02/13/2018 01:30 PM House FINANCE

HOUSE BILL NO. 278                                                                                                            
                                                                                                                                
     "An Act extending the termination date of the Board of                                                                     
     Certified Real Estate Appraisers; and providing for an                                                                     
     effective date."                                                                                                           
                                                                                                                                
1:58:47 PM                                                                                                                    
                                                                                                                                
MEGAN   HOLLAND,  STAFF,   REPRESENTATIVE  ANDY   JOSEPHSON,                                                                    
indicated that HB 278 extended  the termination date for the                                                                    
Board of  Certified Real Estate Appraisers  until June 30th,                                                                    
2026. She shared  that the board had received  a full 8-year                                                                    
extension from the Legislative  Audit Division. In addition,                                                                    
in 2005 and  2007 the board received  favorable reviews from                                                                    
federal audits.                                                                                                                 
                                                                                                                                
2:00:12 PM                                                                                                                    
                                                                                                                                
KRIS  CURTIS,   LEGISLATIVE  AUDITOR,  ALASKA   DIVISION  OF                                                                    
LEGISLATIVE  AUDIT, relayed  that the  audit was  dated June                                                                    
13, 2017.  She cited page 3  of the audit and  detailed that                                                                    
the background information  section described the regulatory                                                                    
oversight  structure of  the appraisal  industry established                                                                    
by  the   federal  government.   She  summarized   that  the                                                                    
structure  included  private  entities  that  set  appraisal                                                                    
standards  and certification  licensing requirements,  state                                                                    
licensing  boards that  certified  and licensed  appraisers,                                                                    
and  federal  entities  that  regulated  and  monitored  the                                                                    
industry.  She   elaborated  that  a   federal  subcommittee                                                                    
monitored  state  licensing  boards  that  included  on-site                                                                    
reviews  of  the board  and  the  Division of  Corporations,                                                                    
Business and  Professional Licensing (CBPL).  She emphasized                                                                    
that the board was subject  to external oversight outside of                                                                    
the  sunset  review  process,  which  did  factor  into  the                                                                    
audit's recommended  term of extension. She  highlighted the                                                                    
audits conclusions on page 7 and read the following:                                                                            
                                                                                                                                
     Overall, the  audit concludes the board  is serving the                                                                    
     public's  interest  by  certifying and  licensing  real                                                                    
     estate  appraisers.  The  board  monitored  certificate                                                                    
     holders  and  licensees  and   worked  to  ensure  only                                                                    
     qualified  individuals  were  issued  certificates  and                                                                    
     licenses  in Alaska.  Furthermore, the  board developed                                                                    
     and   adopted  regulations   to  comply   with  federal                                                                    
     requirements,   improve  the   real  estate   appraisal                                                                    
     industry, and better protect the public.                                                                                   
                                                                                                                                
Ms.   Curtis   noted   that    the   audit   contained   two                                                                    
recommendations that  began on  page 16  of the  report. She                                                                    
read recommendation 1:                                                                                                          
                                                                                                                                
     DCBPL's   director    should   continue    to   improve                                                                    
     administrative support to the board.                                                                                       
                                                                                                                                
Ms. Curtis  reported that improvements  were necessary  in 3                                                                    
areas:                                                                                                                          
                                                                                                                                
        1. Due to general oversight, three certificate                                                                        
          holders   were   incorrectly   reported   in   the                                                                    
          Appraisal  Subcommittee  (ASC) national  registry,                                                                    
          which is required by federal  and state laws. Upon                                                                    
          identification  by   auditors,  the   errors  were                                                                    
          promptly corrected by DCBPL staff.                                                                                    
                                                                                                                                
        2. Auditors reviewed five investigative cases over                                                                    
          180 days old and identified three cases with                                                                          
          periods of inactivity without justification                                                                           
          ranging from 130 to 203 days.                                                                                         
                                                                                                                                
        3. Due to staff turnover, DCBPL management could not                                                                  
          provide evidence that three of 11 board meetings                                                                      
          held between July 1, 2014, and March 31, 2017,                                                                        
          were public noticed.                                                                                                  
Ms.  Curtis offered  that individually  the issues  were not                                                                    
significant but  indicated that improvements  were necessary                                                                    
when considered together. She turned to  Recommendation 2:                                                                      
                                                                                                                                
     DCBPL's director, in consultation with the board,                                                                          
     should reduce fees to address the surplus.                                                                                 
                                                                                                                                
She relayed the following:                                                                                                      
                                                                                                                                
     DCBPL management  did not conduct a  fee analysis after                                                                    
     four  requests  by  board  members.  The  board  had  a                                                                    
     surplus of $165,609 at the  end of March 2017, which is                                                                    
     expected  to  be higher  after  the  June 2017  renewal                                                                    
     period.   DCBPL  management   reported  that   the  fee                                                                    
    analysis was not completed due to other priorities.                                                                         
                                                                                                                                
Ms.  Curtis related  that the  licensees were  paying higher                                                                    
than justified fees as a result.                                                                                                
                                                                                                                                
2:03:28 PM                                                                                                                    
                                                                                                                                
Ms. Curtis provided  further detail. She pointed  to page 11                                                                    
of  the  audit that  included  the  table titled  "Board  of                                                                    
Certified  Real  Estate  Appraisers Licensing  and  Certifi-                                                                    
cation Activity FY 14 through  March 31, 2017" as Exhibit 2.                                                                    
She  noted that  261 licenses  were active  as of  March 31,                                                                    
2017.  The schedule  of revenues  and  expenditures were  on                                                                    
page 12  and the  Summary of  License and  Registration Fees                                                                    
were  included  on  page  13. She  related  that  the  board                                                                    
planned   to   move   forward  with   regulating   appraisal                                                                    
management  companies, which  extended  the board's  duties.                                                                    
Despite  the  increased  duties, the  audit  recommended  an                                                                    
eight-year extension  due to the on-site  external oversight                                                                    
the  board  received  every  other  year.  The  department's                                                                    
response to  the audit was  on page  27. She noted  that the                                                                    
department concurred with  the findings and recommendations.                                                                    
She pointed  out that  the board's response  was on  page 29                                                                    
who also  concurred with  the findings  and recommendations.                                                                    
The  board received  an attorney  general's  opinion that  a                                                                    
statute  was  necessary  to  regulate  appraisal  management                                                                    
companies. However,  the Division  of Legislative  Audit did                                                                    
not  agree with  the  interpretation. The  audit included  a                                                                    
letter on  page 33 stating  they believed the  authority was                                                                    
already in  federal and state  law and detailed  the reasons                                                                    
why.                                                                                                                            
                                                                                                                                
Representative Wilson  pointed to page  15 of the  audit and                                                                    
pointed  out  that the  prior  2013  sunset audit  made  two                                                                    
recommendations that had been  only partially addressed. She                                                                    
asked  what   assurance  Ms.  Curtis  had   that  the  prior                                                                    
recommendations  would be  fully  addressed  by the  current                                                                    
sunset date. Ms. Curtis answered  that every audit addressed                                                                    
the prior  audit report. The  prior audit  recommendation to                                                                    
improve  administrative  support  to   the  board  had  been                                                                    
partially   addressed  but   additional  improvements   were                                                                    
necessary  and   were  addressed   in  the   current  audits                                                                    
Recommendation    1.   The    management   system's    prior                                                                    
recommendation  was  also  partially  addressed,  DCBPL  was                                                                    
aware of the risk, and  understood the cost and believed the                                                                    
risk  was  justified.  Representative Wilson  asked  if  the                                                                    
recommendations were current.  Representative Wilson did not                                                                    
understand  who   was  taking   the  risk.  She   asked  for                                                                    
clarification. Ms. Curtis answered  that the division had an                                                                    
investigative  case  management  system  that  the  auditors                                                                    
evaluated.  She   elaborated  that   the  issues   had  been                                                                    
partially addressed  in the past however,  all investigators                                                                    
continue to  have the  ability to view  and update  all case                                                                    
information besides their own  regardless of the need. There                                                                    
were  no  controls  for limited  reviews.  A  business  need                                                                    
should  drive someone's  ability to  access the  system. She                                                                    
indicated  that  "risk"  was an  audit  term.  The  division                                                                    
informed the legislature of the  issue, but the auditors did                                                                    
not  feel it  was  significant enough  to  reiterate in  the                                                                    
current audit.                                                                                                                  
                                                                                                                                
2:08:02 PM                                                                                                                    
                                                                                                                                
Representative Guttenberg  appreciated the audit  report. He                                                                    
mentioned the board's federal oversight.  He asked about the                                                                    
overlap  between  the  federal  oversight  and  the  state's                                                                    
audit.  He wondered  whether the  auditors read  the federal                                                                    
report and  if the  federal government considered  the state                                                                    
audits. Ms.  Curtis answered  that the  legislative auditors                                                                    
looked at the federal report,  but she found it unlikely the                                                                    
federal  government  would look  at  the  state report.  The                                                                    
federal  government   was  ensuring   that  the   board  was                                                                    
complying with  federal law.  She relayed  that historically                                                                    
the  division was  under federal  review  each year  because                                                                    
improvements   were   necessary.  Recently,   the   division                                                                    
implemented regulations to  address the federal requirements                                                                    
and  were now  being reviewed  every other  year. The  state                                                                    
auditors  examined   the  federal  reviews  to   ensure  the                                                                    
division  was meeting  federal requirements.  Representative                                                                    
Guttenberg  asked if  there was  any redundancy  between the                                                                    
two reviews.                                                                                                                    
                                                                                                                                
2:10:06 PM                                                                                                                    
                                                                                                                                
Ms.  Curtis  answered  that  both  audit  functions  used  a                                                                    
similar process but with different criteria.                                                                                    
                                                                                                                                
SARA  CHAMBERS, DEPUTY  DIRECTOR, DIVISION  OF CORPORATIONS,                                                                    
BUSINESS   AND   PROFESSIONAL   LICENSING,   DEPARTMENT   OF                                                                    
COMMERCE, COMMUNITY  AND ECONOMIC DEVELOPMENT, spoke  to the                                                                    
agency's  fiscal  note FN1  (CED).  She  explained that  the                                                                    
fiscal note  reflected the finite  costs of operating  the 5                                                                    
member board. The  fiscal note totaled $21.  4 thousand that                                                                    
covered  travel  for  board members  to  attend  four  board                                                                    
meetings  per   year,  public  notice  of   board  meetings,                                                                    
training and conference fees, and per diem.                                                                                     
                                                                                                                                
2:11:25 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster OPENED public testimony.                                                                                        
                                                                                                                                
DAVID  DERRY,   CHAIR,  BOARD   OF  CERTIFIED   REAL  ESTATE                                                                    
APPRAISERES,  KENAI (via  teleconference), favored  the bill                                                                    
and asked for support to extend the board until 2026.                                                                           
                                                                                                                                
2:12:06 PM                                                                                                                    
                                                                                                                                
Co-Chair Foster CLOSED public testimony.                                                                                        
                                                                                                                                
2:12:53 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:13:02 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  Seaton MOVED  to REPORT  HB 278  out of  committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
note.                                                                                                                           
HB  278 was  REPORTED  out  of committee  with  a "do  pass"                                                                    
recommendation  and  with  one previously  published  fiscal                                                                    
impact note: FN1 (CED).                                                                                                         
                                                                                                                                
2:13:37 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:13:58 PM                                                                                                                    
RECONVENED