Bloomberg News

The House Financial Services Committee passed a budget bill Wednesday that eliminates the Public Company Accounting Oversight Board and caps the Consumer Financial Protection Bureau’s budget at roughly $249 million, a drastic reduction from its recent budgets.

Committee chair French Hill, R-Ark., said the moves outlined in the budget bill — which will be combined with similar bills in other committees to make up the bill that will appear on the House floor for a vote — deliver more than the $1 billion annual savings required by the House Budget resolution that passed in February. The bill passed the committee by a 30-22 vote along party lines.

“We’re taking a strong step toward restoring fiscal discipline and ensuring government funding is being used wisely and transparently,” Hill said. “To deliver on President Trump’s agenda … House Republicans will reduce the deficit and exceed the $1 billion savings target outlined in the budget resolution.”

The bill would eliminate the PCAOB’s ability to assess and spend accounting support fees, would direct any unspent funds back to the Treasury Department and direct the Securities and Exchange Commission to take over the board’s responsibilities and cease collecting fees. The PCAOB was established in 2003 as part of the Sarbanes-Oxley Act to be an independent investigator and standard-setting body for auditing firms, a need that Congress identified after the WorldCom and Enron accounting scandals created a crisis of confidence in public accounting statements.

GOP lawmakers mull eliminating ‘management’ from CAMELS

 
The bill would also cap the CFPB’s budget at 5% of the Federal Reserve’s total operating budget for 2009, a figure Hill said would amount to roughly $249 million. The CFPB’s estimated operating budget for the 2024 fiscal year was $684.9 million. The bill would also direct the CFPB to return all remaining funds from the Civil Penalty Fund back to the Treasury Department after direct victims had been compensated. The bill also directs the U.S. Department of Housing and Urban Development to rescind unobligated funds for the Green and Resilient Retrofit Program, which were appropriated as part of the Inflation Reduction Act in 2022. The program provides grants for landlords receiving HUD assistance to improve energy and water efficiency, improve indoor air quality and climate resilience for their properties.

The bill also limits assessments collected by the Office of Financial Research to the average operating budget of the Financial Stability Oversight Council over the prior three years. 

During a marathon markup hearing that went into the evening, Democrats offered 35 amendments to the bill, including measures to investigate who is investing in the Trump family’s World Liberty Financial crypto company, as well as to maintain funding for the PCAOB and CFPB. None of the Democratic amendments were adopted; all were voted down along party lines. 

Speaking in favor of an amendment to maintain the PCAOB, Rep. Maxine Waters, D.-Calif., said the organization inspects auditing firms not only in the U.S. but in more than 50 countries abroad, including China. Dissolving the board and handing its duties to the SEC, she said, would cost taxpayers money and give China an opportunity to press its advantage. The PCAOB — which is a non-governmental standard-setting body — has an agreement with the Chinese government to inspect auditing firms, she said, but the SEC does not.

“Every Republican and Democratic member of this committee must understand that if we shut down the PCAOB and transfer its authority to the SEC, we’re shutting down our regulators’ access to China-based auditors,” said Waters, the committee’s ranking member. “If we disband the PCAOB today, the SEC cannot simply be a substitute.”

AI implementation at a CAS practice is hard enough, but it becomes even more so when people don’t fully understand what AI can and cannot do. 

Speaking during the Information Technology Alliance’s spring collaborative in Memphis, Tennessee, Jessica Barnas, the partner leading the finance and accounting solutions advisory group for top 25 firm Wipfli, lamented that public discourse around AI has given people the impression it’s some sort of magic wand that can fix anything, which then leads to unrealistic expectations around its capabilities. 

“I talked to a lot of clients, I think they think that AI is like an elf that jumps out of the box and does things magically. They just say, ‘Can’t AI do that?’ I even had one of our partners [tell me this recently], we’re working on a five year revenue prediction—he said, ‘Well, can’t you just upload that to Copilot and have it spin up the business plan and everything?’ and I’m like, ‘Do you have any idea how generative AI works? It doesn’t do that.’ But I think that there’s just this misconception [that], oh, technology it is just this magic wand that’s going to make all of my accounting problems disappear,” Barnas said. 

Chris Gallo, director of outsourced business accounting services with Kansas-based firm Creative Planning and another one of the panelists, made a similar point, saying that it’s important to be realistic about what technology can do. While it can do a lot, he echoed Barnas in saying that some people seem to think it is magic. 

“If we believed everything that everybody told us you would be flying around in flying cars right now. I think we need to kind of take it with a grain of salt at some point. Because why wouldn’t we just say ‘ChatGPT build me a flying car,’ and then the bot people that you know Tesla’s building will just go do that. Right? It becomes a little bit ridiculous at some point too… There’s a lot of expectation, or unaligned expectations,” said Gallo. 

Misconceptions about AI capabilities also serve to drive fear on the part of accountants. Barnas said that a big part of the change management process when it comes to implementing AI is allaying fears from staff that they’re not going to fire everyone and replace them with bots. While there have been major improvements in AI over the years, she does not believe it is in the position to wholesale replace human accountants just yet. Instead, it has become a great way to augment those humans and make them more competitive against the humans who are not using AI. 

“They think ‘AI will eliminate my job!’ So we talk about our philosophy. We’re looking to adopt these tools to help you get bigger and better and embrace the advisory role, but the only way AI will replace you is if a person using AI will replace you. You need to give that level of comfort to your teams so that everyone knows we’re just trying to get better, we’re just picking up new tools, this is not a replacement for you,” Barnas said. 

There is a similar fear when it comes to billable hours, also explored in another panel (see other story), of what happens when a process that normally takes 8 hours now only takes 1. Barnas first described the billable hour as “the enemy of all of us here in the room” but also conceded it is a real anxiety for practices that have built their foundation on it. She suggested, in response to this concern, to take a page from Google and encourage people to develop pet projects using AI and rewarding them if it turns into something useful for the entire team; and if it really does lead to a reduction in billable hours, don’t punish people with less money when they’ve done what you wanted them do in the first place. Overall, a firm’s business model should not be one that punishes efficiency: a practice should value results, not burning hours. She conceded that, for certain firms set in their ways, this might need retraining. 

“Okay, I took this process down from seven hours to half hour every week. Now what? Teach me how to do advisory. Because being a CFO, doing modeling and projections, it is not something [you learn] from reading a book or sitting in on one webinar. We would all be doing that if that were the case. So how can we train our teams on what to do next? All of that is involved in change management: being a guide and providing the safety for each step,” she said. 

Gregg Landers, the last panelist and managing director of client accounting and advisory services and internal control services with Top 10 firm CBIZ, talked about how a lot of the misunderstandings and misconceptions regarding AI can be allayed from people just experimenting with it themselves, which not only lets them get a better impression of its current capabilities but will train them in using those capabilities to their fullest potential. 

“I’ve been encouraging some of my teams to use their personal generative AI a little Black Mirror-like, [where you] keep talking to it, and it talks back. You get accustomed to how to give a context, how to get better answers. Sometimes, if you’re nice to it, [you get] a tighter answer than if you’re not. So experiment around with it. 

He gave an example from his own life, where he needed to learn more about digital services taxes. Through an extended conversation with an LLM  he was able to understand what the DST is and how it works and how accountants manage it. He was able to get good outputs from the model, though, because previous experience taught him that he needs to provide more context and information for a decent answer, because these models can get tripped up by ambiguities. He compared it to a fortune cookie that could be interrupted in many ways, people should be clear and concise when prompting AIs. 

“We’ve become a society of fortune cookies. I may ask ‘how is that project going’ and you tell me ‘it’s going good’ but what I mean is ‘is it on time?’ and what you might mean is ‘I had this hiccup that put me two weeks behind but now it is resolved so it is good.’ We can’t have fortune cookies when interacting with generative AI. You need clear, concise, contextual communication,” he said.