State Board Report

July 2011

The way the State Boards are regulating accountancy is under attack from three fronts, NASBA Legal Counsel Noel Allen told the Regional Meetings. First there have been over a dozen cases this year where the respondent to a Board’s action has challenged the Board’s authority. Second, there have been legislative budget raids taking the Boards’ funds. Third, the Federal Trade Commission has assaulted licensing boards in general.

Cases challenging grounds for the Board’s discipline have occurred in Alabama, California, Idaho, Missouri, New Hampshire, South Carolina, and Texas. This has been a more litigious year than many, Mr. Allen observed. In the Alabama Board’s case, where a CPA was performing attest work but would not comply with the peer review requirement, NASBA had filed an amicus brief.

There are potential defenses against legislative budget raids of the Boards’ funds, Mr. Allen advised. These include: State Constitutions that limit the use of funds collected by the Boards; the Riley v. Forbes (CA -1924) a case involving an Accountancy Board; and the Opinion of the Justices in a New Hampshire case (1985) that held money collected by a regulatory agency for one statutory purpose could not be used for another. He observed that some State Boards that have been watching their budgets, resulting in their having surpluses, have had trouble in keeping those funds.

The FTC has challenged North Carolina statutes that established a state board comprised of a majority of licensed dentists, defined the practice of dentistry, and authorized the board to enforce a statutory prohibition against unauthorized practice. The state, by statute, had chosen to regulate through the expertise of the board’s licensees, as is the case with many different types of state boards. Mr. Allen said he is confident that the board will ultimately prevail because of the State Action immunity articulated by the Supreme Court 70 years ago pursuant to the 10th Amendment. The case is still working its way through the courts and does represent an unauthorized and unprecedented challenge to all professional licensing boards composed of licensees.

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