Increasingly under fire for failing to properly regulate the mutual fund industry, the Securities and Exchange Commission was dealt another blow when Congress moved to return $120 million in unspent funds to the U.S. Treasury, $30 million of which the SEC will not get back.
The money had been appropriated to expand the financial industry watchdog's staff and when new employees weren't hired fast enough in fiscal year 2003, the money was returned to the Treasury. Next week, Congress is expected to approve the agency's $811 million spending bill for fiscal year 2004, which began Oct. 1. Even with the $30 million cut, the bill is still $66 million more than last year when it was beefed up by 70 percent to $745 million after corporate scandals were uncovered.
Still, some in Congress want to know why it was New York Attorney General Eliot Spitzer who uncovered the fraud in the $7 trillion mutual fund sector, which they say should have been discovered by the SEC.
"The SEC is squandering a golden opportunity to help restore investor confidence by not bringing the agency up to speed," Sen. Paul Sarbanes of Maryland, the Senate Banking Committee's ranking Democrat, said in a prepared statement.
Part of the beefing up of the SEC was the hiring of additional accountants, examiners and support staff, which the SEC claims was delayed by Congress's late approval of the agency's budget and the waiving of hiring rules that kept the SEC from completing its expansion. Bloomberg News reported that a SEC spokeswoman said the agency has hired just 70 percent of the 850 people it had planned to hire in fiscal year 2003.
As a result, $120 million was left in the agency's fiscal 2003 budget, which is what is now being returned to the Treasury, according to the office Sen. Robert Byrd (D-WV), and reported by Bloomberg News.
"Those people and those salaries that they haven't been able to hire result in $30 million in lower annualized costs," said Melanie Alvord, Senate Appropriations Committee spokeswoman.