May 1, 1995
SANDRA A. KINGSLEY, PETITIONER,
DISTRICT OF COLUMBIA DEPARTMENT OF CONSUMER AND REGULATORY AFFAIRS, BOARD OF ACCOUNTANCY, RESPONDENT.
Petition for Review of a Decision of the Board of Accountancy, Department of Consumer and Regulatory Affairs.
Before Ferren, Terry, and Steadman, Associate Judges.
The opinion of the court was delivered by: Ferren
FERREN, Associate Judge: Petitioner appeals a decision of the District of Columbia Board of Accountancy denying her application for a "certificate," D.C. Code § 2-107 (k) (1994 Repl.), and a "permit," id. § 2-114 (a) (1994 Repl.), to practice as a certified public accountant (CPA) in the District. She based her application on a request for waiver of the usual examination and, in lieu thereof, asked for an "endorsement" (and thus acceptance in the District) of her Maryland CPA certificate. See id. § 2-107 (k). Petitioner contends the Board abused its discretion (1) by imposing an "attest function" experience requirement not found in the statute or regulations governing issuance of "permits" to practice public accounting, D.C. Code § 2-114 (a); 17 DCMR § 2504.4 (1990); (2) by ruling that, in any event, the attest function requirement can be met only by persons experienced in "public accounting practice" (a kind of experience petitioner admittedly did not have); and (3) by considering only two years of petitioner's nearly 20-year accounting experience.
We cannot ascertain from the Board's findings and Conclusions whether the Board, in ruling that petitioner did not meet the work experience requirements for a "permit," denied her application on the ground that (A) as a matter of law, no CPA from another jurisdiction who lacks experience in "public accounting practice" can qualify for "endorsement" of a CPA certificate under § 2-107 (k) and for a "permit" under § 2-114 (a), or instead ruled on the narrower basis that (B) a licensed CPA, without public accounting experience, is not necessarily precluded from receiving an endorsed certificate and a related permit, but that petitioner's particular accounting experience is insufficient nonetheless.
If the former is true - if the Board denied petitioner's application as a matter of law for lack of public accounting experience - then there are serious questions whether that limitation is arbitrary and capricious, see D.C. Code § 1-1510 (a)(3)(A) (1992 Repl.), in view of regulations that appear to recognize the acceptability of "private or governmental employment," as well as "public accounting practice," to meet the required work experience. See 17 DCMR §§ 2504.2-3.
If, on the other hand, the reason for denial is petitioner's particular accounting experience, then there are serious questions whether the Board, in considering only her two-year employment experience since attaining her Maryland CPA certificate, was arbitrary and capricious in declining to evaluate her application in light of all her accounting experience, or at least her experience since attainment of her bac -calaureate degree - especially if a demonstration of "attest function" experience was required.
Accordingly, we must remand the case to the Board for further proceedings and clarification.
Petitioner, Sandra A. Kingsley, a resident of Silver Spring, Maryland, applied to the Board on December 4, 1990 for a certificate to practice accounting in the District of Columbia by "endorsement" of her Maryland CPA certificate, see D.C. Code § 2-107 (k), and for a related "permit" to do so, see id. § 2-114 (a). *fn1 Petitioner had received a bachelor of science de -gree with a major in accounting from the University of Maryland in May 1988 and had been licensed as a CPA in Maryland since June 1990. *fn2 Petitioner also received a Virginia CPA license by reciprocity based on her Maryland license.
In her application, petitioner stated that she had been a Marriott Corporation employee since April 1976; that she had begun working at Marriott as an entry level accountant; that she had been promoted to accounts manager in 1980; and that she had received promotion to a controller's position in 1986. Petitioner submitted an academic transcript and three character references in addition to a certificate of experience written by a Marriott division vice president, certifying that petitioner had over 1,000 hours of full-time accounting experience in operational audits.
The Board mailed petitioner a notice of intent to deny her application on the ground that she had failed to show that she had met both the 500 hour accounting experience requirement in 17 DCMR § 2504.4 and the general experience requirements of D.C. Code § 2-114 (a). Petitioner requested a hearing to contest the Board's proposed decision.
At the hearing, on November 3, 1992, petitioner testified that she had worked for almost 20 years in the accounting field *fn3 and that she was a member of the American Institute of Certified Public Accountants, as well as the Maryland and Virginia Associations of Certified Public Accountants. Considering petitioner's accounting experience between June 19, 1990 (when petitioner had been licensed as a CPA in Maryland) and November 3, 1992 (the date of the hearing), *fn4 the Board found that petitioner's work experience was "not in character and variety substantially equivalent to accounting experience gained in public accounting practice," and that it did not involve "applying generally accepted accounting auditing standards so as to be able to issue an independent report in conformity with generally accepted accounting principles." Finding of Fact No. 10. The Board specifically found that petitioner did not have any experience in the "attest function," i.e.,
in the conduct of an examination in accordance with generally accepted auditing procedures culminating in the issuance of a report in conformity with generally accepted accounting principles while maintaining adherence to the independent standard.
Finding of Fact No. 8. Concluding, therefore, that petitioner did not meet the experience requirements of D.C. Code § 2-114 (a) and of 17 DCMR § 2504.4, the Board denied her application. Petitioner appeals the Board's decision.
Where an administrative agency is delegated broad authority to administer a statutory scheme, this court defers to the agency's interpretation of the statute if reasonable. See Smith v. District of Columbia Dep't of Employment Servs., 548 A.2d 95, 97 (D.C. 1988) (citation omitted). The agency's interpretation, therefore, is binding on the court unless it conflicts with the plain meaning of the statute or its legislative history, or is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law. See Nova Univ. v. Educational Inst. Licensure Comm'n, 483 A.2d 1172, 1190-91 (D.C. 1984); D.C. Code §§ 1-1510 (1992 Repl.), 11-722 (1992 Repl.).
The District of Columbia Board of Accountancy is charged with regulating persons practicing and professing expertise in accountancy in the District. See D.C. Code §§ 2-101, -103 (i) (2)-(3). According to statute, the Board will issue a CPA certificate to an applicant who:
(1) Is at least 18 years of age;
(2) Is of good moral character;
(3) Is a resident of the District or has been regularly employed in the District for the immediate 6 months prior to the final date for accepting applications for the written examinations.... *fn5
(4) Has passed a written examination in accounting and auditing and such related subjects as the Board shall determine to be appropriate;
(5) (A) Holds a baccalaureate degree with a concentration in accounting conferred by a college or university recognized by the Board or holds that which the Board determines to be substantially the equivalent thereof; or
(B) Holds a baccalaureate degree acceptable to the Board supplemented with the equivalent of an accounting concentration including related courses in other areas of business administration; and
(6) Has paid all required fees.
D.C. Code § 2-107 (a) (1)-(6). Under D.C. Code § 2-107 (k), the Board, in its discretion, may waive the written examination requirement and issue a CPA certificate by "endorsement" to an applicant who, in addition to meeting the § 2-107 (a) requirements as to age, academic qualifications, fees, and character, see id. § 2-107 (k)(2), "is a certified public accountant of a state" (or holds an equivalent certificate from a foreign country) where "the requirements for such certificate are, in the opinion of the Board, equivalent to" the District's requirements, id. § 2-107 (k)(1), and "declares his or her intention under oath" to obtain employment in the District "for the purpose of engaging in full time public practice" as a CPA, id. § 2-107 (k)(3).
The Board, however, may not issue to any CPA certified elsewhere a "permit to engage in the practice of public accounting in the District of Columbia" until the certificate holder demonstrates at least two years of experience in either:
(1) Auditing books and accounts of other persons in accordance with generally accepted auditing standards;
(2) Reviewing financial statements and supporting material covering the financial conditions and operations of private business entities to determine the reliability and fairness of the financial reporting and compliance with generally accepted accounting principles;
(3) Such other experience including auditing and accounting experience in a governmental agency as the Board in its discretion regards as qualifying experience under the facts and circumstances of individual cases; or
(4) Any combination of the foregoing.
D.C. Code § 2-114 (a)(1)-(4). In addition, applicable regulations, see id. § 2-114 (a), require a permit applicant to show that he or she has engaged in "the full-time practice of accounting during regular business hours for the full period specified," 17 DCMR § 2504.1, and has at least 500 hours of experience in:
(a) Application of a variety of auditing procedures and techniques to the usual and customary financial transactions recorded in accounting records;
(b) Preparation of audit working papers covering the examination of the accounts usually found in accounting records;
(c) Planning of the program of audit work including the selection of the procedures to be followed;
(d) Preparation of and analysis of financial statements including explanations and notes; and
(e) Preparation of written explanations and comments on the findings of the examination and on the content of the accounting records.
17 DCMR § 2504.4. Regulation 17 DCMR § 2504.2 provides that the two-year, full-time practice requirement identified in 17 DCMR § 2504.1, see D.C. Code § 2-114 (a), applies "whether the experience of the applicant was obtained in public accounting practice or in private or governmental employment." Finally, 17 DCMR § 2504.3 specifies that accounting experience in "private or government employment shall qualify [for meeting permit experience requirements] if, in the opinion of the Board based upon a review of the character and variety of experience of an applicant, that experience was substantially equivalent to the experience requirements set forth in [17 DCMR] § 2504.4."
Petitioner contends that the Board's actions were arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with the law, see D.C. Code § 1-1510, in so far as they (1) imposed an "attest function" requirement for obtaining a permit, (2) ruled that the attest function and other experience requirements under D.C. Code § 2-114 (a) and 17 DCMR § 2504.4 could be met only by persons engaged in the practice of public accounting, and (3) considered only two years of petitioner's accounting experience in determining that she did not meet the requirements of 17 DCMR § 2504.4.
As to petitioner's first contention, although neither D.C. Code § 2-114 (a) nor 17 DCMR § 2504.4 explicitly requires experience with the "attest function," we must agree with the District, given our deferential standard of review, that the Board has the statutory discretion (coupled with presumed expertise) to interpret § 2-114 (a) to require attest function experience before the Board issues a § 2-114 permit to someone who holds, or is applying for, a § 2-107 endorsement of a CPA license from another jurisdiction *fn6 We also agree that the Board's requirement of attest function experience is reasonable in light of the Board's responsibility to assure that individuals who receive CPA certificates and annual permits to practice public accounting in the District have experience with independently and objectively applying generally accepted accounting principles. Moreover, as the District points out, the attest function requirement reflects statutory requirements that an applicant have the ability to "audit  books and accounts of other persons" and to "review  financial statements and supporting material covering the financial conditions and operations of private business entitles," in order "to determine the reliability and fairness of the financial reporting and compliance with generally accepted accounting principles." D.C. Code § 2-114 (a) (1),(2).
Indeed, we assume that the Board does not limit the "attest function" requirement to CPAs certified by endorsement but, rather, imposes the requirement on all CPAs who apply for a § 2-114 permit, including those who are certified on the basis of a written examination, since the permit requirements do not distinguish between CPAs who have taken the examination here and have qualified for a certificate by endorsement.
We are troubled, however, by petitioner's second contention: that the Board apparently has determined that attest function and other accounting experience required under D.C. Code § 2-114 (a) and 17 DCMR § 2504.4 can be demonstrated only by persons who have engaged in public accounting. The Board's findings of fact state in relevant part:
8. Applicant has no experience in the attest function of a public accountant, that is, in the conduct of an examination in accordance with generally accepted auditing procedures culminating in the issuance of a report in conformity with generally accepted accounting principles while maintaining adherence to the independent standard.
9. As an employee of a private company where applicant, as part of management, performs accounting functions for the company, applicant's experience is not imbued with the requisite objectivity and independence to constitute the practice of public accounting. [Emphasis added].
10. Applicant's work experience, that of an accountant who works directly for and with the management of the company being audited, is not in character and variety substantially equivalent to accounting experience gained in public accounting practice.... The goal of such former experience is not the same as the goal that directs the practice of public accounting, to-wit: applying generally accepted auditing standards so as to be able to issue an independent report in conformity with generally accepted accounting principles. While much of the technical work is similar in both experiences, the choice of programs, application, analysis, and ultimate opinion may diverge widely depending upon whether the experience is in public accounting practice or private employment. Applicant's work is performed for her employer's benefit, rather than for reliance by third parties. [Emphasis added].
It is unclear, from these findings, whether the Board determined that petitioner's particular accounting experience at a private corporation was insufficient, or whether it concluded, more broadly, that persons, such as petitioner, who practice accounting in private employment - but not in a public accounting firm - as a matter of law cannot qualify for "endorsement" and a "permit" to practice public accounting in the District.
If the Board intended the former, then the Board - apropos of petitioner's third claim of error - has not attempted to justify or otherwise make clear why it limited consideration of her accounting experience to the period since she attained her Maryland CPA certificate, instead of all her accounting experience of nearly 20 years or at least her accounting experience since receiving her baccalaureate degree. Neither the two-year experience requirement of § 2-114 (a) nor the 500 hours experience requirement of 17 DCMR § 2504.4 is limited to a particular time period. In its brief, the District justifies this limitation on the ground that the Office of Corporation Counsel
has been advised that it is the custom and practice of the Board, when determining whether an individual has sufficient accounting experience to practice public accounting, to only consider accounting experience that is obtained after an individual receives either a CPA license or a bachelor's degree.
The District then added that application of this custom "is well within the Board's broad discretion," citing 17 DCMR § 2504.3 (permitting Board to consider "experience obtained in private or governmental employment," in addition to experience obtained in public accounting practice recognized in 17 DCMR 2504.2, if private or government experience was "substantially equivalent" to experience requirements of 17 DCMR § 2504.4).
The problem - the apparent arbitrariness - is the Board's failure to look at substantially all the applicant's accounting experience, especially when requiring experience with the "attest function." It is not clear whether all applicants for CPA endorsements and related permits, or only a few (including petitioner), are limited to scrutiny of their experience from the date of the CPA certificate from another jurisdiction, rather than from some earlier time (such as attainment of a baccalaureate degree). Furthermore, it is unclear whether the Board would have looked at a longer period of experience if petitioner had applied for a certificate and a permit based on a written examination, rather than on an application for endorsement. The Board at least should have explained why it could properly limit its experience inquiry.
On the other hand, we perceive even greater difficulties if the Board denied petitioner's application as a matter of law because she did not have work experience with a public accounting firm. Regulations 17 DCMR §§ 2504.2 and 2504.3 respectively provide:
The requirements of § 2504.1 [requiring "full-time practice of accounting during regular business hours for the full period specified" for compliance with the permit requirements of D.C. Code § 2-114 (a)] apply whether the experience of the applicant was obtained in public accounting practice or in private employment.
Experience obtained in private or government employment shall qualify if, in the opinion of the Board based upon a review of the character and variety of experience of an applicant, that experience was substantially equivalent to the experience requirements set forth in § 2504.4.
These regulations suggest that, contrary to the analysis that the Board appears to have given in petitioner's case, it is possible to achieve qualifying experience with the attest function through "private accounting practice." There is a serious question, therefore, in light of this language in the regulations, whether the Board has acted pursuant to its own regulations. See Macauley v. District of Columbia Taxicab Comm'n, 623 A.2d 1207, 1209 (D.C. 1993) ("It is a basic tenet of administrative law that an administrative agency is bound to follow its own rules and regulations.") (citations omitted). *fn7
We have agreed with the District that the Board has statutory authority to impose an "attest function" experience requirement for § 2-114 (a) permits. We cannot be sure, however, that under either possible reading of the Board's ruling the Board has properly dealt with petitioner's application here. Accordingly, we remand the case for further proceed- ings to address the ambiguities and other concerns expressed in this opinion.