SEC Running Behind on Spending Its Budget

The Securities and Exchange Commission said Wednesday that $103 million of its record $716-million budget would go unspent this fiscal year because it couldn’t hire accountants and investigators fast enough.

Congress boosted the SEC’s budget by 63% for the fiscal year ending Sept. 30 to help the agency combat corporate fraud and restore investor confidence. The unspent money is about one-third of the increase.

“I am perplexed,” said William Niskanen, chairman of the Cato Institute in Washington and a member of the Council of Economic Advisors under President Reagan. “At a time when the Congress and the president seem to be willing to give the SEC a lot more money, they found they couldn’t spend it.”

The House Appropriations Committee has proposed using the $103 million in the SEC’s budget for fiscal 2004.

The SEC’s appropriation was debated Wednesday by the full House.

That bill provides $841.5 million to the SEC for fiscal 2004, the amount the agency was previously projected to get. That means the SEC in effect is losing the $103 million it can’t spend before fiscal 2003 ends.

“A lot of the money was for additional staff,” said Peter Derby, a managing executive at the SEC. “We didn’t pay those people because they didn’t exist.”

SEC officials said the agency didn’t have enough time to hire the hundreds of accountants, economists and inspectors who were to handle the agency’s heavier workload after accounting scandals at Enron Corp., WorldCom Inc. and other companies.

SEC Commissioner Harvey Goldschmid, who pushed Congress for the budget increase, said the agency’s inability to spend the money this fiscal year didn’t mean its budget should be cut in the future.

“We shouldn’t spend more than we can effectively spend, but there is an awful lot we need and will continue to need in the future,” Goldschmid said.

Members of Congress have pledged to monitor the SEC’s growing budget. The fiscal 2004 spending bill calls for the General Accounting Office, the investigative arm of Congress, to study SEC spending.

The appropriations committee “wants to be sure that such significant increases in funding can be effectively utilized,” the committee wrote in a report accompanying the bill.

Another reason the commission hasn’t been able to spend the $103 million, which is an estimated figure, is that Congress didn’t pass the government spending bill until the end of February, almost five months into the fiscal year, SEC officials said.

A new law that exempts the SEC from civil service hiring requirements should speed hiring, Derby said.