Virginia Regulatory Town Hall View Comments

Board of Accountancy

Board of Accountancy Regulations [18 VAC 5 ‑ 22]

Action	Promulgate Chapter 22 and Repeal Chapter 21
Stage	Fast-Track
Comment Period	Ended on 9/1/2010

5 comments

All comments for this forum

Back to List of Comments

8/24/10 4:49 pm

Commenter: Virginia Society of CPAs

VSCPA comments in support

I am writing on behalf of the 9,000 members of the Virginia Society of Certified Public Accountants (VSCPA) in reference to the Virginia Board of Accountancy’s (VBOA) fast-track regulatory proposal to conform its regulations to the public accountancy statutes as revised in 2007 by repealing Virginia Administrative Code 18 VAC 5-21 and promulgating 18 VAC 5-22.

As stated in our January 12, 2010, letter to Gov. McDonnell, the VSCPA has carefully reviewed the proposal and fully supports it as submitted, as well as the notion that fast track is the appropriate channel for these changes. As the result of the comprehensive revisions to Virginia’s accountancy statutes in 2007, there are now multiple instances of conflict between the statutes and the existing regulations. Because it is not common knowledge that in cases of discord statutes supersede regulations, significant confusion exists for both the public and licensed CPAs about the current rules for the practice of public accounting — creating a high risk of non-compliance. Therefore, we reiterate our original position that it is of the utmost importance that the proposed regulations be approved and put into place as soon as possible.

One of the key changes in the statutory revisions is the incorporation of universally accepted accounting standards by reference to the bodies charged with promulgating those standards rather than by adding the specific standards themselves or referencing standards set as of a specific date. The statutory reference for this is § 54.1-4413.3, Standards of Conduct and Practice. For example, each time the U.S. Governmental Accounting Standards Board approves new accounting standards for government agencies, those standards are immediately effective for Virginia CPAs. This ensures that Virginia’s accountancy rules remain evergreen and contemporary with the evolving standards of the profession.

We believe the following aspects of the proposal are critical to bring Virginia’s accountancy statutes and regulations into alignment and make compliance simpler:

Removal of regulations that are no longer necessary because the requirements in the statute are clear, such as definitions and standards of conduct and practice
Removal or update of regulations that are in conflict with the statute, specifically those involving licensing of individuals and firms and peer review requirements
Elimination of time-sensitive regulations that are no longer needed, such as those related to administration of the CPA examination and some continuing professional education (CPE) requirements
Elimination of regulations that simply refer to other regulations
Clarification of CPE requirements and how to comply with them
Several additions of interpretations required by the statutes

In our review of the proposal, the VSCPA paid particular attention to section 18 VAC 5-22-90 dealing with CPE requirements. We concluded that the changes are not substantive in nature, but simply make the requirements more understandable and remove outdated language related to a transition period that has already passed.

CPAs performing services for the public are still required to obtain 120 hours of education over a three-year reporting period.
The gradual phase-up to 120 hours of education over a three-year reporting period for CPAs performing services for an employer is still intact.
CPAs not providing services to either the public or an employer are still exempt from CPE.
CPAs are still permitted to take whatever CPE they deem appropriate for the manner in which they are practicing.

A question has been raised pertaining to the fact that the proposed regulations do not define one hour of CPE as 50 minutes of instruction. We agree with the VBOA’s conclusion that this definition is not necessary. Standard No. 12 of the American Institute of CPAs and National Association of State Boards of Accountancy Statement on Standards for Continuing Professional Education (CPE) Programs states that 50 minutes of instruction constitutes one hour of CPE credit. All substantially equivalent accountancy jurisdictions comply with the 50-minute credit hour.

A crucial reason to conform the regulations to professional standards and not define a CPE credit hour in the regulations is to ensure continued and future compliance with substantial equivalency between the Commonwealth and other jurisdictions.

The VSCPA sincerely appreciates the opportunity to comment on this important matter. If we can be of any service to you during this process, please don’t hesitate to contact VSCPA Government Affairs Director Emily Walker at (804) 612-9428 or ewalker@vscpa.com.

Thank you for your time and consideration.

Sincerely,

Bradford R. Jones, CPA

Chair, Virginia Society of CPAs

CommentID: 14378

8/26/10 10:42 am

Commenter: Rebecca McCoy

Initial Comment on Proposed BOA regulations

Re: Public Comment for Proposed Regulations for 18VAC5-22 Board of Accountancy Regulations

Please accept the following as my comments regarding the proposed regulatory language as published in the Virginia Register of Regulations Volume 26, Issue 24 on August 2, 2010 for the Board of Accountancy. In providing these comments, I do not represent any opinions but my own. I have concerns regarding the language in two specific sections of the proposed regulations, 18VAC5-22-90.G Continuing Professional Education and 18VAC5-22-160 Confidential Consent Agreements.

18VAC5-22-90.G

This section of the proposed regulations delineates how to determine whether a regulant has obtained the required number of hours of continuing professional education (CPE). Under the effective current regulations, an hour of CPE credit is defined as “50 minutes of participation in a group, independent study or self-study program.” Under this definition the 120 hours of CPE requirement is actually satisfied with 6000 minutes or 100 real time hours of CPE experience. The proposed regulations eliminate this definition and simply use the term “hours of continuing professional education” throughout 18VAC5-22-90. Without specific statutory or regulatory definition to change the meaning of “hour” regulants must obtain a full hour (60 minutes) of CPE to meet the legal requirement of the proposed regulations. For the 120 hour requirements this represents an increase of 20 hours or 1200 minutes of additional instruction for every three year cycle. The increase in required CPE represents a 20% increase in the cost of compliance to each regulant due to the omission of the 50 minutes definition from the proposed regulations.

A further issue arises with the requirement to obtain 2 hours of ethics CPE each year during the three year cycle. At the time these proposed regulations become effective on September 16, 2010 every regulant will be out of compliance if he/she has obtained only 100 minutes of ethics CPE per year over the past three year cycle. I would imagine the representative population would be close to 100% of Virginia licensed CPAs, including members of the Board of Accountancy. A regulant cannot go back and obtain additional CPE for prior years as those ethics courses are no longer offered and the requirement must be met on an annual basis, not on a combined three year cycle. In essence, this entire population of regulants is non-compliant and cannot renew their individual licenses as they cannot attest to satisfying the CPE requirements. For regulants who met only the minimum required hours of CPE overall in a particular year (either 15 or 20 as defined under 18VAC5-22-90.A & B) he/she will also be non-compliant with the then effective regulations under the 60 minute per hour of CPE definition.

18VAC5-22-90.G.2 further reduces the ability of instructors to meet CPE requirements. Under the proposed regulation an instructor may only count 30 hours of “preparing for and making presentations” time (emphasis added) indicating that any additional hours must be obtained through a non-instructional role. Under current regulations, instructors may obtain what can be termed as bonus CPE credits equal to 2 CPE per CPE credit of instruction. These extra instructional credits are limited to 30 per three year cycle. However, the actual time spent teaching the course is not limited under the current regulations as the paragraph defining the bonus credits appears to only address the bonus credits. For regulants who regularly earn CPE through instructing courses the proposed changes would represent a very material change in the cost, in the form of time and money, spent to obtain CPE by requiring that 90 hours in a 120 hour three year cycle come from non-instructional CPE. This regulatory change, since it is retroactive in nature, may well cause many CPE instructors to be non-compliant as of September 16, 2010 with CPE requirements.

While I hope that these CPE related issues are unintentional oversights on the part of the Board of Accountancy, both issues have a very significant and material impact on CPE requirements for regulants in the form of time and money. Since CPE providers generally follow the NASBA criteria of awarding CPE based on 50 minute intervals, these changes would mandate that Virginia Certified Public Accountants convert CPE credits from providers to meet the Virginia standards and that Virginia CPAs are able to tell the difference between the offerings of Virginia defined CPE credits and the 50 minute CPE credits. I would ask that if the Board’s intent is to increase the hours required for CPE of regulants that the Board adopt a grandfathering policy for all CPE obtained prior to September 16, 2010 in order to mitigate some of the burden imposed by these regulations and to allow compliance in conformity with the current regulations to the date of enactment of the proposed regulations.

18VAC5-22-160

§54.1-4413.5(C) mandates that the Board of Accountancy adopt regulations that “identify the type of minor violations for which confidential consent orders may be offered”. The statute further states that these orders may not be entered into where probable cause exists “to believe a licensee has demonstrated gross negligence or intentional misconduct in the practice of public accounting.” The proposed regulations only add one additional criteria for a regulant to be eligible for a confidential consent order – that the violation “did not have a significant financial impact on persons or entities.” In creating this definition, the regulations mandate that all other violations will be deemed to be minor and eligible for confidential consent orders. As a defense to complaints, regulants will simply need to state their action was unintentional, did not meet the legal standard of gross negligence (an incredibly high legal standard to prove) and that either there was no monetary damage or the damage was insignificant. The term significant is not defined within the statutes or regulations and is therefore open to interpretation by the Board and regulants.

Under this criteria, as absurd as it may sound, a regulant who losses his/her temper, uses profane language with clients that causes emotional distress to the client is eligible for a confidential consent order and may continue to practice as long as no significant financial impact to others is caused by the regulant simply because he/she claims to not know what they were doing and caused no significant financial harm. This same regulant could return to the Board two further times in a ten year period and be granted additional confidential consent orders and continue to practice as a licensed CPA. In actuality, by the regulation’s definition, the Board has no choice but to allow the confidential consent orders. Under this hypothetical situation, since the public has no access to the impairment information regarding the regulant, has the public been protected and has the Board fulfilled its duty to the public?

By stating that significant financial impact is the regulatory criteria for either allowing a confidential consent order or not, the Board adopts as policy that all other harms done to persons or entities are insignificant. This policy ignores physical harm, emotional harm and damage to reputation, all of which are recognized by our legal system and within Virginia statutes. I believe the Board of Accountancy has a duty to protect the public with relation to these other harms, not just monetary harm in fulfilling its duty. To that end, confidential consent orders should only be used where no significant impact on persons or entities was caused by the regulant. The term “significant” should be more clearly defined.

I would like to thank the Board of Accountancy for considering the comments provided in this letter. Please feel free to contact me if you require further clarification or discussion on any of the issues raised herewith.

Respectfully submitted,

Rebecca E. McCoy, CPA

CommentID: 14384

8/26/10 10:50 am

Commenter: Rebecca McCoy

Additional Comments to proposed BOA Regulations

Thank you and Mr. Holton for the thoughtful response to my concerns regarding the proposed regulations for your agency currently under the fast track process. Please consider this letter as additional comment regarding the issue of the definition of a continuing professional education hour and regulations related to continuing professional education in general. I do not believe the interpretation that a 50 minute hour is legally a generally accepted national standard as defined by Code of Virginia §54.1-4413.3 Standard of Conduct and Practice is correct for the following reasons:

1. By reference (§54.1-4413.3.4) Virginia adopted the Code of Professional Conduct as issued by the American Institute of Certified Public Accountants (AICPA). As stated in the Introduction to the Code of Professional Conduct authority is given to the AICPA Council to designate “bodies to promulgate technical standards under the Rules”. The process to do so is by resolution of the AICPA Council and integration into Appendix A of the Code of Professional Conduct where this authority is specifically referenced. §54.1-4413.3.5 mirrors this authoritative designation language without modification. Under the current listing of designated bodies neither the AICPA CPE subcommittee nor NASBA are included, therefore standards issued by these bodies do not meet the definition of a technical standard under the Code of Professional Conduct. NASBA is also not specifically referenced in Virginia’s listing under §54.1-4413.3.6.

2. The Statement of Standards for Continuing Professional Education (CPE) Programs (CPE Standards) is a publication jointly produced by AICPA and NASBA containing the definition that 50 minutes equals 1 CPE hour (Statement No. 12). AICPA may have adopted these standards as criteria for member CPAs to meet the requirements of the AICPA Bylaws under Sec. 2.3 through a resolution under Section 230R of the AICPA Bylaws. However, I was unable to identify a specific Council resolution or Bylaw amendment that specifically referenced this adoption. AICPA Bylaws are not integrated into the statutes of Virginia by specific reference. This resolution was not adopted under the Code of Professional Conduct authority given to AICPA as discussed in #1 above therefore I do not believe these standards are designated as technical standards. If the Board of Accountancy believes that the AICPA Bylaws are adopted by reference into the Code of Virginia then we have been at a mandated 120 hour CPE requirement since the enactment of those statutes as this has been part of the AICPA Bylaws requirements since January 1, 2001.

3. Several vendors of CPE clearly state that the quantity and quality of CPE is clearly regulated by each state. This would indicate that vendors believe that CPE standards are under the jurisdiction of individual states and that a national licensing standard does not exist that is automatically binding on individual states.

I realize that this is a legal interpretation issue. Since none of us (BOA staff/directors or myself) are qualified attorneys I therefore ask that the Board of Accountancy seek a legal opinion from the Office of the Attorney General to determine whether Virginia has uniformly adopted the CPE Standards or not. If these standards are not adopted through the Virginia statutes then I reiterate my objection to the omission of the definition of one CPE hour equaling 50 minutes. If these standards are uniformly adopted then I would oppose any deviation from the very well written and detailed criteria established under these standards as to qualifying continuing professional education. I believe any deviation would threaten substantial equivalency and evergreen standards and would not serve to provide any additional protection to the public. The proposed regulations contain many deviations from the CPE Standards which place further restrictions on eligible CPE. While these restrictions are under the authority of the Board of Accountancy as designated in §54.1-4403.12 I believe that placing such restrictions into effect would be in conflict with the Board of Accountancy’s goal of eliminating confusion among regulants and the public. To summarize, I recommend that either 1) the Board of Accountancy adopt the CPE Standards uniformly without modification or 2) the Board of Accountancy clearly delineate in detail all of the necessary requirements for CPE compliance in Virginia within the regulations.

Once again, thank you for your timely response and also for the opportunity to offer constructive input on the proposed regulations through the public comment process. The profession has made great strides in the last few years in adopting a global set of standards that allow for the protection of the public while encouraging national and international uniformity in recognition of the mobility of individual professionals. I applaud the efforts of the Board of Accountancy in proposing regulations that will further accomplish these goals. Please let me know if you have any questions or require any further clarification of my opinions.

Respectfully submitted,

Rebecca E. McCoy, CPA

CommentID: 14385

8/31/10 2:46 pm

Commenter: Cheryl Brown Biondolillo CPA

Lack of clarity

I have reviewed the proposed regulations to repeal 18VA C5-21-10 through 18V A C5-21-170 and add 18VA C5-22-10 through VA C5-22-170. I applaud the effort of the Board to allow some flexibility in enforcement of the current statues. However, I am concerned that the removal of the definition of a CPE hour may create some uncertainty. I am also concerned that the requirement for annual CPE for attest or compilation will now require a sole practitioner to obtain sixteen hours every year in these two areas in order to be able to offer both of these's services. Thus, a sole practitioner who generally practices in the area of taxation would not be able to prepare a compiled financial statement requested by a taxation client, unless he had completed eight hours of CPE related to compiliation services during the year of the request. However, the unlicensed accountant may prepare a compiled financial statement. Would the adoption of these regulations require the annual requirement for 2010? If so, I would request that the Board notify all practitioners by mail in time for them to complete the CPE requirement in 2010.

Thank your for considering my comments.

Sincerely,

Cheryl Brown Biondolillo, CPA

CommentID: 14397

9/1/10 10:16 pm

Commenter: Lee Stephens, Spotts Fain PC

Objection to fast-tracking BOA regulations.

Fellow professionals,

It concerns me that wholesale replacement of regulations on a fast-track could throw out the baby with the bathwater. I am not a CPA, but as an attorney in Virginia I am subject to professional regulations designed to give the public confidence in the integrity of lawyers. I know, please hold the jokes. We have a long way to go to gain that confidence, and we must strive daily to raise the bar. I would ask that these Board of Accountancy proposed regulations be put on the ordinary track under the Administrative Processes Act ("APA").

Two substantive issues appear to me, two that are analogs to what we lawyers must concern ourselves with as we try to retain the public's trust. The first issue is a simple math question: there are 60 minutes in an hour, yet the old CPA regulations defined both a "Contact Hour" and a "CPE credit" as 50 minutes. The second issue is the automatic protection of CPAs from the public.

My profession defines an hour as 60 minutes for our Continuing Legal Education ("CLE"), but attendees enjoy a liberal allowance for rounding up. (If I must leave a seminar with 30 minutes to go, I'm allowed to round up to the nearest hour.) Pharmacists also define an hour as 60 minutes. Dentists, funeral directors, optometrists and veterinarians regulations are silent on the definition of an hour of continuing education. Only three other professions -- architects, auctioneers and real estate appraisers -- specifically define an hour of continuing education as 50 minutes within their regulations.

As I understand it, CPAs are required to accomplish 120 CPE hours with a 3-year look-back. 10 minutes * 120 CPE credits = 1,200 minutes of additional study that a CPA must certify they attended. That strikes me as a material difference, and a difference that should not be exempt from the APA process. CPAs are welcome to increase their CPE credits or Contact Hours to 60 minutes, but I would think your fellow accountants would want to talk about that before it becomes a permanent regulation.

Why do we professionals have to take all these continuing education courses anyway? Because laws and regulations and standards change constantly. The public wants to be able to trust that, when they hire a licensed lawyer or an accountant, they are getting someone capable of handling their matter. My second area of concern also has to do with that very public trust and BOA's proposed approach to confidential consent agreements. If there are CPAs who are bad actors, it seems to me that the way these fast-tracked regulations are cast would shield the public from being able to find out until too late.

The proposed language reads as follows:

18VAC5-22-160. Confidential consent agreements.

To determine whether to enter into a confidential consent agreement under subsection A of § 54.1-4413.5 of the Code of Virginia, the board shall consider a violation minor if the board believes that the violation was not intentional misconduct, was not the result of gross negligence, and did not have a significant financial impact on persons or entities. The board shall enter into no more than two additional confidential consent agreements with a person or firm within 10 years after the first confidential consent agreement.

I have emphasized the word "shall", because a consent agreement would be made confidential and hidden from the public automatically if: (1) unintentional, (2) not gross negligence, and (3) no significant financial impact. By using the word "shall" no discretion is left, BOA must mark the consent agreement confidential unless those 3 preconditions are met. You as CPAs can speak to item (3) (significant financial impact) better than I can. Item (1) is a question of fact by the Board. Item (2), however, I may be able to shed some light on.

Gross negligence is a high bar in Virginia law. Michie's Jurisprudence Words and Phrases goes on for more than 2 pages with varying definitions of "gross negligence". Maybe BOA has defined it somewhere so the public would know what it means to the Board of Accountancy as they ponder a violation of a CPA, but I could find it in neither the old regulations nor the proposed ones. Virginia Model Jury Instructions say this:

Instruction No. 4.030
Definition of Gross Negligence

''Gross negligence'' is that degree of negligence which shows such indifference to others as constitutes an utter disregard of caution amounting to a complete neglect of the safety of another person [another person's property]. It is such negligence as would shock fairminded people, although it is something less than willful recklessness.

Wow, do you really want just one level below that to be hidden from the public? A violation is minor and hidden until it raises to the level where it is shocking? Incidentally, it is not clear to me whether a "minor violation" is what makes it eligible for confidential treatment. As I read the proposed regulation, a CPA would have 3 strikes before they are out-ed to the public. Will that instill confidence in the profession among the public? Shouldn't that be discussed rather than fast-tracked?

My profession's reputation is called into question more often than we would like. To help protect the public the Virginia State Bar imposes safeguards like public reports on misbehavior of lawyers and CE requirements. The safety of the public is what our safeguards protect, and so should it be with public accountancy.

The baby is the trust of the public. Please do not throw the baby out with the bathwater of old regulations. Take your time and do it right. I would ask that you derail these proposed regulations from the fast-track.

Thank you,

R. Lee Stephens, Jr.

VSB #27822

CommentID: 14404