The Securities and Exchange Commission is cutting costs to make up for a $48 million budget shortfall blamed on real-estate cost overruns.
The SEC is in the process of moving to a new Washington headquarters and recently relocated its offices in Boston and New York. Peter Derby, a senior aide to chairman William Donaldson, told the Associated Press that higher-than-expected security and building costs for the new offices could run up to $50 million over the next two-and-a-half years.
Derby said employees have been placed on administrative leave or were reprimanded. "We had an internal budgetary process control problem," Derby said. "We won't have to deal with it again."
The situation sparked U.S. Rep. Frank Wolf, chairman of a House of Representatives subcommittee that oversees SEC funding, to request an investigation by the Government Accountability Office.
"We're going to get to the bottom of it," Wolf said in an interview with Bloomberg News. "It is particularly unfortunate, to use a mild word, for the SEC, which is looking at other people's books, to find out that they had this problem."
To cut costs, the nation's top market regulator, will limit travel and training, slow hiring and find other savings to keep funding levels constant for enforcement and investor protection measures, Derby said.
"It looks to me like it was total sloppiness," said former SEC chairman Arthur Levitt, who is a board member at Bloomberg LP, the parent of Bloomberg News. "What is much more serious is cutbacks in funding," because the agency would be less able to conduct investigations.
Wolf's subcommittee on Tuesday approved $888 million for the SEC, which is on par with the Bush administration's proposal to hold funding steady for fiscal 2006. The SEC has received several years of budget increases to deal with investigations and enforcement of major corporate scandals.