Title of Regulation: 18VAC5-22. Board of Accountancy Regulations (amending 18VAC5-22-170).

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: October 3, 2018.

Effective Date: October 18, 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: Subdivision 3 of § 54.1-4403 of the Code of Virginia grants authority to the board to promulgate regulations necessary to assure continued competency, to prevent deceptive or misleading practices by licensees, and to effectively administer the regulatory system.

Purpose: The action is intended to make the occasions in which a licensee or applicant must respond to the board match the language of § 54.1-4425 of the Code of Virginia and to give the board discretion in determining whether a delay or failure to respond is a violation. Currently, there is no discretion for the board, and the intent is to give the board more latitude in determining whether a delay or failure to respond is a willful violation of the regulation. The board's rationale is to ensure that its regulations match statutory language to reduce confusion about when a licensee or applicant is to respond to the board. The action also allows the board to waive purported violations of the regulation if warranted and removes a citation to the Code of Virginia that is no longer accurate.

Rationale for Using Fast-Track Rulemaking Process: This rulemaking is expected to be noncontroversial because its requirements are identical to those currently placed on licensees and applicants when responding to the board. The proposed amendments match the language of current provisions in § 54.1-4425 and allow the board to waive violations of the requirement to respond, if warranted. This action is supported by the Virginia Society of Certified Public Accountants.

Substance: The amendments (i) remove the list of occasions upon which a licensee or applicant has to respond to the board and replaces it with a sentence that matches language found in § 54.1-4425, (ii) give the board discretion in determining whether a delay or failure to respond is a violation, and (iii) remove a citation to the Code of Virginia in the last subsection that is no longer accurate.

Issues: The primary advantage to the public is reduced confusion between the differing language of the regulation and the statute regarding the occasions requiring a response by a licensee. There are no primary disadvantages to the public. The primary advantages to the board and the Commonwealth is the ability to waive purported failures to respond to the board if warranted. There are no primary disadvantages to the board or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Board of Accountancy (Board) proposes to amend the regulation to: 1) allow itself discretion in determining whether a delay or failure to respond is a violation, 2) match the text to that of the Code of Virginia (Code) concerning when a licensee or applicant has to respond to the Board, and 3) remove an out-of-date citation to the Code.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. Code of Virginia § 54.1-4413.4(B)(1) states that the Board may impose penalties on persons using the CPA title in Virginia or firms providing attest services, compilation services, or financial statement preparation services to persons or entities located in Virginia for "Violation of the provisions of this chapter or violation of any regulation,¹ subpoena, or order of the Board." The current regulation allows 30 calendar days for licensees to respond to Board inquiries. Under the current regulation, licensees who fail to respond within 30 days receive a $100 monetary penalty.

According to Board staff, the Board is aware that there may be extenuating facts and circumstances, such as illness, death in the family, or deployment, which would warrant non-timely responses to not be deemed a violation. Thus the Board proposes to add the following sentence to the regulation: "When the requested response is not produced by the licensee or applicant within 30 calendar days, this nonproduction shall be deemed a violation of this rule, unless otherwise determined by the board."² The proposed amendment is beneficial in that it allows the Board to waive the late fee when there are reasonable extenuating circumstances.

Matching the regulatory text to that of the Code and removing an out-of-date citation to the Code would also be beneficial in that it would reduce the likelihood of confusion amongst readers.

Businesses and Entities Affected. The proposed regulation potentially affects CPA firms and CPAs, and CPA licensure applicants. As of September 30, 2017, there were 27,842 persons who held Virginia CPAs licenses, and 1,179 entities or sole proprietors that held Virginia CPA firm licenses. Annually, there are on average 1,360 total applicants for licensure.³ All or most CPA firms would qualify as small businesses.

Localities Particularly Affected. The proposed amendments do not disproportionately affect particular localities.

Projected Impact on Employment. The proposed amendments do not affect employment.

Effects on the Use and Value of Private Property. The proposed amendments do not affect the use and value of private property.

Real Estate Development Costs. The proposed amendments do not affect real estate development costs.

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. The proposed amendments do not significantly affect costs for small businesses.

Alternative Method that Minimizes Adverse Impact. The proposed amendments do not adversely affect small businesses.

Adverse Impacts:

Businesses. The proposed amendments do not adversely affect businesses.

Localities. The proposed amendments do not adversely affect localities.

Other Entities. The proposed amendments do not adversely affect other entities.

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¹Bold added.

²Ibid.

³Data source: Board of Accountancy

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) modify the occasions in which a licensee or applicant has to respond to the board to match the language found in § 54.1-4425 of the Code of Virginia, (ii) allow the board discretion in determining whether a delay or failure to respond is a violation, and (iii) remove an out-of-date citation to the Code of Virginia.

18VAC5-22-170. Communication between with the board and licensees.

A. When requested by the board:

1. Persons or firms applying for the issuance, renewal, or reinstatement of a Virginia license or for lifting the suspension of the privilege of using the CPA title in Virginia or providing attest services or compilation services for persons or entities located in Virginia shall provide the board with support for their conclusion that they have complied with applicable provisions of Chapter 44 (§ 54.1-4400 et seq.) of Title 54.1 of the Code of Virginia and this chapter.

2. Firms shall provide the board with proof of enrollment in a monitoring program and copies of reports and other documentation related to acceptance of their peer reviews.

3. Persons or firms shall provide the board documents related to the board's investigation of their possible violation of provisions of Chapter 44 (§ 54.1-4400 et seq.) of Title 54.1 of the Code of Virginia or this chapter.

Each person or firm Pursuant to § 54.1-4425 of the Code of Virginia, each licensee or applicant shall respond within 30 calendar days to any board request for information by the board under this subsection regarding compliance with any statutes or regulations pertaining to the board or any of the programs that may be in another title of the Code of Virginia for which the board has regulatory responsibility. When the requested response is not produced by the licensee or applicant within 30 calendar days, this nonproduction shall be deemed a violation of this rule, unless otherwise determined by the board.

B. Each holder of a Virginia license shall notify the board in writing within 30 calendar days of any change in the holder's name or in the postal and electronic addresses where the person or firm may be reached.

C. The board shall transmit license renewal notices electronically unless a person or firm is unable to communicate electronically. However, § 54.1-4413.2 of the Code of Virginia places the The responsibility for renewing a Virginia license is on its holder, and that responsibility is not affected by whether the holder receives a license renewal notice.