board of ~mm ~,11~ ~~~~ti~ - texassep 19, 2019 · ross t. johnson, cpa executive committee...

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Texas State Board of Public Accountancy

~MM ~~~,~~11~ ~~~~TI~ September 19, 2019

I. Call to order and roll call-10:00 a.m., September 19, 2019 ............................................. 1-1

II. Approval of the July 18, 2019 Board meeting minutes .................................................... 11-1

Ill. Public comment ................................................................................................................... lll-1

IV. Consideration of report and recommendations of the Executive Committee ............. IV-1

A. Review and approval of the Board's financial statements ............................................. IV-3

B. Fiscal Matters: .............................................................................................................. IV-23

Fee Schedule- FY 2020

C. Discussion, consideration and possible action concerning authorization for the Executive Director to enter into a lease for new office space for the agency ........ IV-27

D. Update on Status of Internal Audit ............................................................................... IV-31

E. Review of NASBA/AICPA matters: .............................................................................. IV-37

1. NASBA dates of interest:

112th Annual Meeting- October 27-30, 2019- Boston, MA.

2. CPA Evolution Guiding Principles response letter

F. State Office of Risk Management- Risk Management Program Review Report ....... IV-51

G. Consideration of FY 2020 professional service contracts and Peer Assistance (ACAN) Grant ................................................................................................................ IV-59

H. Approval of Committee and Board Meeting dates for CY 2020 ................................... 1V-61

I. Review of general correspondence .............................................................................. IV-65

V. Consideration of report and recommendations of the Rules Committee ..................... V-1

A. Discussion, consideration, and possible action concerning a proposed revision to Board Rule 501.91 (Reportable Events) regarding the requirement to report certain crimes, settlements and civil judgments to the Board within 30 days ................. V-3

B. Discussion, consideration, and possible action on a letter received commenting on a proposed revision to Board Rule 515.1 (License) regarding the fingerprinting of licensees ...................................................................................................................... V-7

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C. Discussion, consideration, and possible action concerning proposed revisions to Board Rule 519.21 (Investigations) regarding the elimination of quarterly • notifications to the parties on the status of complaint investigations ............................ V-11

D. Discussion, consideration, and possible action concerning proposed revisions to Board Rules 519.29 (Voluntary Surrender of Certificate) and 519.95 (Reinstatement) recognizing the requirement for the Board fingerprinting of licensees .................................................................................................................... V-13

E. Discussion, consideration, and possible action concerning proposed revisions to the following Board rules to eliminate the reference to the term "good moral character" in Board Rules 511.22 (Initial Filing of the Application of Intent), 511.27 (Good Moral Character Evidence from Foreign Residents), 511.161 (Qualifications for Issuance of a Certificate), 511. 162 (Application for Issuance of the Certificate by Exam After Completion of the CPA Examination), 512. 1 (Certification as a Certified Public Accountant by Reciprocity), 512.4 (Application for Certification by Reciprocity), and 513.11 (Qualifications for Non-CPA Owners of Firm License Holders) ............................................................................................... V-17

F. Discussion, consideration, and possible action on Board Rule 519.7 (Misdemeanors that Subject a Licensee or Certificate Holder to Discipline by the Board) regarding the types of criminal offenses that could subject a licensee to disciplinary action ........................................................................................ V-29

G. Discussion, consideration and possible action on a letter from the Governor's Office ........................................................................................................... V-35

H. Schedule next meeting ...................................................................................................... V- •

VI. Discussion, consideration, and possible action on the report of the Technical Standards Review Committee ......................................................................... Vl-1

July 18, 2019

A. Dismissal - Insufficient Evidence:

1. Investigation No. 13-04-18L ..................................................................................... Vl-1

2. Investigation No. 18-06-12L ..................................................................................... Vl-1

B. Other- Status Report .................................................................................................... Vl-1

C. Next meeting- September 19, 2019 at 11:30 a.m ........................................................ Vl-1

VII. Report on the Unauthorized Practice of Public Accountancy Program ...................... Vll-1

VIII. Report on the Enforcement Division's Probation Monitoring System ....................... Vlll-1

IX. Discussion, consideration, and possible action on Agreed Consent Orders and Administrative Disciplinary Actions ............................................................ IX-1

A. AGREED CONSENT ORDERS

Behavioral Enforcement Committee • 2

• 1. Investigation No. 19-03-05L ........................................................................................... IX-3 2. Investigation No. 19-08-05L ........................................................................................... IX-3 3. Investigation Nos. 19-01-03L & 19-01-04L .................................................................... IX-4 4. Investigation Nos. 19-03-07L & 19-03-0BL .................................................................... IX-4 5. Investigation No. 19-01-0BL ........................................................................................... IX-5

Technical Standards Review Committee

1. Investigation Nos. 19-03-03L & 19-03-04L .................................................................... IX-5

B. ADMINISTRATIVE DISCIPLINARY ACTIONS

1. Investigation Nos. 19-04-10001 - 19-04-10059 ......................................................... IX-6 2. Investigation Nos. 19-05-10001 - 19-05-10043 ......................................................... IX-6 3. Investigation Nos. 19-04-10060- 19-04-10222 ......................................................... IX-6 4. Investigation Nos. 19-05-10044- 19-05-10236 ......................................................... IX-6 5. Investigation Nos. 19-04-10223- 19-04-10235 ......................................................... IX-6 6. Investigation Nos. 19-05-10237- 19-05-10246 ......................................................... IX-6

X. Adoption of Board Rules .......................................................... : ......................................... X-1

1. Section 511.21 (Examination Application) 2. Section 511.122 (Acceptable Work Experience) 3. Section 511.123 (Reporting Work Experience) 4. Section 512.1 (Certification as a Certified Public Accountant by Reciprocity) 5. Section 513. 11 (Qualifications for Non-CPA Owners of Firm License Holders)

• 6. Section 513.15 (Firm Offices) 7. Section 515.2 (Initial License) 8. Section 515.3 (License Renewals for Individuals and Firm Offices) 9. Section 515.5 (Reinstatement of a Certificate or License in the Absence of a

Violation of the Board's Rules of Professional Conduct) 10. Section 515.8 (RetiredorDisabilityStatus) 11. Section 515.10 (Licenses for Individuals with Defaulted Student Loans) (REPEAL) 12. Section 519.2 (Definitions) 13. Section 519.13 (Direct Administrative Costs) (NEW) 14. Section 519.20 (Complaints) 15. Section 527.1 (Establishment of Peer Review Program) 16. Section 527.2 (Definitions) 17. Section 527.12 (Engagement Reviews and System Reviews) (NEw)

XI. Discussion, consideration, and possible action on the report of the Nominating Committee ...................................................................................................... Xl-1

XII. Review of future meetings/hearing schedules ............................................................... Xll-1

XIII. Adjournment. ..................................................................................................................... Xlll-1

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Agenda Item I

Call to Order and Roll Call

September 19, 2019

I. DISCUSSION: The meeting will be called to order, en bane, at 10:00 a.m., September 19, 2019 in the Board's office, at which time the roll will be called.

II. RECOMMENDATION: None required

·111. SUGGESTED MOTION: None required

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Agenda Item II

Approval of the July 18, 2019 Minutes

·September 19, 2019

I. DISCUSSION: The enclosed minutes of the July 18, 2019 Board meeting were kept in accordance with established procedures and reflect the business conducted.

II. RECOMMENDATION: The staff recommends that the minutes of the July 18, 2019 Board meeting be approved as submitted/amended.

Ill. SUGGESTED MOTION: That the minutes of the July 18, 2019 Board meeting be approved as submitted/amended .

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July 18, 2019

The Texas State Board of Public Accountancy met from 10:00 a.m. until11 :15 a.m. on July 18, 2019 at 333 Guadalupe, Tower 3, Suite 900, Austin, Texas 78701-3900. A notice of this meeting containing all items on the agenda was filed with the Office of the Secretary of State at 3:35p.m. on July 8, 2019. (TRD #2019-004011). (ATTACHMENT 1)

Board Members Present

Manuel Cavazos IV, Esq., CPA Presiding Officer

Susan Fletcher Executive Committee Member-at-Large

Lisa A. Friel, CPA Jamie D. Grant Donna J. Hugly, CPA James D. Ingram IV, CPA Ross T. Johnson, CPA

Executive Committee Member-at-Large

Timothy L. LaFrey, Esq., CPA Assistant Presiding Officer

William Lawrence Roselyn E. Morris, Ph.D., CPA Benjamin Peria, CFE, CPA

Secretary Debra S. Sharp

Members Absent

Robert M. McAdams, CPA Treasurer Excused

Steve D. Peria, CPA Excused

Kimberly E. Wilkerson, Esq. Excused

Others Present

John Sharbaugh

Staff Present

Roel Cantu lsmael Castillo Jennifer Costilla Patrick Dore Megan Gloetzner Ann Hallam, PMP Alan Hermanson, CPA J. Randel Hill, Esq. Donna Hiller Jean Ickes John Moore, Esq. Julie Prien Marisa Rios April Serrano Andrea Smith William Treacy Daniel Weaver

I. Mr. Cavazos, Presiding Officer, called the meeting to order at 10:00 a.m. Mr. Treacy called roll and declared a quorum.

Mr. B. Peria moved to excuse the absences of Mr. McAdams, Mr. S. Peria, and Ms. Wilkerson from the Board meeting. Ms. Fletcher seconded the motion and it passed unanimously.

II. Dr. Morris moved to approve the May 16, 2019 Board meeting minutes as presented. Ms. Fletcher seconded the motion and it passed unanimously.

At this time, Mr. Cavazos presented the following staff members with service award plaques:

Julie Prien- 5-year service award Daniel Weaver- 5-year service award Patrick Dore - 1 0-year service award Donna Hiller- 45-year service award

The Board also congratulated Jean Ickes on her 41 years of service to the Board and on her retirement.

Ill. After a call for public comments, there were no comments from the public.

IV. Mr. Cavazos, Executive Committee Chair, reported on the July 17,2019 committee meeting.

Members Present

Manuel Cavazos IV, Esq., CPA Susan Fletcher Ross T. Johnson, CPA Timothy L. LaFrey, Esq., CPA Benjamin Peria, CFE, CPA

Member Absent

Robert M. McAdams, CPA

Others Present

John Sharbaugh

Staff Present

Alan Hermanson, CPA J. Randel Hill, Esq. Donna Hiller William Treacy Daniel Weaver

A. Mr. B. Peria moved to approve the Board's financial statements as presented. Mr. Grant seconded the motion and it passed unanimously.

TSBPA Board Meeting Minutes July 18, 2019

B. Fiscal Matters:

1. Mr. B. Pefia moved to approve the Board's FY 2020 Budget materials as presented. Ms. Hugly seconded the motion and it passed unanimously.

The FY 2020 budget includes fee increases for the individual license fee (from $56 to $65), the firm license fee (from $50 to $60) and the Exam Section fee (from $10 to $15 per part). Additionally, the budget includes a reduction of the Enforcement Reserve portion of the Board Fund Balance Reserve Policy from $500,000 to $350,000.

2. Mr. B. Pefia moved to approve the Board's FY 2020 Scholarship Allocation in the amount of $750,000. Mr. Lawrence seconded the motion and it passed unanimously.

C. Mr. Cavazos discussed the internal audit plan. Staff was directed to review areas for possible internal audits and to report to the Committee at the September 2019 meeting.

D. Mr. Treacy reported on NASBNAICPA matters:

1. NASBA dates of interest: .

a. Report from the Western Regional Meeting- June 18-20, 2019- Salt Lake City, UT- Mr. Prothro, former TSBPA Presiding Officer, was nominated to the NASBA Nominating Committee representing the Southwest Region and Mr. Cavazos was nominated to the alternate position on the Nominating Committee representing the Southwest Region.

b. 11ih Annual Meeting- October 27-30, 2019- Boston, MA.

2. Mr. Treacy reported that the CPA Evolution Guiding Principles was a topic of discussion at the Western Regional Meeting. The Board will prepare a response to the request for comment on or before the requested August 9, 2019 deadline.

E. Mr. Cavazos reviewed general correspondence and thank you letters from the public.

V. Mr. LaFrey, Rules Committee Chair, reported on the July 17, 2019 committee meeting.

Members Present

Manuel Cavazos IV, CPA (ex officio) Donna Hugly, CPA Ross Johnson, CPA Timothy L. LaFrey, Esq., CPA William Lawrence Benjamin Pefia,CFE, CPA

Member Absent

Steve Pefia, CPA

Others Present

Susan Fletcher Gary Mcintosh, CPA John Sharbaugh

A. Mr. LaFrey reported that Rule 501.91 (Reportable Events) was tabled.

Staff Present

Alan Hermanson, CPA J. Randel Hill, Esq. Donna Hiller Marisa Rios William Treacy Dan Weaver

B. Mr. LaFrey moved to authorize the executive director to have proposed Rules 511.122 (Acceptable Work Experience) and 511.123 (Reporting Work Experience) amendments published in the Texas Register for. public comment. Mr. Ingram seconded the motion and it passed unanimously. (ATTACHMENT 2)

C. Mr. LaFrey moved to authorize the executive director to have the proposed amendments to Rules 515.1 (License), 515.2 (Initial License), 515.3 (License Renewals for Individuals and Firm Offices), 515.5 (Reinstatement of a Certificate or License in the Absence of a Violation of the Board's Rules of Professional Conduct), 515.8 (Retired or Disability Status), 513.11 (Qualifications for Non-CPA Owners of Firm License Holders), 513.15 (Firm Offices) and the proposed repeal of 515.10 (Licenses for Individuals with Defaulted Student Loans) published in the Texas Register for public comment as revised by the Committee. Mr. Ingram seconded the motion and it passed unanimously. (ATTACHMENT 3)

D. Mr. LaFrey moved to authorize the executive director to have the proposed Rule 519.2 (Definitions)

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amendment published in the Texas Register for public comment. Mr. Ingram seconded the motion and it • passed unanimously. (ATTACHMENT 4)

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E. Mr. LaFrey moved to authorize the executive director to have the proposed NEW Rule 519.13 (Direct Administrative Costs) published in the Texas Register for public comment. Mr. Ingram seconded the motion and it passed unanimously. (ATTACHMENT 5)

F. Mr. LaFrey moved to authorize the executive director to have the proposed Rule 519.20 (Complaints) amendment published in the Texas Register for public comment. Mr. Ingram seconded the motion and it passed unanimously. (ATTACHMENT 6)

G. Mr. LaFrey moved to authorize the executive director to have the proposed amendments to Rules 527.1 (Establishment of Peer Review Program) and 527.2 (Definitions), and proposed new Board Rule 527.12 (Engagement Reviews and System Reviews) published in the Texas Register for public comment. Mr. Ingram seconded the motion and it passed unanimously. (ATTACHMENT 7)

H. Mr. LaFrey moved to authorize the executive director to have the proposed Rules 511.21 (Examination Application) and 512.1 (Certification as a Certified Public Accountant by Reciprocity) amendments published in the Texas Registerfor public comment. Mr. Ingram seconded the motion and it passed unanimously. (ATTACHMENT 8)

VI. Mr. Cavazos reported on the Board's Swearing-in Ceremony held May 25, 2019 at the Palmer Events Center.

VII. Mr. B. Pena, Behavioral Enforcement Committee Chair, reported on the following committee meetings:

April 23, 2019

Members Present

Bennett Allison, CPA Patrick Durio, CPA Donna Hugly, CPA James D. Ingram IV, CPA John Pearce, Esq., CPA Benjamin Pena,CFE, CPA Debra Sharp

Members Absent

Karen Jones, CPA Steve Pena, CPA

Staff Present

Paulette Beiter, Esq. J. Randel Hill, Esq.

A. Mr. La Frey moved to dismiss Investigation Nos. 19-01-14L 1 and 19-01-15L 1 based on voluntary compliance. Mr. Grant seconded the motion and it passed.

B. Other- The committee considered 12 other matters during its meeting; however, these matters do not require Board action at this time.

C. The next committee meeting was scheduled for June 26, 2019 at 9:15 a.m.

June 26, 2019

Members Present

Bennett Allison, CPA Patrick Durio, CPA Donna Hugly, CPA James D. Ingram IV, CPA Karen Jones, CPA John Pearce, Esq., CPA Benjamin Pena, CFE, CPA

Members Absent

Steve Pena, CPA Debra Sharp

Staff Present

Paulette Beiter, Esq. J. Randel Hill, Esq.

A. Mr. LaFrey moved to dismiss Investigation Nos. 19-05-02L2 and 19-05-03L2 based upon insufficient evidence of a violation of the Act or the Rules. Ms. Fletcher seconded the motion and it passed.

B. Other- The committee considered 15 other matters during its meeting; however, these matters do not require Board action at this time .

C. The next committee meeting was scheduled for September 18, 2019 at 9:15a.m.

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VIII. Mr. Johnson, Technical Standards Review Committee Chair, reported on the following committee meeting:

May 16, 2019

Members Present

Ross Johnson, CPA Lisa A. Friel, CPA Pete M. Gonzales, CPA Jamie D. Grant

Jeffrey L. Johanns, CPA Robert M. McAdams, CPA Dilliana Stewart, CPA

Staff Present

J. Randel Hill, Esq. John Moore, Esq.

A. Ms. Hugly moved to dismiss Investigation Nos. 18-12-14L3 and 18-12-15L3 based upon insufficient evidence of a violation of the Act or the Rules. Mr. B. Pen a seconded the motion and it passed.

B. Other- The committee considered six other matters during its meeting; however, these matters do not require Board action at this time.

C. The next committee meeting was scheduled for July 18, 2019 at 11:30 a.m.

IX. Mr. Weaver, Board staff, reported on the status of the Unauthorized Practice of Public Accountancy Program.

X. Mr. Hill, General Counsel, reported on the status of the Enforcement Division's probation monitoring program.

XI. The Board took the following actions on Agreed Consent Orders and Administrative Disciplinary Actions:

A. Agreed Consent Orders:

Behavioral Enforcement Committee

Dr. Morris moved to approve the following ACOs as presented. Mr. LaFrey seconded the motion and it passed.

1. Investigation Nos.: Respondents:

Rule Violations: Act Violation:

19-02-04L and 19-02-05L Mark Thomas Andersen & Andersen Accounting & Advisory PLLC 501.74(b), 501.75 901.502(6)

Hometown: Certificate No.: Firm License No.:

Pearland, TX 091557 C10247

Respondents entered into an ACO with the Board whereby Respondents were reprimanded. Respondents must also complete and submit proof of completion of eight hours of live continuing professional education (CPE) in the area of Statements on Standards for Accounting and Review Services update. This requirement is in addition to Respondent's annual CPE requirement and must be completed within 180 days of the date of the Board Order. In addition, Respondents must pay $499.48 in administrative costs and $1,000 in administrative penalties within 30 days of the date of the Board Order. Respondents disclosed confidential client communication and prepared financial statements without the required "no assurance" language.

2. Investigation No.: 19-01-13L Hometown: Humble, TX Respondent: Gilberte lracheta Certificate No.: 103748 Rule Violations: 501.90(2), 501.90(1 0) Act Violations: 901.502(2), 901.502(6), 901.502(11) Respondent entered into an ACO with the Board whereby Respondent's certificate was revoked. Respondent misappropriated funds from his employer.

3. Investigation Nos.: 18-11-06L and 18-11-07L Hometown: Alpine, TX Respondents: Krista Sue Kelley and Certificate No.: 083342

FMG CPA, LLC Firm License No.: C09368 Rule Violations: 501. 74(b), 501.90(12) Act Violation: 901.502(6)

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Respondents entered into an ACO with the Board whereby Respondents were reprimanded. In addi-tion, Respondent must pay an administrative penalty of $500 and $568.53 in administrative costs • within 30 days of the date of the Board Order and reimburse Complainant $2,678.92 for penalties

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assessed by the IRS and provide proof of payment within 30 days of the date of the Board Order . Respondents failed to e-file a client's tax return and failed to respond to a client's inquiries regarding the filing of her return within a reasonable time without good cause.

Investigation Nos.: Respondents:

19-01-05L and 19-01-06L Joshua David Ray and Ray CPA, P.C.

Rule Violation: 501.75 Act Violation: 901.502(6)

Hometown: Certificate No.: Firm License No.:

Round Rock, TX 098769 C08057

Respondents entered into an ACO with the Board whereby Respondents were reprimanded. In addition, Respondent must pay $308.28 in administrative costs within 30 days of the date of the Board Order. Respondent must also complete and submit proof of completion of four hours of live CPE in the area of ethics during the current licensing period and the following licensing period. Respondents disclosed confidential client information.

Investigation No.: 19-04-20L Respondent: Gregory Robert Seward Rule Violation: 501.90(4)

Hometown: Ft. Lauderdale, FL Certificate No.: 035996

Act Violations: 901.502(6), 901.502(1 0), 901.502(11) Respondent entered into an ACO with the Board whereby Respondent was revoked in lieu of further disciplinary action. Respondent pleaded no contest to felony DUI on February 6, 2018.

Technical Standards Committee

Ms. Fletcher moved to approve the following ACOs as presented. Ms. Hugly seconded the motion and it passed.

1. Investigation No.: 18-08-03L Hometown: Dallas, TX Respondent: Don B. Morris Certificate No.: 006878 Rule Violations: 501.60, 501.61, 501.70, 501.81 Act Violations: 901.401, 901.460, 901.502(6), 901.502(11) Respondent entered into an ACO with the Board whereby Respondent was reprimanded and his certificate and license were placed on limited scope status. In addition, Respondent must pay an administrative penalty of $2,500 and $163.88 in administrative costs within 30 days of the date of the Board Order. Respondent issued a compliance attestation and audit report without a firm license, which failed to adhere to government auditing standards and generally accepted auditing standards (GAAS) and independence requirements.

2. Investigation Nos.: 18-12-12L & 18-12-13L Hometown: Amarillo, TX Respondents: Dennis Wayne Dockery Certificate No.: 057890

& Dennis Dockery, CPA, PLLC Firm License No.: C08944 Rule Violation: 501.60 Act Violations: 901.502(6), 901.502(11) Respondents entered into an ACO with the Board whereby Respondents were reprimanded and Respondent Dockery and Respondent Firm were placed on limited scope status. In addition, Respondents must pay an administrative penalty of $1,500 and $163.88 in administrative costs within 30 days of the date of the Board Order. Respondents issued an audit report that failed to comply with GAAS.

B. Administrative Disciplinary Actions:

Mr. LaFrey moved to approve the following Disciplinary Actions as presented. Mr. B. Pefia seconded the motion and it passed unanimously.

1. Respondents: In the Matter of Disciplinary Action Against Certain Licensees for Nonpayment of Professional Fees for Three Consecutive License Periods

The Respondents failed to pay their licensing fees for three consecutive license periods. Respondents, although properly notified of the proposed disciplinary action and their right to a hearing on the matter, failed to request a hearing. Staff recommends that the certificate of each Respondent still not in compliance be revoked without prejudice. Each Respondent may regain his or her certificate by paying all license fees and late fees and by otherwise coming into compliance with the Act. Respondents violated Act Section 901.502(4) (failure to pay license fees for three consecutive years). (ATTACHMENT9)

Investigation Numbers 19-02-10001 - 19-02-1 0046 19-03-1 0001 - 19-03-1 0063

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2. Respondents: In the Matter of Disciplinary Action Against Certain License Holders for CPE .• Delinquencies

The Respondents failed to comply with CPE reporting requirements found in Chapter 523 of the Rules and Act Section 901.411 (Continuing Professional Education). The Respondents, although having been notified of the proposed disciplinary action and their right to a hearing on the matter, failed to request a hearing. Staff recommends that the license of each Respondent still not in compliance be suspended for a period of three years, or until he or she complies with the licensing requirements of the Act, whichever is sooner. Additionally, staff recommends a $100 penalty be imposed for each year a Respondent is not in compliance with the Board's CPE requirements. Respondents violated Board Rules 501.94 (Mandatory CPE) and 523.111 (Required CPE Reporting), and Act Section 901.411. (ATTACHMENT 10)

Investigation Numbers 19-02-10047-19-02-10204 19-03-1 0064 - 19-03-1 0231

3. Respondents: In the Matter of Disciplinary Action Against Certain Certificate Holders for Failure to Complete License Notice

The Respondents failed to complete their license renewal notices in accordance with Board Rule 515.3 (License Renewals for Individuals and Firm Offices). Respondents, although properly notified of the proposed disciplinary action and their right to a hearing on the matter, failed to request a hearing. Staff recommends the certificate of each Respondent not in compliance be revoked without prejudice until such time as the Respondent complies with the requirements of the Rules and the Act. Respondents violated Act Section 901.502(12) (Violations of Board Rules). (ATTACHMENT 11)

Investigation Numbers 19-02-10205-19-02-10217 19-03-1 0232 - 19-03-1 023 7

XII. Dr. Morris moved to adopt the following Board Rule as presented on second reading. Mr. B. Peiia seconded • the motion and it passed unanimously. Section 501.91 (Reportable Events) was tabled.

Section 507.3 (Independent Contractors) (ATTACHMENT 12)

XIII. Mr. Cavazos reviewed the schedule of future Board meetings.

XIV. Mr. Cavazos adjourned the meeting at 11:15 a.m.

ATTEST:

Manuel Cavazos IV, Esq., CPA, Presiding Officer Benjamin Peiia, CFE, CPA, Secretary

1 Ms. Hugly, Mr. Ingram, Mr. B. Pen a and Ms. Sharp recused themselves from participating in this matter. 2Ms. Hugly, Mr. Ingram and Mr. B. Pefla recused themselves from participating in this matter. 3Ms. Friel, Mr. Grant and Mr. Johnson recused themselves from participating in this matter.

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Agenda Item Ill

Public Comment

September 19, 2019

I. DISCUSSION: Persons wishing to offer public comment to the Board will·be given an opportunity to do so at this time.


Ill. SUGGESTED MOTION: None required

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Agenda Item IV

Report of the Executive Committee

September 18, 2019

A. Review and approval of the Board's financial statements

B. Fiscal Matters:

• Fee Schedule - FY 2020

C. Discussion, consideration and possible action concerning authorization for the Executive Director to enter into a lease for new office space for the agency.

D. Update on Status of Internal Audit

E. Review of NASBA/AICPA matters:


• 11ih Annual Meeting- October 27-30, 2019- Westin Copley, Boston, MA.


F. State Office of Risk Management- Risk Management Program Review Report

G. Consideration of FY 2020 professional service contracts and Peer Assistance (ACAN) Grant

H. Approval of Committee and Board Meeting dates for CY 2020

I. Review of general correspondence

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Agenda Item IV


, September 18, 2019

A. Review and approval of the Board's financial statements

DISCUSSION: Mr. B. Pena will present the Board's financial statements.

RECOMMENDATION: The staff recommends that the Board's financial statements be approved as presented.

SUGGESTED MOTION: That the Board's financial statements be approved as present-ed. ·

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TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY Financial Overview For the Eleven Months Ended July 31, 2019

Annual Budget

I Actual I Annual Budget I Variance I :er~e~t 11 Target I Variance

emammg

Revenues - YTD $ 5,810,660 $ 5,880,243 $ 69,583 1.2% 8.3% 7.1%

Expenditures - YTD $ (4,571,896) $ (5,699,618) $ (1,127,722) 19.8% 8.3% 11 .5%

Net- YTD 1,238,764 180,625 $ 1,058,139 585.8% 8.3% 577.49%

Transfer Out- SDSI annual payment $ (644,732) $ (703,344) $ (58,612) 8.3% 8.3% 0.00%

Net lncrease/(Reduction) in Fund Balance $ 594,032 $ (522,719) $ 1,116,751 213.6% 8.3% 205.31%

Revenues: See Revenue Budget Summary for additional information

• revenue collected over budget by 7 .1% -+ CPA license fees over budget by 2.36% -+ CPE sponsor fees over budget by 2.55% -+ Firm license fees over budget by 1 0.26% -+ Late Payment fees over budget by 4.71% -+ Exam fees over budget 4.32% -+ Other Collections over budget (Direct Administrative Costs & Interest) over budget by 96.83%

Expenditures: See Expenditure Budget Summary for additional information

• expenditures under budget by 11.5% -+ See Expenditure Budget Summary for discussion of budget items.

Revenues and Expenditures and Changes in Fund Balance

I Current Year Prior Year Difference I % Difference I Beginning Fund Balance 9/01/18 $ 3,519,196 $ 3,353,520

Revenues 5,810,660 5,682,378 128,281 2.3%

Expenditures ( 4,575,571) {5,005,220) (429,649) -8.6%

Other Financing Sources (Uses) {624,736) (656,357) (31,622) -4.8%

Ending Fund Balance 07/31/19 $ 4,129,550 3,374,321

net increase/(reduction) in FB $ 610,353 $ 20,801

Budgeted Ending Fund Balance $ 2,736,036 $ 2,491,085

Budget Expenditures include encumbrances of $0.00; EXH II expenditures include prior year expenditures of $3,674.62.

Financial Overview July 2019 FY 19 - Simplified Formal

IV-5 Financial

TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY Performance Measures For the Eleven Months Ended July 31, 2019

Performance Measures:

Exam Related Measures:

Individuals examined

Sections Taken

Average SectionsTaken per Individual

Licensing Related Measures:

Number of individuals licensed

Number of business facilities licensed (firms) a

Number of Peer Reviews conducted

Sponsor Review Program Related Measures:

Number of CPE Sponsors Reviewed

Number of CPE Sponsors Subject to Review

Enforcement Related Measures:

Administrative:

Open cases, Beginning

Cases opened

Cases closed

Sept. 18-Nov. 18

I 1st0tr.

2,934

3,763

1.28

75,588

9,765

209

1,121

746

(881)

Dec. IB·Feb. 19 Mar. 19-May 19

I 2nd Otr. I 3rd Otr.

2,972 2,815

3,517 4,081

1.18 1.45

75,890 76,220

9,789 9,781

279 248

990 1,266

720 777

(448) (1,025)

June 19·Aug.19

4th Otr. YTD

8,721

11 ,361

#DIV/0! 1.30

not cumulative

not cumulative

736

1,010 1 '121

2,243

(2,354)

Previous quarter adjustment

Open cases, Ending 4 4 (8)

1 .o1o I b------~-,,-----~-,----~~--------,--------

Average time for complaint resolution (days)

Disciplinary:

Open cases, Beginning

Cases opened

Cases closed

Previous quarter adjustment

Open cases, Ending

Average time tor complaint resolution (days)

990

148.8

442

90

(194)

11

349

308.1

1,266

153.6

349

131

(118)

34

396

184.2

1,010 1,010

147.3 149.11

396 278 442

134 355

(233) (545)

(19) 26

278 2781 278

870.9 525.ol

Target o/o

11,61 6 75%

14.861 76%

1.28 102%

77,212 99%

9,882 99%

1, 100 67%

63%

98%

148. d 101%

192 1 273%

a This measure is the number of Registered Accounting Firms not Practice Units. The number of Practice Units is used for estimating revenue because Firms may have more than one Practice Unit.

b Cases opened and closed categories include adjustments for reclassification of cases and report timing.

FY 18

11 ,009

14,328

1.36

75,305

9,823

974

Bffi 9

1,137

2,678

(2,764)

70

1,121

150.91

413

703

(746)

72

442 =

138.31

Financial Overview July 2019 FY 19 • Simplified Formal Performance Measures

IV-6

•

•

•

UNAUDITED


• Exhibit I -Combined Balance SheeUStatement of Net Position- Governmental Funds July 31, 2019

Governmental Fund Types

General Governmental Capital Long-Term Statement Funds Funds Assets Liabilities of

(EXHA-1) Total Adjustments Adjustments Net Position ASSETS

Current Assets: Cash and Cash Equivalents:

Cash on Hand $ 13,273.84 $ 13,273.84 $ $ $ 13,273.84 Cash in Bank- Treasury Safekeeping Trust 10,290.00 10,290.00 10,290.00 Cash in State Treasury 1,271,615.07 1,271,615.07 1,271,615.07 Repurchase Agreement- Treasury Safekeeping Trust 4,301,180.72 4,301 '180. 72 4,301 '180. 72

Due From Other Funds- TTSTF (Note A) Consumable Inventories 68,037.22 68,D37.22 68,037.22

Total Current Assets 5,664,396.85 5,664,396.85 5,664,396.85

Non-Current Assets: Capital Assets:

Depreciable Furniture and Equipment 52,264.40 52,264.40

Accumulated Depreciation Vechicle, Boats, and Aircraft

Accumulated Depreciation Other Capital Assets

Accumulated Depreciation Other Non-Current Assets

Total Non-Current Assets 52,264.40 52,264.40 Total Assets $ 5,664,396.85 $ 5,664,396.85 $ 52,264.40 $ $ 5,716,661.25

LIABILITIES AND FUND BALANCES Liabilities:

Current Liabilities: Payables From:

Vouchers Payable $ $ $ Accounts Payable 115,820.46 115,820.46 115,820.46 Payroll Payable 305,841.10 305,841.10 305,841.10

Refunds Payable 148.25 148.25 148.25 • Due To Other Funds- TTSTF (Note A) 117,224.00 117,224.00 117,224.00 Funds Held for Others 112,836.34 112,836.34 112,836.34 Employees Compensable Leave 204,935.50 204,935.50

Total Current Liabilities 651,870.15 651,870.15 204,935.50 856,805.65

Non-Current Liabilities: Employees Compensable Leave 238,256.52 238,256.52

Total Non-Current Liabilities 238,256.52 238,256.52 Total Liabilities 651,870.15 651,870.15 443,192.02 1,095,062.17

FUND FINANCIAL STATEMENT-FUND BALANCES Fund Balances (Deficits):

Nonspendable 68,037.22 68,037.22 68,037.22 Committed:

Board Policy Reserve 2,628,248.00 2,628,248.00 2,628,248.00 Other 2,316,241.48 2,316,241.48 2,316,241.48

Total Fund Balances 5,012,526.70 . 5,012,526. 70 5,012,526.70 Total Liabilities and Fund Balances $ 5,664,396.85 $ 5,664,396.85

GOVERNMENT-WIDE STATEMENT-NET POSITION Net Position:

Net Investment in Capital Assets, Net of Related Debt 52,264.40 52,264.40

Restricted Unrestricted (443,192.02) (443,192.02)

Total Net Position $ 52,264.40 • $ (443,192.02) • $ 4,621,599.08 .

• Column totals should agree to Exhibit II column totals.

Note A: Transfers between accounts in TTSTC pending

• The accompanying notes to the financial statements are an integral part of this statement.

IV-7

UNAUDITED

Texas State Board of Public Accountancy • Exhibit A-1 - Balance Sheet- All General and Consolidated Funds

July 31,2019

(1000) (0858) (1009) Total

U/F {1 002) U/F (7106, 61 06) U/F (1009, 2858) (EXH I) ASSETS

Current Assets: Cash and Cash Equivalents:

Cash on Hand $ 708.34 $ 180.00 $ 12,385.50 $ 13,273.84 Cash in Bank - Treasury Safekeeping Trust 500.00 190.00 9,600.00 10,290.00 Cash in State Treasury 15,437.30 45,015.14 1,211,162.63 1 ,271 ,615.07 Repurchase Agreement- Treasury Safekeeping Trust 96,190.70 837,591.76 3,367,398.26 4,301 '180.72

Due From Other Funds Consumable Inventories 68,037.22 68,037.22

Total Current Assets 112,836.34 882,976.90 4,668,583.61 5,664,396.85

Non-Current Assets: Total Noncurrent Assets

Total Assets $ 112,836.34 $ 882,976.90 $ 4,668,583.61 $ 5,664,396.85

LIABILITIES AND FUND BALANCES Liabilities:

Current Liabilities: Payables From:

Accounts Payable $ $ $ 115,820.46 $ 115,820.46 Payroll Payable 305,841.10 305,841.10 Refunds Payable 148.25 148.25

Due To Other Funds 117,224.00 117,224.00 Funds Held for Others 112,836.34 112,836.34

Total Current Liabilities 112,836.34 539,033.81 651,870.15

Non-Current Liabilities: lnterfund Payables

Total Non-Current Liabilities • Total Liabilities 112,836.34 539,033.81 651,870.15

FUND FINANCIAL STATEMENT-FUND BALANCES Fund Balances (Deficits):

Nonspendable 68,037.22 68,037.22 Committed:

Board Policy Reserve 2,628,248.00 2,628,248.00

Other 882,976.90 1,433,264.58 2,316,241.48

Total Fund Balances 882,976.90 4,129,549.80 5,012,526.70 Total Liabilities and Fund Balances $ 112,836.34 $ 882,976.90 $ 4,668,583.61 $ 5,664,396.85

Check Figures: Total Assets- Total Liab =Total Fund Balances

• The accompanying notes to the financial statements are an integral part of this statement.

IV-8

•

•

UNAUDITED

Texas State Board of Public Accountancy Exhibit II- Combined Statement of Revenues, Expenditures, and Changes in Fund Balances/Statement of Activities- Governmental Funds For the Month Ending July 31, 2019

The accompanying notes to the financial statements are an integral part of this statement.

IV-9

A

B

Professional Fees a.nd Services lower - State Audit expenditure in FY 2018, expert witness costs and outside legal counsel representation before SOAH cost lower, and SPR Review costs lower

Materials and Supplies higher- computer equipment expensed


IV-10

•

UNAUDITED


• Exhibit J-1 - Combining Statement of Changes in Assets and Liabilities Agency Funds July 31, 2019

Beginning Ending Balance Balance

September 1, 2018 Additions Deductions July 31, 2019

UNAPPROPRIATED RECEIPTS General Revenue Fund (0001} UJF (0002} ASSETS

Current Cash on Hand $ 6,100.00 $ 22,155.04 $ 27,546.70 $ 708.34 Cash in Bank - Trust 200.00 6,868.96 6,568.96 500.00 Cash in State Treasury 244,096.32 228,659.02 15,437.30 Repurchase Agreement- Treasury Safekeeping Trust 66,267.86 1,685,785.16 1,655,862.32 96,190.70 Due From Other Funds

Total Assets $ 72,567.86 $ 1,958,905.48 $ 1,918,637.00 $ 112,836.34

LIABILITIES Current

Payables $ $ $ $ Funds Held for Others 72,567.86 1 ,958,905.48 1,918,637.00 112,836.34

Total Liabilities $ 72,567.86 $ 1 ,958,905.48 $ 1,918,637.00 $ 112,836.34

Local Jurisdictions Sales Tax {0882} U/F {0882} ASSETS

Current Cash on Hand $ $ $ $ Cash in Stale Treasury Short Term Investments • Total Assets $ $ $ $

LIABILITIES Current

Payables $ $ $ $ Funds Held for Others

Total Liabilities $ $ $ $

TOTALS- ALL AGENCY FUNDS

ASSETS Current

Cash on Hand $ 6,100.00 $ 22,155.04 $ 27,546.70 $ 708.34 Cash in Bank - Trust $ 200.00 $ 6,868.96 $ 6,568.96 $ 500.00 Cash in State Treasury 244,096.32 228,659.02 15,437.30 Repurchase Agreement- Treasury Safekeeping Trust 66,267.86 1,685,785.16 1,655,862.32 96,190.70 Due From Other Funds

Total Assets $ 72,567.86 $ 1,958,905.48 $ 1 ,918,637.00 $ 112,836.34

LIABILITIES Current

Payables $ $ $ $ Funds Held for Others $ 72,567.86 $ 1,958,905.48 $ 1,918,637.00 112,836.34

Total Liabilities $ 72,567.86 $ 1 ,958,905.48 $ 1,918,637.00 $ 112,836.34


• IV-11

Texas State Board of Public Accountancy 5th Year Accounting Scholarship Payments FY 19 State Universities For the Month Ending July 31, 2019 • FY 2019

BEGINNING FUND BALANCE -September 1, 2018 $ 774,253.65

Total Scholarship Fund Revenue $ 637,174.40

State Pass Through Expenditures (EXH A-2)

State University Payments:

Angelo State University $ 8,606.00 Lamar University 3,248.50 Prairie View A&M University 3,000.00 Sam Houston State University 13,970.00 Stephen F. Austin State University 12,841.00 Tarleton State University 3,000.00 Texas A&M University 39,715.65 Texas A&M University- Corpus Christi 8,691.00 Texas A&M University- San Antonio 3,000.00 Texas A&M University- Texarkana 2,465.00 Texas State University 25,057.00 Texas Tech University 23,400.00 University of Houston 56,015.00 University of Houston -Victoria 4,848.00 University of North Texas 18,202.00 University of North Texas at Dallas 3,000.00 University of Texas at Arlington 20,000.00 University of Texas at Austin 33,923.00 University of Texas at Dallas 56,324.00 University of Texas at El Paso 14,272.00 University of Texas at San Antonio 4,500.00 University of Texas Rio Grande Valley 18,005.00 University of Texas at Tyler 4,472.00 West Texas A&M University 3,000.00

Total State University Payments $ 383,555.15

State University Refunds: • Total State University Refunds

State Pass Through Expenditures (EXH A-2) $ 383,555.15

conttnueo

Intergovernmental Payments (EXH A-2) Junior College/ Private University Payments: Austin Community College $ 3,000.00

Abilene Christian University 6,000.00

Baylor University 26,269.00

Dallas Baptist University 4,000.00

Hardin-Simmons University 3,000.00

Houston Baptist University 5,319.00

Houston Community College System 3,800.00

University of Mary Hardin-Baylor 3,000.00

Mountain View College 3,706.00

Schreiner University 6,000.00

Southern Methodist University 24,729.00

St. Edward's University 10,668.00

Texas Christian University 24,295.00

Texas Lutheran University 6,000.00 Trinity University 12,000.00 University of the Incarnate Word 3,000.00

Total Junior College/ Private University Payments: $ 144,786.00

Junior College/ Private Univ. Refunds:

Total Junior College/ Private University Refunds: $

Intergovernmental Payments (EXH. A-2) 144,786.00

Other Financing Sources/Uses

Scholarship Refunds (110.00)

Total Other Financing Sources/Uses (EXH. A-2) $ (110.00) • ENDING FUND BALANCE- July 31, 2019 $ 882,976.90

IV-12 0:\FINANCIAL STATEMENTS\FY 19\Schotarship Payments 0719.xls

UNAUDITED

TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY

• SCHEDULE B STATEMENT OF PENAL TIES ASSESSED I CONTRIBUTIONS For the Month Ending July 31,2019

INTEREST/ ADMIN RTN CKFEES

DAC PENALTY OVERPAYMENT STATUS 19160 37700 19920/31100 TOTAL

BEGINNING BALANCE- September 1, 2018 $6,048.26 $68,318.36 $65.57 $74,432.19

ADD: Penalties Assessed \Contributions: Omodele, Boluwaji Sept-18 558.07 558.07 Rincon, Albert J. Sept-18 10,000.00 10,000.00 Batley, Gayle W. & Firm Sept-18 66,890.68 25,000.00 91,890.68 Thakkar, Mahesh K. & Firm Sept-18 3,785.67 60,000.00 63,785.67 J. A. Garrison Firm Sept-18 1,000.00 1,000.00 Weaver & Tidwell, LLP Sept-18 171.20 22,500.00 22,671.20 Freeman, Ricky Collin Oct-18 2,735.00 2,735.00 Weaver, Don C. Nov-18 764.80 10,000.00 10,764.80 Guerrero, Edward F. Nov-18 278.00 1,250.00 1,528.00 Turner, Julie L. Nov-18 501.04 1,000.00 1,501.04 Jankowski, Alexis M. Nov-18 968.49 1,000.00 1,968.49 Bleifeld, Brian Nov-18 419.10 500.00 919.10 Knebel, Walter B. Nov-18 541.22 500.00 1,041.22 BOO USA, LLP Dec-18 63,757.00 85,000.00 148,757.00 Waggoner, Paul D. Dec-18 163.88 2,000.00 2,163.88 Dilbeck, Jill D. Jan-19 235.40 235.40 Tomz, Jeffrey W. Jan-19 258.60 25,000.00 25,258.60 Reyna, Guillermo Jan-19 437.00 10,000.00 10,437.00 Hill, James H. Jan-19 387.08 387.08 Bauer, Christopher Apr-19 10,000.00 10,000.00 Jamieson, Jeffrey W. Apr-19 10,000.00 10,000.00

Jones Jr., Silas Taylor May-19 409.69 10,000.00 10,409.69 Moriss, Don B. Jun-19 163.88 2,500.00 2,663.88

Dockery, Dennis W. & Firm Jun-19 163.88 1,500.00 1,663.88

Ray, Joshua D & Firm Jun-19 308.28 308.28 Long, Debra Lou & Firm Jul-19 476.87 476.87

TOTAL PENALTIES ASSESSED\ CONTRIBUTIONS 151 639.83 281 485.00 0.00 433 124.83 • LESS: Payments Received: Omodeie, Boluwaji Sept-18 pp (558.07) (558.07) Williford, Gregory S. Sept-18 pp (208.34) (208.34)

J. A. Garrison Firm Sept-18 PIF (1 ,000.00) (1,000.00)

Rincon, Albert J. Oct-18 PIF (1 0,000.00) (1 0,000.00) Batley, Gayle & Firm Oct-18 PIF (66,890.68) (25,000.00) (91,890.68)

Williford, Gregory S. Oct-18 pp (208.34) (208.34)

Weaver & Tidwell, LLP Oct-18 PIF (171.20) (22,500.00) (22,671.20)

Freeman, Ricky Collin Oct-18 pp (1,000.00) (1,000.00)

M&K CPAs PLLC Nov-18 PIF (4,500.00) (4,500.00)

Mock, Ronald Nov-18 pp (1 ,000.00) (1 ,000.00)

Manis, Mathew Nov-18 pp (800.00) (800.00)

Ridenour, Jon Eric Nov-18 pp (600.00) (600.00)

Williford, Gregory S. Nov-18 PP {208.36) (208.36) Hill, James M. Nov-18 PIF (387.08) (387.08)

Bleifeld, Brian Nov-18 PJF (410.10) (500.00) (910.10)

BOO USA, LLP Dec-18 PIF (63,757.00) (85,000.00) (148,757.00)

Waggoner, Paul D. Dec-18 PIF (163.88) (2,000.00) (2,163.88)

Williford, Gregory S. Dec-18 PIF (208.34) (208.34) Guerrero, Edward F. Dec-18 PIF (278.00) (1,250.00) (1 ,528.00) Knebel, Walter Dec-18 PIF (541.22) (500.00) (1,041.22)

Williford, Gregory S. Jan-19 pp (208.34) (208.34) Deaver, Don C. Jan-19 pp (5,000.00) (5,000.00} Turner, Julie Jan-19 pp (250.00) (250.00)

Jankowski, Alexis M. Jan-19 PP (1,000.00) (1 ,000.00)

Mock, Ronald Feb-19 pp (1 ,000.00} (1,000.00)

Manis, Mathew Feb-19 PP (800.00) (800.00)

Ridenour, Jon Eric Feb-19 pp (600.00) (600.00)

Williford, Gregory S. Feb-19 pp (208.96) (208.96)

Dilbeck, Jill D. Feb-19 PIF (235.40) (235.40}

Tomz, Jeffrey W. Feb-19 PP (258.60) (6,500.00) (6,758.60) Reyna, Guillermo Feb-19 PP (7,500.00) (7,500.00) Turner, Julie Feb-19 pp (250.00) (250.00)

Jankowski, Alexis M .. Feb-19 PIF (968.49) (968.49) Freeman, Ricky Collin Mar-19 PIF (985.00) (985.00) Williford, Gregory S. Mar-19 pp (208.96) (208.96)

• Bleifeld, Brian Mar-19 PIF (9.00) (9.00)

Bauer, Christopher Apr-19 PIF (10,000.00) (10,000.00)

Jamieson, Jeffrey W. Apr-19 PIF (10,000.00) (1 0,000.00) Mock, Ronald Apr-19 pp (1,000.00) (1 ,000.00)

Williford, Gregory S. Apr-19 pp (208.34) (208.34) Mock, Ronald May-19 pp (1,000.00) (1,000.00) Manis, Mathew May-19 pp (800.00) {800.00)

0;\FINANCIAL STATEMENTSIFY 19\PEN 0719.xls IV-13

UNAUDITED

TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY

SCHEDULE B STATEMENT OF PENALTIES ASSESSED I CONTRIBUTIONS For the Month Ending July 31, 2019

Ridenour, Jon Eric Williford, Gregory S. Moriss, Don B. Dockery, Dennis W. & Firm Ray, Joshua D & Firm Long, Debra Lou & Firm Mock, Ronald Williford, Gregory S.

TOTAL PAYMENTS RECEIVED

Adjustments: McAleer, Kevin W. {debt uncollectable) Blessing, Bradley {Refund of Overpayment)

TOTAL ADJUSTMENTS

Referred to OAG Enforcement for Collection: Hill, Rita B. & Firm Thakkar, Mahesh J. & Firm Deaver, Christopher

TOTAL REFERRED TO ENFORCEMENT

ENDING BALANCE- July 31, 2019

Note: PIF =Paid in Full, PP = Partial Payment, and REF=Refund

0:\FINANCIAL STATEMENTS\FY 19\PEN 0719.xls

DAC STATUS 19160

May-19 pp May-19 pp Jun-19 PIF {163.88) Jun-19 PIF (163.88) Jun-19 PIF {308.28) Jul-19 PIF {476.87) Jul-19 PP Jul-19 PP

(145,741.63)

0.00

Nov-18 Feb-19 (3,785.67) Jul-19 {764.80)

(4,550.47)

$7,395.99

IV-14

• INTEREST/ ADMIN RTN CKFEES

PENALTY OVERPAYMENT 37700 19920/31100 TOTAL

{600.00) {600.00) {208.34) {208.34)

(2,500.00) (2,663.88) {1,500.00) (1,663.88)

(308.28) (476.87)

(2,000.00) (2,000.00) (416.68) (416.68)

(201,228.00) 0.00 (346,969.63)

{5,000.00) (5,000.00) 9.43 9.43

(4,990.57) 0.00 (4,990.57)

(10,000.00) {10,000.00) (60,000.00) {63,785.67)

(5,000.00) (5,764.80)

(75,000.00) 0.00 (79,550.47)

$68,584.79 $65.57 $76,046.35

•

•

• 0:\F!NANCIAL STATEMENTS\FY 19\MBS07!9.xls

IV-15

Texas State Board of Public Accountancy Encumbrance Budget

From 7/1/2019 Through 7/31/2019

Current Period %Budget Account Code Account Title Revenue YTD Revenue Total Budget Variance Remaining

01LIC CPA License

11000 3175- CPA License 4,297.00 65,614.94 0.00 65,614.94 (100.00)%

11002 3175 - CPA License- Retired 1,080.00 9,555.00 0.00 9,555.00 (100.00)%

11003 3175 -CPA License -Disabled 105.00 450.00 0.00 450.00 (100.00)%

11300 3175 OL-CPA License 342,867.01 3,377,665.93 3,814,015.00 (436,349.07) 11.44%

!1301 3175 - OL- CPA License -Retired 15,615.00 130,347.00 0.00 130,347.00 (100.00)%

11302 3175 OL- CPA License- Disabled 150.00 2 475.00 0.00 2475.00 (100.00)%

Total OILIC CPA License 364,114.01 3,586,107.87 3,814,015.00 (227,907.13) 5.98%

02SRP CPE Sponsor Review

17100 3175 - CPE Sponsor Fee 27,850.00 286,450.00 304,555.00 (18,105.00) 5.94%

17110 3175 - CPE Ethics Instructor Fee 0.00 500.00 0.00 500.00 (100.00)%

<otal 02SRP CPE Sponsor Review 27,850.00 286,950.00 304,555.00 (17,605.00) 5.78%

I

~3FOL Firm Office License

11100 3175 -Practice Units 7,435.50 117,533.28 163,171.00 ( 45,63 7. 72) 27.96%

11101 3175 - Practice Units - Refund 0.00 0.00 (56.00) 56.00 100.00%

11102 3175 -Practice Units- Online 34,637.53 337,495.95 380,733.00 (43,237.05) 11.35%

11103 3175 -Practice Units- OOS 221.00 4,605.50 0.00 4,605.50 (100.00)%

11104 3175 -Practice Units OOS- Online 800.00 24,000.00 0.00 24,000.00 (100.00)%

11200 3175 - Firm Organization Fee 1,064.40 109,837.26 136,458.00 (26,620.74) 19.50%

11202 3175 -Firm Organization Fee- Online 10,025.00 157,100.00 90,972.00 66,128.00 (72.69)%

11203 3175 -Finn Organization Fee- OOS 323.20 45,692.55 0.00 45,692.55 (100.00)%

11204 3175 -Firm Organization Fee -OOS-Online 5,110.00 222,505,00 228,206.00 (5,701.00) 2.49%

Total 03FOL Firm Office License 59,616.63 1,018,769.54 999,484.00 19,285.54 (1.93)%

04LPF Late Payment Fees

11050 3175- CPA Penalty 6,403.00 128,455.50 230,087.00 (10 1,631.50) 44.17%

11052 3175- CPA Penalty- Retired 585.00 4,147.00 0.00 4,I47.00 (100.00)%

11 I 50 3 I 75 -Practice Unit (Off. Fee) Penalty 900.00 I5,IOO.OO 23,303.00 (8,203.00) 35.20%

1115I 3 I 75- Practice Unit Pen. Ref 0.00 0.00 (167.00) 167.00 100.00%

11152 3175 - Practice Unit Pen -Online 4,950.00 54,950.00 54,3 73.00 577.00 (1.06)%

11153 3175 -Practice Unit Pen Online- OOS 400.00 4,950.00 0.00 4,950.00 (100.00)%

11400 3175 OL- CPA Penalty 8,374.50 84,304.50 0.00 84,304.50 (100.00)%

1140! 317 5 OL - CPA Penalty - Retired 322.50 4,311.00 0.00 4,3 I 1.00 (100.00)%

11402 3175 - OL- CPA Penalty -Disabled 7.50 217.50 0.00 217.50 (100.00)%

15050 317 5 - Section 14 Penalty 0.00 0.00 0.00 0.00 0.00%

Date: 8/2.10:51 PM Agency-Wid.ue (Selected Groups) .e:1

• • • Texas State Board of Public Accountancy

Encumbrance Budget

From 7/l/2019 Through 7/3112019

Current Period %Budget Account Code Account Title Revenue YTD Revenue Total Budget Variance Remaining

Total 04LPF Late Payment Fees 21,942.50 296,435.50 307,596.00 (11,160.50) 3.63%

05CBT Exam Fees- CBT

24100 3175 -Evaluation Fee (AOI) 7,540.00 67,560.00 75,440.00 (7,880.00) 10.44% 24300 317 5 - Transfer of Credit In 3,510.00 6,910.00 3,202.00 3, 708.00 (115.80)% 24400 3175 -Exam Eligibility Fee- AUD 4,000.00 4,200.00 0.00 4,200.00 (100.00)% 24402 3175 - OL Exam Eligibility Fee- AUD 3,180.00 43,500.00 44,046.00 (546.00) 1.23% 24500 3175 -Exam Eligibility Fee- BEC 0.00 0.00 0.00 0.00 0.00% 24502 3175 - OL Exam Eligibility Fee- BEC (120.00) 36,350.00 48,415.00 (12,065.00) 24.91% 24600 3175- Exam Elibility Fee- FAR 0.00 0.00 0.00 0.00 0.00% 24602 3175- OL Exam Eligibility Fee- FAR 10.00 46,170.00 39,677.00 6,493.00 (16.36)% 24700 3175 -Exam Eligibility Fee- REG 0.00 0.00 0.00 0.00 0.00% 24702 3175 - OL Exam Eligibility Fee- REG liQ.OO 38,610.00 42,692.00 (4,082.00) 9.56%

;=:rotai05CBT Exam Fees - CBT 18,180.00 243,300.00 253,472.00 (10,172.00) 4.01% I

:::jJGOTH Other Collections

12000 3175 -Public Accountant Lie. 0.00 15.00 56.00 (41.00) 73.21% 12010 3175 -Certificate Fee 8,800.00 80,700.00 97,480.00 (16, 780.00) 17.21%

12011 3 1 7 5 - Certificate Fee Refund 0.00 0.00 (56.00) 56.00 100.00% 15000 3175- Section 14 License 0.00 56.00 311.00 (255.00) 81.99% 16000 317 5 - Reciprocal Registration 6,400.00 62,220.00 32,150.00 30,070.00 (93.53)% 17000 3175 -Temporary Practice 0.00 200.00 0.00 200.00 (100.00)% 19140 3770- Admin. Pen.- Other Cases 0.00 0.00 0.00 0.00 0.00% 19160 3802-DAC- Other Cases 476.87 145,741.63 38,320.00 107,42163 (280.32)% 19930 3 777-Voided Warrants-SOL 0.00 927.97 0.00 927.97 (100.00)%

23050 3175 -Transfer of Credit Out 6,090.00 14,680.00 8,802.00 5,878.00 (66.78)% 25000 3 8 52 - Interest Income 7,932.00 71,372.30 18,353.00 53,019.30 (288.88)% 25002 3853 -Interest on Judgments 0.00 0.00 0.00 0.00 0.00% 31020 3719- Sales ofLists 78.00 1,064.00 2,108.00 (1,044.00) 49.52% 31040 3719- Miscellaneous Copies 0.00 0.00 224.00 (224.00) 100.00% 31100 3775- Returned Check Fees 0.00 180.00 267.00 (87.00) 32.58% 32100 3 802 - Lettering Of CPA Cert. 150.00 1,700.00 3,162.00 (1,462.00) 46.23% 32111 3802- Lettering of CPA Cert. Refd 0.00 0.00 (56.00) 56.00 100.00% 34100 3 802 - AICP A Regrades _ ____Q,QQ_ 240.00 0.00 240.00 (100.00}%

Total 060TH Other Collections 29,926.87 379,096.90 201,121.00 177,975.90 (88.49)%

Report Total 521,630.01 5,810,659.81 5,880,243.00 (69,583.19) 1.18%

Date: 8/23/19 04:10:51 PM gency- vv rde Revenue (Selected Gxoups) Page: 2

TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY Expenditure Budget Summary

September 1, 2018- July31, 2019 Target Percentage = 8.33%

Agencl:-wide Budget • Current Period YTD Annual %Budget Actual Encumbrance Actual Budget Remaining Variance

Committed Budget

Enforcement Case Budget:

Professional Services Contracts ($2,065) $ $12,859 $325,000 96.04% $312,141 Attorney General's Office $575 $ $5,753 $39,015 85.25% $33,262 SOAH $0 $ $16,960 $26 010 34.79% $9 050

Total Enforcement Case Budget ($1,490) $35 572 $390,025 90.88% $354,453

Information Systems - Professional fees $2,898 $ $89,472 $77,287 -15.77% ($12, 185) Information Systems -Capital Outlay $0 $ $0 $36,579 100.00% $36,579

Sponsor Review Pro_gram $16,840 $ $173,743 $288,652 39.81% $114,909

Operating Budget $265,788 $ $ 3,223,603 $3,668,481 12.13% $444,878

TARGET 8.33%

YTD Surplus/Deficit 3.80% $139,294 Indirect Costs Budget

Payroll Related Costs $78,644 $ $840,863 $990,913 15.14% $150,050

Building Rent $5,666 $ $62,324 $103,226 39.62% $40,902 Audit $0 $ $0 $0 0.00% $0

SORM Assessment $0 $ $2,554 $7,668 66.69% $5,114 Statewide Cost Allocation $13,070 $ $143,765 $136,787 -5.10% ($6,978) Total Indirect Costs Budget $97,380 $ $1,049,506 $1,238,594 15.27% $189,088

Total Agency Budget $381,416 $ $4 571 896 $5,699,618 19.79% $1 127,722

De(1artmental Budget

Current Period YTD Annual %Budget

Actual Encumbrance Actual Budget Remaining Variance

CPE $14,569 $ $149,483 $199,275 24.99% 49,791

Licensing $62,981 $ $642,473 $655,449 1.98% 12,976

Qualifications $48,263 $ $521,918 $527,385 1.04% 5,467

Enforcement $70,341 $ $865,894 $979,732 11.62% 113,839 • Enforcement - Prof Svc Contracts ($2,065) $ $12,859 $225,000 •94.28% 212,141

Enforcement - AG $575 $ $5,753 $39,795 85.54% 34,043

Enforcement- SOAH $0 $ $16,960 $26,530 36.07% 9,570

Peer Review $4,709 $ $78,333 $122,929 36.28% 44,596

Sponsor Review Program $16,840 $ $173,743 $288,652 39.81% 114,909

Public Education $13,701 $ $274,858 $484,042 43.22% 209,184

Central Administration $26,179 $ $302,723 $469,702 35.55% 166,979

Financial & Personnel $37,098 $ $418,889 $507,524 17.46% 88,636

Information Resources $64,270 $ $846,755 $925,819 8.54% 79,065

Operating Support $23 954 $ ~261,256 $247 783 -5.44% {13,473) Total Agency Budget $381,416 $ $4,571,896 $5,699,618 19.79% 1,127,722

Proof (Dept Total= Agency Total) $0 $0 $0 $0 0.00% $0.00

• 0:\FINANCIAL STATEMENTS\FY 19\MBS0719.xls

IV-18

Account Code Account Title

F0410 Debt Service -Interest LlOOl Sal & Wages- ComJ2. Per Diem_,_. Ll002 Sal & Wages- Employees

Ll003 Sal & Wages -Ben Replace Pay

M9000 Payroll Related Costs (I C) M9010 Payroll Related Costs - Unemp. N2005 Prof Fees-Legal Services-Major

N2007 Prof Fees- Fin!Acctg. Svcs. N2008 Prof Fees -Expert Witnesses

N2009 Prof Fees- PROB N2010 Prof Fees- SOAH

N2011 Prof Fees -Computer

R2001 Communication & Utilities

S2001 Repairs & Maint-Annual Couts. S2005 Repairs & Maintenance- Other

T2001 Rentals & Leases-Furn/Eqpt

T2004 Rentls & Leases-Fum/Eqpt SIC T2013 Rental & Leases-Other Space T2015 Rental & Leases - SIC

T2018 Rental & Leases-Ofc Bldg (IC) U2001 Printing & Reproduction

U2002 Printing of Board Report

W2001 OOE- Membership Fees

W2003 OOE- Registration Fees

W2007 OOE - Freight/Delivery Svc. W2009 OOE - Convention Center Labor

Date: 8/23.11:17 PM

Texas State Board of Public Accountancy Encumbrance Budget

Current Period Expenditures

0.00 (330.00)

3,169.91

(2,139.09)

0.00

1,633.90

0.00

717.80

0.00

5,665.83

1,031.56

0.00

0.00

275.00

172.23

0.00

From 7 /I /2019 Through 7/31/20 19

34,733.72 0.00

62,731.29 0.00

1,088.40 0.00

17,972.90 0.00

4,429.95 0.00

8,004.97 0.00

7,950.00 0.00

62,324.14 0.00

23,627.28 0.00

5,865.40 0.00

7,050.00 0.00

10,615.00 0.00

17,017.61 0.00

1,854.00 0.00

·y-Wide

40,007.13

74,055.00

8,457.90

21,953.43

5,306.04

10,323.60

7,632.17

103,226.00

48,709.44

10,404.00

9,129.59

13,861.00

2,270.04

2,459.96

5,273.41

11,323.71

7,369.50

3,980.53

876.09 2,318.63

/ ;c tl\ .. \ u.'~.c;OI~

%Budget Remaining

(100.00)%

~ [[)

(317.83).

40,901.86

25,082.16

4,538.60

2,079.59

3,246.00

(14,747.57)

605.96

.e:l

• Account Code Account Title

W2011 OOE -Monitoring A! ann System W2013 OOE- Employee Awards

W2020 OOE - Other Fees & Charges W2021 OE- TX Online Processing Fees W2026 OOE - Court Reporters W2027 OOE-Statewide Cost Alloc. (IC)

W2028 OOE-SORM Assessments W2029 PUB - Public Assistance Pymts W3000 State Pass-Through Expenditures

W3010 Intergovernmental Payments

X5005 Capital Outlay-Computer

Report Total

< I N ~

Date: 8/23119 04:11:17 PM

Current Period

• Texas State Board of Public Accountancy

Encumbrance Budget

From 711/2019 Through 7/31/2019

YTD YTD Expenditures Expenditures Encumbrances Total Budget

0.00 3,409.90 0.00 3,448.93

190.00 1,077.00 0.00 1,061.21

2,901.61 49,680.59 0.00 31,836.24

12,892.17 140,341.55 0.00 162,551.24

0.00 0.00 0.00 1,061.21

13,069.58 143,765.41 0.00 136,787.00

0.00 2,553.90 0.00 7,668.00

0.00 107,500.00 0.00 116,361.46

0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00 0.00 0.00 36,579.00

381,415.79 4,571,896.03 0.00 5,699,617.86

Agency-Wide

• %Budget

Variance Remaining

39.03 1.13% OK. (15.79) (1.48)% ()(E)

(17,844.35) ~56.05)% . ;

22,209.69 13.66%·/

1,061.21 100.00%,/

(6,978.41) (5.10)% O!t<. 5,114.10 66.69% v' 8,861.46 7.61%,/

0.00 0.00%~ 0.00 0.00%

36,579.00 100.00%/

1,127,721.83 19.79%

Page: 2

TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY Budget Variance Explanations For the Eleven Months Ending July 31, 2019

Ref.

< I N N

A

B

c

D

Budget Item

Operating Budget

Sal & Wages- Comp Per Diem

Prof Fees - Computer

OOE - Freight/Delivery Svc.

OOE - Other Fees & Charges

Note A:

Rentals and Leases - Ofc Bldg.

subtotal

OOE- Statewide Cost Allocation (SWCAP)

Total

BVE.Y19

Budget

$ 3,668,481

$ 6,353

$ 77,287

$ 2,270

$ 31,836

Actual Difference Explanation

$ 3,223,603.00 $ 444,878.00 12.13% budget remaining versus 8.33% target level

$ (1,980.00} $ 8,333.45 131.16% budget remaining: JE required; actual amount for FY 19 = $5,430.

$ 89,472.31 $ (12, 185.09) -15.77% budget remaining: exam certification issuance web application ($6,512) and

network, server, and workstation support ($5,838.30 p/mo)

$ 17,017.61 $ (14,747.57) -649.66% budget remaining: relocation of DR servers and racks to Austin Data Ctr.

$14,920.91

$ 49,680.59 $ (17,844.35) -56.05% budget remaining: lump sum payment for D&O insurance; mail services

contract (new for FY 2019), temporary servic;~l) __

I Budget I Actuai(Est:) I

$

$

$

192,096 per rent contract due to TBPC 103,226 $ $ ~ • (124, 1 06) rent portion in SWCAP paid to Comptroller (FY 19 amounts) • 67,990 net rent due to TBPC

136,787 $

240,013 $

156,835 per actual SWCAP due to Comptroller (FY 19 amounts)

224,825 I$ 15,1881

• •

•

•

•

Agenda Item IV


September 18, 2019

B. Fiscal Matters:

• Fee Schedule- FY 2020

DISCUSSION: Mr. B. Pella will present for approval the Board's Fee Schedule for FY 2020.

RECOMMENDATION: The staff recommends approval of the fee schedule for FY 2020 in accordance with the Board Policy Statement- Fees dated November 19, 2009.

SUGGESTED MOTION: That the Board's Fee Schedule for FY 2020 be approved as presented .

IV-23

•

•

• IV-24

•

•

•

TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY FEE SCHEDULE FOR FISCAL YEAR 2020

DESCRIPTION

CPA License Annual (Sec. 901.154 & Rule 521.11 Scholarship Fee [Sec. 901.155 & Rule 521.11

PA/Out·of·State/Foreign Registration [Sec. 901.1541 Annual [Sec. 901 .1541 Scholarship Fee [Sec. 901.1551

Retired/Disabled License (Sec. 901.409 & Rule 521.81 Office License Fee [Sec. 901 .159 (b), Rule 521.131

(formerly Practice Unit Fee) Firm Organization Fee [Sec's. 901.154 & 901 .351, Rule 521.131

effective December 6, 2001, revised effective September 1, 2015 Per number of CPA employees and non-CPA owners

1 2-5 6-9 10-49 50+

Out-of-State/Foreign Registration [Sec. 901.355 & Rule 513, 521.41 Reciprocal Registration

Annual [Sec. 901.154 & Rule 521.31

Late Penalty· Individual CPA [Sec. 901.4051 1-90 days 91 days - 1 year 1 year- 2 years

Late Penalty· Practice Unit [Sec. 901.351 (e) (3) & Rule 521.13] 1-90 days over 90 days

Certificate Fee· Issuance [Sec. 901 .257 & Rule 521.91 effective January 1, 2000 (was $30)

Exam Filing Fee (Application of Intent) [Sees. 901.302, 901 .303 & Rule 521.12 Exam Eligibility Fee per part NASBAIAICPA NASBA!AfCPA

[Sec. 901.304 & Rule 521.141 Auditing and Attestation Business Environment and Concepts Financial Accounting and Reporting Regulation

Sponsor Review Program [Rule 523.144] 1 -4 courses 5 • 1 0 courses 11 - 40 courses 41+ courses

IOEX Application Fee (same as Reciprocal) [Rule 512.61 Annual [Sec. 901.154 & Rule 521.31

Transfer of Credit (Out) [Sec. 901 .258 & Rule 521.71 effective January 1, 2000 (was $25)

Transfer of Credit (In) [Sec. 901 .258 & Rule 521.71 Sale of Lists [Rule 521.61 Public Records [Rule 521.61 Replacement CPA Certificate [Rule 521 .111 effective February 4, 2004(was $30}

Review of Papers: [Rule 511.791 AICPA Review SetVice- for AUD, FARE, REG: $200 each AICPA Review SetVice- for BEC: $150

1,000 1,500 2,500

a $60 effective March 2005 licensees (January 12, 2005 Board Meeting, rule effective February 1, 2005) $45 effective January 20071icensees (November 9, 2006 Board Meeting, rule effective November 29, 2006) $30 effective September 2008/icensees (July 24, 2008 Board Meeting, rule effective August 17, 2008) $41 effective November 20121icensees (September 20, 2012 Board Meeting, rule effective October 10, 2012) $47 effective October 2014/icensees (September 18, 2014 Board Meeting, rule effective October 8, 2014) $56 effective September 2015/icensees (July 23, 2015 Board Meeting, no rule change required) $65 effective September 2019/icensees idY.!Y 18, 2019 Board Meeting, no rule change reqwred)

b effective February 1, 2005

effective September 20151icensees (July 23, 2015 Board Meeting, rule effective August 12, 2015)

MAXIMUM

PAA

$125 $10

$125 $10

by rule $200

$25 $25 $25 $25 $25

$250

$250

99.00 132.00 198.00

by rule by rule

$50

$100

nla n/a nla nla

n/a nla nla nla

$250 $50

$100 n/a n/a

$50

n/a n/a

From $35 pip to $15 pip effective September 1, 2008 (July 24, 2008 Board Meeting, rule effective August 17, 2008)

From $15 pip to $20 pip effective September 1, 2012 (July 19, 2012 Board Meeting, rule effective August 8, 2012)

From $20 pip to $10 pip effective September 1, 2016 (July 14, 2016 Board Meeting).

From $10 pip to $15 pip effective September 1, 2019 (July 18, 2019 Board Meeting).

as revised by TSBPA Board Mealing May 17, 2007, effective August 12, 2007.

f $15 effective October 2015/icensees (September 17, 2015 Board Meeting, rule effective October 7, 2015)

g $60 effective September 2015/icensees (July 23, 2015 Board Meeting, rule effective August 12, 2015)

$50 effective September 2016 licensees (July 14, 2016 Board Meeting.)

$60 effective September 2019/icensees (July 18, 2019 Board Meetmg.)

$60 effective October 2015 (September 17, 2015 Board Meeting, rule effective October 7, 2015)

$20 effective September 2016 (July 14, 2016 Board Meeting).

no fee change; Board Rule 521.7 revised to remove dollar amounts (September 17, 201,{3'f"r~ting) PM limits remain

no fee change: Board Rule 521.9 revised to remove dollar amounts (September 17, 201 "ti~J!f't~ting) PM limits remain

\\TSBPA·f$01\Users$\usralh\Documents\Working Files\EXCEL\FSCHED FY 2020

8120/19 09:59AM

Amount FUND D23/D24

$65 a 2858/1009 $10 6106/0858

$56 a 2858/1009 $10 6106/0858 $15 f 2858/1009

$60 g 2858/1009

$0 c nla $10 c 2858/1009 $15 c 2858/1009 $20 c 2858/1009 $25 c 2858/1009

$250 2858/1009

$100 2858/1009

99.00 a 2858/1009 132.00 a 2858/1009 198.00 a 2858/1009

$150 b 2858/1009 $250 b 2858/1009 $50 j 2858/1009

$20 h 2858/1009

$15 d 2858/1009 $15 d 2858/1009 $15 d 2858/1009 $15 d 2858/1009

$400 e 2858/1009 $400 e 2858/1009 $750 e 2858/1009

$1,250 e 2858/1009

$100 2858/1009 $40 2858/1009

$100 2858/1009 variable 2858/1009 variable 2858/1009

$50 2858/1009

pass through nla pass througiJ n/a

•

•

• IV-26

•

•

•

Agenda Item IV


September 18, 2019

C. Discussion, consideration and possible action concerning authorization for the Executive Director to enter into a lease for new office space for the agency.

DISCUSSION: The Executive Director recently advised the Board that the Texas Facilities Commission (TFC) has notified us that our agency will need to relocate our offices as they need our space for another state agency that is being expanded as a result of the last legislative session.

Rule § 115.4 of the Administrative Code requires the Executive Director to have the approval of the governing body i.e. Board to make a request to the TFC for delegated leasing authority from the TFC. Even though the TFC has advised us that we need to relocate our offices we still officially need approval from TFC to enter into a lease contract for office space.

RECOMMENDATON: Staff is recommending that the Board approve providing the Executive Director the authority to request delegated leasing authority from the TFC .

SUGGESTED MOTION: That the Board authorize the Executive Director to make arequest to the TFC for leasing authority for new office space .

IV-27

•

•

• IV-28

•

•

•

William Treacy

From: Sent: To:

Subject:

William Treacy Tuesday, August 20, 2019 2:26 PM Cavazos Manuel; Friel Lisa; Fletcher Susan; Grant Jamie; E- Hugly Donna ([email protected]); Ingram James; Johnson Ross; La Frey Timothy; Lawrence William; McAdams Robert; Morris Roselyn; Pena Ben; Pena Steve; Sharp Debra;

Wilkerson Kimberly Relocation of TSBPA Offices

We were recently notified by the Texas Facilities Commission (TFC) that our agency will need to relocate our offices in the next 12 months or so, perhaps sooner. The TFC informed us that they need our space for another state agency that is being expanded as a result of the last legislative session.

I've looked at the numbers and about half of our staff reside north and the other half south. So my first priority is to find nice office space in the central Austin area that is accessible, has sufficient parking for everyone and located to nearby places to eat. I want to do all I can to find a convenient location with accommodations that all of you will be pleased with.

I am also looking into the possibility of being able to share office space with the Texas Board of Architectural Examiners who are also being asked to relocate. I think pooling our resources with another state agency will help to maximize our accommodations.

As your executive director I want to make this move as smooth as possible. I am excited about the opportunity to have new office space and to have our offices updated to fit the agency's needs.

If you have any questions, concerns, or feedback, please feel free to contact me. I will keep all of you informed as soon as I have any new information to share.

Best regards,

Bill William Treacy Executive Director Texas State Board of Public Accountancy

512-305-7801 wtreacy@tsbpa. texas. gov

1

IV-29

•

•

• IV-30

•

•

•

Agenda Item IV


September 18, 2019

D. Update on Status of Internal Audit

DISCUSSION: Mr. B. Pena will report on the status of the internal audit program.

RECOMMENDATION: None by staff

SUGGESTED MOTION: None by staff

IV-31

•

•

• IV-32

•

•

•

TSBPA

Internal Audit Program Timeline

Beginning FY 2017

July 12, 2017- Executive Committee:

The Executive Committee discussed the internal audit plan for FY 2017 (Cash Disbursements Processing, Payable'S, and Payroll and Licensing Applications and Processing) in relation to having received notice in June of the current SAO audit in addition to the Sunset Review process.

!Committee Action:! After a discussion, Mr. Pena moved to postpone the internal audits scheduled for FY 2017 until FY 2018. Ms. Hugly seconded the motion and it was passed unanimously with a recommendation to the Board for approval.

July 13, 2017 - Board Meeting:

!Board Action:! Mr. McAdams moved to postpone the Board's scheduled internal audit from FY 2017 to FY 2018. Dr. Morris seconded the motion and it passed unanimously.

November 15, 2017 - Executive Committee:

!Committee Action:! After a discussion, Mr. McAdams moved to postpone a decision on the FY 2018 internal audit until after the State Auditor's report is received. Mr. Pena seconded the motion and it was passed unanimously with a recommendation to the Board for approval.

Attended by Monday Rufus and Robert Gonzales

November 16, 2017- Board Meeting:

!Board Action:! Mr. McAdams reported that the Committee postponed making a decision on the Board's FY 2018 internal audit until after the State Auditor's report is received.

January 24, 2018 - Executive Committee:

!Committee Action:! After a discussion, Mr. McAdams moved to accept the FY 2017 Annual Internal Audit Report. Ms. Hugly seconded the motion and it was passed unanimously with a recommendation to the Board for acceptance.

!Committee Action:! After a discussion, Ms. Hugly moved to form an ad hoc audit committee to include Mr. McAdams, Ms. Friel, and Mr. Pena to review the Board's FY 2018 internal audit program. Mr. Lawrence seconded the motion and it was passed unanimously with a recommendation to the Board for approval

January 25, 2018- Board Meeting:

!Board Action:! Mr. Cavazos moved to form an Ad Hoc Audit Committee to include Mr . McAdams, Ms. Friel, and Mr. B. Pena to review the Board's FY 2018 internal audit program. Mr. La Frey seconded the motion and it passed unanimously.

IV-33

Internal Audit Program Timeline Beginning FY 2017

March 28, 2018- Ad Hoc Audit Committee Meeting:

FY 2018 Internal Audit Plan Discussion Attended by Monday Rufus and Robert Gonzales

Mr. McAdams reported on the Board's Ad Hoc Audit Committee meeting held on March 28, 2018.

The Ad Hoc Audit Committee requested additional explanations from Mr. Rufus concerning the procedures used for the risk assessment and also requested that staff prepare a risk assessment to include mission critical and non-critical areas.

!Committee Action:! After a discussion, Mr. McAdams moved to defer FY 2018 Internal Audit pending the Ad Hoc Committee's review and consideration of additional information requested from staff. Mr. Johnson seconded the motion and it was passed unanimously with a recommendation to the Board for approval.

March 29, 2018 - Board Meeting:

!Board Action:! Mr. McAdams moved to defer the Board's FY 2018 internal audit pending the review of additional information that was requested from staff to include a risk assessment on mission critical and non-critical areas. Ms. Fletcher seconded the motion and it passed.

May 16, 2018- Ad Hoc Audit Committee Meeting:

Mr. McAdams reported on the Board's Ad Hoc Audit Committee meeting held on May 16, 2018.

The Ad Hoc Audit Committee discussed the risk assessment prepared by staff.

!Committee Action:! After a discussion, the Executive Committee determined to recommend to the Board that the internal auditor conduct a follow-up review of the State Auditor's Office audit issued in December 2017. The Committee determined that the internal audit should begin after completion of the Sunset Review and the Comptroller's Post Payment Audit.

The Ad Hoc Audit Committee also requested staff to provide its members with the last audit report of each of the items listed on the risk assessment prepared by the internal auditor.

May 17, 2018- Board Meeting:

!Board Action:! Mr. McAdams moved for the internal auditor to conduct a follow-up review of the State Auditor's Office audit issued December 2017 and that the internal audit should begin after completion of the Sunset Review and the Comptroller's Post Payment Audit. Dr. Morris seconded the motion and it passed unanimously

July 19, 2018 - Ad Hoc Audit Committee Meeting:

The Ad Hoc Audit Committee meeting was held on Thursday, July 19, at 8:30 a.m.

See recommendation of Ad Hoc Audit Committee as approved in Board Action below.

IV-34

•

•

•

•

•

•

- --------- ---------------

Internal Audit Program Timeline Beginning FY 2017

July 19, 2018- Board Meeting:

!Board Action:! Mr. McAdams moved to defer consideration of the Board's internal audit plan until mid-2019. In consideration of the audit conducted by the State Auditor's Office audit in 2017, the Sunset Review to be completed in August 2018, and the Post Payment Audit by the Comptroller's Office scheduled to begin in September 2018, the Ad Hoc Audit Committee will reconvene to consider the risk assessment after these reviews and audits are completed. Dr. Morris seconded the motion and it passed unanimously.

Note: It is anticipated that in the late fall or early winter (2019) Sunset Advisory Commission staff will conduct a follow-up review on the Board's implementation of the Sunset Report management action recommendations and HB 1520 legislation.

IV-35

TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY Audit Area History Risk Assessment Ranking Prepared by Monday N. Rufus, P.C.

§ =Internal Audit

=State Auditor's Office

= Comptrofler's Office

Proposed for FY 2018 by Internal Auditor (as revised 03/ 1312018)

Public Information

Follow-up on the State Auditor's Office Recommendations

RANK 2018 2017 2016

SAO-FY SAO-FY 1 3 8 Payroll and Personnel processes 1995 FY 1998 1999

SAO-FY SAO-FY 2 11 10 Information Systems- Loaical & Physical Security FY 1994 1999 2009

FY 2008 3 7 17 Public Information Processes FY 2005 follow up FY 2013

SAO-FY SAO-FY Comp. FY 4 1 2 Cash Disbursements 1995 1999 2000

SAO-FY 5 2 4 Licensing application and processing FY 1994 1999 FY 2011

6 9 5 CPE- Verification and Monitoring FY 1999 FY 2003 FY 2009

7 10 6 CPE- Record keeping FY 2009

< I 8 15 7 Peer Reviews (formerly Quality Reviews) FY 2001 FY 2010 FY 2016

a; SAO-FY 9 6 14 Information systems- Business Continuity FY 2004 2009 FY 2014

SAO-FY. 10 12 13 Cash Receipts and fee processing FY 1994 1995 FY 1997

SAO-FY SAO-FY 11 5 3 Enforcement- Policies and Procedures 1999 FY 2006 2009

SAO-FY 12 Performance Measures (category added March 2018) 2018

SAO-FY 13 18 16 Fixed Assets 1995 FY 1996 FY 2011

SAO-FY 14 14 1 Information Systems- System Development FY 2008 2009 FY 2016

SAO-FY 15 16 15 Qualifications- Policies, Procedures,& Verifications 1999 FY 2001 FY 2007

SAO-FY SAO-FY 16 8 11 Budgetina and Reportina FY 2008 2009 2018

17 17 18 CPE - Sponsor Review Program FY 2009 SAO-FY

18 13 9 Enforcement- Hearings 2009 SAO-FY

19 4 12 Scholarship Trust Fund for Fifth Year-Accounting FY 2012 2018 SAO-FY

20 19 19 Historically Underutilized Business (HUB) Compliance 199~ ·- ----

1\TSB. sersS\usralh\Documents\Working FHes\EXCEL\Risk Assessment Past Audits as of March 2018 •

Audit History SAO-FY SAO-FY I

FY 2003 2009 FY 2012 FY 2014 2018 FY 2010 follow FY 2015 SAO-FY

uo on SAO FY 2013 follow up 2018

Comp. FY SAO-FY Camp. FY I Comp. FY I SAO-FY FY 2002 2007 2009 2010 FY 2012 2014 2018 SAO-FY

2018

FY 2013

SAO-FY 2018

SAO-FY SAO-FY I FY 2000 FY 2007 2009 FY 2014 2018

SAO-FY FY 2013 2018

SAO-FY 2018

FY 2012 follow up FY 2015

---- -----

•

Texas State Board of Public Accountancy P: (512) 305-7802 www.tsbpa.texas.gov

From: Faison, Rebecca [mailto:[email protected]] Sent: Wednesday, September 04, 2019 9:45 AM To: Rhonda C. Fellner Subject: Prairie View A&M University Renewal Documentation - Pages 3 (revised) and page 7

Good morning Rhonda,

First, thank you for your supreme level of customer service. Per our morning conversation, please receive page 3 (revised) and page 7.

Wishing you a productive week,

Rebecca L. Faison, MBA Director, Office of Continuing Education

~ PRAIRIE VIEW ~ A&M UNIVERSITY

Northwest Houston Center 9449 Grant Road Houston, TX 77070 rlfaison@pvamu .edu [email protected] 713-790-7275

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William Treacy

.rom: Sent: To: Cc: Subject:

FY! DLW

Daniel L. Weaver Wednesday, August 28, 2019 8:44AM William Treacy Ismael Castillo FW: phone call

from: Julie Touchstone lllliru.t&l.i..UJllliJ.!J2\&l.J..2;2.'±':~:9mJShllilllJ Sent: Tuesday, August 27, 2019 2:59 PM To: TSBPA Licensing Subject: phone call

I just want to say that Cheryl Turner just helped me and she was very nice and professional. It was a pleasure to speak with her.

Thanks Julie Touchstone

&elp us find the cause and cure of childhood brain tumors and save a child's life!

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8/14/2019 • Donna Hiller

Director of Qualifications

I am now, hopefully, a few weeks away from becoming a CPA. I am currently studying for my

last test (BEC) which I plan on taking at the end of the month. It has been a long and challenging

process, and I am quite excited for it to be over. The culmination of years of hard work is finally

upon me and I will soon be able to write my name " 1 CPA". Looking back at the

last 9 to 10 months I have learned so much about the accounting profession and about myself.

The exams, along with the sobriety, have been the most difficult test I have put myself through

so far and I find myself coming out on top. This process has taught me so much about how hard •

work and determination do payoff. It has allowed me to experience new levels of confidence in

myself to do the necessary work to achieve my ultimate goals. It has also allowed me to see

that I very much enjoy the accounting field and I think I picked the right profession. I look

forward to new experiences in different accounting fields so I can expand my knowledge and

capabilities. I am enjoying the ride to becoming the best CPA that I can be.

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From: Sent: Mondav. August 05, 2019 9:55 AM To: Subject: Accolades to your qualification staff

from: Johnson, Jennifer ~==="='-'='·"'-"'-'-'"-'"'-="c;_"_,,""-'"'"'-' Sent: Friday, August 02, 2019 9:41AM To: Donna Hiller Subject: Accolades to your qualification staff

Hi Donna

I just wanted to reach out and say thanks to your qualifications team. Tina and Gilbert and Sandra and everyone on the team has been really great about getting back to us and our students really fast with any questions that the students have had. I know your team gets so many questions and so much traffic- but I can really see an increase in how

quickly your team is responding to students and able to answer questions. That really helps to put students minds at ease as they go through the process.

Just wanted to let you know so you can share that with them. Thanks

Jennifer

The of Texas at Dallas Naveen Jindal School of 972-883-5912

Best

Bill William Treacy Executive Director Texas State Board of Public

512-305-"7801

JSOtvi 3

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Agenda Item IV


September 18, 2019

I. Review of general correspondence

DISCUSSION: Mr. Cavazos, Presiding Officer, will review general correspondence coming to the Board's attention.



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TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY 333Guadalupe, Tower3, Suite900 5'12-305-7800

WILLIAM TREACY, ExECUTIVE! DIRECTOR Austin, Texas 78701-J900 WWW.TSBPA.TEXAS.GOV

MEMORANDUM

To: Board Members Date: August 26, 2019

From: Bill Treacy

Re: Board meeting dates for 2020

Here are the 2020 Board meeting dates based on the majority of responses. As usual, some committees will meet on Wednesday and all Board meetings will occur on Thursday.

Administration/ Accounting

(512) 305-7800

General Information

(512) 305-7870

2020 DATE

JANUARY 15- 16

MARCH 11- 12

MAY 13- 14

JULY 15- 16

SEPTEMBER 16- 17

NOVEMBER 11-12

CPE (512) 305-7844

Enforcement Licensing (512) 305-7866 (512) 305-7853

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Qualifications (512) 305-7851

Peer Review (512) 305-7853

Fax (512) 305-7875 (512) 305-7854

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Agenda Item IV


September 18, 2019

H. Approval of Committee and Board meeting dates for CY 2020

DISCUSSION: Mr. Cavazos, Presiding Officer, will present for approval the Committee and Board meeting dates for CY 2020.



IV-61

Tim Madrigal Timothy Prebe Alva Winston

FY 2020 Grant:

Peer Assistance (ACAN) Grant

9/1/19- 8/31/20 9/1/19- 8/31/20 9/1/19- 8/31/20

9/1/19-8/31/20

$125.00/hour $125.00/hour $125.00/hour

$107,500

RECOMMENDATION: The staff recommends approval of the FY 2020 professional service contracts and the Peer Assistance (ACAN) Grant as presented.

SUGGESTED MOTION: That the FY 2020 professional service contracts and the Peer Assistance (ACAN) Grant be approved as presented.

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Agenda Item IV


September 18, 2019

G. Consideration of FY 2020 professional service contracts and Peer Assistance (ACAN) Grant

DISCUSSION: Mr. B. Pena will move to ratify the following FY 2020 professional service contracts and the Peer Assistance (ACAN) Grant:

FY 2020 contracts

Technical Standards Review and Behavioral Enforcement Committee consultants: 1. Belen Briones, CPA 2. Harper & Pearson, Co., PC 3. Peter DeiVecchia

9/1/19- 8/31/20 9/1/19- 8/31/20 9/1/19- 8/31/20

Peer Review Committee consultants: 1. John Mason Andres, CPA 9/1/19- 8/31/20 2. John Michael Waters, CPA 9/1/19- 8/31/20 3. Gregory L. Bailes, CPA 9/1/19-8/31/20

Legal: DuBois, Bryant, & Campbell 9/1/19- 8/31/20

Tax: The Dove Firm PLLC 9/1/19- 8/31/20

Office of the Attorney General: 9/1/19-8/31/20

State Office of Administrative Hearings: 9/1/19-8/31/20

$5,000 $50,000 $10,000

$22,700 $18,600 $22,700

$87,750

$25,000

$20,000

$24,750

Sponsor Review Program consultants- each contract not to exceed $3,500:

Master Reviewers: Ron Huntsman Mitch Sutherlin

Reviewers: David Crumbaugh John Jones Connie Kelly

9/1/19- 8/31/20 9/1/19- 8/31/20

9/1/19-8/31/20 9/1/19-8/31/20 9/1/19-8/31/20

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$150.00/hour $150.00/hour

$125.00/hour $125.00/hour $125.00/hour

Mr. William Treacy August 21, 2019 Page 5 of 5

s State Office of Risk Management

Important Dates & Resources

SORM Training Calendar

SORM Safety Videos

Workers' Compensation Health Care Networl<

State Risk Management Employment Opportunities

Jacqueline Baynard

Shelley Crain

Danica Dickson

SORM Contact Information www.sorm.state.tx.us

{512) 475-1440

Director of Enterprise 512-936-1555 Jacg ueline. Baynard @sorm. texas.gov Risk

Senior Statewide 512-936-1477 [email protected]

Continuity Coordinator Senior Insurance 512-936-1483 [email protected]

Manager

Training [email protected]

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processes and procedures is a good practice. Maria Lagunas attended SORM's Workers' Compensation Claims Coordinator Training back in 2012 so it could be proactive for Maria, or her assistant, Patrick, to attend again as a refresher. A new course has been posted on the SORM website for early November and registration is now available.

No official recommendations were generated as a result of this visit. The Texas State Board of

Public Accountancy is congratulated for maintaining an effective Risk Management program.

Please convey my sincere appreciation to the staff at the Texas State Board of Public Accountancy for their cooperation and assistance during the consultation. If you have any questions or concerns regarding the information detailed in this report, please contact me by either phone at 512-936-2942 or email at curt.krill@_sorm.texas.gov

Sincerely,

C·~~~~ I ';J(;' AQ' v--l(~ -- /'

Curt L. Krill Risk Manager State Office of Risk Management

cc: Mr. Alan Hermanson Ms. Maria Lagunas

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• The Texas State Board of Public Accountancy protects the public by ensuring persons

involved in the profession of public accountancy are certified to be competent. This is

accomplished by the approval of exam applications and the issuance of certificates and

licenses. The processing of exam application of intent fees, exam eligibility fees, and

licensing fees are processed by the agency through the use of the Texas.gov Services

Payment Processing system.

• Agency documentation commits themselves to "maximum results- minimum waste". A

good practice for overseeing state assets.

• The Strategic Plan contains a detailed assessment of the Continuity of Operations Plan

(COOP) and a need to keep all vital processes functioning.

• The TSBPA COOP plan was last updated in December 2018.

• An annual walkthrough of the office is conducted to identify safety issues and employees

are encouraged to utilize the internal hazard reporting procedure if needed.

•

• During a walkthrough of the office one deficiency was noted in the computer room, a cord •

heavily wrapped with electrical tape at the plug. A work order was immediately submitted

by TSBPA staff to the Texas Facilities Commission (Hobby Building management) for

repair.

• Congratulations on a successful interaction with the Sunset Advisory Commission.

The following action items require follow-up by SORM per Texas State Board of Public

Accountancy request:

• Issues related to ergonomic risk factors have not been raised by agency employees but responsible staff would like to know where resources might be available if necessary. Basic ergonomic guidelines will be provided as well as information concerning the ability of SORM to conduct ergonomic assessments if requested.

• TSBPA is commended for covering its one vehicle and 7 approved drivers with appropriate insurance coverage. Every person who drives on state business should also participate in a defensive driver course. SORM offers such training (at no cost) and TSBPA may contact SORM's Training Coordinator (contact information listed on the last page of this report) for further information about available training dates.

• Although Workers' Compensation claims are rare, remaining familiar with current

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Determinations about whether to retain or transfer the financial consequences of a potential risk are an essential calculus for any effective risk management program. To this end, and in accordance with its statutory authority contained within the Texas Labor Code, SORM assists state agencies by providing tools and education for making these critical decisions, as well as by sponsoring six statewide lines of insurance, also known as risk financing mechanisms. The insurance lines are: Automobile, Property, Directors' and Officers', Volunteer, Builders' Risk, and Fine Arts. Potential exposures with regards to these potentially insurable risks in these areas were reviewed with the Texas State Board of Public Accountancy during this RMPR.

"Maximum Possible Loss" and "Maximum Probable Loss" are mentioned below in accordance with Texas Labor Code, Title V, Subtitle A, Chapter 412, Section 412.053 (3).

Automobile: The Texas State Board of Public Accountancy has a fleet of one vehicle used in accordance with its duties. State business is occasionally conducted by employees operating their personally-owned vehicles. TSBPA transfers the risks of vehicle operations by participating in the state sponsored auto insurance program.

Property: TSBPA operations occur in the agency office located in the Hobby Building in Austin. TSBPA does not own the office or the building. The agency owns a variety of "contents" property in accordance with its operations. The agency maintains an inventory of office contents and has provided SORM the Maximum Possible Loss and Maximum Probable Loss values with regards to their contents property. TSBPA has elected to participate in the SORM sponsored insurance for Property (Contents).

Directors' and Officers': Decisions made by TSBPA Board and the agency itself may be subject to liability claims, including those involving employment practices liability. Based on the nature of this kind of litigation, however, quantification of this risk is difficult. Therefore, Maximum Possible and Probable Loss are impossible to accurately quantify due to the various factors influencing the likelihood of an insurable event occurring. As such TSBPA has elected to participate in the SORM sponsored insurance for Directors' and Officers'.

Volunteer: According to the Texas State Board of Public Accountancy staff, the agency does not utilize volunteers. As a result, TSBPA has no risk in this regard.

Fine Arts: Not applicable

Noteworthy observations made during this consultation include the following:

• The TSBPA Health & Safety manual (updated in May 2019} contains an excellent, signed

statement from the Executive Director committing himself and the agency to the safety

and well-being of all agency employees .

IV-55

August 21, 2019

Mr. William Treacy Executive Director

s RM State Office of Risk Management

300 W. 15'", AUSTIN, TEXAS 78701/ P.O. BOX 13777, AUSTIN, TEXAS 78711-3777 (512) 475-1440, FAX (512) 370-9025/ WWW.SORM.STATE.TX.US

Texas State Board of Public Accountancy 333 Guadalupe St., Ste. 3-900 W.P. Hobby Bldg. Austin, TX 78701-3900

Dear Mr. Treacy,

Agency #457

The State Office of Risk Management (SORM) conducted a Risk Management Program Review (RMPR) with the Texas State Board of Public Accountancy (TSBPA) at the Hobby Building office on July 25, 2019. The consultation was conducted under authority of Texas labor Code, Title V,

•

Subtitle A, Chapter 412, and is designed to assist state agencies with the development and • implementation of comprehensive risk management programs that meet Risk Management for Texas State Agencies (RMTSA) guidelines.

The visit was scheduled as a consultation with agency risk management to discuss observed or

potential exposures in an attempt to eliminate or mitigate those risks. Ms. Maria Lagunas, Staff

Services Coordinator, was the primary contact for the RMPR although Mr. Alan Hermanson, CFO

and designated Risk Manager, also took part with regard to answering some important questions.

The following items were reviewed during the visit:

• The SORM-200 data for FY18 was reviewed for completeness and accuracy.

• Information related to the Agency's Organizational Chart, Personnel Manual, Safety & Health Manual, Strategic Plan, Financial Report and results of the recent Sunset Review were discussed during the review.

• The most recently completed Risk Evaluation and Planning System (REPS) questionnaire was reviewed. Essential clarifications were addressed and beneficial discussions resulted.

• TSBPA has filed no Workers' Compensation claims since July 2008. This is commendable .

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State Office of Risk Management

Risk Management Program Review Report Texas State Board of Public Accountancy

August 21, 2019

Conducted by: Curt Krill, Risk Manager

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Agenda Item IV


September 18, 2019

E. Review of NASBAIAICPA matters:

DISCUSSION: Mr. Cavazos, Presiding Officer, will present the following NASBAIAICPA matters:


• 112th Annual Meeting- October 27-30, 2019- Westin Copley, Boston,

MA.




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TEXAS STATE BOARD OF PUBLIC ACCOUNTANCY 333Guadalupe,Tower3,Suite900 512-305-7800

w1~~IAM TREACY. ExEcUTIVE DIRECTOR Austin, Texas 7870·1-3900 WWW.TSBPA.TEXAS.Gov

August 5, 2019

Dan Dustin NASBA, Vice President of State Board Relations 150 4th Ave N, Suite 700 Nashville, TN 37219

Dear Mr. Dustin:

The Texas State Board of Public Accountancy has considered the initiative of CPA Evolution and recognizes that the skills and competencies that are needed for CPAs to perform core professional services are rapidly changing. The most recent practice analysis of the profession resulted in several changes to the CPA Exam that was approved by the Board of Examiners. Additionally, the BOE was responsive to federal changes and updates were made to the exam as soon as practicable. Some of these changes are listed. These along with many other previous changes illustrate that the profession is always evolving. The transition to include information technology, data analytics and artificial intelligence should be completed in the same manner and with the same efforts as previous changes.

• January 1, 2017 Changes to the CPA Examination Blueprints effective January 1,2018

• April 1, 2017 Increase the time allocated for the BEC and REG sections from three to four hours

• April1, 2017 New exam testlet structure for all sections of the CPA exam • January 1, 2019 Testing on the Tax Cuts and Jobs Act- included in the REG

section • July 1, 2019 Testing of PCAOB new standards- included in the AUD section

Based on efforts of the AI CPA and BOE the CPA exam continues to stay abreast of the needs of the business community as well as the accounting profession. The joint project of NASBA and the AICPA described as CPA Evolution identified five

guiding principles. The TSBPA submits the following comments for consideration by the joint committee.

Quick adaptation of the CPA profession regarding data analytics, robotics and AI. The TSBPA conducted a research project in 2018 concerning data analytics. Various size CPA firms were surveyed as well as educational institutions. The results showed the following:

• Firms are currently using DA in audit work and they are not contracting this service to outside organizations.

• Firms look for new hires to have a DA skillset.

Fax Administration/ Accounting

(512) 305-7800

General Information

(512) 305-7870

CPE (512) 305-7844

EnforCE!fi9Jll (512) 30t-Vl8.39

Licensing (512) 305-7853

Qualifications (512) 305-7851

Peer Review (512) 305-7853 (512) 305-7875

(512) 305-7854

• Educational institutions offer discrete DA courses as well as integrate the curriculum into various accounting courses

• A number of educational institutions surveyed do not offer a business degree with a major in data analytics or a master's degree track in DA

Based on the Texas survey the CPA profession is using DA and AI and we urge the Board of Examiners to add this skillset to the CPA exam.

Recognition of technological and analytical expertise in performing assurance work The TSBPA research project supports the need for technological and analytical expertise in assurance work and urges the Board of Examiners be proactive in testing the concepts and skills needed to meet the professional requirements of both business and government.

State boards of accountancy acknowledge that protecting the public requires rethinking initial licensure requirements A result from the TSBPA 2018 survey on DA was an amendment to the Board Rules related to the education requirements for the CPA exam.

•

Board Rule 511.57 -Qualified Accounting Courses allows for the acceptance of accounting DA to meet the education requirements. (e)(10) up to 12 semester credit hours of accounting data analytics, provided the • institution of higher education accepts these courses as satisfying the accounting course requirements for graduation with a degree in accounting (while data analytics tools may be taught in the courses, application of the tools should be the primary objective of the courses); Board Rule 511.58- Definitions of Related Business Subjects and Ethics Courses allows for the acceptance of general DA courses to meet the education requirements. (c)(9) business data analytics (while data analytic tools may be used in the course,

application of the tools should be the primary objective of the course); With the addition of these amendments, a student may complete a total of 24 semester hours of DA coursework and use them to meet the TSBPA's 54 semester hour requirement to become CPA exam eligible. We believe that these amendments to Board rules continue to protect the public while also addressing the licensure requirement. Consideration of expanding the work experience requirement may address rethinking the initial licensure requirements. Currently, one year of accounting work experience is required for certification. With the recognition of analytical work experience as it relates to professional accounting work and skills outside of the constraints of public accounting, an individual may use this experience to meet the requirements for certification. NASBA may consider making similar changes to the model rules.

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Expanding entry into the profession to include individuals with technological and analytical expertise We believe that the amendments to existing Board rules allow for individuals with expertise in DA to take the CPA exam and to become CPAs under the educational requirements. The TSBPA Public Accountancy Act does not permit a person to use self-study, CPE or various training classes and courses to be used to meet these educational requirements.

Changes must be rapid, transformational and substantive We understand how changes may need to be substantive to capture the technological advances that impact the profession. We disagree that changes must be rapid and transformational. Anything done in a rapid pace has the potential for unintended consequences. The CPA profession has been relied upon to be consistent in its approach and providing well thought out solutions to issues in businesses and in government. We urge NASBA and the AI CPA to continue to apply a consistent and professional approach to the CPA designation as it evolves into the profession of the future.

Best Regards Texas State Board of Public Accountancy

Manuel (Manny) Cavazos IV, CPA Presiding Officer

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Roselyn Morris, P D, CPA Chair, Qualifications Committee

NASBA @AICPA'

CPA Evolution: Request for Input

The vision of CPA Evolution, a joint project of NASBA and the AICPA, is to transform the CPA profession and its licensure model in recognition of the need for rapidly changing CPA skills and competencies necessitated by constantly escalating technological disruption.

The environment in which CPAs operate is changing at a rapid pace, and the biggest driver of that change is technological innovation.

Starting in 2017, NASBA and the AICPA began speaking with stakeholders to better understand how the profession is changing. We sought input from firms of all sizes, state CPA societies, state boards of accountancy, academia and various other groups. Across the board, we heard that technology is changing the services CPAs provide and how they provide them.

We're hearing that innovations in areas like artificial intelligence, automation and data analytics are creating new opportunities for CPAs, both in terms of the types of services they perform and in how those services are delivered. We're also hearing that the services clients are demanding require skills and knowledge in areas like IT risks and controls, business intelligence and cybersecurity risk management.

•

As the skills required to perform the profession's core services evolve, CPA licensure requirements must evolve • as well. For this reason, NASBA and the AICPA are exploring how to adapt the CPA licensure model so it better aligns with the work CPAs do and continues to serve the public interest.

In 2018, our two organizations formed a diverse working group of stakeholder representatives to consider possible changes to licensure. The group recommended that education and exam requirements need to evolve to address the increased demand for technological and analytical expertise.

This brings us to today, and the purpose of this Request for Input. We're seeking your feedback on five guiding principles on which we believe any new licensure model should be based. Tell us:

• Are these principles directionally correct? • Would they help put the profession in a continued position of strength and relevance while

protecting the public interest?

Throughout the summer, we will be collecting your thoughts and suggestions to inform our decision making. Then, this October, we plan to share what we've heard, along with recommended next steps, at the NASBA Annual Meeting and AICPA Fall Council.

Help us reimagine CPA licensure. Review the guiding principles on the next page and let us know what you think.

For more information, visit EvolutionOfCPA.org

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CPA Evolution: NASBA's and the AICPA's Guiding Principles

• The CPA profession must adapt quickly due to the technological disruptions in areas such as data analytics, robotics, artificial intelligence and more. As such, the competencies, services and attitudes of CPAs need to continually evolve in order to protect the public interest.

• The CPA profession and state boards of accountancy recognize that technological and analytical expertise are essential to performing assurance work, as well as the other services that are currently, or will be in the future, core to professional accounting.

• The CPA profession and state boards of accountancy acknowledge that sustaining the profession and continued public protection require rethinking initial licensure requirements.

• The profession, and therefore entry into the profession, must be redesigned to attract individuals with technological and analytical expertise. This includes non-CPA professionals whose technology and analytics skills are critical to the performance of assurance and other core services, as well as non-accounting major students. All must demonstrate minimum required competencies necessary to perform professional accounting services as a CPA.

• The changes must be rapid, transformational and substantive without negatively impacting candidates currently in the pipeline.

In addition, NASBA and AICPA volunteer leadership have developed the following specific concepts that support the guiding principles.

We need a degree of flexibility in the education requirements in order to best position the profession for the future.

• This means candidates with different degrees would all be required to have education around a common core of both accounting and technology, as well as elective coursework that aligns with the work they are interested in performing as a CPA.

• The existing accounting graduate would need a greater understanding of technology, and the existing technology graduate would need a greater understanding of accounting.

• This may necessitate reducing educational requirements on certain existing concepts and adding educational requirements on other concepts.

We need an exam that tests a common core of accounting and technology, and that allows candidates to demonstrate knowledge in their chosen area of study and interest.

• One examination would serve all candidates, with variations allowed within exam sections that correspond to area of study and interest.

• Using the current exam structure, significantly modify the breadth and depth of the exam based on future looking practice analyses.

• Certain advanced and unique accounting and auditing concepts currently required for licensure are applicable to only a segment of practicing CPAs, while knowledge of systems controls and emerging technologies is increasingly relevant.

For more information, visit EvolutionOfCPA.org

IV-43

Evolving CPA

CPA Evolution

CPA Evolution is a joint effort between NASBA and the AICPA to explore

modifying the requirements for initial CPA licensure.

The environment in which CPAs operate is changing at a rapid pace. Technological innovations are changing

both the services CPAs provide and how they provide them.

The CPA profession must embrace these changes to maintain its strength and support evolving business

needs while continuing to serve the public interest.

NASBA and the AICPA want your feedback

Your input will be crucial as we work toward a new licensure model. NASBA and the AICPA want everyone's

voice to be heard-and that includes yours.

The two organizations developed five guiding principles to inform a new CPA licensure model.

Read our Request for Input on these principles here (/Downloads/CPA Evolution Request for lnput.pdf)

Tell us:

• Are these principles directionally correct?

• Would they help put the profession in a continued position of strength and relevance while protecting the

public interest?

CPA Evolution: NASBA's and the AICPA's Guiding Principles

(+) Show principles

• The CPA profession must adapt quickly due to the technological disruptions in areas such as data

analytics, robotics, artificial intelligence and more. As such, the competencies, services and attitudes of

CPAs need to continually evolve in order to protect the public interest.

• The CPA profession and state boards of accountancy recognize that technological and analytical expertise are essential to performing assurance work, as well as the other services that are currently, or

will be in the future, core to professional accounting.

• The CPA profession and state boards of accountancy acknowledge that sustaining the profession and

continued public protection require rethinking initial licensure requirements.

• The profession, and therefore entry into the profession, must be redesigned to attract individuals with

technological and analytical expertise. This includes non-CPA professionals whose technology and

analytics skills are critical to the performance of assurance and other core services, as well as non

accounting major students. All must demonstrate minimum required competencies necessary to perform

professional accounting services as a CPA.

• The changes must be rapid, transformational and substantive without negatively impacting candidates

currently in the pipeline.

In addition, NASBA and AICPA volunteer leadership have developed the following specific concepts

th!'lt support the guiding principles.

https://www.evolutionofcpa.org/ IV-44

Page 1 of6

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• 6/28/2019

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Evolving CPA

(+)Show concepts

We need a degree of flexibility in the education requirements in order to best position the profession for the future.

• This means candidates with different degrees would all be required to have education around a common

core of both accounting and technology, as well as elective coursework that aligns with the work they

are interested in performing as a CPA.

• The existing accounting graduate would need a greater understanding of technology, and the existing

technology graduate would need a greater understanding of accounting.

• This may necessitate reducing educational requirements on certain existing concepts and adding

educational requirements on other concepts.

We need an exam that tests a common core of accounting and technology, and that allows candidates to

demonstrate knowledge in their chosen area of study and interest.

• One examination would serve all candidates, with variations allowed within exam sections that

correspond to area of study and interest.

• Using the current exam structure, significantly modify the breadth and depth of the exam based on future

looking practice analyses.

Certain advanced and unique accounting and auditing concepts currently required for licensure are

applicable to only a segment of practicing CPAs, while knowledge of systems controls and emerging technologies is increasingly relevant.

Share your thoughts (all fields • are required)

Your data will only be used in conjunction with the CPA Evolution project and will not be shared with any third party .

First Name*

Last Name •

Email address •

Organization •

Feedback •

Input symbols

https://www.evolutionofcpa. org/ IV-45

Page 2 of6

6/28/2019

Evolving CPA

Submit

Want to email your thoughts instead? Download the form below and send your feedback to Feedback@EvolutionOfCP A.org (mailto: Feedback@EvolutionOfCP A.org)

Download Request for Input (/Downloads/CPA Evolution Request for Input. pdf)

CPA Evolution FAQs

Q: What is CPA Evolution? (+)Show answer

A: The CPA Evolution initiative aims to transform the CPA profession and its licensure model in recognition of

the need for rapidly changing CPA skills and competencies necessitated by constantly escalating technological

disruption. It is a joint effort of the National Association of State Boards of Accountancy (NASBA) and the

American Institute of Certified Public Accountants (AICPA).

Q: Why does CPA licensure need to evolve? (+)Show answer

A: The environment in which CPAs operate is changing at a rapid pace.

Innovations in artificial intelligence, automation and data analytics are creating new opportunities for CPAs,

both in terms of the types of services they perform and in how those services are delivered.

At the same time, clients and organizations are demanding services that require expertise in technical areas

such as information technology, cybersecurity, system and organization controls (SOC) reporting, IT

governance and data analytics.

The profession must embrace these changes to maintain its strength and be prepared to support evolving

business needs while continuing to serve the public interest. That's why NASBA and the AI CPA are working to

evolve licensure requirements for new CPAs: so the profession can continue to effectively meet the needs of

organizations, employers and the public.

Q: What are some examples of the skills new CPAs will need? (+)Show answer

A: NASBA and the AICPA have heard from stakeholders across the profession that CPAs increasingly need

new skills and knowledge in areas such as, but not limited to:

• Business intelligence

Data analysis and reporting

Data management

Predictive analytics

Cybersecurity risk management

IT governance

IT audit

IT risks and controls

Information security governance

System and Organization Controls

• Information systems development

When talking about the expertise CPAs need, it is also important to note what skills are not relevant.

Specifically, the CPA Evolution project does not include IT system design and maintenance, software

development or coding within its scope of future CPA skills.

https://www.evolutionofcpa.org/ IV-46

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Evolving CPA

Q: Who else is involved in the CPA Evolution project? (+)Show answer

A: CPA Evolution is a profession-wide effort. Along with NASBA and the AICPA, state CPA societies, state

boards of accountancy, academia, firms of all sizes and CPAs in all areas of practice from across the country

are vital partners in preparing the profession for the future. Their collaboration and support in evolving the CPA

licensure model will help the profession remain strong and relevant while protecting the public interest in a

changing, technology-driven marketplace.

Q: How have NASBA and the AI CPA been working with these stakeholders? (+)Show answer

A: In 2018, NASBA and the AICPA reached out to stakeholders across the profession to gather feedback on

possible changes to licensure requirements.

NASBA and the AICPA spoke with CPAs working in entities of all sizes in public practice, business and

industry, and government. The two organizations also sought input from CPAs whose focus is in technology,

state CPA societies, state boards of accountancy, academia, AI CPA Council and NASBA and AI CPA

committees.

Across the board, there was support for taking action and enhancing the CPA Exam and academic curricula to

focus more on technology and analytics.

NASBA and the AICPA then created the CPA Evolution Working Group- made up of representatives from

practice, state boards, academia and various other stakeholder groups- to explore how licensure

requirements might be modified.

Q: What did the CPA Evolution Working Group recommend? (+)Show answer

A: The working group recommended that the CPA Exam evolve to test a candidate's ability to use emerging

technologies, audit systems and controls, and examine and report on systems (e.g., through SOC attestation).

The group also recommended that education requirements include relevant coursework on technology and

analytics.

Q: How will CPA Evolution help future CPAs succeed? (+)Show answer

A: Employers are increasingly seeking CPAs with skills and knowledge in both accounting and technology.

CPA Evolution aims to evolve education and exam requirements for initial licensure to incorporate the new

skills and knowledge CPAs need. Therefore, future candidates who achieve the CPA license under this new

licensure model will have demonstrated competencies and skills that will equip them for future success.

Q: How will CPA Evolution benefit CPAs working in business and industry? (+)Show answer

A: Technological innovations are making Ieday's business environment increasingly complex. To become

successful, sustainable businesses of the future, organizations must have high-quality decision-making

capabilities. This requires CPA finance professionals to understand how to leverage technologies to generate

reliable and predictive insights that will allow them to partner with the business on decision-making and

influence future direction.

Technological innovation also requires business professionals to gain new skills and knowledge in order to

provide effective controls and properly manage risks while complying with accounting standards.

By evolving licensure requirements, businesses can be assured their talent needs are met with regulated,

credentialed finance staff with competencies in both accounting and technology who adhere to the profession's

high standards of ethics.

Q: Will CPA Evolution address the varying needs of firms of all sizes?(+) Show answer

A: Advancements in technology are impacting firms of all sizes. As such, the CPA Evolution initiative will help

the profession across the board, from larger firms that are already expressing a need for CPAs with technology

skills to smaller firms that will be able to expand their service lines, provide more efficient services and grow their practices.

https :/ /www .evolutionofcpa. org/ IV-47

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6/28/2019

Evolving CPA

Q: Will current CPAs have to be relicensed once a new licensure model goes into effect? (+)Show answer

A: No; current CPAs will not have to be relicensed. Any licensure changes made through CPA Evolution will

only affect initial CPA licensure. Current CPA licenses will be unaffected by these changes.

Q: What is being done to help current CPAs gain skills and competencies in emerging technological areas? (+) Show answer

A: To help CPAs learn more about emerging technologies and services, the AICPA, state societies and others

have developed (and will continue to develop) free content, including thought leadership pieces, podcasts,

videos, toolkits and other resources.

A few AICPA resources include:

An audit data analytics webpage

(https://www.aicpa.org/interestareas/frc/assuranceadvisoryservices/auditanalytics.html) with links to

articles, videos, an audit data analytics to traditional procedures mapping guide and more information

• A white paper (https://www.aicpa.org/interestareas/frc/assuranceadvisoryservices/blockchain-impact-on

auditing.html) (developed in partnership with CPA Canada and the University of Waterloo) exploring

blockchain and its potential impact on the audit and assurance profession

• A "Go Beyond Disruption" (https:/lwww.aicpa-cima.com/disruption.html) podcast in which finance

professionals from across the world discuss trends in emerging technologies

• A Cybersecurity Resource Center (https://www.aicpa.org/cybersecurity) that provides tools and

information for organizations (including CPA firms), CPAs providing advisory services and CPAs

providing assurance services

Q: What's next for the project? (+) Show answer

Q: When will CPA Evolution be completed? (+)Show answer

Evolving tech could mean evolving

the CPA license

AI CPA Insights Jan 16, 2019

How your feedback is shaping and

evolving CPA licensure

AICPA Insights May 20, 2019

Page 5 o£6

Read more (https://blog.aicpa.org/2019/0 1 /evolving-tech-<: uRl:!mlllamaY~htif!>1J~UIBag:JaidpaJ1[8'§/!'ifil1 r,1 /how-your -feedback-is-~

https://www.evolutionofcpa.org/ IV-48 6/28/2019

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Evolving CPA

CPA Regulators and Profession Jointly Explore Evolving Licensure

Model

Press release Nov 29, 2018

About NASBA

jOURNAL OF ACCOUNTANCY.

Working group considers changes to CPA licensing requirements

Journal of Accountancy Nov 29, 2018

Since 1908, the National Association of State Boards of Accountancy (NASBA) has served as a forum for the

nation's Boards of Accountancy, which administer the Uniform CPA Examination, license more than 650,000

certified public accountants and regulate the practice of public accountancy in the United States. NASBA's

mission is to enhance the effectiveness and advance the common interests of the Boards of Accountancy in

meeting their regulatory responsibilities. The Association promotes the exchange of information among

accountancy boards, serving the needs of the 55 U.S. jurisdictions. NASBA is headquartered in Nashville, TN,

with a satellite office in New York, NY, an International Computer Testing and Call Center in Guam and

operations in San Juan, PR. To learn more about NASBA, visit www.nasba.org.

About the AICPA

The American Institute of CPAs (AICPA) is the world's largest member association representing the CPA

profession, with more than 429,000 members in the United States and worldwide, and a history of serving the

public interest since 1887. AI CPA members represent many areas of practice, including business and industry,

public practice, government, education and consulting. The AICPA sets ethical standards for its members and

U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It

develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future

talent and drives professional competency development to advance the vitality, relevance and quality of the

profession.

Page 6 of6

For more information or to share your thoughts, please email [email protected] (mailto:[email protected])

https://www.evolutionofcpa.org/ IV-49 6/28/2019

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Agenda Item IV


September 18J 2019

F. Risk Management Program Review Report

DISCUSSION: Mr. Cavazos, Presiding Officer, will review the State Office of Risk Management - Risk Management Program Review Report



IV-51

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Agenda Item V Rules Committee Agenda

September 18, 2019 1:30 p.m.

A. Discussion, consideration, and possible action concerning a proposed revision to Board Rule 501.91 (Reportable Events) regarding the requirement to report certain crimes, settlements, and civil judgments to the Board within 30 days.

B. Discussion, consideration, and possible action on a letter received commenting on a proposed revision to Board Rule 515.1 (License) regarding the fingerprinting of licensees.

C. Discussion, consideration, and possible action concerning proposed revisions to Board Rule 519.21 (Investigations) regarding the elimination of quarterly notifications to the parties on the status of complaint investigations.

D. Discussion, consideration, and possible action concerning proposed revisions to Board Rules 519.29 (Voluntary Surrender of Certificate) and 519.95 (Reinstatement) recognizing the requirement for the Board fingerprinting of licensees.

E. Discussion, consideration, and possible action concerning proposed revisions to the following Board rules to eliminate the reference to the term “good moral character” in Board Rules 511.22 (Initial Filing of the Application of Intent), 511.27 (Good Moral Character Evidence from Foreign Residents), 511.161 (Qualifications for Issuance of a Certificate), 511.162 (Application for Issuance of the Certificate by Exam After Completion of the CPA Examination), 512.1 (Certification as a Certified Public Accountant by Reciprocity), 512.4 (Application for Certification by Reciprocity), and 513.11 (Qualifications for Non-CPA Owners of Firm License Holders).

F. Discussion, consideration, and possible action on Board Rule 519.7

(Misdemeanors that Subject a Licensee or Certificate Holder to Discipline by the Board) regarding the types of criminal offenses that could subject a licensee to disciplinary action.

G. Discussion, consideration, and possible action on a letter from the Governor’s Office.

H. Schedule next meeting.

V-1


September 18, 2019 1:30 p.m.

A. Discussion, consideration, and possible action concerning a proposed revision to Board Rule 501.91 (Reportable Events) regarding the requirement to report certain crimes, settlements, and civil judgments to the Board within 30 days.

DISCUSSION: This proposed rule revision was discussed at the July meeting and the committee decided to reconsider it at this meeting. The committee would like the language of the rule to clearly reflect what a negotiated settlement is that requires reporting to the Board. As an example, it is not the committee’s intention to require the reporting of minor agreements such as an agreement to reimburse a client for nominal penalties for the late filing of a tax return. Establishing a minimum threshold dollar amount for reporting was also discussed. The staff is not recommending a minimum amount but has incorporated language used by the North Carolina Board of Accountancy for the committee’s consideration. RECOMMENDATION: The staff recommends that the Rules Committee recommend to the Board that the proposed rule amendments be adopted by the Board as published in the Texas Register and revised in response to the public comments it received from the public.

SUGGESTED MOTION: That the Rules Committee recommends to the Board that the Board adopt the proposed revisions to the rule as published in the Texas Register and revised in response to public comments on the rule.

V-3

CHAPTER 501 RULES OF PROFESSIONAL CONDUCT 1 SUBCHAPTER E RESPONSIBILITIES TO THE BOARD/PROFESSION 2 RULE §501.91 Reportable Events 3

4 (a) A licensee or certificate holder shall report in writing to the board the occurrence of 5

any of the following events within 30 days of the date the licensee or certificate holder 6

has knowledge of these events: 7

(1) the filing of criminal charges or the conviction or imposition of deferred 8

adjudication of the licensee or certificate holder of any of the following: 9

(A) a felony; 10

(B) a crime of moral turpitude as listed in §519.7(2) of this title (relating to 11

Misdemeanors that Subject a Certificate or Registration Holder to Discipline by 12

the Board); 13

(C) a any crime of which fraud or dishonesty is an element as listed in §519.7(1) of 14

this title or that involves alcohol abuse or controlled substances; and 15

(D) a crime that involves alcohol abuse or controlled substances as listed in 16

§519.7(3) of this title any crime related to the qualifications, functions, or duties of a 17

public accountant or CPA, or to acts or activities in the course and scope of the practice 18

of public accountancy or as a fiduciary; 19

(E) a crime of physical injury or threats of physical injury to a person as listed in 20

§519.7(4) of this title; or 21

(F) a crime related to the qualifications, functions, or duties of a public 22

accountant or CPA, or to acts or activities in the course and scope of the practice 23

of public accountancy or as a fiduciary. 24

(2) the cancellation, revocation, or suspension or a voluntary consent decree of the 25

right to practice as a CPA or a public accountant by before any governmental body or 26

agency or state, foreign country, or other jurisdiction for a reason other than the 27

failure to pay the appropriate authorization fee; 28

(3) an un-appealable adverse finding in any state or federal court, or an agreed 29

settlement in a civil action against the licensee or certificate holder or an agreed 30

consent order or settlement with a regulatory authority or licensing body 31

concerning professional accounting services or professional accounting work; or a 32

finding of a breach of fiduciary duty, fraud or misappropriation; or 33

V-4

(4) the revocation, suspension, or voluntary consent decree or any limitation on a 1

professional license from any state or federal regulatory agency such as an insurance 2

license or a securities license, resulting from an un-appealable adverse finding. 3

(b) The report required by subsection (a) of this section shall be signed by the licensee 4

or certificate holder and shall set forth the facts which constitute the reportable event. If 5

the reportable event involves the action of an administrative agency or court, then the 6

report shall set forth the title of the matter, court or agency name, docket number, and 7

dates of occurrence of the reportable event. 8

(c) Regardless of whether a civil suit or administrative adjudicatory action has 9

been filed, a licensee shall notify the board within 30 days of any written 10

settlement agreement in which a licensee has been released from any or all 11

claims or liabilities grounded, in whole or in part, upon an allegation of: 12

(1) professional negligence, gross negligence, dishonesty, fraud, 13

misrepresentation, incompetence; or 14

(2) a violation of any consent order or settlement with a regulatory or licensing 15

body concerning professional accounting services or professional accounting 16

work. 17

(d) A licensee is not required to report to the board any of the events set forth in 18

subsections (a) or (c) of this section when no Texas licensee is involved in the 19

event or no harm has been caused to a person or entity located in Texas. The firm 20

may contact the board to determine what may constitute involvement or harm to 21

a person or entity located in Texas. 22

(e) (c) Nothing in this section imposes a duty upon any licensee or certificate holder to 23

report to the board the occurrence of any of the events set forth in subsection (a) of this 24

section either by or against any other licensee or certificate holder. 25

(f) (d) As used in this section, a conviction includes the initial plea, verdict, or finding of 26

guilt, plea of no contest, or pronouncement of sentence by a trial court even though that 27

conviction may not be final or sentence may not be actually imposed until all appeals 28

are exhausted. 29

(g) Confidentiality provisions in the terms of any settlement of the reportable 30

events described in subsections (a) and (c) of this section relating to any 31

professional accounting services or professional accounting work shall not limit 32

V-5

the licensee or certificate holder’s obligation to report such event and to 1

cooperate fully with the board in any investigation. All information gathered or 2

received by the board regarding a disciplinary action is confidential and not 3

subject to disclosure under Chapter 552 of the Government Code (relating to 4

Public Information) prior to public hearing. 5

(h) (e) Interpretive Comment: A crime of moral turpitude is defined in this chapter as a 6

crime involving grave infringement of the moral sentiment of the community and further 7

defined in §501.90(19) of this title (relating to Discreditable Acts) §501.90(18) and 8

§519.7 of this title (relating to Discreditable Acts and Misdemeanors that Subject a 9

Certificate or Registration Holder to Discipline by the Board). 10

V-6


September 18, 2019 1:30 p.m.

B. Discussion, consideration, and possible action on a letter received commenting on a proposed revision to Board Rule 515.1 (License) regarding the fingerprinting of licensees. COMMENT: One commenter suggested that the proposed rule revision makes it clear that fingerprinting must be submitted electronically and the rule should address how out-of-state individuals can comply with the proposed rules changes.

RESPONSE: Licensees will receive specific fingerprinting instructions in their renewal notice at least 45 days prior to their current expiration date. The staff is of the opinion that addressing the mechanics of the fingerprinting process in a mailing to each individual applicant will be more effective than having the instructions in a Board rule. Note: Applicant will be advised that the collection and submission of fingerprints will be handled by a third-party vendor (IdentoGo) under contract with the Texas Department of Public Safety and not by the Board or a Board vendor. There will be about 85 IdentoGo locations in-state and some locations out-of-state. The out-of-state and international fingerprinting process will not require travel to Texas to fulfill the requirement. If an applicant is unable to be fingerprinted through IdentoGo, the applicant can be fingerprinted at a law enforcement agency. If the DPS and or the FBI are unable to read the fingerprints, the applicant will be required to provide an additional set. If an applicant submitted electronic fingerprints to the Board after September 1, 2014, no additional fingerprints are required. However, all individuals who submitted fingerprints prior to September 1, 2014 will need to be fingerprinted.

RECOMMENDATION: The staff recommends that the Rules Committee recommend to the Board that the proposed rule amendment be adopted as proposed.

SUGGESTED MOTION: That the Rules Committee recommends to the Board that the proposed rule amendment be adopted as proposed.

V-7

CHAPTER 515 LICENSES 1 RULE §515.1 License 2

3 (a) An individual or firm license holder is responsible for renewing the license before 4

the expiration date of the license. 5

(b) An individual certified or registered by this board must obtain a license for a 12-6

month interval and the license shall not be issued or renewed unless the board has 7

received all required fees, satisfactory documentation of compliance with CPE 8

requirements and a completed application which includes fingerprints unless 9

fingerprints have been previously submitted to the board. 10

(c) Subject to §515.3 of this chapter (relating to License Renewals for Individuals and 11

Firm Offices), a firm registered with the board must obtain a license for each office 12

associated with the firm. 13

(d) An individual license holder shall submit to the Texas Department of Public 14

Safety a complete and legible set of fingerprints from a vendor approved by the 15

Texas Department of Public Safety for the purpose of obtaining the applicant's 16

criminal history record information. The fingerprinting can be waived by the 17

executive director with evidence of extenuating circumstances. An extenuating 18

circumstance would exist when doing so is not possible or would likely harm or 19

cause irreparable damage to the license holder. Examples of extenuating 20

circumstances include, but are not limited to, persons lacking fingers, the ability 21

to produce fingerprints, or persons with no fingerprints. Evidence of an 22

extenuating circumstance shall be required by the executive director where 23

appropriate and may include medical documentation. 24

V-10


September 18, 2019 1:30 p.m.

C. Discussion, consideration, and possible action concerning a proposed revision to Board Rule 519.21 (Investigations) regarding the elimination of quarterly notifications to the parties on the status of complaint investigations. DISCUSSION: Effective September 1, 2019, the Act will be revised to remove the required quarterly notifications of the status of a complaint investigation in favor of updates being provided when there has been a substantive change in the complaint status. The proposed revision eliminates the quarterly notification language.

RECOMMENDATION: The staff recommends that the Rules Committee recommend to the Board that the proposed rule amendment be published in the Texas Register for public comment.

SUGGESTED MOTION: That the Rules Committee recommends to the Board that the Board authorize the Executive Director to have the proposed rule amendment published in the Texas Register for public comment.

V-11

CHAPTER 519 PRACTICE AND PROCEDURE 1 SUBCHAPTER B COMPLAINTS AND INVESTIGATIONS 2 RULE §519.21 Investigations 3

4 (a) A board investigative file may be opened when the board determines that there may 5

be a potential violation of the Act, board rules, or board order and the subject matter of 6

the complaint is within the board's jurisdiction. 7

(b) The board may open an investigative file on its own initiative. 8

(c) A licensee or certificate holder shall cooperate with the board in its investigation of a 9

complaint. The respondent will receive notice of the investigation by certified mail return 10

receipt requested at the respondent's mailing address on file with the board. Upon 11

notice of an investigation from the board, the respondent shall respond to the 12

investigation and any request by the board for information or records concerning the 13

investigation in accordance with §501.93 of this title (relating to Responses). 14

(d) The respondent must provide the board with a detailed response to each allegation 15

and the request for background information contained in the notice of investigation. The 16

response must be in writing and delivered to the board within 30 days of the date of the 17

notice of the investigation. The respondent's response may include any additional 18

information the respondent wants the board to consider. Failure to provide the detail 19

sought by the board to each allegation or to the records or documents requested will be 20

considered a non-substantive response as also required in §501.93 of this title. 21

(e) The board will provide the respondent and the complainant with quarterly notification 22

of the status of an investigation. 23

(e) (f) The board may request information from a person who is not the subject of an 24

investigation. 25

(f) (g) Withdrawal of a complaint by a complainant does not automatically cease an 26

ongoing investigation. 27

V-12


September 18, 2019 1:30 p.m.

D. Discussion, consideration, and possible action concerning proposed revisions to Board Rules 519.29 (Voluntary Surrender of Certificate) and 519.95 (Reinstatement) recognizing the requirement for the Board fingerprinting of licensees.

DISCUSSION: The proposed rule amendments recognize that when a former certificate holder who has previously surrendered his certificate or has had his certificate revoked applies for reinstatement, he must provide a set of legible fingerprints unless fingerprints have previously been submitted to the Board.

RECOMMENDATION: The staff recommends that the Rules Committee recommend to the Board that the proposed rule amendments be published in the Texas Register for public comment with any additions made by the committee.

SUGGESTED MOTION: That the Rules Committee recommends to the Board that the Board authorize the Executive Director to have the proposed rule amendments published in the Texas Register for public comment as revised by the committee.

V-13

CHAPTER 519 PRACTICE AND PROCEDURE 1 SUBCHAPTER B COMPLAINTS AND INVESTIGATIONS 2 RULE §519.29 Voluntary Surrender of Certificate 3

4 (a) Subject to board approval, a certificate holder may voluntarily surrender his 5

certificate by submitting a written statement of intent to voluntarily surrender the 6

certificate. 7

(b) The board may deny a certificate holder's application to voluntarily surrender his 8

certificate in order for the board to initiate and complete an investigation of any of the 9

reportable events identified in §501.91(a) of this title (relating to Reportable Events). 10

(c) Once a certificate holder has surrendered their certificate, they are no longer eligible 11

to hold a license under §901.402 of the Act (relating to Eligibility Requirements; General 12

Prohibition) and licensing exemptions will no longer apply. 13

(d) A former certificate holder who has voluntarily surrendered his certificate under 14

subsection (a) of this section may apply for a new certificate upon completion of the 15

following requirements: 16

(1) evidence of completion of all CPE that would have been required to be completed 17

up to a maximum of 120 hours over the three years immediately preceding the 18

application including a four-hour board approved ethics course; 19

(2) a sworn affidavit in the form provided by the board stating that the former certificate 20

holder has not been convicted of, placed on community supervision or accepted 21

deferred adjudication for any felony crime or for any misdemeanor crime involving 22

dishonesty, fraud, moral turpitude, alcohol abuse or controlled substances, or physical 23

injury or threats of physical injury to a person under the laws of any state or the United 24

States and that the former certificate holder did not surrender the certificate to avoid 25

disciplinary action by the board or to avoid administrative revocation under board rules 26

adopted pursuant to §§901.159, 901.411 or 901.502 of the Act (relating to Peer Review; 27

Continuing Professional Education; or Grounds for Disciplinary Action); and 28

(3) payment of all fees that would have been paid if the former certificate holder's 29

license had been active since the date of surrender and all applicable late fees; and . 30

(4) unless fingerprints have been previously submitted to the board, a complete 31

and legible set of fingerprints from a vendor approved by the Texas Department 32

of Public Safety for the purposes of obtaining applicant’s criminal history record 33

V-14

information in order to ensure the applicant lacks a history of dishonest or 1

felonious acts and the board is aware of any criminal activity that might be 2

relevant. 3

(e) A new certificate issued to a former certificate holder will bear the same certificate 4

number as the original certificate. 5

(f) If an individual, subject to the approval of the board, voluntarily surrenders and 6

resigns the certificate or registration during the course of a disciplinary investigation or 7

proceeding conducted by the board, this fact shall be disclosed in any later application 8

for a new certificate, and shall be considered before the issuance of a new certificate. 9

(g) A voluntary surrender is effective on the date of this agency's approval letter or other 10

written notification. The voluntary surrender may be disapproved when doing so is in the 11

best interest of the public. It is in the best interest of the public to deny a licensee's 12

voluntary surrender prior to the adjudication of a board complaint, criminal charge or 13

civil proceeding alleging fraud or dishonesty. 14

(h) If a certificate holder voluntarily surrenders his certificate after being charged with a 15

crime for which he subsequently receives a conviction or deferred adjudication, or 16

voluntarily surrenders his certificate subsequent to the filing of a civil suit alleging fraud 17

or dishonesty which subsequently results in a finding by a court of fraud or dishonesty, 18

the voluntary surrender may be set aside by the board upon a finding by the board that 19

the criminal or civil adjudication warrants disciplinary action. 20

V-15

CHAPTER 519 PRACTICE AND PROCEDURE 1 SUBCHAPTER E POST BOARD ORDER PROCEDURES 2 RULE §519.95 Reinstatement 3

4 (a) A person whose certificate has been revoked may be considered for reinstatement: 5

(1) after two years following the successful completion of all obligations to the criminal 6

justice system related to convictions that led to the revocation, if any, with no criminal 7

conviction during that two year period; 8

(2) if there have been no final adjudications finding violations of the Act or any board 9

rule for two years from the effective date of the revocation; and 10

(3) if the applicant demonstrates from the date of the revocation or from the date of a 11

two year period following the completion of all obligations to the criminal justice system, 12

the following: 13

(A) Responsibility: applicants must demonstrate that they recognize that their actions 14

were unacceptable, they are accountable for those actions, and they have the ability 15

and intent to not repeat those actions. 16

(B) Rehabilitation: applicants must demonstrate that they have made behavioral and 17

practice changes that evidence the intent to not repeat the action that resulted in the 18

revocation. 19

(C) Restitution: applicants must have completed the terms of any agreement or 20

assessment against the applicant. 21

(D) Fingerprints: unless fingerprints have been previously submitted to the 22

board, a complete and legible set of fingerprints from a vendor approved by the 23

Texas Department of Public Safety for the purposes of obtaining applicant’s 24

criminal history record information to ensure the applicant lacks a history of 25

dishonest or felonious acts and the board is aware of any criminal activity that 26

might be relevant. 27

(b) All requests for reinstatement must be in writing to the board. 28

(c) Reinstatement will be at the sole discretion of the board. 29

V-16


September 18, 2019 1:30 p.m.

E. Discussion, consideration, and possible action concerning proposed revisions to the following Board rules to eliminate the reference to the term “good moral character” in Board Rules 511.22 (Initial Filing of the Application of Intent), 511.27 (Good Moral Character Evidence from Foreign Residents), 511.161 (Qualifications for Issuance of a Certificate), 511.162 (Application for Issuance of the Certificate by Exam After Completion of the CPA Examination), 512.1 (Certification as a Certified Public Accountant by Reciprocity), 512.4 (Application for Certification by Reciprocity), and 513.11 (Qualifications for Non-CPA Owners of Firm License Holders).

DISCUSSION: Effective September 1, 2019, the term good moral character will be deleted from the Act. It is found in the following three sections of our rules requiring applicants to be licensed and non-CPA owners to be of good moral character. The term was apparently deleted from the Act because it is too broad and subjective. We are proposing to have the term removed from our rules and replaced with remaining language in our Act.

RECOMMENDATION: The staff recommends that the Rules Committee recommend to the Board that the proposed new rule be published in the Texas Register for public comment.

SUGGESTED MOTION: That the Rules Committee recommends to the Board that the Board authorize the Executive Director to have the proposed new rule published in the Texas Register for public comment.

V-17

CHAPTER 511 ELIGIBILITY 1 SUBCHAPTER B CERTIFICATION BY EXAMINATION 2 RULE §511.22 Initial Filing of the Application of Intent 3

4 (a) The initial filing of the application of intent shall be made on forms prescribed by the 5

board and shall also be in compliance with board rules and with all applicable laws. The 6

application of intent may be submitted at any time and will be used to determine 7

compliance and eligibility for an applicant to take the UCPAE. The application of intent 8

will remain active until: 9

(1) an applicant takes at least one section of the UCPAE within two years from the 10

date of submission of the application; or 11

(2) the second anniversary of the submission of the application has lapsed. 12

(b) Each applicant shall submit their social security number on the application form. 13

Such information shall be considered confidential and can only be disclosed under the 14

provisions of the Act. 15

(c) Each applicant who submits an application of intent to determine eligibility for the 16

UCPAE must pay a nonrefundable filing fee in accordance with §521.12 of this title 17

(relating to Filing Fee). An application of intent not accompanied by the proper fee or 18

required documents shall not be considered complete. The withholding of information, a 19

misrepresentation, or any untrue statement on the application or supplemental 20

documents will be cause for rejection of the application. 21

(d) Each applicant must provide official educational documents to be used in 22

determining compliance with the applicable education requirements of the Act. 23

(e) Each applicant must comply with the board's fingerprinting procedure to investigate 24

the moral character of applicants in accordance with an established fingerprint process 25

that access accesses the Federal Bureau of Investigation (FBI) database and the 26

Texas Department of Public Safety-Crime Records division files. This is necessary to 27

ensure an applicant to take the uniform CPA examination or to receive a 28

certificate lacks a history of dishonest or felonious acts and the board is aware of 29

any criminal activity that might be relevant to the applicant’s qualifications to take 30

the UCPAE. 31

V-18

(f) Each applicant will be notified when all requirements have been met to apply to take 1

the UCPAE, and with the notification, an examination application will be made available 2

to the applicant. 3

(g) Each applicant must provide a copy of the following documents: 4

(1) Unexpired driver's license issued by a state of the United States provided it 5

contains a photograph and information such as name, date of birth, sex, height, eye 6

color, and address; or an unexpired United States passport; and 7

(2) social security card. 8

(h) Applicants who are citizens of a foreign country and who cannot meet the 9

requirements of subsection (g) of this section shall comply by providing evidence of a 10

non-expired F-1 Visa issued to students attending a university or college. The board 11

may consider an F-1 Visa with a Certificate of Eligibility for Nonimmigrant Student 12

Status. Form I-20 shall be approved by the designated school official at the educational 13

institution where the applicant is currently attending. 14

(i) Applicants who cannot meet the requirements of subsection (g) or (h) of this section 15

may be eligible to take the UCPAE by providing evidence of both identity and 16

employment authorization by submitting a copy of one of the following unexpired 17

documents: 18

(1) An Alien Registration Receipt Card or Permanent Resident Card (Form I-551); or 19

(2) A foreign passport that contains a temporary I-551 stamp, or temporary I-551 20

printed notation on a machine-readable immigrant visa; or 21

(3) An Employment Authorization Document which contains a photograph (Form I-22

766). 23

(j) Applicants who do not have or do not submit a social security card will be required to 24

pay an additional fee to NASBA each time they make application for the UCPAE to 25

verify their legal entry into the U.S. 26

V-19

CHAPTER 511 ELIGIBILITY 1 SUBCHAPTER B CERTIFICATION BY EXAMINATION 2 RULE §511.27 Good Moral Character Evidence from Foreign Residents of a 3

Lack of a History of Dishonest or Felonious Acts 4 5

(a) An applicant who at the time of the filing of an application of intent resides outside of 6

the United States or its territories, or has so resided for any portion of the two years 7

immediately preceding the filing shall, in order for the board to be aware of any 8

criminal activity that might be relevant to the applicant’s qualifications to take the 9

UCPAE, provide a document from the law enforcement agency of that country or 10

territory certifying a lack of a history of dishonest or felonious acts. The 11

certification shall be issued and sealed by an official of the country or territory of 12

the residence of the applicant. provide evidence of good moral character satisfactory 13

to the board. Such evidence may include but not be limited to an official "certificate of 14

good moral character," "certificate of good conduct," "police clearance certificate," or 15

other identifying title that shows attestation of good moral character. Certificates 16

presented shall be issued and sealed by an official of the country of residence. 17

(b) An applicant who is a citizen of the United States and who participates in a study 18

abroad program as a part of their course of study through a U.S. educational institution 19

is not required to provide evidence of a lack of a history of dishonest or felonious 20

acts from a law enforcement agency good moral character from the country where 21

the study abroad occurred. 22

(c) An applicant is permitted to visit their official country of residence for a period of time 23

allowable under their official Visa and will may not be required to provide a subsequent 24

certificate evidencing a lack of a history of dishonest or felonious acts from a law 25

enforcement agency of good moral character. 26

V-20

CHAPTER 511 ELIGIBILITY 1 SUBCHAPTER H CERTIFICATION 2 RULE §511.161 Qualifications for Issuance of a Certificate 3

4 The certificate of a CPA shall be granted by the board to an applicant who qualifies 5

under the current Act and has met the following qualifications: 6

(1) successfully completed the UCPAE; 7

(2) met the education requirements; 8

(3) submitted an application prescribed by the board; 9

(4) submitted the requisite fee, set by the board, for issuance of the certificate; 10

(5) provided evidence of a lack of a history of dishonest or felonious acts or any 11

criminal activity that might be relevant to the applicant’s qualifications good moral 12

character; 13

(6) submitted, on a form prescribed by the board, evidence of completion of the work 14

experience requirements commensurate with the education requirements; 15

(7) executed an oath of office stating support of the Constitution of the United States 16

and of this state and the laws thereof, and compliance with the board's Rules of 17

Professional Conduct; 18

(8) an applicant who has completed a board-approved ethics course more than two 19

years prior to the date of submitting an application for issuance of a CPA certificate 20

must complete a board-approved four-hour ethics course of comprehensive study on 21

the board's Rules of Professional Conduct; 22

(9) successfully completed the examination on the board's Rules of Professional 23

Conduct; and 24

(10) provided any other information requested by the board. 25

V-21

CHAPTER 511 ELIGIBILITY 1 SUBCHAPTER H CERTIFICATION 2 RULE §511.162 Application for Issuance of the Certificate by Exam After 3

Completion of the CPA Examination 4 5

(a) Application for issuance of the CPA certificate must be made on forms prescribed by 6

the board and shall be in compliance with board rules and with all applicable laws. 7

(b) The board will send an application for issuance of the CPA certificate to an applicant 8

who successfully completes the UCPAE, and thereafter as requested by the same 9

applicant. 10

(c) An applicant must submit with the issuance application all information required in 11

§511.161 of this chapter (relating to Qualifications for Issuance of a Certificate). 12

(d) An applicant must submit with the application for issuance of a certificate the 13

requisite fee in accordance with §521.9 of this title (relating to Certification Fee). 14

(e) An applicant must comply with the board’s procedure to obtain criminal history 15

record information investigate the moral character of applicants in accordance with an 16

established fingerprint process that accesses the Federal Bureau of Investigation (FBI) 17

and the Texas Department of Public Safety - Crime records division files in order to 18

ensure that the applicant lacks a history of dishonest or felonious acts and for 19

the board to be aware of any criminal activity that might be relevant to the 20

applicant’s qualifications. 21

V-22

CHAPTER 512 CERTIFICATION BY RECIPROCITY 1 RULE §512.1 Certification as a Certified Public Accountant by Reciprocity 2

3 (a) The certificate of a "certified public accountant" shall be granted by reciprocity to an 4

applicant who is qualified under §901.259 of the Act (relating to Certification Based on 5

Reciprocity) or §901.260 of the Act (relating to Certificate Based on Foreign 6

Credentials) and lacks a history of dishonest or felonious acts and any criminal 7

activity that might be relevant to the applicant’s qualifications is of good moral 8

character as provided for described in §901.253 of the Act (relating to Background 9

Character Investigation). The applicant must provide in the application for reciprocity the 10

names of all the jurisdictions in which the applicant is or has been certified and/or 11

licensed and all disciplinary actions taken or pending in those jurisdictions. 12

(b) An applicant from a domestic jurisdiction demonstrates that he meets the 13

requirements for certification by reciprocity by: 14

(1) satisfying one of the following conditions: 15

(A) the applicant holds a certificate or license to practice public accountancy from a 16

domestic jurisdiction that has been determined by the board pursuant to §512.2 of this 17

chapter (relating to National Association of State Boards of Accountancy Verified 18

Substantially Equivalent Jurisdictions) as having substantially equivalent requirements 19

for certification; or 20

(B) the applicant holds a certificate or license to practice public accountancy from a 21

domestic jurisdiction that has not been determined by NASBA and the board to have 22

substantially equivalent certification requirements but has had his education, 23

examination and experience verified as substantially equivalent to those required by the 24

UAA by NASBA; or 25

(C) the applicant meets all requirements for issuance of a certificate set forth in the 26

Act; or 27

(D) the applicant met the requirements in effect for issuance of a certificate in this 28

state on the date the applicant was issued a certificate or license by another domestic 29

jurisdiction; or 30

(E) after passing the UCPAE, the applicant has completed at least four years of 31

experience practicing public accountancy within the ten year period immediately 32

preceding the date of application in this state; and 33

V-23

(2) meeting CPE requirements applicable to certificate holders contained in Chapter 1

523 of this title (relating to Continuing Professional Education). 2

(c) An applicant from a foreign jurisdiction demonstrates that he meets the requirements 3

for certification by reciprocity by: 4

(1) holding a credential that has not expired or been revoked, suspended, limited or 5

probated, and that entitles the holder to issue reports on financial statements issued by 6

a licensing authority or professional accountancy body of another country that: 7

(A) regulates the practice of public accountancy and whose requirements to obtain 8

the credential have been determined by the board to be substantially equivalent to the 9

requirements of education, examination and experience contained in the Act; and 10

(B) grants credentials by reciprocity to applicants certified to practice public 11

accountancy by this state; 12

(2) receiving that credential based on education and examination requirements that 13

were comparable to or exceeded those required by the Act at the time the credential 14

was granted; 15

(3) completing an experience requirement in the foreign jurisdiction that issued the 16

credential that is comparable to or exceeds the experience requirement of the Act or 17

has at least four years of professional accounting experience in this state; 18

(4) passing an international qualifying examination (IQEX) covering national standards 19

that has been approved by the board; and 20

(5) passing an examination that has been approved by the board covering the rules of 21

professional conduct in effect in this state. 22

V-24

CHAPTER 512 CERTIFICATION BY RECIPROCITY 1 RULE §512.4 Application for Certification by Reciprocity 2

3 (a) An applicant seeking certification by reciprocity must apply for certification on a form 4

prescribed by the board. The application must be accompanied by the requisite fee and 5

shall include written authorization from the applicant empowering the board to obtain all 6

information concerning the applicant's qualifications and present standing. 7

(b) An applicant for certification by reciprocity from a domestic jurisdiction that has not 8

been approved as being substantially equivalent by both NASBA and the board must 9

submit the following along with the completed application form and requisite fee to be 10

processed: 11

(1) an interstate exchange of information form documenting the credits under the 12

domestic jurisdiction of origin; 13

(2) an executed oath of office stating support of the Constitutions of the United States 14

and of the State of Texas and their laws and the rules of the board; 15

(3) evidence of completion of an examination on the board's Rules of Professional 16

Conduct; 17

(4) evidence of completion of 120 hours of CPE during the last three years, including a 18

board-approved four-hour ethics course; in compliance with Chapter 523 of this title 19

(relating to Continuing Professional Education); 20

(5) evidence of completion of the board's procedure to investigate the background 21

moral character of applicants in accordance with the established fingerprint process that 22

accesses the Federal Bureau of Investigation (FBI) database and the Texas 23

Department of Public Safety - Crime Records division files in order to ensure the 24

applicant lacks a history of dishonest or felonious acts and for the board to be 25

aware of any criminal activity that might be relevant to the applicant’s 26

qualifications; and 27

(6) any other information requested by the board. 28

(c) An applicant for certification by reciprocity from a domestic jurisdiction that has been 29

approved as being substantially equivalent by both NASBA and the board must submit 30

the following along with the completed application form and requisite fee to be 31

processed: 32

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(1) a certificate of good standing as a CPA from a domestic jurisdiction approved by 1

both NASBA and the board as being substantially equivalent; 2

(2) if requested, a certificate of verification of substantial equivalency of the domestic 3

jurisdiction of origin from NASBA; 4



(4) evidence of completion of an examination on the board's Rules of Professional 7

Conduct; 8

(5) evidence of completion of 120 hours of CPE during the last three years, including a 9

board-approved four-hour ethics course; in compliance with Chapter 523 of this title 10

(relating to Continuing Professional Education); 11





applicant lacks a history of dishonest and felonious acts and for the board to be 16




(d) An applicant for certification by reciprocity from a foreign jurisdiction that has been 20

approved as being substantially equivalent by both U.S. IQAB and the board must 21

submit the following along with the completed application form and requisite fee to be 22

processed: 23

(1) a certificate of good standing of credentials to practice public accountancy from the 24

foreign jurisdiction of origin; 25



(3) evidence of a passing grade on the IQEX; 28

(4) evidence of a passing grade on a board approved examination on the board's 29

Rules of Professional Conduct; 30

(5) evidence of the completion of a board-approved four-hour ethics course; 31

V-26





applicant lacks a history of dishonest or felonious acts and for the board to be 5




(e) All correspondence and supporting documentation submitted to the board shall be in 9

English or accompanied by a certified translation into English of such documents.10

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CHAPTER 513 REGISTRATION 1 SUBCHAPTER B REGISTRATION OF CPA FIRMS 2 RULE §513.11 Qualifications for Non-CPA Owners of Firm License Holders 3

4 (a) A firm which includes non-CPA owners may not qualify for a firm license unless 5

every non-CPA individual who is an owner of the firm: 6

(1) is actively providing personal services in the nature of management of some 7

portion of the firm's business interests or performing services for clients of the firm or an 8

affiliated entity; 9

(2) is of good moral character as demonstrated by a lack of history of dishonest or 10

felonious acts or any criminal activity that might be relevant to the applicant’s 11


(3) is not a suspended or revoked licensee or certificate holder excluding those 13

licensees that have been administratively suspended or revoked. (Administratively 14

suspended or revoked are those actions against a licensee for Continuing Professional 15

Education reporting deficiencies or failure to renew a license.) 16

(b) Each of the non-CPA individual owners who are residents of the State of Texas must 17

also: 18

(1) pass an examination on the rules of professional conduct as determined by board 19

rule; 20

(2) comply with the rules of professional conduct; 21

(3) maintain professional continuing education applicable to license holders including 22

the Board approved ethics course as required by board rule; 23

(4) hold a baccalaureate or graduate degree conferred by a college or university within 24

the meaning of §511.52 of this title (relating to Recognized Institutions of Higher 25

Education) or equivalent education as determined by the board; and 26

(5) maintain any professional designation held by the individual in good standing with 27

the appropriate organization or regulatory body that is identified or used in an 28

advertisement, letterhead, business card, or other firm-related communication. 29

(c) A "Non-CPA Owner" includes any individual or qualified corporation who has any 30

financial interest in the firm or any voting rights in the firm. 31

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September 18, 2019 1:30 p.m.

F. Discussion, consideration, and possible action on Board Rule 519.7 (Misdemeanors that Subject a Licensee or Certificate Holder to Discipline by the Board) regarding the types of criminal offenses that could subject a licensee to disciplinary action. DISCUSSION: Chapter 53 of the Occupations Code provides limitations on when licensing agencies may take disciplinary actions against licensees and applicants for initial licensure. During this last session of the legislature, Chapter 53 was amended to remove the section that permits a licensing agency to suspend or revoke a licensee or deny an applicant for licensure when the offense does not relate to the duties and responsibilities of the occupation if the offense was committed less than five years before the date the person applies for the license. This agency utilized this provision for disciplining licensees convicted of felonies. Chapter 53 does continue to permit a licensing agency to revoke or suspend a licensee if the offense directly relates to the duties and responsibilities of the occupation. The Public Accountancy Act (§ 901.005(c) & (e)) finds that “the public relies on the competence and integrity of certified public accountants in all of its dealings with certified public accountants…” A felony conviction or multiple misdemeanor convictions which establish a pattern of lawlessness directly relates to the practice of public accountancy. The public, including the business community, relies on the integrity of licensees and certificate holders in providing professional accounting services. Someone who repeatedly violates the law or is convicted of a felony lacks the integrity to enjoy the public’s trust and therefore the privilege of a being a CPA. RECOMMENDATION: The staff recommends that the Rules Committee recommend to the Board that the proposed new rule be published in the Texas Register for public comment.

SUGGESTED MOTION: That the Rules Committee recommend to the Board that

the Board authorize the Executive Director to have the proposed new rule published in the Texas Register for public comment.

V-29

CHAPTER 519 PRACTICE AND PROCEDURE 1 SUBCHAPTER A GENERAL PROVISIONS 2 RULE §519.7 Criminal Offenses Misdemeanors that May Subject a Licensee 3

or Certificate Holder to Discipline or Disqualify a Person from 4 Receiving a License by the Board 5

6 (a) Final conviction or placement on deferred adjudication for a felony, or final 7

conviction or placement on deferred adjudication for the following misdemeanors 8

, deferred prosecution, withheld adjudication or community supervision may subject a 9

licensee or certificate holder to disciplinary action pursuant to §501.90 of this title 10

(relating to Discreditable Acts) or disqualify a person from receiving a license or 11

deny a person the opportunity to take the UCPAE pursuant to §511.70 of this title 12

(relating to Grounds for Disciplinary Action of Applicants). Licensees and 13

certificate holders are often placed in a position of trust with respect to client funds and 14

assets. The public including the business community relies on the integrity, morality 15

and honesty of licensees and certificate holders in providing professional accounting 16

services or professional accounting work. The board considers a conviction or 17

placement on deferred adjudication for a felony or conviction or placement on 18

deferred adjudication for the following misdemeanor offenses to be evidence of 19

an individual lacking the integrity necessary to be trusted with client funds and 20

assets. The repeated failure to follow state and federal criminal laws directly 21

relates to the integrity required to practice public accountancy , deferred 22

prosecution, withheld adjudication or community supervision for any crime relating to 23

integrity, morality and honesty to relate directly to the practice of public accountancy 24

and may subject the licensee or certificate holder to discipline. The board has 25

determined that the following list of misdemeanor offenses evidence violations of law 26

that involve integrity and, morality and honesty directly relate to the duties and 27

responsibilities involved in providing professional accounting services or professional 28

accounting work, pursuant to the provisions of Chapter 53 of the Occupations Code: 29

(1) dishonesty or fraud: 30

(A) Unlawful Use of Criminal Instrument; 31

(B) Unlawful Access to Stored Communications; 32

(C) Illegal Divulgence of Public Communications; 33

(D) Burglary of Coin-Operated or Coin Collection Machines; 34

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(E) Burglary of Vehicles; 1

(F) Theft; 2

(G) Theft of Service; 3

(H) Tampering with Identification Numbers; 4

(I) Theft of or Tampering with Multichannel Video or Information Services; 5

(J) Manufacture, Distribution, or Advertisement of Multichannel Video or Information 6

Services Device; 7

(K) Sale or Lease of Multichannel Video or Information Services Device; 8

(L) Possession, Manufacture, or Distribution of Certain Instruments Used to Commit 9

Retail Theft; 10

(M) Forgery; 11

(N) Criminal Simulation; 12

(O) Trademark Counterfeiting; 13

(P) Stealing or Receiving Stolen Check or Similar Sight Order; 14

(Q) False Statement to Obtain Property or Credit or in the Provision of Certain 15

Services; 16

(R) Hindering Secured Creditors; 17

(S) Fraudulent Transfer of a Motor Vehicle; 18

(T) Credit Card Transaction Record Laundering; 19

(U) Issuance of a Bad Check; 20

(V) Deceptive Business Practices; 21

(W) Rigging Publicly Exhibited Contest; 22

(X) Misapplication of Fiduciary Property or Property of Financial Institution; 23

(Y) Securing Execution of Document by Deception; 24

(Z) Fraudulent Destruction, Removal, or Concealment of Writing; 25

(AA) Simulating Legal Process; 26

(BB) Refusal to Execute Release of Fraudulent Lien or Claim; 27

(CC) Fraudulent, Substandard, or Fictitious Degree; 28

(DD) Breach of Computer Security; 29

(EE) Unauthorized Use of Telecommunications Service; 30

(FF) Theft of Telecommunications Service; 31

(GG) Publication of Telecommunications Access Device; 32

V-31

(HH) Insurance Fraud; 1

(II) Medicaid Fraud; 2

(JJ) Coercion of Public Servant or Voter; 3

(KK) Improper Influence; 4

(LL) Acceptance of Honorarium (by restricted government employees); 5

(MM) Gift to Public Servant by Person Subject to his Jurisdiction; 6

(NN) Offering Gift to Public Servant; 7

(OO) Perjury; 8

(PP) False Report to Police Officer or Law Enforcement Employee; 9

(QQ) Tampering with or Fabricating Physical Evidence; 10

(RR) Tampering with Governmental Record; 11

(SS) Fraudulent Filing of Financial Statement; 12

(TT) False Identification as Peace Officer; 13

(UU) Misrepresentation of Property; 14

(VV) Record of a Fraudulent Court; 15

(WW) Bail Jumping and Failure to Appear; 16

(XX) False Alarm or Report; 17

(YY) Engaging in Organized Criminal Activity; 18

(ZZ) Violation of Court Order Enjoining Organized Criminal Activity; and 19

(AAA) Failing to file license holder's own tax return; 20

(2) moral turpitude: 21

(A) Public Lewdness; 22

(B) Indecent Exposure; 23

(C) Enticing a Child; 24

(D) Violation of a Protective Order Preventing Offense Caused by Bias or Prejudice; 25

(E) Failure to Identify; 26

(F) Hindering Apprehension or Prosecution; 27

(D) (G) Improper Contact with Victim; 28

(H) Barratry and Solicitation of Professional Employment; 29

(I) Unauthorized Practice of Law; 30

(J) Hindering Proceedings by Disorderly Conduct; 31

(E) (K) Abuse of Corpse; 32

V-32

(F) (L) Prostitution; 1

(G) (M) Promotion of Prostitution; 2

(H) (N) Obscene Display or Distribution; 3

(I) (O) Obscenity; 4

(J) (P) Sale, Distribution, or Display of Harmful Material to Minor; and 5

(K) (Q) Employment Harmful to Children; 6

(3) alcohol abuse or controlled substances: 7

(A) Possession of Substance in Penalty Group 3 (less than 28 grams), under the 8

Texas Health and Safety Code; 9

(B) Possession of Substance in Penalty Group 4 (less than 28 grams), under the 10


(C) Manufacture, Delivery, or Possession with Intent to Deliver Miscellaneous 12

Substances, under the Texas Health and Safety Code; 13

(D) Manufacture, Delivery, or Possession of Miscellaneous Substances, under the 14


(E) Delivery of Marijuana, under the Texas Health and Safety Code; 16

(F) Possession of Marijuana, under the Texas Health and Safety Code; 17

(G) Possession or Transport of Certain Chemicals with Intent to Manufacture 18

Controlled Substance (for substance listed in a Schedule but not in a Penalty Group), 19

under the Texas Health and Safety Code; 20

(H) Possession or Delivery of Drug Paraphernalia, under the Texas Health and 21

Safety Code; 22

(I) Obstructing Highway or Other Passageway; and 23

(J) Any misdemeanor involving intoxication under the influence of alcohol or a 24

controlled substance. 25

(4) physical injury or threats of physical injury to a person: 26

(A) Assault; 27

(B) Deadly Conduct; 28

(C) Terroristic Threat; and 29

(D) Leaving a Child in a Vehicle. 30

(b) A licensee or certificate holder is often placed in a position of trust with respect to 31

client funds; and the public, including the business community relies on the integrity, 32

V-33

morality and honesty of licensees and certificate holders in preparing reports and 1

providing professional accounting services or professional accounting work. The board 2

considers repeated violations of criminal laws to relate directly to a licensee or 3

certificate holder providing professional accounting services or professional accounting 4

work. 5

(c) A conviction or placement on deferred adjudication, deferred prosecution, withheld 6

adjudication or community supervision for a violation of any state or federal law that is 7

equivalent to an offense listed in subsection (a)(1) - (4) of this section is considered to 8

directly relate to a licensee or certificate holder providing professional accounting 9

services or professional accounting work and may subject a certificate or registration 10

holder to discipline by the board. 11

(d) Misdemeanor convictions in another state will be analyzed by the general counsel to 12

determine if such out of state misdemeanor has an equivalency to Texas law prior to 13

opening a complaint investigation. 14

V-34


September 18, 2019 1:30 p.m.

G. Discussion, consideration, and possible action on a letter from the Governor’s Office. DISCUSSION: The Governor’s Office is confirming in the attached letter that all rules proposed by this agency for adoption or revision must be provided to their office for their review prior to publication for public comment in the Texas Register. The Governor’s Office is also advising that some agencies, which will include this agency, will be asked sometime in the future to participate in the Governor’s Office’s review of proposed rules by this agency that could affect “market competition.” This is an effort to address the concern of state agencies with Boards comprised of “active market participants” making decisions that could violate federal anti-trust laws, e.g. the U.S. Supreme Court decision in the North Carolina Dental Examiners Board case. RECOMMENDATION: This is FYI. No action needed.

SUGGESTED MOTION: No action needed.

V-35

August 27, 2019

Dear State Agency Heads:

Last year, the Office of the Governor formalized the process for reviewing new rules proposed bystate agencies. Thank you for your commitment to this important initiative, which aims forimproved efficiencies at your agencies and fewer burdensome regulations being imposed onhardworking Texans.

This process will continue for all agencies. Before a proposed rule is submitted to the TexasRegister for publication, the Office of the Governor will review the Notice of Proposed Rule aswell as the agency’s internal analysis of the rule. All proposed rules should be sent to the policyadvisor assigned to your agency using the rulemaking template previously distributed.

Please note that an additional, distinct review process will also soon be required for a limitednumber of agencies. This past session, in Senate Bill 1995, the Legislature authorized the creationof a division within the Office of the Governor to review certain state agency rule changes formarket-competition purposes. The Office of the Governor will send additional information to theaffected agencies to initiate and give direction regarding this separate process.

Thank you for your cooperation in these efforts. If you have any questions, please contact thepolicy advisor assigned to your agency.

Sincerely,

Luis SaenzChief of Staff

GOVERNOR GREG ABBOTT

Posi OFFICE Box 12428 AUSTIN, TEXAS 78711 (512) 463-2000 (VoIcE)/DI 7-1-1 FOR RELAY SERVICESV-36


September 18, 2019 1:30 p.m.

H. Schedule next meeting.

V-37

•

•

•

Agenda Item VI


July 18, 2019 The Technical Standards Review Committee met on July 18, 2019, beginning at 11:30 a.m.

Members Present Ross Johnson, CPA,

Committee Chair Lisa A. Friel, CPA Pete M. Gonzales, CPA Jamie D. Grant Jeffrey L. Johanns, CPA Dilliana Stewart, CPA

Member Absent Robert M. McAdams, CPA

Staff Present J. Randel (Jerry) Hill, Esq. John Moore, Esq.

A. AFTER GIVING THESE MATTERS DUE CONSIDERATION, THE COMMITTEE RECOMMENDS THEY BE DISMISSED BASED ON INSUFFICIENT EVIDENCE OF A VIOLATION OF THE ACT OR THE BOARD'S RULES:

1. Investigation No. 13-04-18L: Respondent allegedly violated generally accepted auditing standards in audits of a construction company. (Board approval required)

2. Investigation No. 18-06-12L: Respondent allegedly violated generally accepted auditing standards in audits of a construction company. (Board approval required)

B. OTHER: The Committee considered six other matters during its meeting; however, these matters do not require Board action at this time.

C. NEXT MEETING: September 19, 2019 at 11:30 a.m .

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•

•

•

Agenda Item VII

Unauthorized Practice of Public Accountancy

September 19, 2019

Status Docket BOARD REPORTING PERIOD JULY 1, 2019 THROUGH August 31, 2019

OPEN FILES AT START 217

NEW FILES OPENED 112

TOTAL UPPA FILES 329

UPPA FILES CLOSED 94

OPEN FILES AT END 235

FILES CURRENTLY REFERRED TO 8 ATTORNEY GENERAL

UPPA CLOSED FILES:

VOLUNTARY COMPLIANCE 90

AGREED CONSENT ORDERS 0

FILES REFERRED TO BEHAVIORAL 0 ENFORCEMENT COMMITTEE

FILES PREVIOUSLY REFERRED TO 1 ATTORNEY GENERAL

OTHER 3

TOTAL 94

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•

•

•

AGENDA ITEM VIII

PROBATION & LIMITED SCOPE REPORT

SEPTEMBER 19, 2019

STATUS DOCKET BOARD REPORTING PERIOD JUNE 21,2019 THROUGH AUGUST 23,2019

OPEN CASES AT START: NEW CASES OPENED:

CASES CLOSED: OPEN CASES AT END:

A. PROBATION STATUS

PROBATION 11 0 1 10

At present, the Enforcement Division is monitoring:

1. Probation Files: 10

2. Limited Scope Files: 61

B. LIMITED SCOPE

LIMITED SCOPE 59 2 0

61

Certificate holders with limited scope status are subject to practice limitations, are required to perform affirmative acts, or both.

1. Certificate holders placed on limited scope during this reporting period: 2

2. Certificate holders released from limited scope during this reporting period: 0

C. PROBATION

1. Certificate holders placed on probation during this reporting period: 0

2. Certificate holders released from probation during this reporting period: 1

• Investigation No. 15-1 0-13L Respondent: Benjamin Joel Ortego Certificate No.: 094845 Hometown: Order Date:

Katy, Texas May 12,2016

The Securities and Exchange Commission (SEC) conducted an investigation of the Respondent regarding his involvement in providing audit reports of public shell companies. Respondent accepted a minimum three (3) year ban from appearing or practicing before the Securities and Exchange Commission (SEC)

Vlll-1

and paid a $50,000 civil money penalty under SEC Administrative Proceeding File Number 3-16339.

On May 12, 2016, Respondents entered into an Agreed Consent Order with the Board whereby Respondent's certificate and Respondent Firm's license would be suspended. However, this suspension was stayed and Respondent and Respondent Firm were placed on probated suspension for a period of three years from the date of the Board Order. In addition, Respondents were ordered to pay an administrative penalty of $25,000 and $119.11 in administrative costs

Respondents fulfilled all of the obligations under the agreement. On August 6, 2019, Respondents were released from the Board's monitoring system.

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•

•

•

•

•

•

Agenda Item IX

Consideration of Agreed Consent Orders & Administrative Disciplinary Actions

September 19, 2019 A. AGREED CONSENT ORDERS

Behavioral Enforcement Committee

1. Investigation No. 19-03-05L 2. Investigation No. 19-08-05L 3. Investigation Nos. 19-01-03L & 19-01-04L 4. Investigation Nos. 19-03-0?L & 19-03-08L 5. Investigation No. 19-01-08L


1. Investigation Nos. 19-03-03L & 19-03-04L

B. ADMINISTRATIVE DISCIPLINARY ACTIONS

1. Investigation Nos. 19-04-10001 - 19-04-10059 2. Investigation Nos. 19-05-10001 - 19-05-10043 3. Investigation Nos. 19-04-10060- 19-04-10222 4. Investigation Nos. 19-05-10044- 19-05-10236 5. Investigation Nos. 19-04-10223- 19-04-10235 6. Investigation Nos. 19-05-10237- 19-05-10246

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Agenda Item X

Consideration of Adoption of Proposed Board Rules (Second Reading)

September 19, 2019

DISCUSSION: The rules listed below were proposed for amendment on first reading at the July 18, 2019, Board meeting.

RECOMMENDATION: The staff recommends that the proposed rules be adopted as presented on second reading.

SUGGESTED MOTION: That the proposed rules listed below be adopted as presented on second reading.

1. Section 511.21 (Examination Application) 2. Section 511.122 (Acceptable Work Experience) 3. Section 511.123 (Reporting Work Experience) 4. Section 512. 1 (Certification as a Certified Public Accountant by Reciprocity) 5. Section 513. 11 (Qualifications for Non-CPA Owners of Firm License Holders) 6. Section 513.15 (Firm Offices) 7. Section 515.2 (Initial License) 8. Section 515.3 (License Renewals for Individuals and Firm Offices) 9. Section 515.5 (Reinstatement of a Certificate or License in the Absence of a

Violation of the Board's Rules of Professional Conduct) 10. Section 515.8 (Retired or Disability Status) 11. Section 515. 10 (Licenses for Individuals with Defaulted Student Loans) (Repeal) 12. Section 519.2 (Definitions) 13. Section 519. 13 (Direct Administrative Costs) (NEW) 14. Section 519.20 (Complaints) 15. Section 527.1 (Establishment of Peer Review Program) 16. Section 527.2 (Definitions) 17. Section 527.12 (Engagement Reviews and System Reviews) (NEW)

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§511.21.Examination Application.

• (a) An application to take the UCPAE shall be made on forms prescribed by the board and shall also be in compliance with board rules and with all applicable laws.

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(b) Each applicant shall submit to the Department of Public Safety a complete and legible set of fingerprints from a vendor approved by the Department of Public Safety in conjunction with the application for the purpose of obtaining criminal history record information .

.{9 f91 Each applicant shall submit their social security number on the application form. Such information shall be considered confidential and can only be disclosed under the provisions of the Act.

.{Ql WAn applicant must sign a statement on the application that states that if the applicant's examination is lost, the limit of liability for which the board may be held responsible will be the amount of the exam fee collected by NASBA.

@} fGj Each applicant for the UCPAE must pay an eligibility fee for each section for which the applicant requests to take in accordance with §521.14 of this title (relating to Eligibility Fee). Application forms not accompanied by the proper fee or required documents shall not be considered complete. The withholding of information, a misrepresentation, or any untrue statement on the application or supplemental documents will be cause for rejection of the application .

ill tet Each application must be verified to show that the applicant remains qualified in all respects to take the examination .

.(g} tft The board shall evaluate each examination application and establish dates of eligibility for each approved application, which will be used by the testing vendor or other organization to schedule and test an applicant.

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§511. 122.Acceptable Work Experience.

(a) Work experience shall be under the supervision of a CPA who is currently licensed • and in good standing with this board or with another state board of accountancy as defined in §511.124 of this chapter (relating to Acceptable Supervision). and who is experienced in the non-routine accounting area assigned to the applicant and •.vho holds a current license issued by this board or by another state board of accountancy as defined in §511.124 of this chapter (relating to Acceptable Supervision).

(b) Non-routine accounting involves attest services as defined in §501.52(4) of this title (relating to Definitions), or professional accounting services or professional accounting work as defined in §501.52(22) of this title, and the use of independent judgment, applying entry level or higher professional accounting knowledge and skills to select, correct, organize, interpret, and present real-world data as accounting entries, reports, statements, and analyses extending over a diverse range of tax, accounting, assurance, and control situations.

(c) Acceptable AU work experience, to be acceptable, shall be gained in the following categories or in any combination of these:

(1) Client practice of public accountancy. All client practice of public accountancy experience shall be obtained from a supervisor in a properly licensed CPA firm in good standing with the firm's licensing board and be of a non-routine accounting nature which continually requires independent thought and judgment on important accounting • matters.

(2) Unlicensed business entity. Work experience gained in an unlicensed business entity shall be of a non-routine accounting nature which continually requires independent thought and judgment on important accounting matters. Unlicensed business entity experience may include, but is not limited to:

(A) providing management or financial advisory or consulting services;

(8) preparing tax returns;

(C) providing advice in tax matters;

(D) providing forensic accounting services;

(E) providing internal auditing services; and

(F) business valuation services.

(2) Industry. All work experience gained in industry shall be of a non routine accounting nature •.vhich continually requires independent thought and judgment on important accounting matters. Acceptable industry work experience includes:

(A) internal auditor;

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(B) staff, fund or tax accountant;

(C) accounting, financial or accounting systems analyst; and

(D) controller.

(3) Industry practice. All work experience gained in industry shall be internal to the organization and of a non-routine accounting nature which continually requires independent thought and judgment on important accounting matters and may include: providing management or financial advisory internal services; preparing tax returns; providing advice in tax matters; providing forensic accounting services; and providing internal auditing services.

(A) Examples of industries may include. but are not limited to:

(i) commercial business enterprise;

(ii) non-profiUcharitable organization;

(iii) financial institution; and

(iv) health care entity.

(B) Acceptable industry work experience positions may include. but are not limited to:

(i) internal auditor;

(ii) staff. senior. fund or tax accountant;

(iii) accounting, financial or accounting systems analyst; and

(iv) controller.

ffi ~ Government practice. All work experience gained in government shall be of a non-routine accounting nature which continually requires independent thought and judgment on important accounting matters and which meets the criteria in subparagraphs (A) - (E) of this paragraph. The board will review on a case-by-case basis experience which does not clearly meet the criteria identified in subparagraphs (A) - (E) of this paragraph. Acceptable government work experience includes~ but is not limited to:

(A) employment in state government as an accountant or auditor at Salary Classification B14 or above, or a comparable rating;

(B) employment in federal government as an accountant, auditor or IRS revenue agent;

(C) employment as a special agent accountant with the Federal Bureau of Investigation or equivalent position at a governmental entity;

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(D) military service, as an accountant or auditor as a Second Lieutenant or above; and

(E) employment with other governmental entities as an accountant or auditor.

@l f4t Law firm practice. All work experience gained in a law firm shall be of a nonroutine accounting nature which continually requires independent thought and judgment on important accounting matters comparable to the experience ordinarily found in a CPA firm, shall be under the supervision of a CPA or an attorney, and shall be in one or more of the following areas:

(A) tax-planning, compliance and litigation; and

(B) estate planning.

f.§l ~·Education. 'Nark experience gained as an instructor at a college or university may qualify if evidence is presented showing independent thought and judgment was used on non routine accounting matters. Only the teaching of upper division courses on a full time basis may be considered. All experience shall be supervised by the department chair or a faculty member who is a CPA.

(A) Internal work experience gained at an educational institution shall be of a nonroutine accounting nature which continually requires independentthought and judgment on important accounting matters and may include: providing management or financial advisory internal services; preparing tax returns; providing advice in tax matters; providing forensic accounting services; and providing internal auditing services without an opinion.

(B) Work experience gained as an instructor at an educational institution may qualify if evidence is presented showing independent thought and judgment was used on nonroutine accounting matters. Only the teaching of upper division courses on a full-time basis may be considered. All experience shall be supervised by the department chair or a faculty member who is a CPA.

ill f@jlnternship. The board will consider, on a case-by-case basis, experience acquired through an approved accounting internship program, provided that the experience was non-routine accounting as defined by subsection (b) of this section. If an accounting internship course is counted toward fulfilling the education requirement, the internship may not be used to fulfill the work experience requirement.

.(§2 f71 Other. Work experience gained in other positions may be approved by the board as experience comparable to that gained in the practice of public accountancy under the supervision of a CPA upon certification by the person or persons supervising the applicant that the experience was of a non-routine accounting nature which continually required independent thought and judgment on important accounting matters .

.em~ Self-employment Self employment may not be used to satisfy the work experience requirement unless approved by the board.

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§511.123.Reporting Work Experience .

(a) The board requires a minimum of one year of work experience as described in §511.122 of this chapter (relating to Acceptable Work Experience) which shall be obtained in one of the following ways:

(1) full-time full time employment consisting of 40 or more hours per week completed in no less than 12 months; or

(2) part-time part time employment consisting of a minimum of 20 hours per week until 2000 hours of accounting work experience have been completed. Part-time work experience must be completed in no more than 24 months from the date the work begins.

(b) All work experience presented to the board for consideration shall be accompanied by the following items:

(1) a statement from the supervising CPA describing the non-routine work performed by the applicant and a description of the important accounting matters requiring the applicant's independent thought and judgment;

(2) a statement from the supervising CPA describing the type of experience that the CPA possesses which qualifies the CPA to supervise the applicant; and

(3) an affidavit from the supervising CPA stating that he has supervised the applicant's work; and offers his opinion that the applicant is qualified to perform all the accounting related work assigned to the applicant in accordance with the professional standards required by the board as defined in §501.62(1 )(B) of this title (relating to Other Professional Standards) .

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§512.1.Certification as a Certified Public Accountant by Reciprocity.

(a) The certificate of a "certified public accountant" shall be granted by reciprocity to an • applicant who is qualified under §901.259 of the Act (relating to Certification Based on Reciprocity) or §901.260 of the Act (relating to Certificate Based on Foreign Credentials) and is of good moral character as described in §901.253 of the Act (relating to Character Investigation). The applicant must provide in the application for reciprocity the names of all the jurisdictions in which the applicant is or has been certified and/or licensed and all disciplinary actions taken or pending in those jurisdictions.

(b) Each applicant shall submit to the Department of Public Safety a complete and legible set of fingerprints from a vendor approved by the Department of Public Safety in conjunction with the application for the purpose of obtaining criminal history record information .

.(Ql tat An applicant from a domestic jurisdiction demonstrates that he meets the requirements for certification by reciprocity by:

(1) satisfying one of the following conditions:

(A) the applicant holds a certificate or license to practice public accountancy from a domestic jurisdiction that has been determined by the board pursuant to §512.2 of this chapter (relating to NASBA Verified Substantially Equivalent Jurisdictions) as having • substantially equivalent requirements for certification; or

(B) the applicant holds a certificate or license to practice public accountancy from a domestic jurisdiction that has not been determined by NASBA and the board to have substantially equivalent certification requirements but has had his education, examination and experience verified as substantially equivalent to those required by the UAA by NASBA; or

(C) the applicant meets all requirements for issuance of a certificate set forth in the Act; or

(D) the applicant met the requirements in effect for issuance of a certificate in this state on the date the applicant was issued a certificate or license by another domestic jurisdiction; or

(E) after passing the UCPAE, the applicant has completed at least four years of experience practicing public accountancy within the ten year period immediately preceding the date of application in this state; and

(2) meeting CPE requirements applicable to certificate holders contained in Chapter 523 of this title (relating to Continuing Professional Education).

@ fst An applicant from a foreign jurisdiction demonstrates that he meets the requirements for certification by reciprocity by:

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(1) holding a credential that has not expired or been revoked, suspended, limited or probated, and that entitles the holder to issue reports on financial statements issued by a licensing authority or professional accountancy body of another country that:

(A) regulates the practice of public accountancy and whose requirements to obtain the credential have been determined by the board to be substantially equivalent to the requirements of education, examination and experience contained in the Act; and

(B) grants credentials by reciprocity to applicants certified to practice public accountancy by this state;

(2) receiving that credential based on education and examination requirements that were comparable to or exceeded those required by the Act at the time the credential was granted;

(3) completing an experience requirement in the foreign jurisdiction that issued the credential that is comparable to or exceeds the experience requirement of the Act or has at least four years of professional accounting experience in this state;

(4) passing an international qualifying examination (IQEX) covering national standards that has been approved by the board; and

(5) passing an examination that has been approved by the board covering the rules of professional conduct in effect in this state .

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§513.11.Qualifications for Non-CPA Owners of Firm License Holders.

(a) A firm which includes non-CPA owners may not qualify for a firm license unless • every non-CPA individual who is an owner of the firm:

(1) is actively providing personal services in the nature of management of some portion of the firm's business interests or performing services for clients of the firm or an affiliated entity;

(2) lacks a is of good moral character as demonstrated by a lack of history of dishonest or felonious acts; and

(3) is not a suspended or revoked licensee or certificate holder excluding those licensees that have been administratively suspended or revoked. (Administratively suspended or revoked are those actions against a licensee for Continuing Professional Education reporting deficiencies or failure to renew a license.)

(b) Each of the non-CPA individual owners who are residents of the State of Texas must also:

(1) pass an examination on the rules of professional conduct as determined by board rule;

(2) comply with the rules of professional conduct;

(3) maintain professional continuing education applicable to license holders including the Board approved ethics course as required by board rule;

(4) hold a baccalaureate or graduate degree conferred by a college or university \Nithin the meaning of §511.52 of this title (relating to Recognized Institutions of Higher Education) or equivalent education as determined by the board; and

.Ql tat maintain any professional designation held by the individual in good standing with the appropriate organization or regulatory body that is identified or used in an advertisement, letterhead, business card, or other firm-related communication; and-=-

(4) provide to the board fingerprinting required in §515.1 (d) of this title (relating to License) unless previously submitted to the board.

(c) A "Non-CPA Owner" includes any individual or qualified corporation who has any financial interest in the firm or any voting rights in the firm.

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§513.15.Firm Offices.

• (a) A certified public accountancy firm must hold a license for each office located in Texas.

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(b) Each office of a firm must designate be under the direct supervision of a resident manager who is a resident of Texas. Exempted from the requirement of Texas residency is a resident manager who spends a majority of the work week in Texas as the firm's resident manager. A resident manager may be an owner, member, partner, shareholder, or employee of the firm and must be licensed under the Act.

(c) A resident manager may supervise more than one office provided that the firm's application for issuance or renewal of the firm license or registration identifies each of the offices the resident manager will supervise.

(d) A resident manager is responsible for the supervision of professional services and may be held responsible for the violations of the Act or Rules for the activities of each office under his supervision.

(e) Interpretive comment: The exemption provided for in subsection (b) of this section is intended to address licensees residing outside of Texas but are able to commute to the Texas office for which the licensee is the firm resident manager on a routine and regular basis .

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§515.2./nitia/ License.

(a) An initial license is the first license issued to an individual or firm certified or • registered under the Act. The board will prorate the initial license fee for an individual or firm for those months during which the license is valid. ·

(b) The firm's initial and subsequent office license shall not be issued until such time as the sole proprietor, all partners, officers, directors, members, or shareholders of the firm~ including non-CPA firm owners, who reside in Texas and who are certified or registered under the Act have obtained a license and have been fingerprinted unless they have been previously fingerprinted by the board.

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§515.3.License Renewals for Individuals and Firm Offices .

(a) License renewals for individuals shall be as follows:

(1) Licenses for individuals have staggered expiration dates based on the last day of the individual's birth month. The license will be issued for a 12-month period following the initial licensing period.

(2) An individual's license will not be renewed if the individual has not earned the required CPE credit hours, has not completed all required parts of the renewaiJ. 9f has not completed the affidavit affirming the renewal submitted is correct or has not provided the required fingerprinting unless it has been previously submitted to the board.

(3) At least 30 days before the expiration of an individual's license, the board shall send notice of the impending license expiration to the individual at the last known address according to board records. Failure to receive notice does not relieve the licensee from the responsibility to timely renew nor excuse, or otherwise affect the renewal deadlines imposed on the licensee.

(b) A licensee is exempt from any penalty or increased fee imposed by the board for failing to renew the license in a timely manner if the individual establishes to the satisfaction of board staff that the individual failed to renew the license because the individual was serving as a military service member. In addition, the military service member has an additional two years to complete any other requirement related to the renewal of the military service member's license.

(c) License renewal requirements for firm offices shall be as follows:

(1) Licenses for offices of firms have staggered expiration dates for payment of fees, which are due the last day of a board assigned renewal month. All offices of a firm will have the same renewal month. All offices of a firm will be issued a license for a 12-month period following the initial licensing period.

(2) At least 30 days before the expiration of a firm's office license, the board shall send notice of the impending license expiration to the main office of the firm at the last known address according to the records of the board. Failure to receive notice does not relieve the firm from the responsibility to timely renew nor excuse, or otherwise affect the renewal deadlines imposed on the firm.

(3) A firm's office license shall not be renewed unless the sole proprietor, each partner, officer, director, or shareholder of the firm who is listed as a member of the firm and who is certified or registered under the Act has a current individual license. This does not apply to firms providing work pursuant to the practice privilege provisions of this title.

(4) If a firm is subject to peer review, then a firm's office license shall not be renewed unless the office has met the peer review requirements as defined in Chapter 527 of this title (relating to Peer Review).

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§515.5.Reinstatement of a Certificate or License in the Absence of a Violation of the Board's Rules of Professional Conduct.

(a) An individual whose license has been expired for 90 days or less may renew the license by paying to the board a renewal fee that is equal to 1 1/2 times the normally required renewal fee.

(b) An individual whose license has been expired for more than 90 days but less than one year may renew the license by paying to the board a renewal fee that is equal to two times the normally required renewal fee.

(c) An individual whose license has been expired for at least one year but less than two years may renew the license by paying to the board a renewal fee that is equal to three times the normally required renewal fee.

(d) An individual whose license has been expired for two years or more may obtain a license by paying all renewal fees including late fees.

(e) An individual whose license has been suspended or certificate revoked for the voluntary non-payment of the annual license fees, the voluntary non-completion of the annual license renewal, or the voluntary non-completion of the board required CPE may be administratively reinstated by complying with the board's CPE requirements pursuant to Chapter 523 of this title (relating to Continuing Professional Education) and providing the board the individual's required fingerprints if not previously submitted; and

(1) by paying all renewal fees including late fees; or

(2) upon showing of good cause, entering into an Agreed Consent Order that reinstates the certificate and permits the issuance of a conditional license with the agreement to pay all required fees by a certain date.

(f) An individual who was revoked under §901.502(3) or (4) of the Act (relating to Grounds for Disciplinary Action), has moved to another state, and is currently licensed and has been in practice in the other state for the two years preceding the date of submitting a complete application may obtain a new license without reexamination by:

(1) providing the board with a complete application including evidence of the required licensure;

(2) demonstrating that the out of state license is no more than 90 days beyond the normal expiration date of the license;

(3) paying the board a fee that is equal to two times the normally required renewal fee for the license; and

(4) meeting the other requirements for licensing.

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(g) If the certificate, license, or registration was suspended, or revoked for non-payment of annual license fees, failure to complete the annual license renewal, or failure to comply with §501.94 of this title (relating to Mandatory Continuing Professional Education), upon written application the executive director will decide on an individual basis whether the renewal fees including late fees must be paid for those years and whether any fee exemption is applicable.

(h) A military service member, military veteran or military spouse may obtain a license in accordance with the provisions of §515.11 of this chapter (relating to Licensing for Military Service Members, Military Veterans, and Military Spouses).

(i) Interpretive Comment: Effective September 1, 2015, when calculating the renewal fee provided for in subsections (a)- (d) of this section, the professional fee that was required by §901.406 and §901.407 of the Act (relating to Fee Increase and Additional Fee) will no longer be included in the renewal fee. However, when calculating any renewal fees accrued prior to September 1, 2015, the professional fee that was required by §901.406 and §901.407 of the Act will be included in the renewal fee .

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§515.8.Retired or Disability Status.

(a) Retired status. A licensee who is at least 60 years old and has filed a request on a • form prescribed by the board stating that he has no association with accounting may be granted retired status at the time of license renewal. A licensee in retired status is exempt from the fingerprinting required in §515.1 (d) of this chapter (relating to License). A licensee who has been granted retired status and who reenters the workforce in a position that has an association with accounting automatically loses the retired status except as provided for in subsection (a)(1) of this section, and must provide the fingerprinting required in §515.1 (d) of this chapter unless previously submitted to the· board.

(1) A licensee who serves without compensation on a Board of Directors, or Board of Trustees, or provides volunteer tax preparation services, participates in a government sponsored business mentoring program such as the Internal Revenue Service's Volunteer Income Tax Assistance (VITA) program or the Small Business Administration's SCORE program or participates in an advisory role for a similar charitable, civic or other non-profit organization continues to be eligible for retired status.

(2) Licensees providing such uncompensated volunteer services have the responsibility to maintain professional competence relative to the volunteer services they provide even though exempted from CPE requirements.

(3) The board shall require licensees to affirm in writing their understanding of the • limited types of activities in which they may engage while in retired status and their understanding that they have a professional duty to ensure that they hold the professional competencies necessary to offer these limited volunteer services.

(4) Licensees may only convert to retired status if they hold a license in good standing and not be subject to any sanction or disciplinary action.

(5) Compensated services do not include routine reimbursement for travel costs and meals associated with the volunteer services or de minimis per diem amounts paid to cover such expenses.

(6) A retired licensee shall place the word "retired" adjacent to his CPA or Public Accountant title on any business card, letterhead or any other document. A licensee may be held responsible for a third party incorrectly repeating the CPA's title and shall make reasonable efforts to assure that the word "retired" is used in conjunction with CPA. Any of these terms must not be applied in such a manner that could likely confuse the public as to the current status of the licensee. The licensee will not be required to have a certificate issued with the word "retired" on the certificate.

(7) A licensee in "retired" status is not required~ to maintain CPE.

(A) to maintain CPE; and

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(B) provide fingerprinting in accordance with §515.1 (d) of this chapter unless the retired status is removed. ·

(8) A retired licensee shall not offer or render professional services that requires his signature and use of the CPA title either with or without "retired" attached, except a retired licensee providing supervision of an applicant to take the UCPAE may sign the work experience form.

(9) Upon reentry into the workforce, the licensee must notify the board and request a new license renewal notice and:

(A) pay the license fee established by the board for the period since he became employed;

(B) complete a new license renewal notice; and

(C) meet the CPE requirements for the period since he was granted the retired status as required by §523.113(3) of this title (relating to Exemptions from CPE).

(b) Disability status. Disability status may be granted to an individual who submits to the board a statement and a notarized affidavit from the licensee's physician which identifies the disability and states that the individual is unable to work because of a severe ongoing physical or mental impairment or medical condition that is not likely to improve within the next 12 consecutive months. This status may be granted only at the time of license renewal.

(1) Disability status is immediately revoked upon:

(A) the CPA reentering the workforce in a position that has an association with accounting work for which he receives compensation; or

(B) the CPA serving on a Board of Directors, Board of Trustees, or in a similar governance position unless the service is for a charity, civic, or similar non-profit organization.

(2) Upon reentry into the workforce under such conditions, the individual must notify the board and request a new license renewal notice and:

(A) pay the license fee established by the board for the period since he became employed;

(B) complete a new license renewal notice; aR4

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(D) provide the fingerprinting required in §515.1 (d) of this chapter unless previously submitted.

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(c) For purposes of this section the term "association with accounting" shall include the following:

(1) working or providing oversight of accounting or supervising work performed in the areas of financial accounting and reporting; tax compliance, planning or advice; management advisory services; accounting information systems; treasury, finance, or audit; or

{2) representing to the public, including an employer, that the individual is a CPA or public accountant in connection with the sale of any services or products involving accounting services or work, as provided for in §501.52(22) of this title (relating to Definitions) including such designation on a business card, letterhead, proxy statement, promotional brochure, advertisement, or office; or

(3) offering testimony in a court of law purporting to have expertise in accounting and reporting, auditing, tax, or management services; or

(4) providing instruction in accounting courses; or

(5) for purposes of making a determination as to whether the individual fits one of the categories listed in this section the questions shall be resolved in favor of including the work as an "association with accounting."

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(d) Nothing herein shall be construed to limit the board's disciplinary authority with regard to a license in retired or disabled status. All board rules and all provisions of the • Act apply to an individual in retired or disability status.

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§515.10.Licenses for Individuals with Defaulted Student Loans.

• (a) The board shall not rene·.v the license of a licensee \Nhose name appears on the list of individuals •.vho are in default of loans guaranteed by the Texas Guaranteed Student Loan Corporation (TGSLC) and in default of repayment agreements unless:

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(1) the rene•.val is the first rene•.val follmving the board's receipt of the list including the licensee's name among those in default; or

(2) the licensee presents a certificate issued by TGSLC certifying that:

(/\) the licensee has entered into a repayment agreement on the defaulted loan; or

(B) the licensee is not in default on a loan guaranteed by TGSLC.

(b) The board may issue an initial license to an applicant whose name appears on the list of individuals ·.vho are in default of loans guaranteed by TGSLC if the applicant meets the qualifications for licensure established by the board; provided, however, that the board shall not renew the license unless the licensee presents a certificate issued by TGSLC certifying that:

(1) the licensee has entered into a repayment agreement on the defaulted loan; or

(2) the licensee is not in default on a loan guaranteed by TGSLC .

(c) The board shall provide a licensee with the opportunity to have a public hearing pursuant to the board's rules prior to taking action concerning non renewal of a license for default of student loans.

(d) The board's nonrenewal policy shall be printed on each license renewal notice and license application .

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§519.2.Definitions.

In this chapter:

(1) "Address of record" means the last address provided to the board by a certificate or registration holder pursuant to §501.93 of this title (relating to Responses);

(2) "ALJ" means SOAH administrative law judge;

(3) "APA" means the Texas Administrative Procedure Act, Chapter 2001 of the Texas Government Code;

(4) "Board staff' means the agency's employees;

(5) "Committee" means an enforcement committee of the board;

(6) "Complainant" means the person or entity who initiates a complaint with the board against a certificate or registration holder;

(7) "Complaint" means information available to or provided to the board indicating that a certificate or registration holder may have violated the Act, board rules, or order of the board;

(8) "Contested case" means a proceeding, including a ratemaking or licensing proceeding, in which the legal rights, duties, or privileges of a party are to be determined by a state agency after an opportunity for adjudicative hearing;

(9) "Deferred Adjudication" means a person entered a plea of guilty or nolo contendere, the judge deferred further proceedings without entering an adjudication of guilt and placed the person under the supervision of the court or an officer under the supervision of the court and at the end of the period of supervision, the judge dismissed the proceedings and discharged the person.

i1Q2 f91 "Direct Administrative Costs" means those costs actually incurred by the board through payment to outside vendors and the resources expended by the board in the investigation and prosecution of a matter within the board's jurisdiction, including, but not limited to, staff salary, payroll taxes and benefits and other non-salary related expenses, expert fees and expenses, witness fees and expenses, filing fees and expenses of the support staff of the Office of the Attorney General, filing fees, SOAH utilization fees, court reporting fees, copying fees, delivery fees, case management fees, costs of exhibit creation, technical fees, travel costs and any other cost or fee that can reasonably be attributed to the matter;

.(1.1l fiG1 "Petitioner" means the Texas State Board of Public Accountancy;

U1l (4-4-1 "PFD" means the proposal for decision prepared by an ALJ;

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~ f4-2-t"Respondent" means a licensee or certificate holder, individual or entity against whom a complaint has been filed; and

{Ml ~ "SOAH" means the State Office of Administrative Hearings .

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§519.13.Direct Administrative Costs.

(a) The Texas Legislature does not appropriate funds to finance the operations of the • board. Instead, the board is funded by licensing fees and other sources and is responsible for all direct and indirect costs of operations. It is the policy of the board to impose all direct administrative costs against the persons responsible for the costs of enforcement as opposed to being assessed against the licensing fees collected from license holders in compliance with the Act in the absence of a waiver of these costs for good cause.

(b) Direct administrative costs are defined in §519.2(1 0) of this chapter (relating to Definitions) and the board will use this definition in determining the direct administrative costs of an enforcement action. The direct administrative costs will not exceed the actual costs of the criteria established in §519.2(1 0) of this chapter.

(c) The board staff is responsible for proving the amount and method of assessing the direct administrative costs being presented in a proceeding before an ALJ at SOAH and when presented to the board for the board's final decision. The costs will be documented by the staff recording the time they devote to each enforcement action .

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§519.20. Complaints .

(a) Written complaints should contain information necessary for the proper processing of the complaint by the board, including:

(1) complainant's name, address and phone number;

(2) name, address and phone number of the licensee or certificate holder against whom the complaint is filed;

(3) description of the alleged violation;

(4) supporting information and factual evidence;

(5) names and addresses of witnesses; and

(6) sources of other pertinent information.

(b) The board has discretion whether or not to open an investigative file. A complaint that does not contain all of the information requested in subsection (a) of this section may be pursued if the missing information can be obtained from another source. For the board to proceed it must have jurisdiction over the person and the subject matter. Once the board has received a complaint, board staff shall conduct an initial screening of the complaint within 30 days. The board staff shall notify the complainant whether or not the board will proceed with an investigation.

(c) The board may accept anonymous complaints. Anonymous complaints may not be investigated if insufficient information is provided, the allegations are vague, appear to lack factual foundation, or cannot be proved for lack of a witness or other evidence.

(d) The board will periodically provide an update on the status of the complaint investigation to the complainant when there has been a substantive change of status. A substantive change would include the scheduling of the complaint investigation before an enforcement committee, the execution of an agreed consent order, a decision to refer the matter to litigation for prosecution at SOAH, any subsequent settlement agreement and the issuance of a proposal for decision.

(e) The board may open a complaint investigation on:

(1) an individual licensee and the individual's firm when it has evidence that the individual licensee participated in a possible violation of the Act or board rule; and

(2) a firm when there is evidence that the firm, in the practice of public accountancy, may have caused harm to a Texas resident or entity.

CD Interpretive comment: The CPA firm may contact the board to determine if there is a nexus to Texas regarding the issue in subsections (e)(1) and (e)(2) of this section. The

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board will not open a complaint investigation on a firm unless the firm, in the practice of public accountancy, has caused harm to a person or entity located in Texas.

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§527. 1.Establishment of Peer Review Program.

• (a) Pursuant to §901.159 of the Act (relating to Peer Review), the board establishes a peer review program to monitor CPAs' compliance with applicable accounting, auditing and other attestation standards adopted by generally recognized standard-setting bodies. The program may include education, remediation, disciplinary sanctions or other corrective action where reporting does not comply with professional or regulatory standards.

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(b) This chapter shall not require any firm to become a member of any sponsoring organization and all sponsoring organization(s) shall charge the same administrative fee to all firms participating in peer review regardless of their membership or affiliation with a sponsoring organization .

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§527.2.Definitions.

The following words and terms used in this chapter shall have the following meanings, • unless the context clearly indicates otherwise.

(1) "Engagement Review" means a peer review evaluating engagements performed and reported on in conformity with applicable professional standards in all material respects and unless agreed to otherwise is performed off-site from the reviewed firm's office and does not provide a basis for expressing any assurance regarding the firm's system of quality control for its accounting practice. "Revimv" or "review program" means the revievJ conducted under the peer review program.

(2) "Systems Review" means an on-site peer review designed to provide a peer reviewer with a reasonable basis for expressing an opinion on whether, during the year under review: "Revie\v year" means the one year (t\velve month) period covered by the review. Engagements selected for review normally would have periods ending during the year under review.

(A) the reviewed firm's system of quality control for its accounting and auditing practice has been designed in accordance with quality control standards; and

(B) the reviewed firm's quality control policies and procedures were being complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects.

(3) "Review Year" means the one-year (12-month) period covered by the peer review. Financial statement engagements selected for review normally would have periods ending during the year under review. Engagements related to financial forecasts or projections, or agreed upon procedures engagements, with report dates during the year under review would also be subject to selection for review.

ffi ~ "Sponsoring organization" means an entity that meets the standards specified by the board for administering the review. The board shall periodically publish a list of sponsoring organizations, which have been approved by the board.

@l \4-)- "Firm inspection program" means the process of firm inspection administered by the PCAOB .

.(§} fej"Rating" of a peer review refers to the type of report issued. The three types of reports are pass, pass with deficiencies, or fail. The peer review rating is clearly indicated in the peer review report. A peer review report with a rating of pass with deficiencies or fail is considered a deficient review.

ill tat "Assigned review date" is the reporting due date to the board of an accepted peer review report .

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.@} f7t "Acceptance date" of a peer review is the date that the sponsoring organization's • peer review report committee (PRRC), referred to in §527.9(a)(1) of this chapter

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(relating to Procedures for a Sponsoring Organization), is presented the peer review report on a review with the rating of pass and the PRRC approves the review. The acceptance date and in this case the completion date of the peer review are the same date and is noted in a letter from the administering entity to the reviewed firm. The PRRC will be presented with the peer review report and the firm's letter of response on reviews with a rating of pass with deficiencies or fail. Ordinarily, the PRRC will require the reviewed firm to take corrective action(s) and those actions will be communicated in a letter to the firm from the administering entity. In this circumstance, the "acceptance date" is defined as the date that the reviewed firm signs the letter from the administering entity agreeing to perform the required corrective action(s) .

.{.ill.~ "Completion date" of a peer review is the date that the sponsoring organization's PRRC, referred to in §527.9(a)(1) of this chapter, is presented the corrective action and the committee decides that the reviewed firm has performed the agreed-to corrective action(s) to the committee's satisfaction and the committee requires no additional corrective action(s) by the firm. The date is noted in a final letter from the administering entity to the reviewed firm .

.(1Ql t9-f"AICPA Public File" is the file for firms that are members of AI CPA's Employee Benefit Plan Audit Quality Center, Governmental Audit Quality Center, Private Companies Practice Section, or other firms that voluntarily post their review information to this public file on AICPA's web site as a membership requirement. Information in the public file includes the firm's most recently accepted peer review report and the firm's response thereto, if any .

f11l twj"Facilitated State Board Access (FSBA)" is a secure website accessible only to the state board that provides the most recently accepted peer review report, the firm's letter of response (LOR), the corrective action letter (CAL), and the final letter of acceptance (FLOA) .

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§527. 12.Engagement Reviews and System Reviews.

(a) In order to balance the public's risk with the public's protection, the board is requiring • peer review of firms providing financial reporting services. In implementing the peer review program, the board will consider the level of risk to the public of various attest services and require different levels of peer review based on those risks. Those firms that provide limited financial statement services can elect to perform non-attest preparation engagements under SSARS which do not require peer review.

(b) A firm whose only level of financial reporting is preparation engagements under SSARS must request on its annual license renewal an exemption from peer review.

(c) A firm that performs the following is subject to Engagement Peer Review.

(1) Compilations with disclosures or omitting substantially all disclosures and/or reviews of financial statements performed in accordance with SSARS. If the firm performs both an attest service and a preparation engagement(s), then the preparation engagement(s) is also subject to review and could be selected for peer review.

(2) Reviews and/or agreed-upon procedures engagements performed in accordance with SSAEs, or alternate wording engagements performed under the SSAEs, other than examinations.

(d) A firm that performs the following is subject to a System Peer Review.

(1) Engagements performed in accordance with SAS;

(2) Engagements performed in accordance with Government Auditing Standards (GAS);

(3) Examination engagements performed in accordance with SSAEs;

(4) Audits of non-SEC issuers performed in accordance with PCAOB standards; or

(5) Attestation of non-SEC issuers performed in accordance with PCAOB standards .

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Agenda Item XI

Report of the Nominating Committee and Election of Officers

September 19, 2019

I. DISCUSSION: Mr. LaFrey, Member of the Nominating Committee along with members Mr. B. Pena, and Ms. Wilkerson, will announce the committee's slate of officers and Executive Committee members-at-large for terms to run from 2019 through 2020. The presiding officer will also entertain nominations from the floor.

II. RECOMMENDATION: That the Board approve the following slate of officers and Executive Committee members-at-large:

Dr. Morris Mr. B. Pena Mr. LaFrey Ms. Friel Mr. Johnson Ms. Wilkerson

Assistant Presiding Officer Treasurer Secretary Executive Committee member-at-large Executive Committee member-at-large Executive Committee member-at-large

Ill. SUGGESTED MOTION: Motion to approve the new slate of officers and Executive Committee members-at-large

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Agenda Item XII

. Review of Future Meetings/Hearing Schedules

September 19, 2019

I. DISCUSSION: Schedules of dates for 2019 Board and committee meetings, hearings, and other activities are attached for your information.

II. RECOMMENDATION: None by staff

Ill. SUGGESTED MOTION: None by staff

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EVENT Jan Feb Mar Apr May Jun Jut Aug Sep Oct Nov Dec Board 24 21 16 18 19 14

Meeting 10:00 10:00 10:00 10:00 10:00 10:00

Swearing-in 251 141

Ceremony 10:00 10:00

26-28 18-20

NASBA E.D. Western

27-30

Meetings & Regional

Annual Legal Mtg. Conf. Mtg.

TSCPA 28-30 21-22

Meetings Mid-yr. Annual Conf. Mtg.

Staff 1 18 27 192 4 272 2 28-29 24-26 Holidays 21

~t 7 23 26 18

9:15 9:15 9:15 9:15

CPE

CEC 15 10:00

Executive 23 20 15 17 18 3:00 3:00 2:30 2:30 2:30

Licensing 20 9:30

Qualifications 16 15 9:30 1:30

Peer Assistance

Peer Review 20 9:30

Rules 20 17 18 1:30 1:00 1:00

TSR 24 16 18 19 Noon 11:30 11:30 11:30

1Swearing-in ceremonies are scheduled for May 25, 2019 and December 14, 2019, in Austin, Texas, at the Palmer Events Center .

• 2Skeleton crew holiday .

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Agenda Item XIII

Adjournment

September 19, 2019

I. DISCUSSION: The presiding officer will entertain a motion to adjourn.


Ill. SUGGESTED MOTION: None required

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board of ~mm ~~~,~~11~ ~~~~ti~ - texassep 19, 2019 · ross t. johnson, cpa executive committee...

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board of ~mm ~,11~ ~~~~ti~ - texassep 19, 2019 · ross t. johnson, cpa executive committee...