Hot stuff: CPA profession keeps emerging in proposed legislation.

• Author: Allen, Bruce C.
• Position: Government Relations

The state attorney general is sponsoring legislation SB 1262 (Sher) that imposes additional controls on nonprofits, management and fundraising.

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The original bill would have required nonprofits with revenues of more than $500,000 in any year to contract with a CPA firm to perform an audit. That limit has been increased to $2 million.

CalCPA and others were successful in persuading the author that proposed restrictions prohibiting the audit firm from providing any services to the non-profit other than tax preparation were unnecessary. The bill now would require audit firms to follow the independence standards established by the General Accounting Office.

Although several technical issues remain, CalCPA is neutral on the bill.

Special District Audits

SB 1272 (Ortiz) would, among other things, increase the state controller's oversight of the audits of special districts by requiring the controller to perform quality reviews of the audit firms every three years.

Additionally, the bill would allow the controller to unilaterally suspend audit firms from performing audits of special districts for up to three years. The bill also proposes audit partner rotation every six years.

CalCPA is working to have the bill amended to provide for due process for audit firms, establish standards for controller reviews, require that the audit guide be adopted through a regulatory process allowing for public input and timely adoption, and exempt small firms from the audit partner rotation mandate.

The bill is opposed by virtually every special district in the state because it imposes new limits on reimbursements for travel expenses and payments for participation in public meetings.

Mandated Reporting of Elder Financial Abuse

AB 2474 (Wolk) sponsored by the Yolo County District Attorney and a variety of senior groups, would have required CPAs, banks and other financial experts, including real estate and title agents, to immediately report any suspected cases of elder financial abuse.

Failure to report would be a misde-meanor subject to six months in jail and fines--or if serious physical harm occurs, the CPA could be subject to one year in jail and additional fines.

CalCPA and many other affected financial professionals were opposed to AB 2474 because of concerns that it could encourage over-reporting and civil litigation by disgruntled clients.

CalCPA recommended during a legislative hearing that educational efforts be encouraged to lessen...