Summary of Report 09-044

July 2009

Report Number 09-044

The Board of Public Accountancy's (Board) basic financial statements for fiscal year 2008 are materially accurate. The Board has implemented well-designed key financial controls to enable it to accurately report financial statement balances.

The Board's total fund balance as of August 31, 2008, was $6,791,635, which is the result of a 761 percent growth in the fund balance between fiscal years 2004 and 2008. Board management stated that the fund balance was a result of anticipated major expenses related to the litigation of certain legal cases. The Board's process for setting fees is appropriately documented and is designed to comply with statutory limits on fee setting. The process is based on the anticipation of revenues, enforcement case expenditures, and operating expenditures. The Board's Executive Committee uses a method that considers budget resources to determine which fees should be adjusted to meet the Board's needs. All decisions to adjust the fees were disclosed in the Executive Committee minutes.

The Board has a process for assessing penalties in disciplinary matters. However, auditors were not allowed access to a portion of the information in the individual case files that contained support for the penalties assessed. As a result, auditors could not verify that the Board consistently follows its process when assessing penalties in disciplinary matters.

The Board also has a documented process for setting administrative penalties. The Board's current rules in the Texas Administrative Code grant the Board's executive director the authority to waive/abate penalties for the failure to pay annual fees. As a result, the Board did not collect at least $100,000 in late fees for at least 43 certified public accountants in fiscal year 2008. However, the Texas Occupations Code states that the Board may not waive the collection of any fees or penalties, which includes penalties for the late payment of annual fees.

The Board reported accurate results for all 14 performance measures tested for fiscal year 2008. However, the Board did not maintain supporting documentation for the queries it used to calculate and report its performance measures.

Based on information provided by management, trends in the Board's reported performance between fiscal years 2005 and 2008 are reasonable. Specifically:

- The number of licenses the Board issued increased by 2 percent.

- The number of firms practicing public accountancy decreased by 5 percent.

- The total number of individuals certified or registered increased by 35 percent.

- The numbers of complaints opened and complaints closed increased by 12 percent and 20 percent, respectively.

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