Title of Regulation: 18VAC5-22. Board of Accountancy Regulations (amending 18VAC5-22-90).

Statutory Authority: §§ 54.1-4402 and 54.1-4403 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: February 21, 2018.

Effective Date: March 8, 2018.

Agency Contact: Rebekah E. Allen, Enforcement Director, Board of Accountancy, 9960 Mayland Drive, Suite 402, Richmond, VA 23223, telephone (804) 367-2006, FAX (804) 527-4207, or email rebekah.allen@boa.virginia.gov.

Basis: Section 54.1-4403 of the Code of Virginia grants authority to the Board of Accountancy to promulgate regulations, "in accordance with the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia) necessary to assure continued competency, to prevent deceptive or misleading practices by licensees, and to effectively administer the regulatory system" and specifically references the board's power to establish continuing professional education (CPE) requirements as a condition for licensure. The board is the promulgating entity for regulations governing public accountancy

Purpose: The amendments simplify the regulatory burden on and reduce confusion for certified public accountants (CPAs) by having a single subsection addressing general CPE requirements and codify additional ways by which CPAs can earn CPE hours, which has been permitted by practice for several years in the board's guidance documents. Roughly 20% of CPAs have been found to have a CPE deficiency, due in part to confusion about which subsection of regulation applies to them, when in fact, since 2011, the CPE requirements for CPAs, regardless of the type of work they perform, have been the same, unless granted an exemption from the CPE requirements by the board. The board anticipates that by eliminating duplicative material, CPAs will have a better understanding of their CPE obligations, which in turn will allow them to achieve the minimum continuing education necessary to competently provide services to the public and to their employers. The board also believes that increased CPE compliance will occur if it codifies an additional way for CPAs to earn CPE hours.

Rationale for Using Fast-Track Rulemaking Process: This rulemaking is expected to be noncontroversial because the amendments do not increase the CPE requirements of CPAs, add an additional way by which CPAs can earn CPE hours that is already permitted in the board's guidance documents, and do not change the criteria by which a person is judged to be eligible for an exemption. The amendments are also supported by the Virginia Society of Certified Public Accountants.

Substance: The amendments combine the existing first two subsections of 18VAC5-22-90 into one subsection. Since 2011, the CPE requirements have been identical for CPAs regardless of where they work. Information that is contained in Board Policy #9 on how an exemption from CPE requirements is obtained and retained, which has been the board's practice for several years, is incorporated into regulation text. The amendments also include examination and certification as an additional way of earning CPE hours and codify information that is contained in Board Policy #4 on this subject, which also has been the board's practice for several years.

Issues: There are no primary disadvantages to the public. The primary advantages to the public are greater likelihood that CPAs are earning the CPE hours related to the services they are providing, which allows them to stay up-to-date with current technical standards, improves work product produced, and broadens the range of services they can competently provide. There are no primary disadvantages to the board or the Commonwealth. The primary advantages to the board and the Commonwealth are less staff time devoted to explaining the CPE requirements to CPAs by telephone and by email. There is no restraint on competition as a result of promulgating this regulation.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Virginia Board of Accountancy (Board) proposes to amend its regulation to: 1) remove obsolete language, 2) specify that individuals who qualify for an exemption from having to complete continuing education must show evidence that they qualify to the Board and 3) allow licensees to receive up to 60 hours of continuing education credit during any three calendar-year period for passing examinations and obtaining certifications approved by the Board.

Result of Analysis. Benefits likely outweigh costs for all proposed changes.

Estimated Economic Impact. Current regulation includes provisions that expired in 2011 for individuals who have certified public accountants (CPA) licenses, who provided CPA services for their employers but did not provide services to the public, to complete fewer hours of continuing education. The Board now proposes to remove these provisions. Because CPA licensees are no longer allowed to take advantage of these provisions, no individuals are likely to be adversely affected by these proposed changes. To the extent that obsolete regulatory language can cause confusion for individuals reading that language, removing that language will likely provide the benefit of additional clarity.

Current regulation exempts individuals who are licensed by the Board but do not provide CPA services to the public or an employer from having to complete required continuing education hours. The Board proposes to clarify that individuals who claim this exemption must demonstrate to the Board that no CPA services were provided during the time for which the exemption is claimed. Because the Board would have already needed information from licensees to know whether they would need to complete continuing education, no entity is likely to incur additional costs on account of this proposed change. To the extent that this clarification eliminates confusion about the rules for claiming the exemption from continuing education, licensees will benefit.

Finally the Board proposes to allow licensees to receive up to 60 hours¹ of continuing education credit during any three-calendar-year period for passing examinations and obtaining certifications approved by the Board. No entity will be required to use this avenue to complete their continuing education hours, so no entity is likely to use this avenue if it increases their total continuing education costs. This proposed change will provide licensees with the benefit of additional flexibility in meeting the requirements to maintain their CPA licenses.

Businesses and Entities Affected. These proposed regulatory amendments will affect all individuals and firms licensed by the Board of Accountancy. Board staff reports that, as of September 30, 2017, there were 27,842 individuals who had CPA licenses issued by the Board and 1,179 CPA firm licenses issued by the Board. 

Localities Particularly Affected. No locality is likely to be particularly affected by these proposed regulatory changes.

Projected Impact on Employment. These proposed regulatory changes are unlikely to affect employment in the Commonwealth.

Effects on the Use and Value of Private Property. These proposed regulatory changes are unlikely to affect the use or value of private property in the Commonwealth.

Real Estate Development Costs. These proposed regulatory changes are unlikely to affect real estate development costs in the Commonwealth.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. No small businesses are likely to incur any additional costs on account of these proposed regulatory changes. Individual and firm licensees will likely benefit from the additional avenue for obtaining continuing education credit proposed by the Board.

Alternative Method that Minimizes Adverse Impact. No small businesses are likely to incur any additional costs on account of these proposed regulatory changes.

Adverse Impacts:

Businesses. No businesses are likely to incur any additional costs on account of these proposed regulatory changes.

Localities. Localities in the Commonwealth are unlikely to see any adverse impacts on account of these proposed regulatory changes.

Other Entities. No other entities are likely to be adversely affected by these proposed changes.

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¹Licensees must complete 120 hours of continuing education during any three calendar-year period.

Agency's Response to Economic Impact Analysis: The Virginia Board of Accountancy concurs with the economic impact analysis of the Department of Planning and Budget.

Summary:

The amendments (i) combine existing continuing professional education (CPE) requirement provisions into a single subsection addressing general CPE requirements; (ii) clarify how a person requests an exemption from CPE requirements, as detailed under current board policy and practice; and (iii) provide an additional way for certified public accountants to earn CPE hours, as already permitted under board policy.

18VAC5-22-90. Continuing professional education.

A. If during the current calendar year a person who holds a Virginia license provided services to the public and has not been granted an exemption by the board pursuant to subsection C of this section, he shall have obtained at least 120 hours of continuing professional education during the three-calendar-year period ending with the current calendar year. For each of the calendar years in that period, he shall have obtained at least 20 hours of continuing professional education, including an ethics course of at least two hours.

1. If the person also holds the license of another state and Virginia is not the his principal place of business in which he provides services to the public, the ethics course taken to comply with this subsection either shall conform with the requirements prescribed by the board or shall be an ethics course acceptable to the board of accountancy of another state in which the person holds a license.

2. Otherwise, the ethics course shall conform with to the requirements prescribed by the board.

B. If during the current calendar year a person who holds a Virginia license provided services to or on behalf of an employer and did not provide services to the public, he shall have obtained a minimum number of hours of continuing professional education determined as follows:

1. If the current calendar year is 2009 or 2010, the person shall have obtained at least 90 hours of continuing professional education during the three-calendar-year period ending with the current calendar year. For each of the calendar years in that period, he shall have obtained at least 15 hours of continuing professional education, including an ethics course of at least two hours.

2. If the current calendar year is 2011 or later, the person shall have obtained at least 120 hours of continuing professional education during the three-calendar-year period ending with the current calendar year. For each of the calendar years in that period, he shall have obtained at least 20 hours of continuing professional education, including an ethics course of at least two hours.

The ethics course taken to comply with this subsection either shall conform with the requirements prescribed by the board or shall be an ethics course acceptable to the board of accountancy of another state in which the person holds a license.

C. If during the current calendar year a person who holds a Virginia license provided services to the public or to or on behalf of an employer, has not been granted an exemption by the board pursuant to subsection C of this section, and did not hold a Virginia license or the license of another state during one or both of the two preceding calendar years, he shall determine whether he has complied with the requirements of subsection A or B of this section as follows:

1. If the person became licensed during the current calendar year, he shall be considered to have met the requirements of the subsection A of this section for the three-calendar-year period ending with the current calendar year.

2. If the person became licensed during the preceding calendar year, he shall be considered to have met the requirements of the subsection for the three-calendar-year period ending with the current calendar year if during the current calendar year he obtained at least the minimum number of hours of continuing professional education required by the subsection A of this section for the current calendar year, including an ethics course of at least two hours.

3. If the person became licensed during the calendar year prior to the preceding calendar year, he shall be considered to have met the requirements of the subsection for the three-calendar-year period ending with the current calendar year if during the current calendar year and the preceding calendar year he obtained at least the minimum number of hours of continuing professional education required by the subsection A of this section for each of the years, including for each year an ethics course of at least two hours.

D. C. If during the current calendar year a person who holds a Virginia license did not provide services to the public or to or on behalf of an employer and has demonstrated to the board that he does not provide those services, he is not required to have obtained continuing professional education during the three-calendar-year period ending with the current calendar year. Any person who holds a Virginia license to whom an exemption has been granted shall annually affirm and certify to the board his continued eligibility for the exemption in that he does not provide services to the public or to or on behalf of an employer. However, in order to begin providing those services:

1. He is required to have obtained at least 120 hours of continuing professional education prior to providing the services, including an ethics course of at least two hours.

2. The ethics course shall conform with to the requirements prescribed by the board for the calendar year in which the person begins providing the services.

Continuing professional education obtained during the three calendar years prior to the current calendar year and from the start of the current calendar year to when he begins providing the services shall be considered in determining whether the person has complied with the requirements of this subsection.

E. D. If a person who has not held the license of any state applies for a Virginia license after the end of the calendar year in which he passes the CPA examination, he shall obtain continuing professional education prior to applying for the license, including an ethics course of at least two hours.

1. The required minimum number of hours of continuing professional education shall be 40, 80, or 120 depending on whether he applies for the Virginia license by the end of the first calendar year after the calendar year in which he passes the CPA examination, by the end of the second calendar year, or later.

2. The ethics course shall conform with to the requirements prescribed by the board for the calendar year in which the person applies for the license.

Continuing professional education obtained subsequent to passing the CPA examination but during the three calendar years prior to the calendar year in which the person applies for the license and from the start of that calendar year to when he applies for the license shall be considered in determining whether he has complied with this requirement.

F. E. Continuing professional education acceptable to the board may be obtained through a variety of forums, provided there is a means of demonstrating that the education was obtained. The following forums are acceptable The acceptable forums are:

1. Attendance at Attending seminars and educational conferences, provided that the instructors have appropriate knowledge of the subject matter and use appropriate teaching materials and that attendance is monitored in a manner that can be verified by the board;

2. Taking courses at an accredited institution for credit;

3. Self-study Completing self-study courses, provided there is a method for determining that the person met the learning objectives;

4. Making a presentation at a professional seminar, educational conference, or in a classroom setting, provided the person has appropriate knowledge of the subject matter and uses appropriate teaching materials; and

5. Writing material that is relevant to providing services to or on behalf of an employer or to the public that is formally reviewed by an independent party and that is published in a book, magazine, or similar publication that is used by persons who provide services to the public or to or on behalf of an employer; and

6. Passing examinations and obtaining certifications that have been approved by the board.

Whether other forums are acceptable shall be determined by the board on a case-by-case basis.

G. F. In determining whether a person has obtained the required number of hours of continuing professional education:

1. Repeat presentations shall not be considered.

2. No more than 30 hours from preparing for and making presentations shall be considered during each three-calendar-year period.

3. One semester-hour of credit for courses at an accredited institution constitutes 15 hours of continuing professional education, and one quarter-hour of credit constitutes 10 hours of continuing professional education.

4. Credit for examination and certification shall be awarded for the calendar year in which the examination was passed and certification was received. If passage of the examination and certification occur in different calendar years, credit shall be awarded for the calendar year in which the examination was passed. The board shall determine how many hours are credited per certification.

5. No more than 60 hours from examination and certification shall be considered during each three-calendar-year period.

H. G. Depending on the facts and circumstances, the board may waive all or part of the continuing professional education requirement for one or more calendar years or grant additional time for complying with the continuing professional education requirement, provided that the waiver or deferral is in the public interest.