HB 242-EXAM FOR CPA'S CHAIR ANDERSON announced that the next order of business would be HOUSE BILL NO. 242, "An Act relating to licensing of certified public accountants." Number 1150 REPRESENTATIVE MIKE HAWKER, Alaska State Legislature, sponsor of HB 242, noted that he'd once been a certified public accountant (CPA). He explained that the bill was brought forward at the request of the Alaska Society of Certified Public Accountants (ASCPA) as well as the Division of Occupational Licensing. Relating to testing for CPAs, the bill is necessary because of changes made by the American Institute of Certified Public Accountants (AICPA), which has administered a nationwide standardized test for CPAs since the early 1960s. This uniform examination has been adopted by all jurisdictions in the U.S. The AICPA has changed the format, however, and now will administer the exam via computer using a keyboard; it will be given four times a year, whereas the old paper-and-pencil exams were given twice a year. In addition, there are some other changes that he characterized as "a technical issue." REPRESENTATIVE HAWKER told members that Alaska's statute was written in the early 1960s and says there shall be a written examination. Thus the Division of Occupational Licensing was concerned that it implied a paper-and-pencil examination and that a computerized examination wouldn't qualify. Therefore, on page 1, line 4, the bill deletes the requirement that the examination be written. Furthermore, on page 1, lines 7-11, the bill [specifies that the board shall use] "the Uniform Certified  Public Accountant Examination of the American Institute of  Certified Public Accountants" and "the institute's advisory grading service, if available." REPRESENTATIVE HAWKER explained that Alaska's statute also codifies the frequency of the exam, the reexamination procedures, and the standards for passing the examination; this is to mirror criteria established by the AICPA. The ASCPA and the Division of Occupational Licensing have requested that those criteria be put into regulation instead; furthermore, those are inconsistent with the new computerized system. Thus the bill deletes them from statute, with the proviso that the Division of Occupational Licensing work with the [Alaska State Board of Public Accountancy] to put those provisions into regulation. There also is a transitional period [in Section 4]; that was taken from language suggested by the AICPA to explain and provide for a transition from the current twice-a-year testing to the four-times-a-year testing, which has different requirements for passing the test. Number 1418 REPRESENTATIVE LYNN inquired about the standard for "good moral character" on page 2, line 16. REPRESENTATIVE HAWKER recalled that when he applied for a license in Alaska he had to sign an affidavit that allowed a background examination and had to complete "a one-inch-thick course and about a half-inch-thick examination in professional ethics." Number 1448 CHAIR ANDERSON suggested it is similar to the ethics examination required as of 1998 of a person who has completed law school, which must be passed in addition to the bar exam. REPRESENTATIVE LYNN said it is similar in real estate, but questioned whether ethics can be taught. "You either have it or you don't have it," he remarked. Number 1464 REPRESENTATIVE GUTTENBERG surmised that the AICPA has its own grading service available. He asked whether the language "if available" is necessary on page 1, line 11. REPRESENTATIVE HAWKER answered that the Uniform Certified Public Accountant Examination [specified in the bill] is a term that describes the examination given by the AICPA; it isn't a change [except that the words aren't capitalized in the statute]. He explained that the exams are taken and administered nationwide by the local accounting organizations, but grading is consistent and centralized in one location in the country. Indicating he'd discussed the wording "if available" with the Division of Occupational Licensing, he said: The sense was that we'd have a statute here that would ... give a priority to require that institute's examination. If something highly unusual happened and that institute ceased to function, we would still be in the position of being able to continue the licensing process for prospective accountants with whatever ... nationalized examination process may [become] available. Number 1546 REPRESENTATIVE GATTO, calling it a minor detail, said there is a difference, to him, between a passing score and a passing grade. For example, there can be grades of A, B, C, D, and F, with C as a passing grade; however, it can be more specific. He asked whether, the intention is to have a passing score rather than a passing grade. REPRESENTATIVE HAWKER answered that [the bill] uses the language and semantics that are "customary and normal in the certified public accounting world." Number 1583 STEVEN R. TAROLA, CPA, Chairman, Alaska State Board of Public Accountancy, testified on behalf of the board in full support of HB 242. He reported that the board's mission is to protect the public interest by ensuring that only qualified persons are licensed and that appropriate standards of competency and practice are established and enforced. Primary is administration of the uniform CPA exam, which a person must pass in order to obtain a license to practice as a CPA. There is only one exam available, which is the four-part exam prepared by the AICPA and used in all 50 states as well as the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands. MR. TAROLA agreed that the current paper-and-pencil exam is being discontinued and replaced by a computerized version, noting that the "roll-out date" is no later than May 2004. He also agreed that the bill's purpose is to amend Alaska's statutes to accommodate the computerized exam. He added that it provides transitioning to grandfather in candidates who have successfully passed a portion of the paper-and-pencil exam when HB 242 becomes law. He said the new computerized exam is available "numerous times a year" and agreed that without HB 242, the board would have no legal means to administer the new computerized version. He urged support of the bill. Number 1652 DAN F. KENNEDY, CPA, MBA, Member, Alaska State Board of Public Accountancy, thanked legislators - Representative Hawker, in particular - for supporting the CPA profession on this important change. He requested that the committee support the bill. CHAIR ANDERSON asked whether anyone else wished to testify. He then closed public testimony. Number 1706 REPRESENTATIVE ROKEBERG began discussion of Conceptual Amendment 1. He referred to the transitional provisions in Section 4, noting that on [page 2, lines 26-28] there is a formula, [the second part of which] relates to "the number of opportunities the applicant had remaining on the day before the effective date of this Act multiplied by six months". An additional provision on lines 30-31 talks about the effective date. He asked why there is no effective date for the bill. REPRESENTATIVE HAWKER answered that this needs to be in effect by the end of the first quarter of 2004. He offered his belief that the automatic passage of this bill into law would allow adequate time. REPRESENTATIVE ROKEBERG pointed out that the effective date would be uncertain because of the time it takes a bill to be engrossed, transmitted to the governor, and then taken up by the governor. It could be August 17 or August 28, for example, which would make the calculations for dates complicated. He noted that if there is no effective date, it becomes effective 90 days after signature [by the governor]. He suggested it would be preferable to have a date that begins on the first of some month. REPRESENTATIVE HAWKER indicated legislative drafters had informed him that it was unnecessary, but he said Representative Rokeberg had made a clear and convincing argument. Agreeing with amendment of the bill, he recommended January 1, 2004. Number 1809 REPRESENTATIVE ROKEBERG moved to adopt Conceptual Amendment 1, to add a new Section 5 such that this Act shall take effect on January 1, 2004. REPRESENTATIVE HAWKER asked whether that includes a corresponding title amendment. REPRESENTATIVE ROKEBERG agreed that is a good idea. CHAIR ANDERSON asked whether there was any objection to Conceptual Amendment 1, to adopt a new Section 5 that provides an effective date of January 1, 2004, with a corresponding title change. There being no objection, Conceptual Amendment 1 was adopted. Number 1856 REPRESENTATIVE DAHLSTROM moved to report HB 242, as amended, out of committee with individual recommendations and the accompanying zero fiscal note. There being no objection, CSHB 242(L&C) was reported from the House Labor and Commerce Standing Committee.