposit Insurance Corporation should be included in the 

budget, despite being exempted by statute from the budgetary review 

process, because its structure and function are governmental in nature. Id.

at 30. On the other hand, federal lending entities established by Congress 

that were privately owned and that operated in essentially the same way as 

private banks were considered appropriately excluded from the budget. Id.

at 29–30. 

II.

A.

The Board contends that subjecting its funds to sequestration is contrary to Sarbanes-Oxley and BBEDCA. In particular, it maintains that its 

program receipts and expenditures have been improperly included in the 

President’s budget—and therefore categorized as subject to BBEDCA 

sequestration—because provisions in Sarbanes-Oxley indicate that Congress intended to exclude the Board from the President’s budget. See 

PCAOB Memorandum at 8. Although we summarize and address below 

the Board’s chief arguments, we find that most of them do not directly 
Sequestration of Public Company Accounting Oversight Board Funds

69

bear on the point we find dispositive: that Congress clearly identified in 

BBEDCA and its amendments the entities that it intended to exempt from 

sequestration, and the Board was not one of them. 

The Board’s position rests principally on the language of SarbanesOxley, which provides that (i) “[t]he Board shall not be an agency or 

establishment of the United States Government,” (ii) the Board’s receipts 

“shall not be considered public monies of the United States,” and (iii) the 

Board shall not be “subject to procedures in Congress to authorize or 

appropriate funds.” 15 U.S.C. §§ 7211(b), 7219(c)(1), 7219(j). The Board 

maintains that the President’s budget, as the “budget of the United States 

Government,” 31 U.S.C. § 1105, may only include government agencies 

and establishments, and that the Board, by virtue of these provisions of 

Sarbanes-Oxley, is not part of the government for purposes of the President’s budget. PCAOB Memorandum at 8–9. This conclusion, the Board 

submits, is compelled by Lebron v. National Railroad Passenger Corp., 

in which the Supreme Court, in considering whether Amtrak is a government actor for First Amendment purposes, stated (in dicta) that a 

statutory provision providing that Amtrak “will not be an agency or 

establishment of the United States Government,” 45 U.S.C. § 541 (1992), 

“is assuredly dispositive of Amtrak’s status as a Government entity for 

purposes of matters that are within Congress’s control.” 513 U.S. 374, 

392 (1995). The Board maintains that whether it should be included in 

the budget and subject to sequestration is just such a matter “within 

Congress’s control,” and that Congress spoke directly to this question in 

Sarbanes-Oxley. PCAOB Memorandum at 9. The Board adds that it 

should not be subject to sequestration when Congress modeled it on other 

private self-regulatory organizations, such as the New York Stock Exchange, that are not included in the President’s budget and are not subject 

to sequestration. Id. at 14–15.

According to OMB, however, the language of Sarbanes-Oxley is not 

conclusive of the question presented here. Whether to include an item in 

the President’s budget, OMB explains, is “largely a policy judgment” 

that is guided principally by the 1967 Report’s “general rule” that 

“[b]orderline agencies and transactions should be included in the budget 

unless there are extremely persuasive reasons for exclusion.” See OMB 

Memorandum at 6; 1967 Report at 25. OMB argues that nothing in 31 

U.S.C. § 1105 prevents the President from including in his budget the 
37 Op. O.L.C. 63 (2013)

70

congressionally authorized receipts and outlays of an entity whose authorizing statute provides that it is not a federal “agency or establishment” for statutory purposes. OMB Memorandum at 7. What is important 

here, OMB notes, is that OMB has taken the position that the Board 

should be included in the budget since the Board was established in 

2003. See OMB, Budget of the United States Government, Fiscal Year 

2004—Analytical Perspectives 463 (2003) (“Even though the statute says 

the Board is not an agency or establishment of the Government, its 

sources of funding and activities are governmental in nature.”). The CBO 

has also consistently considered the Board to be an on-budget entity (i.e., 

one that is included in the budget) because it “exercis[es] the sovereign 

power of the federal government” and is “subject to a significant level 

of federal control”—conclusions reflected in Sarbanes-Oxley’s preenactment legislative history. S. Rep. No. 107-205, at 61 (2002) (“CBO 

Report”). OMB further observes that the President’s budget includes 

several other entities subject to sequestration whose organic statutes 

contain similar provisions stating that they are not agencies or establishments of the United States and that their funds are not government 

funds. See OMB Memorandum at 9. OMB submits, however, that the 

critical point is not the merits of the underlying designation, but rather 

that the Board has consistently been designated as on-budget and that 

Congress knew and understood that fact when it enacted BBEDCA 

section 251A. See id. at 1.

We begin our analysis by focusing on the text of BBEDCA. Under that 

statute, an agency’s funds are subject to sequestration if the agency’s 

account is included in the President’s budget. See 2 U.S.C. § 900(c)(11). 

The Board recognizes, as it must, that it has long been included in the 

budget, but believes that its inclusion has been a mistake. In the Board’s 

view, once this mistake is corrected, the consequence will be the exclusion of its funds from BBEDCA sequestration. We interpret BBEDCA 

differently. We think that the key question is whether Congress understood the Board to be within the category of accounts subject to sequestration when it amended BBEDCA. Put another way, when it amended 

BBEDCA in 2010 and 2011, Congress understood the Board to be part of 

the President’s budget and declined to exempt it from sequestration. See 

Bragdon v. Abbott, 524 U.S. 624, 645 (1998) (Congress is presumed to be 

aware of settled administrative interpretations of legislative commands); 
Sequestration of Public Company Accounting Oversight Board Funds

71

Goodyear Atomic Corp. v. Miller, 486 U.S. 174, 184–85 (1988) (stating 

that Congress “is knowledgeable about existing law pertinent to the legislation it enacts”). In these circumstances, even if the Board had mistakenly been included in the budget in the first place,7 that would not overcome 

Congress’s more specific intent in BBEDCA to subject the Board to 

sequestration. Cf. Nitro-Lift Techs., LLC v. Howard, 133 S. Ct. 500, 504 

(2012) (invoking the “ancient interpretive principle that the specific 

governs the general”). 

By its terms, sequestration under BBEDCA section 251A applies to 

each “account” that is not listed as exempt in section 905 of title 2. See

2 U.S.C. § 901a(7). BBEDCA defines an “account” as: (i) “an item for 

which appropriations are made in any appropriation Act and, [(ii)] for 

items not provided for in appropriation Acts, . . . an item for which there 

is a designated budget account identification code number in the President’s budget.” Id. § 900(c)(11). The universe of “accounts” subject to 

sequestration therefore includes, among other things, all items with an 

account identification code number in “the President’s budget” (unless 

exempted by section 905). Congress’s reference to “the President’s 

budget” plainly means the budget that OMB prepares and the President 

submits to Congress according to the requirements of 31 U.S.C. § 1105. 

To the extent that OMB had settled on and abided by a consistent understanding of the requirements of section 1105—including which entities 

should and should not be included in the budget—we presume that 

Congress intended to adopt this understanding when it substantially 

revised BBEDCA in 2010 and 2011. See Bragdon, 524 U.S. at 645. In 

other words, we presume that, when Congress referred to the list of 

entities in the President’s budget, Congress knew what was on that list. 

See id.; Goodyear Atomic Corp., 486 U.S. at 184–85. 

That list has, at all relevant times, included the Board. Before the enactment of Sarbanes-Oxley, the CBO concluded that the Board should 

be included in the budget, and the bill’s pre-enactment Senate Report 

reflected the CBO’s conclusion. See CBO Report at 61 (2002) (quoted 

supra p. 70). OMB agreed with the CBO’s judgment and included the 

Board in the President’s budget beginning in the year the Board was 

established; OMB also included in an accompanying report a full para-

 

7 We express no view on this question, but note that the President does appear to have 

significant discretion about what is included in the budget. See supra Part I.C.
37 Op. O.L.C. 63 (2013)

72

graph explaining the reasons for this decision. See OMB, Budget of the 

United States Government, Fiscal Year 2004—Appendix 1104 (2003); 

OMB, Budget of the United States Government, Fiscal Year 2004—

Analytical Perspectives 463 (2003). OMB has designated the Board as 

on-budget in every year since then.8 Thus, we presume that, when 

Congress directed OMB to use the list of entities covered in the President’s budget in implementing sequestration under section 251A, it was 

aware of OMB’s settled practice and understood that the Board would 

be among the affected entities. 

This conclusion finds strong support in the structure of BBEDCA. 

Congress specifically exempted dozens of accounts and activities from 

sequestration in the statute. If Congress had intended to exempt the Board 

from sequestration, it could simply have added the Board’s account to its 

lengthy list of accounts and activities exempt from sequestration under 

section 905, either in 2010 when it fully revised the list of exempt accounts and activities, or in 2011 when it enacted section 251A. Significantly, there can be no doubt that Congress referred to the President’s 

budget in the course of drawing up these lists: each exempt account in 

section 905 “is identified by the designated budget account identification 

code number set forth in the Budget of the United States Government

2010—Appendix.” 2 U.S.C. § 905(j). The 2010 budget appendix—like 

every budget appendix going back to the Board’s creation in 2003—

included the Board. And Congress had yet another opportunity to exempt 

the Board from sequestration. In August 2012, Congress enacted the 

Sequestration Transparency Act, Pub. L. No. 112-155, 126 Stat. 1210 

(2012), which required OMB to submit a comprehensive report the following month explaining which accounts would be subject to sequestration reductions. Congress required OMB to submit the report in advance 

 8 See OMB, Budget of the United States Government, Fiscal Year 2005—Appendix

1184 (2004); OMB, Budget of the United States Government, Fiscal Year 2006—

Appendix 1223 (2005); OMB, Budget of the United States Government, Fiscal Year 

2007—Appendix 1207 (2006); OMB, Budget of the United States Government, Fiscal 

Year 2008—Appendix 1126 (2007); OMB, Budget of the United States Government, 

Fiscal Year 2009—Appendix 1229 (2008); OMB, Budget of the United States Government, Fiscal Year 2010—Appendix 1288 (2009); OMB, Budget of the United States 

Government, Fiscal Year 2011—Appendix 1329 (2010); OMB, Budget of the United 

States Government, Fiscal Year 2012—Appendix 1299 (2011); OMB, Budget of the 

United States Government, Fiscal Year 2013—Appendix 1405 (2012); OMB, Budget of 

the United States Government, Fiscal Year 2014—Appendix 1317 (2013). 
Sequestration of Public Company Accounting Oversight Board Funds

73

of implementing sequestration reductions in order to “obtain information 

about how this sequester will be applied and its effect on both nondefense 

and defense programs,” with the ultimate aim of “provid[ing] both the 

President and the Congress [with] improved tools to reconsider spending.” 

H. Rep. No. 112-577, at 5, 10 (2012). The Sequestration Transparency 

Act gave Congress the opportunity to preview OMB’s determination of 

which accounts and activities were subject to sequestration, and allowed 

Congress time to revise BBEDCA before sequestration reductions took 

effect if it disagreed with any of OMB’s determinations concerning the 

statute’s application. OMB’s report, submitted in September 2012, included the Board. See OMB Report Pursuant to the Sequestration Transparency Act of 2012 at 218 (2012) (describing Board’s budget account as 

containing budget authority subject to sequestration). Had Congress 

wanted to exempt the Board from sequestration following receipt of this 

notice from OMB, it could have added the Board to the section 905 list 

when it amended BBEDCA in January 2013. It did not do so. Cf. Whether 

Reservists Must Exhaust Available Leave 5 U.S.C. § 6323(b) Before Taking Leave Under 5 U.S.C. § 6323(a), 36 Op. O.L.C. 129, 149–50 (2012) 

(stating that Congress may be understood to have ratified an administrative interpretation when there is evidence to suggest that Congress was 

aware of that interpretation, citing Brown v. Gardner, 513 U.S. 115, 121 

(1994)).9

Given the strong textual indicia of congressional intent to subject the 

Board to sequestration, we cannot accept the Board’s contrary arguments. 

As noted above, the Board emphasizes Lebron’s statement that statutory 

language resembling the referenced provisions of Sarbanes-Oxley is 

 9 The Board objects that this reasoning “overlooks that an entity requires an exemption 

only if it is properly subject to sequestration in the first place.” Memorandum for Virginia 

Seitz, Assistant Attorney General, Office of Legal Counsel, and Benjamin Mizer, Deputy 

Assistant Attorney General, Office of Legal Counsel, from J. Gordon Seymour, General 

Counsel, Public Company Accounting Oversight Board, Re: Whether the Public Company 

Accounting Oversight Board Is Subject to Sequestration under the Balanced Budget and 

Emergency Deficit Control Act of 1985, as Amended by the Budget Control Act of 2011

at 9 (June 10, 2013) (“PCAOB Reply”). We agree that, if Congress had not included the 

Board in the entities subject to sequestration as an initial matter, it would have had no 

reason to list the Board as exempt in section 905. But as explained above, we believe 

Congress subjected the Board to sequestration when it defined the covered accounts to 

include those OMB had listed in the budget. In this context, Congress’s failure to list the 

Board as exempt evinces its intent to subject it to sequestration.
37 Op. O.L.C. 63 (2013)

74

“assuredly dispositive of [the Board’s] status as a Government entity for 

purposes of matters that are within Congress’s control.” Lebron, 513 U.S. 

at 392. But the Court further explained in Lebron that such statutory 

language bears on the applicability of laws that expressly depend on the 

entity’s status as part of the federal government or as a government agency, such as the Administrative Procedure Act, 5 U.S.C. § 551 et seq.

(2012), the Federal Advisory Committee Act, 5 U.S.C. app. § 1 et seq., 

and the laws governing federal government procurement, 41 U.S.C. § 5 et 

seq. (2006 & Supp. V 2012). See Lebron, 513 U.S. at 392. As set out 

above, BBEDCA’s applicability does not depend on an entity’s governmental status for the purposes addressed in this passage of Lebron.

10 And 

in other instances in which Congress has sought to make clear that funds 

are exempt from BBEDCA sequestration, it has said so clearly and with 

express reference to BBEDCA. See 39 U.S.C. § 2009a(3) (2006 & Supp. 

V 2012) (providing that Postal Service Fund receipts and disbursements 

“shall be exempt from any order issued under part C of the Balanced 

Budget and Emergency Deficit Control Act”); Pub. L. No. 101-508, 

§ 13301(a), 104 Stat. 1388, 1388-623 (1990) (stating that Social Security 

trust funds “shall not be counted as new budget authority, outlays, receipts, or deficit or surplus for purposes of . . . the Balanced Budget and 

Emergency Deficit Control Act of 1985”).

Finally, we note that the Board is not the only federal entity subject to 

sequestration despite a congressional statement that it is not an “agency or 

establishment of the United States,” or that its funds are not “Government 

funds or appropriated monies.” Cf. PCAOB Memorandum at 14–17. As 

OMB notes, OMB Memorandum at 9, other entities are in the same position. See, e.g., 15 U.S.C. § 78ccc(a)(1)(A) (Securities Investor Protection 

 10 For the same reason, the analysis contained in a 2007 opinion from our Office does 

not apply here. See Status of the Public Company Accounting Oversight Board Under 18 

U.S.C. § 207(c), 31 Op. O.L.C. 47 (2007) (“2007 Opinion”). In the 2007 Opinion, we 

concluded that a former SEC employee representing the Board before the SEC was not 

acting “on behalf of . . . the United States” for purposes of 18 U.S.C. § 207(c). Applying 

Lebron, we reasoned that the statutory provision stating that the Board is not “an agency 

or establishment of the United States Government” was dispositive of the Board’s status 

as an agency or instrumentality of the United States Government for purposes of the 

conflict of interest laws. Id. at 51. As was the case in Lebron (and not the case here) 

the applicability of those laws, specifically 18 U.S.C. § 207(c), depended on the entity’s 

status as part of the United States Government.
Sequestration of Public Company Accounting Oversight Board Funds

75

Corporation); 22 U.S.C. § 2131(b)(1) (2006 & Supp. V 2012) (Corporation for Travel Promotion); 12 U.S.C. § 16 (2012) (Office of the Comptroller of the Currency); id. § 5497(c)(2) (Consumer Financial Protection 

Bureau); 15 U.S.C. § 78d(i)(4) (SEC Reserve Fund). The fact that similarly situated entities are included in the budget and not exempted from 

sequestration by section 905 of BBEDCA supports OMB’s conclusion 

that Congress intended to subject the Board’s funds to sequestration. 

B.

The text of BBEDCA refers to the President’s budget to determine 

whether an entity’s funds are subject to sequestration. As a result, the 

Board, which has consistently been included in the President’s budget, is 

subject to sequestration. The analysis does not end there, however, because section 251A sequestration applies only to “budgetary resources,” 

2 U.S.C. §§ 900(c)(2), 901a(7)(A), which means “new budget authority, 

unobligated balances, direct spending authority, and obligation limitations,” id. § 900(c)(6). The Board asserts that even if its operating funds 

are held in an “account” within the meaning of BBEDCA, that account 

does not contain “budgetary resources” subject to sequestration.

Because none of the other categories of “budgetary resources” applies 

here, the resolution of this argument turns on whether the Board possesses “budget authority.” The Board argues that it lacks budget authority. It 

relies on a Government Accountability Office (“GAO”) publication 

defining budgetary authority as the “[a]uthority provided by federal law 

to enter into financial obligations that will result in immediate or future 

outlays involving federal government funds.” GAO, A Glossary of Terms 

Used in the Federal Budget Process 20 (2005); see PCAOB Memorandum at 11–12; PCAOB Reply at 2–3. The Board argues that, under 

Sarbanes-Oxley, it does not have the authority to incur obligations that 

will result in outlays on behalf of the federal government, and therefore 

does not have “budget authority” under that definition of the term. 

But BBEDCA contains its own, broader definition of “budget authority”: “the authority provided by Federal law to incur financial obligations,” 

consisting of, among other things, “provisions of law that make funds 

available for obligation and expenditure (other than borrowing authority), 

including the authority to obligate and expend the proceeds of offsetting 

receipts and collections.” 2 U.S.C. § 622(2)(A); see id. § 900(c)(1) (incorporating definition of “budget authority” in section 622). The defini-
37 Op. O.L.C. 63 (2013)

76

tion also includes “offsetting receipts and collections as negative budget 

authority, and the reduction thereof as positive budget authority.” Id.

§ 622(2)(A)(iv). BBEDCA therefore defines “budget authority” as funds 

made available pursuant to authority provided by federal law, irrespective 

of whether the funds are labeled “federal government funds” or otherwise. 

The Board’s funds plainly satisfy BBEDCA’s definition of “budget authority.” They are funds collected (as SEC-approved mandatory registration and accounting support fees) and obligated (consistent with an SECapproved annual budget) for expenditure consistent with the congressional 

authorization provided in Sarbanes-Oxley. In other words, the Board’s 

activities are funded under “provisions of law that make funds available 

for obligation and expenditure.” Id. § 622(2)(A). They are therefore 

budgetary resources subject to sequestration under BBEDCA.11

The Board also argues that subjecting it to sequestration would “lead to 

incongruous results” because the Board may continue to collect receipts at 

its normal pace but may not obligate those funds or send them to the 

Treasury Department. See PCAOB Memorandum at 12 n.10. Funds may 

therefore be escrowed and not made available for obligation by the Board 

until BBEDCA section 251A sequestration is no longer in effect; in the 

meantime, sequestration reductions imposed on the Board “will not decrease the federal deficit by a single dollar.” Id. at 2. The Board’s argument appears to be that requiring cancellation of the authority to obligate 

collected offsetting receipts—and putting collected funds in escrow until 

the end of sequestration—would not result in deficit reduction, and thus 

would be inconsistent with (or at least would not advance) BBEDCA’s 

legislative purpose. But Congress considered the possibility that this 

scenario might occur and expressly provided for it: “Budgetary resources 

sequestered in revolving, trust, and special fund accounts and offsetting 

collections sequestered in appropriation accounts shall not be available for 

obligation during the fiscal year in which the sequestration occurs, but 

shall be available in subsequent years to the extent otherwise provided in 

law.” 2 U.S.C. § 906(k)(6). An argument based on BBEDCA’s general 

 11 Congress’s declaration of purpose in the Congressional Budget and Impoundment 

Control Act of 1974, Pub. L. No. 93-344, 88 Stat. 297 (codified at 2 U.S.C. § 621), does 

not provide significant guidance in determining BBEDCA’s reach. See PCAOB Reply

at 2. In BBEDCA, Congress adopted the prior act’s definition of “budget authority,” but 

it did not expressly or implicitly adopt the earlier statute’s declaration of purpose. In any 

event, section 621’s declaration of purpose is broad and general, and provides little 

assistance in interpreting the phrase “budget authority” in section 622.
Sequestration of Public Company Accounting Oversight Board Funds

77

purpose cannot be used to countermand section 251A, particularly where 

Congress has expressly recognized that some applications of the statute 

might not directly serve that purpose. See Kloeckner v. Solis, 133 S. Ct.

596, 607 n.4 (2012).12

III.

For these reasons, we conclude that the Board is subject to the sequestration provisions of BBEDCA section 251A.

BENJAMIN C. MIZER

Deputy Assistant Attorney General 

Office of Legal Counsel

 12 The Board also suggests that if OMB includes it in the list of programs, projects, and 

activities subject to sequestration, then it must also include “purely private” entities 

ranging from “Apple to the local apple cart, as well as state and local activities with no 

federal involvement.” PCAOB Memorandum at 12 n.11; see also PCAOB Reply at 3. Our 

reading of BBEDCA, however, does not lead to the absurdity that the Board posits. In our 

judgment, the Board’s funds are subject to sequestration under BBEDCA section 251A 

because (i) that section specifies that sequestration applies to entities that are on-budget, 

(ii) the Board has consistently been such an entity since its inception, (iii) Congress did 

not exempt the Board from sequestration, and (iv) the Board collects and obligates funds 

pursuant to authority provided by federal law. Plainly, the entities the Board likens to 

itself do not meet these criteria. In any event, we do not address the circumstances of 

entities not presented here.