Sunset Review of Public Accountancy Laws: The Colorado Experience

Abstract

Sunset reviews are periodic examinations by state legislatures to assess the necessity, effectiveness, and efficiency of various state functions, including regulatory boards and commissions. The outcome of a sunset review can range from a minor change in the existing law to outright elimination of the regulatory function. In fact, agencies subject to sunset reviews automatically terminate unless renewal legislation is passed. As reported in Table 1, the public accountancy laws of 25 states are subject to sunset reviews. Given the potential substantive results of a sunset review, practicing accountants, educators, and regulators might benefit from a better understanding of the sunset review process and the interplay of the involved parties. The public accountancy law in Colorado underwent a sunset review during the 2000 legislative session. This provided us the opportunity to examine, in depth and on a contemporaneous basis, the sunset review of a public accountancy law. Various parties, such as government officials, the State Board of Accountancy (SBA), the State Society of CPAs (SSCPA), and ourselves were involved in this process. We were able to interview and/or observe all of these parties. This commentary reflects our observations and experiences with Colorado's sunset review process. OVERVIEW OF SUNSET REVIEW Colorado's Department of Regulatory Agencies (DORA) is charged by state statute with the regulation of many occupations and professions, including the accounting profession, and most regulated entities such as public utilities, banks and insurance companies. DORA helps manage the day-to-day business of the boards through administrative and support staff it provides the boards. The Executive Director of DORA, appointed by the Governor, is responsible for management of the department and is also the principal advisor to the Governor and the Legislature on policy issues relating to regulation. In 1976, Colorado became the first state to pass a sunset law. The law automatically terminates certain state regulatory agencies, boards, or functions on specific dates. Unless the Legislature passes and the Governor signs sunset legislation extending the life of the agency, board or function, its affairs must be concluded within one year. The purpose of Colorado's sunset law is to balance the need for regulation that protects the public with the effects of possible over-regulation of an agency or profession. DORA's Office of Policy and Research is responsible for the initial stages of sunset reviews. Sunset reviews are conducted according to statutorily established evaluation criteria. In general, the criteria address the following (Colorado Revised Statutes 2000): * Whether regulation is needed to protect the public interest; * If regulation is needed, whether the existing regulation is the least restrictive form of regulation consistent with the public interest; * Whether the agency actually operates in the public interest; and * Whether the agency operates effectively and efficiently. Agencies, boards, and functions are each on a specific schedule, typically requiring a sunset review every 5 to 15 years. The SBA was last reviewed in 1993. A timetable and list of sunset review activities pertaining to the SBA appears in Table 2. INITIAL SUNSET REVIEW PROCESS A staff analyst under the supervision of the Director of Sunrise/Sunset was primarily responsible for the pre-legislative phase of the public accountancy sunset review. This phase took approximately six months to complete and included the activities outlined in the top half of Table 2. These activities are described below. Focus Groups The focus group meetings with the SBA members were primarily intended to identify important issues that the sunset review could possibly address. The SBA members identified a large number of issues, but could not agree on the most important issues. …