VSCPA Comment Letter on HUD Independent Public Accountant Roster

March 25, 2008

Regulations Division
Office of General Counsel
Department of Housing and Urban Development
451 Seventh Street, SW
Room 10276
Washington, D.C. 20410-00

Dear Madam or Sir,

The Virginia Society of Certified Public Accountants (VSCPA) welcomes the opportunity to comment on proposed rule FR-5054-P-01, Independent Public Accountant Roster (Roster). Thank you for your hard work on the rules and your dedication to finding effective solutions to protect the public and ensure that only high caliber, qualified firms are permitted to perform HUD audits.

We submit the following comments on behalf of the 8,300 members of the VSCPA and ask the Department to consider them in determining whether or not to proceed with the proposed rule.

• As described in section 5.810 of the proposed rule, the eligibility requirements for independent public accountants and public accounting firms (IPAs) to be added to the Roster are overly broad. As an example, IPAs must agree to comply with any requests for information made by HUD and agree to comply with all applicable HUD rules and instructions in order to stay on the Roster.
• Section 5.814 of the proposed rule describes the Roster removal procedure. Unfortunately, as written, this procedure appears to limit the due process for removal of IPAs from the Roster by not affording them a fair hearing under certain circumstances before becoming ineligible to perform HUD audits. Section III of the Supplementary Information characterizes the current suspension and debarment proceedings as being costly and time consuming. The VSCPA believes that removing the provisions will compromise due process in the following ways:
• The proposed rule does not incorporate any appeal rights for IPAs removed from the Roster under the automatic removal provisions, which could be perceived as a violation of due process by not affording IPAs an opportunity to dispute the reason for removal or present any additional information. Furthermore, the rule does not give HUD the authority to waive the automatic removal provisions if it would be in the public interest to do so.
• The automatic provisions related to licensing restrictions imposed due to disciplinary matters do not recognize the potential for variance in the licensing requirements among different jurisdictions. For example, a CPA’s license could be suspended for failure to comply with CPE in one jurisdiction, without consequence to other jurisdictions having slightly different CPE requirements.
• Section 5.814 (d) outlines the procedures for contestable removal and allows for the assignment of a Reviewing Official if the IPA chooses to contest removal. The procedures do not provide any information related to the qualifications of Reviewing Officials, other than to state that the Reviewing Official cannot be the same individual who made the initial determination to propose removal of the IPA from the Roster. This could compromise due process by not ensuring a fair conference conducted by an appropriately qualified Reviewing Official.
• The VSCPA has concerns that removal from the Roster may be viewed as debarment by a federal agency, not only for the purposes of state accountancy laws (which could result in CPA license revocation), but also in the public view. Both situations could result in irreparable damage to IPAs’ reputations and continued viability as businesses.
• Barring an IPA from performing HUD audits because a partner or employee who does not participate in HUD audits has been debarred by the Securities and Exchange Commission (SEC) would reduce the pool of qualified HUD auditors. This would in turn place undue burdens on both eligible IPAs and the entities needing HUD audits, and could have a negative financial impact on all stakeholders, including HUD.
• The proposal estimates one hour of administrative burden time per IPA registrant. This may not adequately account for total time, effort and financial resources IPAs would need to generate, maintain, retain, disclose or provide information to HUD. IPAs would need to devise a process to not only determine initial eligibility, but to also track compliance with the eligibility requirements on an ongoing basis.
• The ultimate impact of the proposed rule may be that quality IPAs may decide that the proposed registration process is not worth the effort or risk to their practice and choose to abandon their HUD audit practices altogether.