Legislature(2013 - 2014)HOUSE FINANCE 519

02/12/2013 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 22(L&C) Out of Committee
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 30(FIN) Out of Committee
HOUSE BILL NO. 26                                                                                                             
     "An Act extending the termination date of the Board of                                                                     
     Public Accountancy; and providing for an effective                                                                         
2:00:37 PM                                                                                                                    
REPRESENTATIVE  MIKE HAWKER,  SPONSOR,  relayed  that HB  26                                                                    
extended  the  termination  date  for the  Board  of  Public                                                                    
Accountancy  to  June  30,  2021.   He  explained  that  the                                                                    
legislature  routinely designated  sunset  dates for  boards                                                                    
and  commissions; prior  to  the sunset  date  the board  or                                                                    
commission was  reviewed through the legislative  budget and                                                                    
audit process  to ensure that  its services continued  to be                                                                    
needed.  The bill  was supported  by legislative  audit work                                                                    
conducted the prior summer; the  auditor had determined that                                                                    
the board's termination date should  be extended to June 30,                                                                    
2021; that  it was operating  in the public's  interest; and                                                                    
that it  had exercised  appropriate regulatory  oversight of                                                                    
public   accountants.  He   communicated   that  the   audit                                                                    
expressed one  concern related to the  overall operations of                                                                    
the case management system of  the Division of Corporations,                                                                    
Business,  and  Professional  Licensing (CBPL).  The  fiscal                                                                    
note would continue  to fund the board at  its current level                                                                    
with  receipt  supported  services. He  explained  that  the                                                                    
funds  were  taken  from the  regulated  community  for  the                                                                    
purpose of administrating its professional licensing board.                                                                     
2:03:18 PM                                                                                                                    
Co-Chair  Stoltze  asked  CBPL  to  provide  detail  on  the                                                                    
concerns from its perspective.                                                                                                  
DON HABEGAR,  DIRECTOR, DIVISION OF  CORPORATIONS, BUSINESS,                                                                    
AND   PROFESSIONAL   LICENSING,  DEPARTMENT   OF   COMMERCE,                                                                    
COMMUNITY AND  ECONOMIC DEVELOPMENT, addressed the  issue of                                                                    
concern  outlined in  the  audit. He  explained  that a  new                                                                    
database  had   been  installed  into   investigations;  the                                                                    
database had some issues in  the installation and conversion                                                                    
process that  had been caught  by a 2011 special  audit. The                                                                    
division had addressed the issue  by generating a task-force                                                                    
including  a  database  specialist and  the  division's  own                                                                    
investigators  and information  technology staff.  The task-                                                                    
force had come  out with a number of  recommendations to fix                                                                    
the  issues.   He  elaborated  that   CBPL  had   asked  the                                                                    
legislature for a special appropriation  to pay for incurred                                                                    
costs related to the task-force.  The division was currently                                                                    
implementing   the   fixes;   the   software   writing   was                                                                    
anticipated to be completed in  draft form by April 1, 2013.                                                                    
The division  would have 60-plus  days of testing  to ensure                                                                    
that the  system was working  correctly and the  final fixes                                                                    
were scheduled for completion by the end of June 2013.                                                                          
2:06:08 PM                                                                                                                    
Co-Chair  Stoltze  discussed  that most  boards  were  self-                                                                    
supporting,  self-assessed,  and that  legislative  affirmed                                                                    
board members set policies. He  referred to discussions that                                                                    
the  professional wishes  had been  side tracked  related to                                                                    
the use of funds. He asked for clarification on the issue.                                                                      
Mr. Habegar had  heard from the boards that  they wanted the                                                                    
increased  ability to  travel to  out-of-state meetings.  He                                                                    
shared   that  AS   Title   8   included  approximately   40                                                                    
professional  licensing programs;  20  of  the programs  had                                                                    
boards  and   20  had   department  oversight.   The  boards                                                                    
generally  belonged  to national  professional  associations                                                                    
that helped to  steer the profession in  various states. The                                                                    
Alaska boards  liked to  be part  of the  discussions, given                                                                    
that national  associations set  policies that  had national                                                                    
and state  impacts. The division had  approximately $400,000                                                                    
in travel authority in FY  13 (the governor's proposed FY 13                                                                    
request had  been $550,000).  He had  devised a  system that                                                                    
included  travel  to  all   in-state  meetings,  which  were                                                                    
statutorily required.  He had  carved out  a portion  of the                                                                    
funds  for  administrative  purposes  (e.g.  his  travel  to                                                                    
Anchorage to  "steer" staff).  He communicated  that out-of-                                                                    
state travel was parceled out of remaining funds.                                                                               
2:08:34 PM                                                                                                                    
Representative Costello  asked whether the  division planned                                                                    
to provide  licensees with online  visibility in  regards to                                                                    
how their fees were spent. She supported the idea.                                                                              
Mr. Habegar answered  that the division had  been working on                                                                    
bringing its accounts up to speed; it had conducted a 10-                                                                       
year review of  all the boards' revenue  and expense reports                                                                    
and  had  reconciled the  reports  to  the state  accounting                                                                    
system. He furthered that  quarterly reports were reconciled                                                                    
to  the state  accounting system  and were  provided to  the                                                                    
boards. He  believed putting the  reports online was  a good                                                                    
suggestion   and   the   division   would   take   it   into                                                                    
REPRESENTATIVE   STEVE  THOMPSON,   SPONSOR  pointed   to  a                                                                    
reconciliation showing  excess funds carried forward  by the                                                                    
Board of  Accountancy, which showed $147,000  accumulated in                                                                    
its account.  He observed that  the board's request  to send                                                                    
two CPAs to the national  conference had been denied because                                                                    
it had  not fit in  the budget; however, there  was $147,000                                                                    
in  the board's  account. He  asked if  there should  be two                                                                    
line items in the budget for department travel and for pre-                                                                     
paid professional  board travel. He thought  the distinction                                                                    
may prevent the misconception  that general funds were being                                                                    
saved  when the  travel budget  was cut.  He discussed  that                                                                    
other  boards  had  used state  travel  funds  for  national                                                                    
conferences;  subsequently, the  funds were  reimbursed, but                                                                    
instead of going  back into the board's  travel account, the                                                                    
funds were deposited  into the state's general  fund. He was                                                                    
concerned  that  the  issue   was  creating  a  problem  and                                                                    
wondered about a solution.                                                                                                      
2:11:41 PM                                                                                                                    
Mr. Habegar  replied that he  had spoken with all  20 boards                                                                    
about the  issue at  some point  in time.  He felt  that the                                                                    
$400,000 provided by the legislature  could not be overspent                                                                    
even if  the division  collected other revenue  sources. For                                                                    
example,  professionals paid  licensing fees  on a  biennial                                                                    
basis;  two  years of  revenue  was  typically collected  in                                                                    
advance  of  two years  of  expenses;  therefore, a  program                                                                    
could  have a  surplus at  any one  time. He  expounded that                                                                    
programs may  have a carryover  if expenses came in  as less                                                                    
than revenue; after analysis by  the division, the carryover                                                                    
may  be  used  to  reduce  fees or  to  pay  for  additional                                                                    
anticipated expenses (i.e. for a court case or other).                                                                          
Mr.  Habegar addressed  the  second  part of  Representative                                                                    
Thompson's  question  related to  third-party  reimbursement                                                                    
for  travel.  He  relayed that  state  policy  required  the                                                                    
division to  show the costs  on revenue expense  reports. He                                                                    
agreed that the incurred  expenses records should be public;                                                                    
therefore  the division  paid for  the travel  up front.  He                                                                    
confirmed   that    when   third-parties    (e.g.   national                                                                    
organizations) reimbursed for travel  expenses the money was                                                                    
deposited into the general fund.                                                                                                
2:14:36 PM                                                                                                                    
Representative Thompson found it  hard to believe that board                                                                    
members  paying into  a travel  account were  denied out-of-                                                                    
state  travel  and  that instead  the  division  recommended                                                                    
reducing  fees when  excess revenue  accrued from  licensing                                                                    
fees. He  saw confusion  arising because licensees  were not                                                                    
able to  use the  money designated  for travel.  He asserted                                                                    
that pre-paid  professional travel fees should  be separated                                                                    
from the department's general fund expenditures.                                                                                
Representative   Hawker  had   met  with   members  of   the                                                                    
Corporations Board  who claimed  that they had  been granted                                                                    
insufficient  spending authority  for the  receipt supported                                                                    
services (RSS) funds  collected in aggregate for  all of the                                                                    
state's boards  and commissions.  The issue resulted  in the                                                                    
agency's need  to ration the  amount of RSS funds  that were                                                                    
collected from  each of the boards.  Additionally, boards or                                                                    
commissions  (paying   their  own  way  through   RSS)  were                                                                    
prevented from accessing all of  the money that was assessed                                                                    
and taken  by the state.  He asserted that the  practice was                                                                    
"confiscation  and  impoundment"  of  money  paid  by  self-                                                                    
supporting  organizations  into   the  state's  custody  who                                                                    
expected  it to  be  available for  the  operation of  their                                                                    
boards  and commissions.  He agreed  that  the practice  was                                                                    
tantamount to theft if the  agency did not have authority to                                                                    
spend its  money. He noted  that the issue was  scheduled to                                                                    
be discussed  in subcommittee. He emphasized  that the funds                                                                    
came from RSS and not the general fund.                                                                                         
Representative  Hawker  recommended  that  in  the  case  of                                                                    
third-party reimbursement  for travel, the  operating budget                                                                    
language section  should specify  that an  appropriation for                                                                    
RSS   includes   the    monetary   appropriation   and   any                                                                    
reimbursement  of  funds  from  national  organizations.  He                                                                    
stressed that  the solution  was very  simple. He  asked the                                                                    
committee   to  consider   ensuring  that   the  legislature                                                                    
authorized  the spending  of all  money taken  from Alaska's                                                                    
citizens and  that the state  was not stealing  travel money                                                                    
from the organizations.                                                                                                         
2:19:18 PM                                                                                                                    
Co-Chair   Stoltze  believed   the   discussion  point   was                                                                    
Representative Hawker noted  that the conversation pertained                                                                    
to  an operation  of the  board of  corporations and  public                                                                    
licensing;  it  had  nothing  to  do  with  HB  26  and  the                                                                    
reauthorization of the Board of Accountancy.                                                                                    
Representative Gara  asked for  verification that  the Board                                                                    
of  Accountancy's operations  were  paid  for by  membership                                                                    
fees and not with general  fund dollars. Mr. Habegar replied                                                                    
in the affirmative.                                                                                                             
Representative  Gara asked  if  travel money  had been  held                                                                    
back  due to  a dispute  (within the  profession) that  more                                                                    
money should be  spent on investigation and  less on travel.                                                                    
Mr.  Habegar answered  in the  negative.  He furthered  that                                                                    
investigations   were  fully   funded  with   fee  supported                                                                    
services. The issue pertained to travel authorization.                                                                          
Representative Gara  asked how  long the  proposed extension                                                                    
Co-Chair  Stoltze responded  that  the audit  recommendation                                                                    
was for an eight-year extension.                                                                                                
Representative  Gara read  the last  sentence of  a one-page                                                                    
Division of Legislative Audit document  (copy on file): "The                                                                    
noted deficiencies hamper the  division's ability to provide                                                                    
adequate investigative  support to  the board."  He believed                                                                    
the  statement   warranted  concern.  He  wondered   if  the                                                                    
deficiency should be fixed prior to granting the extension.                                                                     
2:22:03 PM                                                                                                                    
Representative  Hawker  argued  that waiting  to  grant  the                                                                    
extension would  be "punishing the innocent  and letting the                                                                    
guilty go free." He stated  that AS 08.03.020(c) allowed the                                                                    
legislature to  extend the board's  termination date  for up                                                                    
to eight  years. He  accentuated that  the problem  noted in                                                                    
the Division  of Legislative Audit  document had  nothing to                                                                    
do with  the operation of  the Board of  Public Accountancy;                                                                    
it had to do with a  larger unsolved problem within CBPL. He                                                                    
relayed  that  the  time  and   work  put  into  the  sunset                                                                    
authorizations by  the legislative auditor  was significant;                                                                    
the authorizations additionally  were expensive and required                                                                    
substantial "man  power" that took away  from the division's                                                                    
ability  to  pursue  other  requests  (particularly  special                                                                    
audits requested  by legislators). He believed  the Board of                                                                    
Public  Accountancy had  sufficiently  demonstrated that  it                                                                    
merited  the 8-year  extension. He  stated that  the problem                                                                    
identified lay  with CBPL;  a special  audit related  to the                                                                    
problems  had been  released by  the Legislative  Budget and                                                                    
Audit Committee on June 29,  2011. He acknowledged that CBPL                                                                    
had  been  working  diligently to  resolve  the  issues.  He                                                                    
believed  the  division  needed   to  be  working  with  the                                                                    
legislature  to resolve  the budget  issues and  to continue                                                                    
work  with  legislative  oversight to  remedy  its  internal                                                                    
operation problems.                                                                                                             
2:25:15 PM                                                                                                                    
Co-Chair  Stoltze remarked  that the  Professional Licensing                                                                    
Board had done a good  job making improvements over the past                                                                    
several  years. He  added that  in the  past there  had been                                                                    
some "wild audit reports" that had been highly frustrating.                                                                     
Vice-Chair Neuman  asked whether  there were  any repetitive                                                                    
issues brought  to the  Board of  Public Accountancy  by its                                                                    
members.  Mr. Habegar  replied that  there were  issues, but                                                                    
they  were part  of  the  normal course  of  business for  a                                                                    
professional  board  (e.g.  granting  licenses,  determining                                                                    
whether  licensing violations  had  occurred, regulation  of                                                                    
the profession, and other); the  board handled the issues on                                                                    
a  quarterly basis.  He furthered  that the  board was  busy                                                                    
with routine business.  He did not see  any anomalies before                                                                    
the board.                                                                                                                      
Co-Chair Stoltze OPENED public testimony.                                                                                       
JEFF JOHNSON,  CERTIFIED PUBLIC ACCOUNTANT and  CHAIR, STATE                                                                    
BOARD  of   ACCOUNTANCY,  FAIRBANKS   (via  teleconference),                                                                    
appreciated the  discussion. He  had been  on the  board for                                                                    
several years  and had learned  from other members  that the                                                                    
investigative process had been  greatly improved in the past                                                                    
couple of  years. He  believed the board  was headed  in the                                                                    
right direction and mentioned  the improved reporting system                                                                    
that should be operational in  the spring of 2013. He stated                                                                    
that  in  the  past  there  had  been  a  problem  with  the                                                                    
timeliness of investigations and  protection of the public's                                                                    
interest. He  reiterated that the  board felt it  was headed                                                                    
in the right direction.                                                                                                         
2:28:40 PM                                                                                                                    
Co-Chair  Stoltze   asked  if  Mr.  Johnson   supported  the                                                                    
legislation. Mr. Johnson replied in the affirmative.                                                                            
Co-Chair Stoltze CLOSED public testimony.                                                                                       
Representative Costello  discussed the fiscal note  from the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
for receipt  services in the  annual amount of  $161,700 for                                                                    
FY 14 through FY 19 and one full-time position.                                                                                 
Vice-Chair Neuman  MOVED to  REPORT HB  26 out  of committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
Representative  Gara  OBJECTED  for discussion.  He  made  a                                                                    
remark about an "attorney barb" and WITHDREW his OBJECTION.                                                                     
Representative Hawker  commented that  he would  come before                                                                    
the committee during session with  an Alaska Bar Association                                                                    
reauthorization bill.                                                                                                           
There being NO further OBJECTION,  HB 26 was REPORTED out of                                                                    
committee  with  a "do  pass"  recommendation  and with  one                                                                    
previously published zero fiscal note: FN1 (CED).                                                                               
2:31:11 PM                                                                                                                    
AT EASE                                                                                                                         
2:33:11 PM                                                                                                                    

Document Name Date/Time Subjects
HB22 Supporting Documents-Audit Summary.pdf HFIN 2/12/2013 1:30:00 PM
HB 22
HB22 Supporting Documents-Audit 08-20076-13.pdf HFIN 2/12/2013 1:30:00 PM
HB 22
HB 22 Sponsor Statement.pdf HFIN 2/12/2013 1:30:00 PM
HB 22
HB 26 Sponsor Statement.pdf HFIN 2/12/2013 1:30:00 PM
HB 26
HB26 Audit Report Digest.pdf HFIN 2/12/2013 1:30:00 PM
HB 26
HB22 Supporting Documents.pdf HFIN 2/12/2013 1:30:00 PM
HB 22
HB26 Audit Public Accountantcy.pdf HFIN 2/12/2013 1:30:00 PM
HB 26
HB 30FN.3-Leg Audit-2-11-13.pdf HFIN 2/12/2013 1:30:00 PM
HB 30
CSHB 30 Gara-1- Amendment.pdf HFIN 2/12/2013 1:30:00 PM
HB 30