In an effort to compete with the private sector for more accounting help, the Securities and Exchange Commission unanimously approved a 4 percent budget boost for the Public Company Accounting Oversight Board on Monday, increasing the group’s funding to $136.4 million for 2007.

Most of the board’s outlays will be spent on salaries, benefits, recruitment, and related personnel expenses, said PCAOB Chairman Mark Olson during an open meeting of the SEC held Monday. Indeed, the PCAOB, which is charged by Congress to inspect and oversee public accounting firms, has budgeted about $80 million for salaries, the majority of which will be used to pay experienced accountants and attorneys to inspect accounting firms, added Olson. The next highest outlay is the $9.4 million budgeted for employee benefits.

During the SEC meeting, Olson stressed that recruitment and retention of experienced accountants has been especially tough for the three-year-old organization, which was set up under the Sarbanes-Oxley Act 2002. As a result, the PCAOB has been focused on keeping pace with private-sector salaries and benefits, as well as opening up offices outside of the District of Columbia to lure audit talent from other parts of the country. The PCAOB currently has regional inspectors in offices located in New York, Atlanta, Dallas, Orange County, California, San Francisco, Denver, and Chicago.

The PCAOB is hoping to grow its inspection staff from its current total of 230 employees to 250 by the end of 2007. The total number of PCAOB employees will likely be 480 by the end of 2006, which the group hopes to increase to 519 by the end of 2007.

The PCAOB is currently putting the finishing touches on its longer-term strategic plan, which will likely be released to the SEC sometime in January. The focus, according to Olson, will remain on attracting and retaining accounting and auditing talent. The PCAOB also intends to use the extra research funding to develop risk analysis tools for the accounting industry that resemble the ones used by Federal Reserve inspectors when they assess bank risk.

To date, more than 1,700 public accounting firms have been registered by the PCAOB, including about 750 firms based outside the United States. Firms with more than 100 public-company audit clients must be inspected annually, while firms with one to 100 public company audit clients must be inspected at least once every three years.

To be sure, making inspections more effective is one of the board’s goals. But Olson said it “was clear” that the PCAOB “did not have a lot of tools to make the inspections more efficient regarding risk analysis.” On that front, Olson envisions some sort of financial statement risk assessment tool that may be able to ferret out potential risk areas that require an inspector’s attention. He suspects that the tool would be used to scrutinize data flow and information feeds from companies and the market in general.

What would such tools be trolling for? Evidence of regulatory arbitrage, patterns tied to class-action lawsuits, and meaningful correlations between pre-Sarbox and post-Sarbox restatements, said Olson.

In terms of the board’s overall program costs, the PCAOB plans to spend $6.9 million in total administrative costs (including salaries) tied to its board and executive staff in 2007—about $770,000 more than was budgeted in 2006. Meanwhile, the budget for the Division of Enforcement will rise by nearly 23 percent, to $9.2 million. The PCAOB will spend $6.8 million on research and analysis in 2007, or $2 million more than this year. Information technology spending, however, will remain flat at $23 million this year.

On the income side, the lion’s share of the board’s budget will come from public companies, which will pay an aggregate $122.4 million in support fees in 2007. Those fee assessments are based on a company’s market capitalization. On top of that, the audit firms will pay a total of $44,000 in registration fees in 2007. The balance of the budget will be paid for by funds carried over from 2006, including interest and working capital reserves.