HB 126-EXTEND BOARD OF PUBLIC ACCOUNTANCY 3:18:15 PM CO-CHAIR FIELDS announced that the first order of business would be HOUSE BILL NO. 126, "An Act extending the termination date of the Board of Public Accountancy; and providing for an effective date." 3:18:30 PM REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature, introduced HB 126 as prime sponsor, explaining that it would extend the termination date for the Board of Public Accountancy for eight years until June 30, 2029, as recommended by a legislative audit. He read excerpts from the sponsor statement, which read as follows [original punctuation provided]: Legislative Audit conducted their review of this board and concluded that "?the board served the public's interest by conducting meetings in accordance with state laws, amending certain regulations to improve the public accountancy occupation, and effectively licensing and regulating certified public accountants and partnerships/corporations engaged in the practice of public accountancy." Extending the Board of Public Accountancy is critical in protecting the public interest by ensuring that only qualified persons are licensed, and that appropriate standards of competency and practice are established and enforced. 3:20:26 PM KRIS CURTIS, Legislative Auditor, Division of Legislative Audit, explained that the purpose of the audit is to determine whether a board or commission is serving the public's interest and whether its termination date should be extended. She stated that the audit concluded that the board served the public's interest by conducting meetings in accordance with state laws, amending certain regulations to improve the public accountancy occupation, and effectively licensing and regulating certified public accountants (CPAs) and partnerships or corporations engaged in public accountancy. She said that the recommended extension is eight years. MS. CURTIS directed attention to page 5 of the audit report [included in the committee packet], showing licensing statistics for the board. As of January 31, 2020, there were 1,328 active licenses and permits, a 10 percent increase when compared to the prior sunset audit in 2012. She noted that Alaska is one of the few states that doesn't require a social security number for licensure; consequently, the board receives many international applicants, which accounts for the increase. She then directed attention to page 7, showing a schedule of revenues and expenditures, and noted that the board had a surplus at the end of fiscal year 2019 (FY 19) of just over $84,000. She directed attention to page 11 and noted that there is one recommendation for improvement, which read as follows [original punctuation provided]: Recommendation No. 1: DCBPL's chief investigator  should ensure investigations are completed timely.  Forty of the 101 cases open or opened from July 1, 2016, through January 31, 2020, were open over 180 days. Five of the 40 were evaluated by auditors. Two of five investigative cases selected for review had unjustified periods of inactivity ranging from 64 to 219 days. According to DCBPL staff, the inactivity was the result of turnover and competing priorities. Auditors also noted that supervisory review of outstanding investigations was not documented in the case files as required by DCBPL procedure, indicating that the reviews did not occur or did occur but were not documented. MS. CURTIS said that response from the Department of Commerce, Community, and Economic Development (DCCED) begins on page 21. She stated that the DCCED commissioner agrees with the report conclusions, except for the finding that 40 percent of investigations took over six months to complete. The response stated that the Division of Corporations, Business, and Professional Licensing (DCBPL) has no control over how an investigation will unfold or how long it will take and has no policy stating a specific timeframe of completion. The commissioner did agree, however, to authorize an additional supervisor to help reduce caseloads. Ms. Curtis also noted that the commissioner didn't agree with the audit's conclusion that the use of technology impacted board operations, saying that technology tools have been successful for all of the boards. The response from the chair of the Alaska Board of Public Accountancy begins on page 25, Ms. Curtis said, and highlights a disagreement between the board and DCCED regarding what constitutes "essential travel." MS. CURTIS stated that auditing standards require that, in cases where management disagrees with an audit, the auditor must respond; her response, she said, begins on page 27. She said, "I explained that the report conclusions regarding technology's negative impact on the board operations was based on the auditor's observation of a board meeting in February 2020, and discussions with the board members." In response to the commissioner's comments on the investigations, she said, "Management has a responsibility to implement controls over the investigative process to ensure the accuracy, due process, and timely completion of an audit." 3:25:34 PM REPRESENTATIVE MCCARTY expressed his understanding that there are investigations taking over 180 days, and DCBPL is of the opinion that staying within 180 days is not that important. MS. CURTIS read a quote from the DCCED commissioner, found on page 21, which read [original punctuation provided]: While a noble goal, the department finds the inference that all investigative matters should be completed within six months is unreasonable and unattainable in many situations. The agency is more concerned with ensuring the facts are correctly obtained in each matter and that due process is secured than ensuring the speed of concluding investigations meets an arbitrary goal. MS. CURTIS said that her response read, "I agree that accuracy and due process are essential to an investigation; however, investigations should also be timely. Some may argue that timeliness is critical to due process." She described the six- month timeframe as a performance measure that was developed over prior administrations, and she said that one of the objectives of the audit was determining how efficiently the complaints have been addressed. She noted that there could be valid reasons for periods of inactivity, such as awaiting a response from an expert or having a competing priority. She said that the audit only highlighted periods of unjustified inactivity. The question of "What would be a good performance measure?" has been discussed over previous administrations, and the 180-day timeframe is in the board's procedures; therefore, she said, it's "odd" to receive that response. REPRESENTATIVE MCCARTY surmised that the board is operating appropriately, and that DCBPL is of greater concern. MS. CURTIS answered, "Yes, this is [DCCED's] support for the board, which is reviewed at the same time we reviewed the board." 3:29:02 PM REPRESENTATIVE KAUFMAN referred to Ms. Curtis's explanation that the significant increase in the number of licenses since the previous sunset audit is because Alaska does not require a social security number. He asked for further explanation. MS. CURTIS responded that it's a policy call. She said that the report also stated that the number of new licenses issued from FY 17 to FY 19 increased 36 percent compared to the three prior years. She said that the increase was notable enough to lead to more questions. REPRESENTATIVE KAUFMAN said that a social security number provides a certain level of "traceability," and he said that he would like to know more. 3:30:39 PM CO-CHAIR SPOHNHOLZ, referencing the schedule of revenues and expenditures on page 7, noted that there's volatility from year to year due to biannual renewals. She said asked about the total number of licenses renewed. MS. CURTIS replied that the licenses are on a biannual renewal schedule, with the renewals happening every other year, which is standard practice with occupational boards. CO-CHAIR SPOHNHOLZ asked if an extension shorter than eight years was considered. MS. CURTIS said that it wasn't considered because there are typically systematic issues in boards and, in every aspect other than timeliness, the board is operating effectively. CO-CHAIR SPOHNHOLZ asked about any liability issues arising from taking more than six months to complete 40 percent of investigations. MS. CURTIS explained that the Board of Public Accountancy doesn't deal with aspects of health or safety. Some of the cases are likely dealing with lower-priority issues such as continuing education or unlicensed activity, with the biggest risk coming from complaints of unqualified or incompetent license holders. She said that the audit didn't include a review of the specific nature of the complaints, and expressed that she is not surprised that the cases of this board take longer because, in the big picture, they're less important compared to the cases of other boards. 3:33:56 PM REPRESENTATIVE KAUFMAN asked whether or not it is the policy for investigations to finish in 180 days. MS. CURTIS replied that the policy is quoted on page 28 of the report, and read as follows [original punctuation provided]: Investigative actions (regardless of category) open over 180 days must be reviewed by supervisory staff (Senior Investigators) to determine what (if anything) remains to be done to complete the action and to spur a discussion of possible means to resolve the action. MS. CURTIS said that it's an internal control that's been changed since the audit was done. 3:35:35 PM LESLIE SCHMITZ, Chair, Alaska Board of Public Accountancy, said she is currently serving her eighth and final year on the board. She expressed gratitude for the recommendation of the maximum extension. She stated that the board makes "every effort" to interact with stakeholders and licensees, as well as to stay active at the national level to address issues affecting the profession. She said that the board maintains ongoing projects to update and modernize its statutes and regulations. 3:36:29 PM DON RULIEN, Member, Alaska Society of Certified Public Accountants, said that in March 2021 he completed his second four-year term on the Alaska Board of Public Accountancy. He stated his belief that the board is an integral part of providing protection to the public and ensures that all CPAs meet the requirements put forth by statutes and regulations, protecting the public's interest for all financial matters concerning Alaskans. 3:37:32 PM CO-CHAIR SPOHNHOLZ asked Mr. Rulien whether he has any concerns about the timeliness of investigations, as identified in the audit report. MR. RULIEN replied that each investigation is different, with some of them taking longer than the average of three months. He mentioned that the seasonality of the industry can make it more difficult to get information, and that CPAs normally have a good rapport with the investigators. He said that while he would like investigations to go more quickly, it's difficult. 3:38:49 PM REPRESENTATIVE MCCARTY asked whether investigation cases come to board members for review before the investigation moves on to the next step. MR. RULIEN replied that the case goes first to the board, which determines whether or not to investigate. If the board determines an investigation is in order, he said, it's "out of our hands," and once the investigation is concluded it's reviewed before going to the board for a vote. REPRESENTATIVE MCCARTY asked whether there are individual board members reviewing the cases. MR. RULIEN responded that there are sometimes multiple investigations occurring, so board members take turns reviewing the cases on their own before presenting to the full board at a meeting. 3:40:28 PM REPRESENTATIVE MCCARTY asked why there exists a fiscal note on the proposed legislation. 3:41:00 PM SARA CHAMBERS, Director, Division of Corporations, Business, and Professional Licensing, Department of Commerce, Community & Economic Development, responded that all of the fund sources require a fiscal note to reflect the cost of the board aspect of the licensing program. This fiscal note, she said, is not funds being requested from the legislature but an expenditure authority for the licensing fees. REPRESENTATIVE MCCARTY asked, "Are you saying that to manage the board of over 600 people it's only going to cost $25,000?" MS. CHAMBERS explained that the board is a group of seven people appointed by the governor and that the licensing program is the administrative program to license individuals. According to state law, she said, DCCED would assume regulation of the licensing program if the board sunsets. She clarified that this audit was only of the governance of the board, not the licensing itself. [HB 126 was held over.]