Monday, April 7, 2008

Bill revises law for out-of-state CPAs

Four years ago, California accountants pushed for a bill they said would better protect consumers by forcing out-of-state CPAs to let state regulators know they were practicing in the state.

Now, they say that 2004 law "created a monster" and want the state Legislature to undo it. The law led to a confusing system that discourages the free flow of commerce between state lines, the state accounting board says.

The board and an association representing the profession want to return to a system of allowing out-of-state accountants to provide many services without notifying the state or paying a fee.
Not so fast, says a consumer advocacy group that closely monitors the accounting board.

Considering recent accounting scandals, California consumers need the protections created by the 2004 bill more than ever, the Center for Public Interest Law says.

The center sees the attempt to reverse the law as part of a nationwide push by the accounting profession to loosen oversight that increased after the Enron scandal, which brought down accounting powerhouse Arthur Andersen.

"They want to dismantle the entire ability of the state of California to license CPAs and prevent harm before it happens," said Julianne D'Angelo Fellmeth, administrative director of the Center for Public Interest Law, part of the University of San Diego School of Law.

The language overturning the 2004 law is contained in Assembly Bill 2473, co-written by Assemblyman Roger Niello, R-Fair Oaks, and Assemblywoman Fiona Ma, D-San Francisco. The bill would allow out-of-state accountants to practice in California without paying the current fee of $50 or $100 or filling out a four-page application.

The state Board of Accountancy, which oversees California's 76,000 licensees, is sponsoring the bill. All 15 members of the board, including eight who are not accountants, voted to support AB 2473. The bill also is backed by the California Society of Certified Public Accountants, national professional associations and other business groups.

Senate President Don Perata, D-Oakland, wrote a letter to the state accounting board in January raising a host of questions. He wrote that an earlier bill to discontinue out-of-state notification "caused much confusing and conflicting debate."

Perata sent the board four pages of questions. Board President Donald Driftmier says the board has answered some and is working on the others.

The director of the Department of Consumer Affairs, which oversees the accounting board, opposes AB 2473.

"The Department fears that this policy could encourage unqualified individuals to practice as CPAs in California and lead to a decline in consumer protections," Director Carrie Lopez wrote in a Feb. 6 letter to Driftmier.

The Center for Public Interest Law laid out its opposition in a 12-page letter to Niello, the bill's author.

The center says that the bill puts the state in a passive stance, waiting for problems to occur rather blocking bad accountants from working in California before they do harm.

"There will be no way for the board to check first to make sure those requirements are met before someone from out-of-state provides services that could devastate the financial lives of families or small businesses," the center wrote.

The accountants are fighting back. With the help of Roseville political consultant Goddard & Claussen, they argue that cross-state practice has become the way of the global economy.
Sacramento accountant Michael Ueltzen, a past chairman of the statewide accountants' association, offers the cases of a trucking company that does business in 37 of the 50 states.

Using the model contained in the 2004 California law, he said, an accountant working on the company's books would have to register 37 different times.

The law hinders accountants from quickly addressing financial emergencies by placing a call across the California state line, they say.

Accountants say that they all operate under the same rules and guidelines, regardless of their home states. They liken cross-border practice to using a driver's license to travel across states.

Many states have reacted to the "chaos" created by notification laws such as California's by passing laws that allow cross-border practice -- at least a dozen so far.

The current system, Ueltzen and others say, creates a false sense of security by listing out-of-state accountants who have registered on the state board's Web site.

Consumers may think these accountants have been screened, said board Chairman Driftmier.
"We really don't look at them now," he said. "Are we doing a great investigation on these people? No."

Niello's bill, by contrast, would give the state the power to fine out-of-state miscreants, bar them from practice and report them to their home state boards, supporters say.

But Fellmeth says that, under the 2004 law, the board can and should be screening out-of-state accountants who want to work in California.

"If they don't have sufficient staff, that's the board's fault and the profession's fault for not insisting on that," she said. The center maintains that the forms are simple enough that accountants, of all people, should be able to fill them out in very little time.

It disputes the contention that all states have the same rules when it comes to accountants - in fact, California has some that are stricter, which could be undermined if Niello's bill passes.

Accountants who have to deal with a financial emergency are free under current law to do so, the center says. They just have to notify the state board by e-mail, and send in the fee later.