At its meeting on August 21, 1998, the Joint Legislative Committee on Administrative Rules (Committee) voted, pursuant to RSA 541-A:13, IV, to enter a preliminary objection to Final Proposal 98-039 of the Board of Accountancy. The Board responded by letter dated October 2, 1998, received by the Office of Legislative Services on that same day.

At its special meeting on November 13, 1998, the Committee voted, pursuant to RSA 541-A:13, V(d), to enter a final objection to Final Proposal 98-039. The final objection has been filed with the Director of the Office of Legislative Services for publication in the New Hampshire Rulemaking Register. The effect of a final objection is stated in RSA 541-A:13, VI:

The Committee entered its final objection based upon the annotations made to the rules by Committee staff. The annotations covered issues that could be handled editorially, and so indicated. The annotations also included issues of clarity. Neither editorial issues nor issues of clarity are discussed below in the text of the final objection. Instead, the text of the final objection addresses issues of authority, legislative intent, and the economic impact of these rules. Copies of the rules with the complete annotations can be obtained from the Office of Legislative Services, Division of Administrative Rules, Room 219, State House Annex, 25 Capitol Street, Concord, New Hampshire, 03301. The following summarizes such bases for the Committee’s final objection:

The Committee objected that Ac 401.01 in Final Proposal 98-039 is, pursuant to Committee Rule 401.01(c), beyond the authority of the Board, and, pursuant to Committee Rule 402.02(a), contrary to legislative intent, as set forth below.

This section, Ac 401.01, contains provisions relative to time limits and fees relative to renewals of registrations. In pertinent part, the rule provides that "failure to [renew] within this period shall result in a fee of 5 percent per month, or fraction of a month until he/she is so registered."

Agencies are prohibited, pursuant to RSA 541-A:22, III(c), from requiring fees "unless specifically authorized by a statute enforced or administered" by the agency. The Board has the authority, pursuant to RSA 309-B:3, VIII(h), to adopt rules relative to "all fees required under this chapter [RSA 309-B]." [Emphasis added.] The various substantive sections set forth the specific services and actions for which fees are authorized to be set and collected. RSA 309-B:5, VI, specifically authorizes the Board to "charge a fee for each application for initial issuance or renewal of a permit under this section in an amount prescribed by the board by rule."

In the Committee’s view, the authority granted to the Board in RSA 309-B:5, VI, allows the Board to set a single fee for applications for initial license, and a single fee for applications for renewals. However, the rule provides for a changing fee amount for renewals, based upon when the renewal application is filed. The Committee concluded that this was inconsistent with the language of RSA 309-B:5, VI, and RSA 541-A:22, III(c), that the late fee was not authorized by a statute administered or enforced by the Board, and was therefore beyond the authority of the Board.

The Committee objected that Ac 401.03 in Final Proposal 98-039 is, pursuant to Committee Rule 402.02(a), contrary to legislative intent as set forth below.

This section contains rules relative to practice unit registration. The rule provides, in pertinent part, that "Pursuant to RSA 309-B:5, IV and RSA 309-B:10, X, each practice unit, with a physical office/s [sic] in New Hampshire, shall register with the board on Form NHBOA-10." Pursuant to RSA 309-B:5, IV, firms are required to show that each principal who regularly works in New Hampshire as an accountant holds a valid New Hampshire certificate to practice, and that each other principal of the firm is licensed to practice in some other state. Pursuant to RSA 309-B:10, X, no certificate holder may practice accountancy in New Hampshire unless the person also possesses a valid permit issued under RSA 309-B:5, or unless such person is an employee and not a principal of the firm and has not met the experience requirements for an individual permit to practice. Pursuant to RSA 309-B:5, I, the Board is required to grant permits to practice to "individuals who make application and demonstrate their qualifications." [Emphasis added.]

The Committee noted that the provisions of RSA 309-B:5, IV, do not specifically require practice units to register. Rather, such provisions simply require that firms show that every principal in the firm is licensed in at least one of the several states, and that those who regularly practice in New Hampshire are in fact licensed in New Hampshire. Similarly, in the Committee’s view, RSA 309-B:10, X, merely sets the requirement that each individual practitioner must have a permit to practice accountancy in New Hampshire unless the stated condition has been met. Based upon the foregoing, the Committee concluded that neither RSA 309-B:5, IV, nor RSA 309-B:10, X, requires that practice units register with the Board.

The Committee objected that Ac 401.04 in Final Proposal 98-039 is, pursuant to Committee Rule 401.01(c), beyond the authority of the Board as set forth below.

This provisions states in its entirety that " foreign accountant practice permits shall expire on June 30 of each odd year." The Committee noted that RSA 309-B:5, I, provided that permits under the chapter "shall be initially issued and renewed for periods of not more than 3 years." The Committee further noted that the Board set the permit period for other permits to expire every 3 years, but set the permit period for foreign practitioners at 2 years. The Committee concluded that the Board had no authority to treat foreign licensees, who must meet all other initial and continuing requirements for practice in New Hampshire, in a discriminatory manner.

The Committee objected that Ac 402.01(a) and Ac 402.02(a) in Final Proposal 98-039 are, pursuant to Committee Rule 402.02(a), contrary to legislative intent as set forth below.

Ac 402.01(a) and Ac 402.02(a) indicate that revocation and suspension, respectively, of authority to practice accountancy in another jurisdiction "shall be grounds for" revocation or suspension in New Hampshire. The Committee noted that the rules do not mention that a hearing must be conducted, as otherwise required by RSA 309-B:6, I, and RSA 309-B:8, I, to determine whether the Board, in fact, will impose a disciplinary sanction. Therefore, the Committee concluded that the rules are not consistent with the requirements of the statutes noted above.

The Committee objected that Ac 404 in Final Proposal 98-039 has, pursuant to Committee Rule 404.01(a)(5) and 404.01(b), a substantial economic impact not accounted for in the fiscal impact statement, that Ac 404.01 is, pursuant to Committee Rule 401.01(c), beyond the authority of the Board, and that Ac 404.05 is, pursuant to Committee Rule 401.01(c), beyond the authority of the Board as set forth below.

Part Ac 404 governs peer review. The sections lay out the peer review requirements, a definition of the term "practice of public accountancy" for the purpose of the part, what constitutes evidence of peer review, how the peer review requirements apply to new firms, and affidavits and attestations required for such reviews. Essentially, the rules require that an independent organization review the licensee’s practice, and that such independent organization use the standards set forth in the rules.

When Committee staff reviewed this part as an initial proposal, comment was made that the Fiscal Impact Statement (FIS) did not account for the costs of such reviews conducted by independent organizations as required under Ac 404. Although peer review was mentioned, the FIS indicated that there would be no costs to citizens or to independently owned businesses. The Board did not correct this misstatement when it applied for the amended FIS. Further, in the cover letter for its objection response the Board described another correction that should have been made to the amended FIS but did not mention the costs of peer review. At the special Committee meeting on November 13, 1998, Board representatives testified that the cost of peer review could range from several hundred dollars to several thousand dollars, depending upon the size and complexity of the practice being reviewed. Therefore, the Committee concluded that peer review requirements of Ac 404 had a substantial economic impact not accounted for in the amended FIS.

Ac 404.01 requires in pertinent part that "all practice units engaged in the practice of public accountancy shall provide evidence that the practice unit employing said licensee has undergone a peer review within the last 3 years prior to the renewal application" if certain conditions are met. Pursuant to RSA 309-B:5, VIII, applicants for renewals of permits must show that they have undergone peer review no more frequently than once every 3 years. The Committee noted that, as discussed above, RSA 309-B:5, I, only requires individuals, not practice units, to register. Therefore, the Committee concluded that the Board had no authority to impose such a requirement on practice units.

Pursuant to Ac 404.05, practice units applying for permit renewals must submit an affidavit that attests to the accuracy of certain statements. Affidavits require that the affiant make the statements contained in the affidavit under oath or affirmation. The Committee noted that there was no specific language in RSA 309-B:5, VIII, that authorized the Board to require that such attestations be made under oath or affirmation. The Committee further noted that the General Court has, in other statutes enforced by other agencies, indicated when materials must be submitted under oath or affirmation. Having concluded that RSA 309-B contained no similar provision, the Committee determined that so requiring was beyond the authority of the Board.