Office closed: if CBA is eliminated, bureaucrats would regulate profession.

In a surprise move, Gov. Arnold Schwarzenegger's reorganization plan No. 1 proposes to eliminate the California Board of Accountancy--along with almost 100 other boards, including all the health care licensing boards.

Under this proposal, the CPA profession would be regulated by Department of Consumer Affairs staff rather than the current public-majority oversight board. Existing CBA staff would be transferred from the board of accountancy to the DCA. According to the proposal's proponents, the transfer would allow them to use current boards' existing expertise and resources more efficiently to meet consumer needs.

[ILLUSTRATION OMITTED]

All consumer calls would be centralized and routed to appropriate staff. Such a move would allow the DCA to standardize and measure performance on complaint handling and licensing.

Supporters argue that the governor and his administration are held accountable for protecting the citizens of California, but are unable to overrule or control the actions of the state's independent boards and staff under the current system.

They point to the existing regulatory systems for insurance and real estate agents, who are licensed by the Department of Insurance and Department of Real Estate without benefit of an independent board.

Administration officials have indicated that advisory committees may, if necessary, be appointed by the DCA director to provide non-binding input.

Opponents

Opponents, including the Center for Public Interest Law and Consumer Union, see the proposal as an unwarranted consolidation of power in the executive branch of government which will decrease government transparency and lessen the public's ability to provide input.

This lack of transparency and public oversight will lead, in their view, to a lack of accountability and focus.

Other critics argue that the proposal would increase costs for the state because the services provided by volunteer board members would have to be replaced by highly paid consultants. All of the licensing boards targeted for elimination are self-funded by licensing fees.

Little Hoover Commission's Role

Under California law, the proposal must be reviewed by the state's Little Hoover Commission, which will either support or oppose the proposed reorganization.

The Little Hoover Commission's report is due by March 7, but its recommendation is not binding to the governor, who may introduce the reorganization plan to the Legislature anytime after Feb. 7.

The plan may not be amended by the Legislature, which has 60 days to reject it or it will become effective. The plan may be rejected by a majority vote of either house of the Legislature, but Capitol insiders are speculating that if the governor's plan is rejected by the Legislature, he may turn the proposal into a November ballot initiative.

CalCPA Chair Outlines Concerns

CalCPA Chair Paul Regan presented the profession's concerns to the Little Hoover Commission Jan 26.

He expressed the profession's desire to work with the administration, but identified the critical components of any regulatory system governing CPAs in California that would be compromised if regulatory oversight were passed to bureaucrats.

The essential components that must be maintained for the effective regulation of the profession include:

* A national voice for California CPAs. California's Board of Accountancy has been a leader in innovation and consumer protection for decades. Eliminating the CBA would make California the only state without an accountancy board.

* Access to public and technical volunteers who, as board members and committee volunteers, devote thousands of hours annually to the regulation of CPAs in California.

* The independent review and oversight of enforcement decisions. Currently proposed enforcement decisions made by administrative law judges must be reviewed and approved by the CBA. The CBA can levy fines of up to $5 million and can cause thousands of innocent Californians to lose their jobs. Such authority requires oversight.

* Public access to development of policy and regulations. CBA proposals have national and international ramifications for financial markets.

CalCPA is working with the Legislature and the Schwarzenegger administration to identify options and alternatives.

During its Jan. 26 hearing, several members of the Little Hoover Commission expressed support for retaining some of the boards that are proposed for elimination, including the California Board of Accountancy. Commissioner and Sen. Liz Figueroa cited the CBA as a model of how boards should protect consumers.

California Conformity Tsunami Relief

SB 50 (Campbell) would allow charitable contributions for donations made for tsunami victims during January 2005 to be claimed on either 2004 or 2005 tax returns.

The bill conforms to the new federal law so taxpayers who made a donation for tsunami relief in January 2005 can claim the deduction on both federal and state 2004 returns.

The bill passed the Senate Feb. 10. It has bipartisan support and should be enacted quickly as a fast-track measure.

Bruce C. Allen is CalCPA's director of government relations.