Cost-Benefit Analysis

In performing a cost-benefit analysis, each rulemaking entity must provide the information requested for the cost-benefit analysis to be considered a good faith effort.  The cost-benefit analysis must be submitted to the Office of Policy, Research and Regulatory Reform at least five (5) days before the administrative hearing on the proposed rule.  For all questions, please attach all underlying data that supports the statements or figures stated in this cost-benefit analysis.

Department:	Divisions of Registrations		Agency:	Department of Regulatory Agencies	

CCR:	3CCR 705-1		Date:	February 13, 2008	

Rule Title or Subject:	
Certificate Status Maintenance	

Benefits of the Proposed Rule(s)/Amendment(s)

1.	Please provide the statutory authority, and detailed statements indicating the need for the proposed changes.  (This statement should include specific issues such as specific changes in statutes or the subject matter area, market failure, a compelling public need, risks to the health, safety or welfare of Coloradans, lack of efficient and effective performance of an important government function, or other specific problem(s) that are being addressed by the proposed rule(s).)  Please include the number of complaints you received (if any) that spurred you to take regulatory action.	
	The statutory authority for the proposed changes are CCR §§42-4-104, 12-2-119(5) and 12-2-104(b). The amendments’ purposes are to clarify the rule’s language regarding reinstatement of certificates and to improve the wording throughout the rule.  The present rule combines applicants with three different statuses into one section.  This language creates confusion with the certificate requirements for applicants, consumers and the Board of Accountancy.  The failure to change the rule would continue to result in a lack of clarity, and difficulty on the part of expired licensees to comply, thereby inefficient and ineffective performance of an important government function, protecting consumers.  The proposed change clarifies the section by separating the status of each applicant into a specific subsection and then sets forth the requirement for each to obtain a CPA license based on that status.  We have not received a complaint from the public but the matter has caused confusion with the Board attempting to rule on the reinstatement of expired, inactive or retired licenses.  	

2. 	Please list the top three benefits of the proposed regulation; explain how the proposed regulation results in the expected benefits; and if the proposed regulation reduces or eliminates the problem(s) listed above.	
	The modification of Rule 5.7C has three benefits:  (1) To protect the welfare of consumers by requiring an applicant for reinstatement with an expired license for over six years to obtain recent work experience, teaching experience, or education, prior to performing accounting services without supervision;  2) To separate the status of applicants who should be required to have recent work experience, educational experience or teaching experience prior to providing services to the public from those who do not require such experience;. 3)  To clarify the language of the present rule.	

3.	What, in your estimation, would be the consequence of taking no action, thereby maintaining the status quo?	
	Taking no action would allow for continued confusion over the language of the rule and a continued failure to protect the consumer.  Failure to act would allow expired applicants to obtain an active license and practice accountancy prior to fulfilling the additional requirements that the Board of Accountancy deems appropriate.	

4.	Please describe market-based alternatives or voluntary standards that you considered in place of the proposed regulation and state the reason(s) for not selecting those alternatives.  How many small businesses did you talk to about the proposed regulation?	
	We did not consider any market based alternatives or voluntary standards in place of the changes to the rule. We did not discuss the changes with small businesses.  This rule does not affect small businesses per se. It requires a CPA who wants to reinstate their license after allowing it to remain expired for a period of over six years to obtain additional education, teaching experience, or work experience.  There is no effect on small business, in that, the additional period of work experience required by the proposed rule would not prevent a CPA with an expired license from seeking employment prior to the reinstatement of the license.  The expired applicant’s employment would count as the required one-year work experience.	

Impact of Proposed Rule(s)/Amendment(s)

5.	Please describe the government costs to be incurred because of the proposed regulation (Examples include collection; paperwork; filing; recordkeeping; audit, inspection and training costs, etc.), and state your estimates (in dollars) of the costs that will be incurred.	
	There should be no additional governmental costs because the statute already requires an application and reporting by the retired, inactive and expired applicants.  There is no additional requirement on behalf of the State in processing the applications. 	

6.	Please provide the number and types of entities or small businesses that will be required to comply with the proposed rule(s).  Please provide the source of data used (i.e., program data, NAICS code statistics, etc.).	
	The rule affects individual licensees whose license has been expired for more than six years.  There is no way to estimate how many applicants with expired licenses, in excess of six years, will apply to have their license reinstated. This rule impacts entities or small businesses by requiring an applicant to1) Obtain one-year of work experience as provided in Chapter 4 of the Board’s Rules within two years immediately preceding the application for reinstatement…2) A master’s or doctoral degree in accounting… or 3) One-year of teaching experience in accounting.  Although the applicant would be able to work for an accountant it would postpone this applicant from opening their own CPA office until the completion of the one-year work or teaching experience.	

7.	Does the proposed regulation create barriers to entry (i.e., licensing, permit or educational requirements)?  If so, please describe those barriers and why those barriers are necessary. 	
	Yes, the proposed rule does create an additional barrier to re-entry.  The new rule clarifies the status of three separate sets of requirements to re-obtain a license after a period of license inactivity, which are the retired, inactive, and expired licenses.  The requirements for obtaining a license which is retired, expired or inactive are basically the same, except for a license expired for over six years has additional requirements for reinstatement.  These are either 1) Obtain one year of work experience as provided in Chapter 4 of the Board’s Rules within two years immediately preceding the application for reinstatement… (2) A master’s or doctoral degree in accounting or (3) One year of teaching experience in accounting  These barriers are necessary because this applicant has failed to maintain any contact with the Board of Accountancy for over six years, has failed to maintain inactive status and has failed to inform the Board of their whereabouts.  Therefore, the Board mandates the additional requirements for this expired licensee to insure the competency of the expired applicant to practice accountancy in order to protect the public. 	

8.	Explain the additional requirements with which small business owners will have to comply (i.e., will they need to purchase new equipment or software to meet the requirement(s); are there training costs; are there new disclosure/filing requirements they will have to provide to the state; are there transactional costs, paperwork costs, recordkeeping, etc.).  Please state your estimates (in dollars) of the compliance costs by types listed.	
	The rule affects individual licensees whose license has been expired for more than six years.  There are no additional requirements except those stated above.  There are no losses or costs to the expired applicant because during the two-year period prior to tendering the application, the expired licensee will be required to seek employment in the field of accounting and will therefore not lose any funds due to the additional requirement.  Although the applicant would be able to work for an accountant it would postpone this applicant from opening their own CPA office until the completion of the one-year work or teaching experience.	

9.	Please state whether the proposed regulation contains different requirements for different sized entities or different geographic regions, and explain why this is, or is not, necessary.  (For example, an audit fee (as a percentage of assets) for a bank examination is lower based upon a higher level of assets due to marginal cost savings and water usage is more restricted in geographic regions with less water storage or supplies because demand far outpaces supply.)	
	Therefore, there are no requirements based on size of entity or geography.	

10.	Please describe your understanding of the ability of small business owners to implement changes required by the proposed regulation, and state the average estimated cost of implementation.  (For example, if a proposed rule required all business in a particular sector to utilize a specific software application, a small business owner may have a difficult time implementing the software if the software is expensive to purchase or if their existing computers are not able to run the software.)	
	There will be no difficulty for the small business owner (the expired licensee) to implement the changes required by the proposed change in the Rule.  Although the applicant would be able to work for an accountant it would postpone this applicant from opening their own CPA office until the completion of the one-year work or teaching experience.  There are no economic losses or costs to the expired applicant because during the two-year period prior to tendering the application the expired licensee will be required to seek employment in the field of accounting and will therefore not lose any funds due to this requirement.	

11.	Please state if the proposed regulation will force the cessation of business by any existing businesses, and the impact the cessation will have on the economy including but not limited to the number of employees losing their jobs, the economic losses by the businesses and the estimated economic ripple the cessation will have on suppliers, consumers or buyers. 	
	No, there will be no cessation of business due to the adoption of this rule.	

12.	Does the proposed regulation restrict consumer choice (i.e., availability of goods or services; price increases; etc.)?  If so, please describe those restrictions. 	
	The adoption of this rule will not restrict the choice of the consumer.  If an expired applicant wishes to reinstate their license they may, within two years immediately preceding the application for reinstatement, either 1) Obtain one year of work experience as provided in Chapter 4 of the Board’s Rules …2) Obtain a master’s or doctoral degree in accounting… or 3) provide one year of teaching experience in accounting…  The consumer can hire this applicant to perform accountant duties for them but cannot retain the services of the applicant, as a sole practitioner, until the applicant complies with the requirement set forth in this rule..	

13.	Please state the estimated impact (in dollars) the proposed regulation will have on sales, employment or tax revenue.	
	None.	

14.	Please identify all other small business sector(s) that the proposed regulation(s) may impact, and state the estimated financial impact the proposed regulation will have on each small business sector.  	
	None.	

Thank you for your time and effort.