Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred S.B. No. 2530 entitled:

begs leave to report as follows:

The purpose of this measure is to repeal the Board of Public Accountancy's authority to accept experience in private or government accounting as a substitute for professional public accounting experience for licensure purposes.

The Board of Public Accountancy (Board), Hawaii Association of Public Accountants, and thirty-six individuals testified in support of this measure. The Department of Taxation, Internal Revenue Service, Hawaii Society of Certified Public Accountants, and four individuals opposed the measure.

Act 86, Session Laws of Hawaii 1997, established the authority of the Board of Public Accountancy to allow experience in private or government accounting to be substituted for all or part of the two-year public accountancy experience requirement for persons applying for a license as a certified public accountant (CPA). This measure repeals that authority.

In the three years since the Board has been administering the substituted experience provision, it has received fifty-three applications seeking licensure based on private or government experience. Of this total, thirty-seven applications were approved, one was denied, two were withdrawn, and thirteen are pending due to deficiencies, mostly related to verification of the applicant's experience by a licensed CPA supervisor.

Your Committee finds that the subjective nature of the process of evaluating an applicant's private or government accounting experience to determine whether such experience is a satisfactory substitute for public accounting has given rise to concerns among Board members about the validity of the process. These concerns have led the Board to change its position on the issue of accepting substituted experience and the Board no longer supports substitution.

Your Committee further finds that the licensing law's substituted experience provision has allowed agencies such as the Department of Taxation and the Internal Revenue Service to recruit, hire, and retain talented individuals to perform complex tax audits. These agencies argue that if substitution of experience is no longer allowed, they will have difficulty replacing an aging work force.

Your Committee concludes that this measure merits further consideration and encourages the parties to continue their discussions and to work towards a satisfactory resolution of the issues. In order to support a continued dialogue, your Committee has amended this measure by inserting a delayed effective date of July 1, 2030.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2530, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2530, S.D. 1, and be placed on the calendar for Third Reading.