CSSB 75(STA) - REGULATION OF ACCOUNTANTS Number 044 CHAIRMAN ROKEBERG announced the committee would hear CSSB 75(STA), "An Act relating to the regulation of accountants; and providing for an effective date." Number 067 TIM BENINTENDI, Legislative Assistant to Senator Tim Kelly, Alaska State Legislature, came before the committee to present the sponsor statement which follows: "Senate Bill 75 would strengthen the application criteria for taking the Alaska CPA (certified public accountant) examination, which is given each May and November. It would not change the test nor the licensing requirements. It is needed because of the dramatic increase of foreign nonresident applicants who come to take the test, but do not intend to live or practice in our state. Many have no background in accounting. Concerns for the integrity of our exam process and for the security of the exam itself necessitates changes in our application criteria, currently the lowest in the nation. Recently the state of Montana changed its minimal requirements to eliminate the same problem." MR. BENINTENDI explained that in the committee file is a summary sheet showing the numbers of applicants, for the past two years, who have taken the May and November tests. He noted there is an unusual increase in applicants for the November, 1996, test. Where usually there might be a few dozen who might take the test, it increased to 506 for November of last year. He pointed out that the state doesn't make money on the exams, but tries to break even, so there is no real incentive for Alaska to be the testing center of the world. MR. BENINTENDI said the bill would add to the current requirement of merely having a baccalaureate degree in any subject in order to take our CPA exam, by adding a minimum of academic course work in college level accounting or one year of public accounting experience under the direct supervision of a CPA, or the near completion of a degree program if the applicant is majoring in accounting. All this is found in Section 1 of the bill. He said they had originally hoped to address this problem in order to head off the anticipated large number of applicants for the May, 1997 exam; however, in discussions with the Division of Occupational Licensing and the Senate Labor and Commerce Committee, they concluded it would be more prudent to address the problem in time for November, 1997. Therefore, the Senate Labor and Commerce Committee substitute shows the effective date changed to June 1, from an immediate effective date. He noted that is located in Section 5. Number 280 MR. BENINTENDI explained in the Senate State Affairs CS, they simply provided for those who have already passed at least two components of the test to go ahead and finish their remaining parts under the old criteria. That basically applies to instate residents. Those provisions are found in Section 3 and Section 4. MR. BENINTENDI said another provision of SB 75, unrelated to the testing issue, is to allow the professional use of the designation "E A" by enrolled agents. They are unlicensed accountants or tax practitioners who are enrolled by the Internal Revenue Service (IRS) to engage in tax related business. He noted that is in Section 2. MR. BENINTENDI stated the bill is supported by the State Board of Accountancy, the State Society of CPAs and the Alaska Society of Independent Accountants. He said it was his understanding that Chuck Griffin, Chairman, State Board of Accountancy, is on-line and also, Bradley Shaffer who is a member of the board. Number 369 CHAIRMAN ROKEBERG referred to information in his file and said, "I looked at the November, 1996, examinations where it had 392 foreigners and then 21 out of state. Many times in statute a foreigner can mean, particularly in insurance law for example, mean somebody just out of state, for example. Is that actually off- shore aliens?" MR. BENINTENDI said it is nonresidents. He noted the Division of Occupational Licensing anticipates as many as 800 or more applicants this May. Number 493 CHARLES GRIFFIN, Chairman, Alaska State Board of Accountancy, Certified Public Accountant, testified via teleconference. He said the bill is needed to do an end-run around any residency requirements which we cannot impose. We cannot require people to live, work or attend school in Alaska, so they have increased the qualification requirements thus most of the foreign applicants won't qualify. He noted the requirements aren't so high that they would disqualify our Alaskan candidates. He said there isn't a fiscal note for the exam as it is self supporting and is paid for by costs of application and examination fees. The board supports the bill as does the License Accounting (indisc.), the State Society of CPAs, as well as the unlicensed accountants. Mr. Griffin urged the committee to pass the legislation. Number 607 CHAIRMAN ROKEBERG said he had indicated that the increased requirements wouldn't be a burden to state residents. MR. GRIFFIN said that is correct. He explained both at the University of Alaska, Anchorage and University of Alaska, Fairbanks most of the professional candidates are accounting majors have a minimum of 24 hours, and in most cases closer to 36 hours, in accounting. This bill would establish a minimum of 15 semester hours. He noted most of the foreign candidates aren't even business or accounting majors. Someone at University of Alaska in the general business program will still have that accounting and business course curriculum to meet the requirement. Number 666 REPRESENTATIVE JOHN COWDERY asked what the difference is in the requirements of a CPA and regular public accountant. MR. GRIFFIN pointed out there currently is no provision in statute for a public accountant. There have been provisions for CPAs since about 1960. The "E A" class of accountants is a grandfathered group which will some day be extinct. There are unlicensed accountants and they are people that provide bookkeeping and income tax services. Number 752 REPRESENTATIVE COWDERY asked if someone becomes a CPA is he/she always a CPA. MR. GRIFFIN explained there is required continued education. He said he believes it 60 hours every two years. Beginning in January, 1998, it will increase to 80 hours every two years. Number 789 CHAIRMAN ROKEBERG asked if the influx in applicants for license exams has been a burden to the board. He also asked if the fee schedule has been adjusted so they can at least make sure the costs have been covered. MR. GRIFFIN explained the impact hasn't been so much financial because they charge each person an application and examination fee. So if they don't show, they make a little more on somebody who doesn't show up and it offsets the costs of greater facilities. Mr. Griffin informed the committee that he thinks the biggest burden that is placed on the board is they have a single licensing examiner in the division. He devotes about two-thirds of his time to the Board of Accountancy and, unfortunately, he has been busy with 500 to 600 foreign applications every six months. Number 886 REPRESENTATIVE BILL HUDSON asked if it is required to have a baccalaureate degree in order to be a CPA in Alaska. MR. GRIFFIN indicated it is required and currently, that is their only requirement. It can be a baccalaureate degree in any subject. REPRESENTATIVE HUDSON indicated he has a friend who is a CPA and he also has a son who has been working for him for a number of years without a degree. He asked if he will have to go back to college to meet that requirement. MR. GRIFFIN said that is correct. He noted that is the situation as it exists today. Since 1991, there has been that requirement. Number 1016 BRADLEY SHAFFER, Member, Alaska State Board of Accountancy, testified via teleconference from Sitka. He noted he has been on the board since approximately 1990. Mr. Shaffer said he had the opportunity to (indisc.) the uniform exam last November in Juneau. He said there were three instances where the American Institute of CPAs felt there were indications of cheating. One circumstance was in a group of 30 people. He said when there is such a volume of people, you can lose control. Mr. Shaffer said Alaska, as a state, could possibly lose the confidence of the American Institute of CPAs and lose the opportunity to administer the test by the state. Mr. Shaffer said what is being asked for is not unique when it is compared with the other jurisdictions in the United States. It is part of a national process of all jurisdictions hoping to have similar requirements. CHAIRMAN ROKEBERG said Mr. Shaffer indicated that we could possibly lose the confidence of the American Institute of CPAs and lose the opportunity to administer the test by state. He asked him to clarify that. Number 1241 MR. SHAFFER said Alaska, as a state, has to provide assurance that we're administering the examination to the standards that are required by the American Institute of CPAs. If we don't meet those requirements, their action would be to say, "You're no longer eligible to administer it." Mr. Shaffer said they do not want jurisdiction to look at the CPA exam as an enterprise fund where they are making money for the department. Number 1148 CHAIRMAN ROKEBERG indicated there were no further witnesses to testify and closed the public hearing. Number 1248 REPRESENTATIVE COWDERY made a motion to move CSSB 75(STA) out of committee with the attached zero fiscal note. CHAIRMAN ROKEBERG asked if there was an objection. Hearing none, CSSB 75(STA) was moved out of the House Labor and Commerce Committee.