The Sunset process for the Texas Public Accountancy Act (TPAA) and the Texas State Board of Public Accountancy (TSBPA) is underway. The Sunset Commission held its first hearing on TSBPA on August 30, 2018, to receive a report and recommendations from the Sunset Commission staff, as well as testimony from TSBPA and members of the public, including TSCPA. You can watch a recording of the hearing by going to this link.
What is Sunset?
Sunset is the regular assessment of the continuing need for a state agency to exist. It was established by the Texas Legislature in 1977. About 140 agencies are subject to Sunset Review. TSBPA and the TPAA are set to expire on September 1, 2019, unless specifically reauthorized by the Texas Legislature.
The Texas Sunset Commission
The 12-member Sunset Commission is appointed by the lieutenant governor and the speaker of the House of Representatives. The 10 Senate and House members serve four-year terms and the two public members serve two-year terms. Rep. Senfronia Thompson from Houston serves on the Commission this year.
How the Process Works
The first step in the Sunset process is a self-evaluation report prepared by the agency under review. You can see a copy of TSBPA’s self-evaluation report by going to the Sunset Commission website here. The next step in the process is a review of TSBPA performed by the Sunset Commission staff. The Sunset staff concluded its review of TSBPA in early August and submitted its report to the Sunset Commission. The report contained a number of specific recommendations (21 in total), which can be viewed in their entirety here.
In addition to TSBPA responding to the staff’s report, public comments are welcome to the process and TSCPA, AICPA and NASBA all submitted comment letters to the Sunset Commission. You can see those comment letters, as well as other public comments to the process, by going to the Sunset Commission website here.
Staff Recommendations and TSCPA Response
Perhaps the most significant recommendation by the Sunset staff was to support the continuation of TSBPA and the TPAA for another 12 years. TSCPA was pleased to see this recommendation and concurred with the staff’s assessment that the licensing and regulation of CPAs is warranted and necessary to provide adequate protection to the public.
One of the other significant recommendations from the Sunset staff, which TSCPA did not agree with, pertained to the composition of the Board. Currently, there are 15 members of the Board, with 10 CPAs and five public members.
The Sunset staff was recommending that the composition be changed to a majority of public members. The Sunset staff made this recommendation in response to a U.S. Supreme Court case that dealt with a North Carolina licensing board that was found in violation of the antitrust laws. You can read more about this case here.
TSCPA noted that a reduction in the number of CPAs serving on TSBPA would be detrimental, as it would reduce the number of qualified individuals with the necessary competence and experience to help adjudicate complaints and other matters before the Board. Fortunately, at the August hearing, the Sunset Commission decided not to adopt this recommendation at this time. Rather, the Commission is recommending that the Texas Legislature study this issue to determine the best solution for all boards in Texas, not just TSBPA. We will have to wait and see how the legislature decides to deal with this issue and whether that will happen in 2019 or carry over to the 2021 legislative session.
Another matter TSCPA commented on was a recommendation by the Sunset staff to modify the current mandatory Peer Review program to provide a different frequency for reviews based on risk. The staff recommended that Compilations be treated differently under Peer Review and that if CPAs only provide Compilations or only conduct one Compilation a year that they be reviewed less frequently or not at all. TSCPA argued against this suggestion, noting that Compilations are part of “attest services” in the TPAA and are restricted to CPAs because they are relied on by the public. Also, the Peer Review program is a national program that is followed by more than 40 states. Deviating from the national standards for Peer Review could also create mobility issues for Texas CPAs who wish to practice in other states.
At the August hearing, TSCPA encouraged the Commission to include some provisions in the TPAA to bring Texas into alignment with most other states and the Uniform Accountancy Act of AICPA and NASBA with respect to firm mobility and the ability of CPAs and CPA firms to practice across state lines and manage their firms. TSCPA provided these suggestions in its formal comment letter, as well.
The Sunset Commission will now take all the information it received at this hearing and from the public comments and develop a final report and recommendations for submission to the legislature. That final report and proposed legislation will be discussed and voted on at the next Sunset Commission hearing scheduled for November 14-15, 2018. TSCPA will be there to represent its members and will report on new developments as this matter continues to evolve.
John M. Sharbaugh, CAE is the Managing Director of Governmental Affairs for the Texas Society of CPAs (TSCPA), a position he assumed on January 1, 2017.