An article in the Wall Street Journal ("FASB Recognition Stalled Amid Fight Over Control," February 21, 2003) reveals that in the weeks leading up to his departure, Harvey Pitt pushed for and failed in an attempt to establish greater SEC control over the Financial Accounting Standards Board.
Mr. Pitt’s plan was for the SEC to hold tighter control over FASB, the make up of the membership of the Financial Accounting Foundation, the selection of the members of the FASB, and the standard setting agenda of the organization. His proposal would have given the SEC a greater representation at FASB meetings and would have given the SEC access to confidential FASB documents. According to the article, Mr. Pitt withheld crucial SEC recognition of the FASB pending acceptance of the greater control, essentially blocking the ability for the independent accounting standard setter to receive the critical funding it needs to survive.
As part of the Sarbanes-Oxley Act, funding for the FASB is to be changed so that operating funds come from fees imposed on listed corporations, instead of the current funding model, which generates much of the revenue from public accounting firms and publication sales. Lawyers believe that the FASB cannot impose fees on public corporations unless it receives SEC recognition.
In the end, FASB lobbying to assert and maintain its independence won out. "We need to be able to do our thing in an independent, objective and thorough way," FASB Chairman Robert Herz to the Wall Street Journal. "We don't want to be subject to constant interference or domination of our agenda."
According to The Journal, FASB has enough cash on hand to last through the fall. The new SEC Chairman William Donaldson is in a position to quickly recognize the FASB with no additional strings attached, allowing it to get the funding it needs to increase staffing and continue its duties.