HOUSE BILL NO. 26 "An Act extending the termination date of the Board of Public Accountancy; and providing for an effective date." 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 consideration. 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 appropriate. 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 was. 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 note. 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 RECONVENED