Sequestration of Public Company Accounting Oversight Board Funds

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 Con-
trol Act of 1985, as amended, because the Board’s funds have consistently been in-
cluded 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 Ex-
change Commission. 15 U.S.C. § 7219(d). The Board draws no funds
from the United States Treasury, and by statute its receipts are not “pub-
lic 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 Presi-
dent’s budget, and on that basis the Office of Management and Budget
(“OMB”) designated the Board’s budget account as subject to the cancel-
lations 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/

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 37 Op. O.L.C. 63 (2013)

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 exempt-
ed, 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 sub-
ject 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 understand-
ing 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 Manage-
ment 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”).

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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 Con-
gress did not enact such legislation, the President ordered sequestration
of fiscal year 2013 budgetary resources on March 1, 2013. See Sequestra-
tion Order for Fiscal Year 2013 Pursuant to Section 251A of the Bal-
anced 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 “budget-
ary 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 unemploy-
ment insurance. See id.

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 37 Op. O.L.C. 63 (2013)

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 non-
exempt 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 identi-
fication 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).

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 Sequestration of Public Company Accounting Oversight Board Funds

$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 Co-
lumbia. 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 Commis-
sion, 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 achieve-
ments 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.

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 37 Op. O.L.C. 63 (2013)

to include an item in the budget “is made jointly” by OMB, the Congres-
sional 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 prin-
ciples 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 Presi-
dent’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 contra-
ry 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 Con-
gress 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

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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 Sarbanes-
Oxley, 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 Presi-
dent’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 gov-
ernment 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 Ex-
change, 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

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congressionally authorized receipts and outlays of an entity whose au-
thorizing statute provides that it is not a federal “agency or establish-
ment” 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 pre-
enactment 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 estab-
lishments 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 exclu-
sion of its funds from BBEDCA sequestration. We interpret BBEDCA
differently. We think that the key question is whether Congress under-
stood the Board to be within the category of accounts subject to sequestra-
tion 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);

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Goodyear Atomic Corp. v. Miller, 486 U.S. 174, 184–85 (1988) (stating
that Congress “is knowledgeable about existing law pertinent to the legis-
lation it enacts”). In these circumstances, even if the Board had mistaken-
ly 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 Presi-
dent’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 under-
standing 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 en-
actment 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.

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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 Presi-
dent’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 ac-
counts and activities, or in 2011 when it enacted section 251A. Signifi-
cantly, 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 fol-
lowing month explaining which accounts would be subject to sequestra-
tion 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 Govern-
ment, 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).

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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, in-
cluded the Board. See OMB Report Pursuant to the Sequestration Trans-
parency 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 Tak-
ing 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 administra-
tive 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.

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 37 Op. O.L.C. 63 (2013)

“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 agen-
cy, 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 govern-
mental 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, re-
ceipts, 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 posi-
tion. 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.

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Corporation); 22 U.S.C. § 2131(b)(1) (2006 & Supp. V 2012) (Corpora-
tion for Travel Promotion); 12 U.S.C. § 16 (2012) (Office of the Comp-
troller of the Currency); id. § 5497(c)(2) (Consumer Financial Protection
Bureau); 15 U.S.C. § 78d(i)(4) (SEC Reserve Fund). The fact that similar-
ly 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, be-
cause 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 limita-
tions,” 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 possess-
es “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 Memoran-
dum 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 authori-
ty”: “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) (in-
corporating definition of “budget authority” in section 622). The defini-

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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 au-
thority.” They are funds collected (as SEC-approved mandatory registra-
tion and accounting support fees) and obligated (consistent with an SEC-
approved 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 de-
crease the federal deficit by a single dollar.” Id. at 2. The Board’s argu-
ment 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.

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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 seques-
tration 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.

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