WASHINGTON — A rift within the Securities and Exchange Commission regarding oversight of the Public Company Accounting Oversight Board deepened on the eve of a vote on the board's 2005 budget.
Two Republicans on the five-member SEC extended a written invitation Tuesday to PCAOB Chairman William McDonough to take part in the SEC's public meeting Thursday over objections of SEC Chairman William Donaldson. They extended the same invitation to Financial Accounting Standards Board Chairman Robert Herz.
"We understand that you have not been invited to attend or participate in this meeting," SEC Commissioners Cynthia Glassman and Paul Atkins wrote.
They told McDonough, "We think it would be useful and efficient to have the PCAOB represented at the meeting in addition to our staff." Glassman and Atkins said they would be happy to yield some of their own discussion time to allow McDonough or his staff to respond to questions on the oversight board's budget.
PCAOB spokeswoman Christi Harlan said McDonough had received the written invitation and "as is his custom, he will respond to the people who wrote to him."
FASB officials didn't immediately return phone calls seeking comment. The annual budget of the private, Connecticut-based accounting standard-setter is subject to SEC oversight.
SEC spokesman Matt Well declined to comment. Glassman wasn't immediately available to comment.
In a telephone interview, Atkins said, "the chairman indicated he wasn't inviting them and had no intention of inviting them."
Atkins said he isn't trying to "pick a fight" with Donaldson, but believes the oversight board budget should be thoroughly discussed in public, "not behind closed doors."
An individual familiar with the matter predicted McDonough would decline the invitation, leaving the matter in the hands of an increasingly divided SEC. Although the SEC chairman typically sets the agenda for the agency, Glassman and Atkins have been willing to break ranks and buck Donaldson, a fellow Republican, on several high-profile issues, from increasing regulation of hedge fund managers to requiring that mutual funds be chaired by independent outsiders.
Divisions have delayed action on the oversight board's budget for 2005. Congress created the board in 2002 to inspect and discipline public company accountants. While it is a private organization funded chiefly by fees on public companies, the oversight board's budget is subject to SEC oversight.
The PCAOB first proposed a $152.5 million budget for 2005, up sharply from 2004. It later cut that figure to $137.1 million, all but $1 million of which is to be billed to U.S. public companies. The board began the year with about a three-month cash cushion, but cannot bill public companies until the SEC approves its budget.
SEC approval of the PCAOB's 2004 budget was done without a public meeting, in a process in which the matter is circulated to each commissioner in turn for written approval, as is routinely done with items that aren't deemed to require public discussion. Atkins said he balked at doing that again this year and asked for a public meeting.
Despite that, Atkins said Donaldson chose to circulate the oversight board's 2005 budget for approval in private. The issue was put on the agenda for the SEC meeting Thursday when Atkins demanded a public hearing.
"This is an agency I always thought was supposed to stand for transparency," Atkins said.
With the PCAOB's budget increasing, he said it should be discussed in the open, with PCAOB officials in the room to answer any questions.
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