BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON
          BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
                              Senator Jerry Hill, Chair
                                2015 - 2016  Regular 

          Bill No:            SB 467          Hearing Date:    April 27,  
          2015
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          |Author:   |Hill                                                  |
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          |Version:  |April 21, 2015                                        |
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          |Urgency:  |No                     |Fiscal:    |Yes              |
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          |Consultant|Bill Gage                                             |
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                        Subject:  Professions and vocations.

          SUMMARY:  Requires the Department of Consumer Affairs to receive  
          approval of the Legislature to levy any pro rata charges against  
          any of the boards, bureaus, or commission for administrative  
          expenses of the Department; requires the Attorney General's  
          Office to submit specified reports and information to the  
          Legislature annually; provides that the Director or the  
          Department, through its Division of Investigation, shall work  
          with the health care boards to standardize referral of  
          complaints; extends until January 1, 2020 the provisions  
          establishing the California Accountancy Board  and the term of  
          the executive officer; and allows the Board to provide for  
          certain practice restrictions on the license of an accountant  
          for disciplinary reasons.

          Existing law:
          
          1) Specifies that there is in the state government, in the  
             Business, Consumer Services, and Housing Agency, a Department  
             of Consumer Affairs (DCA).  (Business and Professions Code  
             (BPC) § 100)

          2) Specifies that the entities under DCA are established for the  
             purpose of ensuring that those private businesses and  
             professions deemed to engage in activities which have  
             potential impact upon the public health, safety, and welfare  
             are adequately regulated in order to protect the people of  
             California.  (BPC § 101.6)







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          3) Specifies the powers and duties of the Director of DCA.  (BPC  
             § 310)

          4) Provides that a charge for the estimated administrative  
             expenses of the DCA, not to exceed the available balance in  
             any appropriation for any one fiscal year, may be levied in  
             advance on a pro rata share basis against any boards,  
             bureaus, commissions, divisions, and agencies, at the  
             discretion of the Director and with the approval of the  
             Department of Finance.  (BPC § 201 (a)(1))

          5) Requires the DCA to submit a report of the accounting of the  
             pro rata calculation of administrative expenses to the  
             appropriate policy committees of the Legislature on or before  
             July 1, 2015, and on or before July 1 of each subsequent  
             year.  
          (BPC § 201 (a)(2))

          6) Requires the DCA to conduct a one-time study of its current  
             system for prorating administrative expenses to determine if  
             that system is the most productive, efficient, 

          and cost-effective manner for the DCA and the agencies  
             comprising the DCA and that the study shall include  
             information as specified.  (BPC § 201 (b))

          7) Requires the Director of the DCA to submit to the Governor  
             and the Legislature on or before January 1, 2003, and  
             annually thereafter, a report of programmatic and statistical  
             information, as specified, regarding the activities of the  
             DCA and its constituent entities for the previous fiscal  
             year.  (BPC § 312)

          8) Requires the Office of Administrative Hearings (OAH) to  
             submit a report to the DCA, the Governor, and the Legislature  
             on or before January 1, 2016, and on or before January 1 of  
             each subsequent year that includes specified statistical  
             information regarding cases referred to each office of OAH.   
             (BPC § 312.1)

          9) Specifies that it shall be the duty of the Director to  
             receive complaints from consumers concerning various  
             violations of the Business and Professions Code relating to  








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             businesses and licensed professions, unfair or deceptive acts  
             or practices by any person in the conduct of any trade or  
             commerce, and the production, distribution, sale and lease of  
             any goods or services undertaken by any person which may  
             endanger the public health, safety or welfare.  (BPC § 325)

          10)Requires the Director to transmit any valid complaint to the  
             appropriate local, state or federal agency whose authority  
             provides the most effective means to secure the relief and it  
             shall be the continuing duty to the Director to discern  
             patterns of complaints and to ascertain the nature and extend  
             of action taken with respect to the probably violations or  
             pattern of complaints.  (BPC § 326)

          11)Provides that in order to ensure that its resources are  
             maximized for the protection of the public, the Medical Board  
             of California (MBC) shall prioritize its investigative and  
             prosecutorial resources to ensure that physicians and  
             surgeons representing the greatest threat of harm are  
             identified and disciplined expeditiously and that cases be  
             given the highest priority as specified.  (BPC § 2220.05 (a))

          12)Provides that the MBC may by regulation prioritize other  
             cases that are not designated as high priority cases.  (BPC §  
             2220.05 (b))

          13)Provides that the California Board of Accountancy (CBA)  
             within the DCA is responsible for the licensure and  
             regulation of accountants and is required to designate an  
             executive officer and repeals these provisions on January 1,  
             2016.
          (BPC § 5000 et seq.)

          14)Provides that a person shall be deemed to be engaged in the  
             practice of public accountancy if he or she performs certain  
             acts, makes certain representations, and renders accounting  
             services to the public and clients for compensation.  
          (BPC § 5051)

          15)Provides that the CBA, after notice and hearing, may revoke,  
             suspend, or refuse to renew any permit or certificate granted  
             by the CBA, or may censure the holder of that permit or  
             certificate for unprofessional conduct that includes, but is  
             not limited to, one or any combination of criminal acts,  








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             specified false statements or omissions, dishonesty, fraud,  
             gross negligence or repeated negligent acts in performance of  
             professional standards, and other acts or violations as  
             specified.  (BPC § 5100)     

          This bill:

          1) Requires the DCA to receive approval of the Legislature to  
             levy in advance a charge for the estimated administrative  
             expenses of the DCA on a pro rata share basis  against any of  
             the boards, bureaus, commissions, divisions, and agencies for  
             the estimated administrative expenses of the DCA.

          2) Requires the Attorney General (AG) to submit a report to the  
             DCA, the Governor, and the appropriate policy committees of  
             the Legislature on or before January 1, 2017, and on or  
             before January 1 of each subsequent year that includes  
             specific statistical information regarding cases referred to  
             the AG by each constituent entity comprising the DCA and the  
             Division of Investigation (DOI) of the DCA.

          3) Provides that in order to implement the complaint  
             prioritization guidelines as specified by the Department in  
             2009, titled "Complaint Prioritization Guideline for Health  
             Care Agencies," the Director, through the DOI, shall work  
             cooperatively with the health care boards to standardize  
             referral of complaints to the DOI and those that are retained  
             by the health care boards for investigation.

          4) Extends until January 1, 2020 the provisions establishing the  
             CBA and the term of the Executive Officer.

          5) Provides that the CBA, after notice and hearing may, for  
             unprofessional conduct, permanently restrict or limit the  
             practice of a licensee or impose a probationary term or  
             condition on a license, which prohibits the licensee from  
             performing or engaging in any of the acts or services as  
             provided for in the practice of accountancy, and that  
             unprofessional conduct shall include, but not be limited to,  
             those grounds for discipline or denial as specified in Item #  
             15 above.

          6) Provides that a practice restriction may include, but not be  
             limited to, the prohibition on engaging in or performing any  








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             attestation engagement, audits or compilations.

          7) Allows a licensee to petition the CBA as provided for  
             reduction of penalty or reinstatement of the privilege to  
             engage in the service or act restricted or limited by the  
             CBA.

          8) Provides that the authority of sanctions provided are in  
             addition to any other civil, criminal, and administrative  
             penalties or sanctions provided by law, and do not supplant,  
             but are cumulative to, other disciplinary authority,  
             penalties or sanctions.

          9) Specifies that failure to comply with any restrictions or  
             limitation imposed by the CBA is grounds for revocation of  
             the license.
          

          FISCAL  
          EFFECT:  Unknown.  This bill has been keyed "fiscal" by  
          Legislative Counsel.

          


          COMMENTS:
          
          1.Purpose.  This bill is sponsored by the  Author  .  This bill is  
            one of five "sunset bills" the Author is sponsoring this  
            session.  According to the Author, this bill is necessary to  
            extend the sunset date of the Accountancy Board in order to  
            ensure continued oversight of accountancy profession.  This  
            measure would require approval of the Legislature for the  
            administrative pro rata charges of the DCA against any of its  
            boards, bureaus, commissions, divisions, and agencies (boards)  
            for the estimated administrative expenses of the DCA.  With  
            current pro rata costs incurred by most boards, and the  
            potential for additional costs because of the BreEZe project  
            and the potential for fee increases for many of these boards,  
            the Legislature needs to give     careful consideration to pro  
            rata costs charged to the boards, rather than just the  
            Department of Finance.  This bill will also establish and  
            enhance mandatory reporting requirements for the AG's office  
            and require health care boards to prioritize complaints to  








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            assist policy makers in determining how best to solve the long  
            standing problem of delayed disciplinary action.       


          2.Sunset Review Process.  The sunset review process provides a  
            formal opportunity and mechanism for the DCA, the Legislature,  
            the boards and bureaus, interested parties and stakeholders to  
            provide oversight, evaluate and discuss the performance of the  
            boards and bureaus and other programs under the DCA and make  
            recommendations for improvement.  This is performed on a  
            standard four-year cycle and was mandated by SB 2036  
            (McCorquodale, Chapter 908, Statutes of 1994).  The  
            legislation pertaining to this bill is based on specific  
            issues raised and addressed in the reports ("Background  
            Papers") released by the Senate and Assembly committees.

          3.Oversight Hearings and Sunset Review of Licensing Boards and  
            Programs.  In 2015, the Senate Business, Professions and  
            Economic Development Committee and the Assembly Business and  
            Professions Committee (Committees) conducted joint oversight  
            hearings to review 12 regulatory entities: California  
            Accountancy Board; California Architects Board and Landscape  
            Architects Committee; California State Athletic Commission;  
            Board of Barbering and Cosmetology; Cemetery and Funeral  
            Bureau; Contractors State License Board; Dental Board of  
            California; Board for Professional Engineers, Land Surveyors  
            and Geologists; Board of Registered Nursing; Bureau of  
            Security and Investigative Services and; Board of Vocational  
            Nursing and Psychiatric Technicians.
            
            The Committees began their review of the aforementioned  
            licensing agencies in March and conducted two days of  
            hearings.  This bill, and the accompanying sunset bills, are  
            intended to implement legislative changes as recommended by  
            staff of the Committee's and which are reflected in the  
             Background Papers  prepared by Committee staff for each agency  
            and program reviewed by the Committees for this year.

          4.Review of the Department of Consumer Affairs: Issues  
            Identified and Recommended Changes.  The mission of DCA is to  
            "protect and serve the interests of California consumers." By  
            statute, consumer protection is the primary purpose for all of  
            the regulatory programs located within DCA, which consists of  
            26 boards, nine bureaus, two committees, one program, and one  








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            commission (hereafter referred to as "boards" unless otherwise  
            noted).  Collectively, these entities regulate more than 100  
            types of businesses and 200 different industries and  
            professions.  For example, doctors, auto mechanics, private  
            security companies, and beauty salons are all regulated by  
            DCA.  

          As regulators, these entities perform two basic program  
            functions: licensing and enforcement.  Licensing entails  
            ensuring only those who meet minimum standards are issued a  
            license to practice, and enforcement entails investigation of  
            alleged violations.  During the March 2015, Sunset Review  
            Oversight Hearing, and in the Committee Background Paper on  
            the DCA, several issues were raised relating to the  
            administration and operations of the DCA.  

          This bill addresses some of the issues raised during the Sunset  
            Review process regarding the DCA, including Legislative  
            oversight of pro rata charges which are charged to the boards,  
            prioritization of disciplinary cases, and specific enforcement  
            reporting requirements for the AG's Office.  The following  
            provides background information on these issues and the  
            recommendations which are being made by Committee staff  
            regarding the particular issue area and which issues need to  
            be addressed by statutory changes.

              a)   Issue: Pro Rata of the DCA  .

             Background:  The Committees continue to be interested in  
               exploring the manner in which the DCA boards are charged  
               for administrative services provided by the DCA.  Business  
               and Professions Code Section 201 gives the Director, with  
               approval of the Department of Finance, the authority to  
               charge the boards for estimated administrative expenses.   
               B&P Code Section 201 reads:

             "A charge for the estimated administrative expenses of the  
               department, not to exceed the available balance in any  
               appropriation for any one fiscal year, may be levied in  
               advance on a pro rata share basis against the funds of any  
               of the boards, bureaus commissions, division and agencies,  
               a the discretion of the director and with the approval of  
               the Department of Finance."









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             Through its divisions, the DCA provides centralized  
               administrative services to all boards.  Most of these  
               services are funded through a pro rata calculation that is  
               based on "position counts."  Other functions (call center  
               services, complaint resolution, and correspondence unit)  
               are based on past-year workload.  The pro rata charges fund  
               the entire DCA operations.  For FY 2015-16, DCA is budgeted  
               $94 million with 727 employees.

             Importantly, the boards have no control over the pro rata  
               charges, regardless of the quality or quantity of services  
               provided by the DCA.  This is true, despite the fact that  
               Executive Officers are held responsible for managing their  
               budgets, as well as spearheading requests for fee  
               increases.  Pro rata charges in actual dollars are  
               significant for some boards.  Perhaps more importantly, pro  
               rata can be as much as 40% of a board's annual operating  
               budget.


             Under the current model, some boards are be charged for  
               services (again, based on position count) that they may not  
               be receiving.  Some of the DCA's larger programs, like the  
               Bureau of Automotive Repair (BAR) and Contractors' State  
               License Board (CSLB), may not use the full complement of  
               the DCA services.  For example, both BAR and CLSB have  
               their own sophisticated in-house public information units  
               that serve the sole purpose of supporting their own  
               regulatory
             program.  Basically, it appears as if these larger boards are  
               subsidizing the program needs of smaller ones.

             The DCA's pro rata calculations are based on position  
               authority, rather than actual number of employees, which  
               may inflate pro rata charges.  In recent years, there have  
               been a number of statewide efforts to reduce expenditures  
               and staffing levels throughout state government.  Those  
               cost-control measures reduced staffing levels at the  
               boards, and it was unclear if or how pro rata charges were  
               adjusted as a result of staffing reductions.  For this  
               reason, on January 28, 2014, Assembly Member Curt Hagman  
               sent a letter to the DCA asking that pro rata be calculated  
               based on filled positions, not based on allocated  
               positions.








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             Citing added workload and volatility of staffing levels, the  
               DCA was resistant to changing the pro-rata model from  
               authorized position count to filled positions last year.    
               But the department indicated it was willing to pursue a  
               study of pro-rata methodology.  The department indicated,  
               "The Department would need time to procure the services of  
               a qualified entity to perform an independent and objective  
               study?"

             After discussing pro rata at the 2014 oversight hearing, the  
               Committee Chair authored Senate Bill 1243 (Lieu, Chapter  
               395, Statues of 2014), which requires DCA to conduct a  
               one-time mandatory study of its "current system for  
               prorating administrative expenses to determine if that  
               system is the most productive, efficient, and  
               cost-effective manner for the department and the agencies  
               compromising the department".  The bill requires that the  
               study consider whether some services should be outsourced  
               or if DCA boards could elect to opt out of some of the  
               administrative services.  The DCA is conducting a survey of  
               board executives regarding pro rata.  Participation in the  
               survey requires respondents to identify themselves, which  
               may inhibit candid responses.  The pro rata report is due  
               to the Legislature by July 1, 2015.

             Based on some of the observations above, there is growing  
               interest in increasing transparency of pro rata  
               calculations to allow for better understanding of how these  
               assessments are calculated and what impact they have on  
               board operations, especially in light of assessments now  
               being made for the BreEZe project.  [The DCA has been  
               working since 2009 on replacing multiple antiquated  
               standalone IT systems with one fully integrated technology  
               system.  In October 2013, DCA launched its new customized  
               information technology (IT) system, which it calls BreEZe.   
               Unfortunately, there were significant problems with the  
               planning, design, project management, and training  
               associated with BreEZE which were pointed out by a recent  
               audit conducted by the Bureau of State Audits.  The future  
               of the project is now in question.]


             The BreEZe assessments by DCA on the boards will have a  








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               significant impact on several boards' overall budget.  On  
               February 24, 2015, the DCA provided fund condition reports  
               that demonstrate the impact of development and maintenance  
               of BreEZe on all of the DCA's special funds.  According to  
               these reports, 18 of the funds are projected to have less  
               than 3 months in reserve in FY 2016-17. Typically, boards  
               consider seeking fee increases when they project the funds  
               will dip below a three-month reserve. If these projections  
               are accurate, those same 18 regulatory programs could be  
               seeking fee increases next fiscal year.

             The time has come to provide better oversight by the  
               Legislature on what administrative charges are being  
               incurred and charged to the boards by the DCA, rather than  
               just a review of pro rata by the DCA and the Department of  
               Finance.

             Recommendation and Proposed Statutory Change:  Given the  
               significant impact of pro rata on the boards' operating  
               budgets, Business and Professions Code Section 201 should  
               be amended to require Legislative approval, through the  
               budget process, for the DCA's annual pro rata assessment.

              b)   Issue:  Consumer Protection Enforcement Initiative  
               (CPEI) - A Systemic Solution to a Systemic Problem  .  

             Background:  Some of the DCA's health care boards have a long  
               history of taking three years or longer to take  
               disciplinary action on their licensees when discipline is  
               warranted.  In response to pressure from the media and the  
               Legislature, the DCA created CPEI in 2010.  The specific  
               goal of CPEI was to reduce the average length of time it  
               takes health care boards to take formal disciplinary action  
                         from three years to 12 to 18 months.  Key components of  
               CPEI include administrative changes, ensuring the boards'  
               enforcement programs are sufficiently staffed and have  
               adequate technology to conduct their regulatory functions,  
               and establishing and publishing precise performance  
               targets.

             The Legislature has been very supportive of the DCA's efforts  
               to establish and meet performance measures.  In prior  
               years, the Legislature has authorized 220 additional  
               enforcement staff, approved funding for the BreEZe project,  








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               and established performance measures for the OAH.  All of  
               these efforts have been in support of CPEI.

             Aside from BreEZe, many components of CPEI have been  
               implemented.  For example, enforcement staff has been  
               increased and most health care boards have adopted changes  
               in procedure designed to expedite certain enforcement  
               transactions.  However, the impact of those efforts have  
               not been identified or measured and most boards have failed  
               to meet their performance targets for formal discipline,  
               which is the stated purpose of the entire initiative.

             The DCA continues to work with the boards on improving  
               performance targets and believes that by July of 2015 it  
               will be able to provide more accurate performance reports,  
               but it has also been determined that reporting performance  
               measures for two other state agencies that provide legal  
               services to the DCA boards could also be useful to the DCA  
               and the Legislature.  The DCA boards rely on the AG and OAH  
               to perform certain functions in the formal disciplinary  
               enforcement process and the boards do not have direct  
               control over when and how cases are handled once the cases  
               have been referred to the AG's Office.

             In 2010, the DCA's CPEI states, "DCA has been working with  
               the Attorney General's Office and the Office of  
               Administrative Hearings (OAH) to establish performance  
               agreements that will expedite the prosecution of cases.   
               The DCA and the AG's Office are developing expectations for  
               filing accusations, setting settlement conferences, and  
               filing continuance requests."

             In March 2014, the DCA was still working on those agreements.  
                The DCA reported that it planned to "continue to work with  
               both OAH and the AG's Office to develop performance  
               measures."  It also has been reported that the DCA legal  
               staff were meeting regularly with OAH and the AG's Office  
               to discuss methods and efforts to reduce enforcement time  
               frames.

             Absent an agreement between the DCA and the OAH regarding  
               performance measures, Senate Bill 1243 (Lieu, Chapter 395,  
               Statutes of 2014), established performance measures for the  
               OAH beginning January 1, 2016.  The OAH issued its First  








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               Annual Caseload Statistics and Hearing Timeframe Report to  
               the Legislature on September 30, 2014.  Notably, the report  
               was published over a year ahead of the due date.  In  
               addition to measuring workload and timelines, the OAH  
               reports that it is in the process of developing targets for  
               those timelines.  This effort is consistent with the  
               Committees' past recommendations.

             Performance measurements and targets have not been  
               established for the AG's Office.  By requiring performance  
               reports from the AG, the information could be expanded to  
               include additional major milestones, such as all  
               investigations (not just those that do not result in formal  
               discipline), length of time to file accusations and other  
               milestones in prosecution, as well as the length of time to  
               conduct a hearing.  This would help management,  
               stakeholders, the general public, and lawmakers determine  
               where there is room for improvement by reviewing all three  
               agencies.  There does not appear to be any good reason why  
               both the DCA and the OAH are required to provide  
               performance measurements and targets dates for actions  
               taken but the AG's office is not.

             Another essential part of CPEI was enhancing the use of  
               non-sworn investigative staff to conduct less complex  
               investigations for the health care boards.  According to  
               the CPEI Budget Change Proposal (BCP), which was approved  
               in FY 2010-11, "Recognizing the need to make internal  
               changes and acquire additional resources, and as part of  
               these proactive efforts to develop a greater level of  
               consistency as to how these complaints could be  
               categorized, DCA issued 'Complaint Prioritization  
               Guidelines' for Boards to utilize in prioritizing their  
               respective complaint and investigative workloads."  The  
               guidelines established three categories of complaint  
               identification:  Urgent, High and Routine. 

              Urgent  included acts that could result in serious patient  
               harm, injury or death and involve, but are not limited to,  
               gross negligence, incompetence, drug/alcohol abuse,  
               practicing under the influence, theft of prescription  
               drugs, sexual misconduct while treating a patient,  
               physical/mental abuse, conviction of a crime etc.









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              High  included acts that involve negligence/incompetence  
               (without serious injury), physical/mental abuse (without  
               injury), mandatory peer review reporting,  
               prescribing/dispensing without authority, involved in  
               aiding and abetting unlicensed activity, complaints about  
               licensees on probation, exam subversion, etc.

              Routine  involved complaints that involve fraud, general  
               unprofessional conduct, unsanitary conditions,  
               false/misleading advertising, patient abandonment, fraud,  
               failure to release medical records, recordkeeping  
               violations, applicant misconduct, continuing education,  
               non-jurisdictional issues, applicant misconduct.

             As designed, investigations of routine cases could be  
               conducted by non-sworn staff at the boards.  Cases  
               categorized as urgent or high would be investigated by  
               sworn staff at the DCA's DOI.  These guidelines, coupled  
               with staff training, were designed to free up sworn staff  
               so that they could work on complex investigations.  It also  
               would allow the non-sworn staff to focus on and keep cases  
               moving that might have been a lower priority if they were  
               assigned to sworn staff.  If this model is not being used,  
               cases handled by sworn and non-sworn investigative staff  
               could become bogged down, thus elongating investigative  
               timeframes.

             CPEI staffing enhancements were approved by the Legislature  
               with this model in mind.  It does not appear as if these  
               Complaint Prioritization Guidelines are being implemented  
               appropriately by boards under the DCA.  There are, however,  
               at least two boards that have set their own prioritization  
               requirements for complaints, one of them being the Medical  
               Board.  The DCA should work more closely with the boards to  
               assure that the complaint prioritization requirements are  
               more closely adhered to when necessary. 

             Recommendations and Proposed Statutory Changes:  Require the  
               AG to submit a report to the DCA, the Governor and the  
               appropriate policy committees of the Legislature on or  
               before January 1, 2017, and on or before January 1 of each  
               subsequent year that includes specific statistical  
               information regarding cases referred to the AG by each  
               constituent entity comprising the DCA and the DOI of the  








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               DCA.  Specify that in order to implement the complaint  
               prioritization guidelines the Director of DCA, through the  
               DOI, work cooperatively with the health care boards to  
               standardize referral of complaints to the DOI and those  
               that are retained by the health care boards for  
               investigation. 

          5.Review of the California Accountancy Board (CBA): Issues  
            Identified and Recommended Changes.  CBA is a public majority  
            board and is composed of 15 members: seven CPAs and eight  
            public members who shall not be licensees of the CBA, or  
            registered by the CBA.  The CBA enforces the Accountancy Act  
            which defines the practice of public accountancy as the  
            process of recording classifying, reporting and interpreting  
            the financial data of an individual or an organization.  In  
            California, the accounting profession's licensed practitioners  
            are the CPAs and the Public Accountants (PA).  Shortly after  
            World War II, the PA license was awarded to individuals who  
            demonstrated experience in public accounting and possessed a  
            specified educational background.  As of January, 2015 only 82  
            individuals held PA licenses.  The last PA license was issued  
            in 1968, and as these particular licenses expire, California  
            eventually will no longer have licensees with this  
            designation.  A CPA is a person who has met the requirements  
            of California state law, including education, examination, and  
            experience requirements, and has been issued a license to  
            practice public accountancy by the CBA.  Only persons who are  
            licensed can legally be called a CPA or a PA.  Additionally,  
            the CBA exercises regulatory authority over accountancy firms.  
             As accounting practitioners, CPAs and PAs are proprietors,  
            partners, shareholders and staff employees of public  
            accounting firms.  They provide professional services to  
            individuals, private and public companies, financial  
            institutions, nonprofit organizations, and local, state and  
            federal government entities.  CBA's regulatory authority over  
            CPAs, PAs, and accounting firms is guided by CBA's statutory  
            mandate to protect the public.

          In concert with this statutory mandate and Strategic Plan, the  
            CBA establishes and maintains entry level standards of  
            qualification and conduct within the accounting profession,  
            primarily through its authority to license.  Through its  
            Examination and Initial Licensure Programs, the CBA qualifies  
            California candidates for the national Uniform CPA  








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            Examination, certifies and licenses individual CPAs, registers  
            accountancy partnerships and accountancy corporations.   
            Additionally, CBA ensures that licensees maintain the current  
            professional knowledge necessary for competent performance,  
            permits qualified out-of-state CPAs to practice public  
            accountancy in California pursuant to a practice privilege,  
            and exercises disciplinary authority over CPAs, PAs and  
            accounting firms.

          The CBA was last reviewed by the Senate Business, Professions  
            and Economic Development Committee in 2011.  At that time,  
            this Committee raised nine issues with several  
            recommendations.  On November 1, 2014, the CBA submitted its  
            required sunset report to the Committees.  In this report,  
            (which was actually completed on June 30, 2014) the CBA  
            described actions it has taken since its prior review to  
            address the issues and recommendations of this Committee.  The  
            CBA addressed all of the nine issues raised by this Committee  
            and attempted to comply with the recommendations of this  
            Committee.

          There was only one current issue that Committee staff considered  
            as necessary to be addressed through a statutory change to the  
            Accountancy Act, besides the need to also extend their sunset  
            provisions for four years.  The following provides background  
            information concerning the particular issues and the  
            recommended statutory changes.

              a)   Issue: Permanent Practice Restrictions  .

             Background.  The CBA has the authority to revoke, suspend, or  
               refuse to renew any permit or certificate, or censure the  
               holder of that permit or certificate due to unprofessional  
               conduct.  Over the years the authority (BPC section 5100)  
               has been modified, with the last substantive change  
               occurring in 2005 when the Legislature took steps to  
               further clarify the meaning of dishonesty, fraud, and gross  
               negligence contained in the provision, as well as add the  
               following to unprofessional conduct: unlawful practice of  
               public accountancy in another state, and the imposition of  
               any discipline, penalty, or sanction on a licensee by the  
               Public Company Accounting Oversight Board or the United  
               States Securities and Exchange Commission.  This provision,  
               however, does not presently allow the CBA, and  








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               Administrative Law Judges (ALJ), the authority to consider  
               including permanent practice restrictions.  Currently,  
               practice restrictions may only be imposed beyond the  
               probationary term when specifically agreed to by the  
               licensee via a stipulated settlement.  Some circumstances  
               may warrant permanent practice restrictions in order to  
               protect the public; however, if the licensee is unwilling  
               to agree to such terms via a stipulated settlement, the  
               only recourse for the CBA is to seek revocation of the  
               license.  This change would allow the CBA, and ALJs, to  
               include permanent practice restrictions as part of a  
               disciplinary order, as opposed to seeking a complete  
               license revocation, and permit the licensee to retain a  
               license and be able to practice and earn income in such  
               areas where competency is not compromised. 
             
             Recommendation and Proposed Statutory Change:  BPC section  
               5100.5 should be added to the Accountancy Act to allow the  
               CBA, and ALJs, to include permanent practice restrictions  
               as part of a disciplinary order, while still permitting the  
               licensee to retain a license to practice in such areas  
               where competency is not compromised.  

              b)   Issue:  Continued Regulation of the Accountancy  
               Profession by the CBA  .

             Background:  The health, safety and welfare of consumers are  
               protected by a well-regulated certified public accounting  
               profession.  The CBA has shown over the years a strong  
               commitment to improve the Board's overall efficiency and  
               effectiveness and has worked cooperatively with DCA, the  
               Legislature and the Committees to bring about necessary  
               changes.  The CBA should be continued with a four-year  
               extension of its sunset date so that the Committees may  
               review once again if the issues and recommendations in this  
               Paper and others of the Committees have been addressed.

             Recommendation and Proposed Statutory Change:  It was  
               recommended that the certified public accounting profession  
               continue to be regulated by the current CBA members in  
               order to protect the interests of the public and be  
               reviewed once again in four years.  
           
          6.Related Legislation This Session.  SB 465  (Hill) extends the  








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            operation of the Contractors' State License Board until 2020  
            and makes various changes to the Contractors' State License  
            Law.  (  Status:   The bill will also be considered by this  
            Committee at today's hearing.) 

           SB 466  (Hill) sunsets the Board of Registered Nursing.  (  Status:   
             The bill will also be considered by this Committee at today's  
            hearing.)

           SB 468  (Hill) extends the operation of the Bureau of Security  
            and Investigative Services and the Alarm Company Act,  
            Locksmith Act, Private Investigator Act, Private Security  
            Services Act, Proprietary Security Services Act, and  
            Collateral Recovery Act until January 1, 2020.  Subjects the  
            Bureau to review by the appropriate committees of the  
            Legislature.  Makes various changes to provisions in the  
            aforementioned Acts to improve the oversight, enforcement and  
            regulation by the Bureau of licensees under each Act.   
            (  Status:   The bill will also be considered by this Committee  
            at today's hearing.) 

           SB 469  (Hill) extends the operation of the California State  
            Athletic Commission until 2020.  Makes changes to the laws  
            governing the Commission's operations and the Commission's  
            oversight of professional and amateur boxing, professional and  
            amateur kickboxing, all forms and combinations of full contact  
            martial arts contests, including mixed martial arts and  
            matches or exhibitions conducted, held or given in California.  
             (  Status:   The bill will also be considered by this Committee  
            at today's hearing.)
           
          AB 177  (Bonilla) extends the operation of the Board for  
            Professional Engineers, Land Surveyors and Geologists and  
            California Architects Board and Landscape Architects Committee  
            until January 1, 2020.  (  Status:   The bill is pending in the  
            Assembly Committee on Business and Professions.)

           AB 178  (Bonilla) extends the operation of the Board of  
            Vocational Nursing and Psychiatric Technicians until January  
            1, 2020.  (  Status:   The bill is pending in the Assembly  
            Committee on Business and Professions.)

           AB 179  (Assembly Committee on Business and Professions) extends  
            the operation of the Dental Board of California until January  








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            1, 2020.  (  Status:   The bill is pending in the Assembly  
            Committee on Business and Professions.) 

           AB 180  (Assembly Committee on Business and Professions) extends  
            the operation of the Cemetery and Funeral Bureau until January  
            1, 2020.  (  Status:   The bill is pending in the Assembly  
            Committee on Business and Professions.)

           AB 181  (Assembly Committee on Business and Professions) extends  
            the operation of the Board of Barbering and Cosmetology until  
            January 1, 2020.  (  Status:   The bill is pending in the  
            Assembly Committee on Business and Professions.)   

          7.Arguments in Support.  The California Board of Accountancy  
            (CBA) is in support of this measure and indicates that the  
            Board plays an important role in protecting consumers by  
            ensuring only qualified licensees practice public accountancy  
            in accordance with established professional standards.  CBA  
            believes it is vital for the CBA to continue regulating the  
            practice of public accountancy, which includes both licensing  
            and enforcement functions of more than 97,000 licensees.

          SUPPORT AND OPPOSITION:
          
           Support:  

          California Board of Accountancy
          California Society of CPAs (CALCPA)

           Opposition:  None on file as of April 21, 2015.

                                      -- END --