Texas Sunset Commission

Texas state law requires that every state licensure board be reviewed every 12 years to determine if the board should continue. The first step in the review process is a report by the Sunset Commission staff to the Sunset Commission. That step was recently completed when the report was released August 2nd. The full report can be found here. In addition to the conclusion that the Texas State Board of Public Accountancy (TSBPA) should continue for another 12 years, the report included a number of recommendations, with three key recommendations being:

  1. Changes to the composition of the Board of TSBPA
  2. Changes in requirements for non-CPA owners
  3. Changes to peer review requirements

The Sunset Commission staff report recommended that the board composition of TSBPA be changed from a ratio of 10 CPAs and five public members to eight public members and seven CPAs. This recommendation was primarily in response to a recent United States Supreme Court decision regarding anti-trust activity by a North Carolina Dental Board. TSCPA believes that such a change does not guarantee immunity from anti-trust claims, and other changes, including several already implemented by TSBPA, would be more effective in alleviating such concerns.

The recommended changes to non-CPA ownership requirements include eliminating requirements to hold a bachelor’s degree, as well as the requirement to receive 120 hours of continuing education every three years. These changes would not impact CPA requirements in both areas. Requirements for non-CPA ownership around percentage of ownership and responsibility for assurance services would also remain unchanged.

The Sunset staff is recommending that TSBPA amend its Peer Review rules to allow CPA firms to be reviewed on a frequency based on risk factors, such as if the CPA firm performs lower-risk work (compilations) or a low volume of work (only one compilation a year). The facts are that firms that perform only one or two compilations show a high percentage of deficiencies, so these are the very firms that need to be peer reviewed rather than eliminating the requirement. Compilations are included in the definition of attest services in Texas because the public places a high level of confidence in financial statements issued by a CPA. The recent addition of preparation work as a non-assurance service also provides another avenue for firms to provide the services previously provided under the umbrella of compilation services. The Sunset staff also recommended that the Board implement rules to ensure that non-members of TSCPA pay the same administrative fees as members, which would mean that peer review fees would need to be adjusted accordingly.

One other recommendation from the Sunset staff is to require fingerprint-based criminal background checks of all licensure applicants and all current CPA license holders as is required of all new licensees and many other professions, including doctors and lawyers in Texas. I’m sure there are many CPAs who wish this didn’t have to happen, but like it or not, such requirements are the norm these days and going through a background check is really not much of an incremental task to ensure the integrity of the profession. If you would like to see a full copy of the TSCPA comment letter, you can find it here.

The Sunset Commission will hold hearings on August 29th and 30th where the staff report related to TSBPA will be discussed. The sunset process will continue with formal recommendations from the Sunset Commission in November and then passing legislation in 2019 to ensure the continuance of TSBPA. Without a state licensing authority such as TSBPA, CPAs would no longer be licensed in Texas, so TSCPA will be working to make sure TSBPA and your CPA license continue during the next legislative session.

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