ALJDEC decisions subject to certification as final

13F-2012.056-ACY · State Board of Accountancy · 2013-07-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 10, 2013, at 8:00 a.m. APPEARANCES: The Arizona State Board of Accountancy appeared through Seth T. Hargraves, Esq., Assistant Attorney General; Respondent PMS Management Services, PC appeared through Rocco Albisani, its sole owner and only employee who is a Certified Public Accountant. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. The Arizona State Board of Accountancy (“the Board”) is the state agency authorized pursuant to A.R.S. §§ 32-701 et seq., to regulate the profession of Certified Public Accountants (“CPAs”) in the State of Arizona. 2. The Board issued Certified Public Accounting Firm Registration No. 2184-C to PMS Management Services, PC (“PMS” or “Respondent”). 3. The Board referred this matter to the Office of Administrative Hearings (“OAH”), an independent agency, for an evidentiary hearing. On May 10, 2013, the Board issued a Complaint and Notice of Public Hearing. The Complaint and Notice of Public Hearing charged PMS with failing to comply with the Board’s March 13, 2012 Decision and Order (By Consent), thereby furnishing cause for the Board to revoke the firm’s registration under A.R.S. § 32-741(A)(9) and (A)(15). 4. On July 10, 2013, a hearing was held in the OAH. The Board presented the testimony of Ryan Edmonson, its Compliance Manager, and submitted four exhibits. PMS presented the testimony of Rocco Albisani (“Mr. Albisani”), its sole owner and only employee who is a CPA. Hearing Evidence 5. Mr. Edmonson testified that CPA firms that perform a certain level of attestation for the public are required to have educational enhancement. Mr. Edmonson testified that PMS was subject to educational enhancement review (“EER”). Mr. Edmonson testified that the Board randomly selects seven firms per month for EER. 6. Mr. Edmonson testified that as a result of the Board’s random EER of PMS, the Board’s Peer Review Oversight Advisory Committee identified certain deficiencies. As a result of the deficiencies, on March 9, 2012, Mr. Albisani on behalf of PMS signed the March 13, 2012 Decision and Order (By Consent). 7. Mr. Albisani agreed to the following terms in the March 13, 2012 Decision and Order (By Consent): 1. Respondent shall undergo and submit a completed peer review to the Board prior to its next renewal registration, currently scheduled for March 2013. Respondent and its designated CPA, [Mr. Albisani], shall be solely responsible to ensure that the peer review is scheduled, completed and submitted to the Board on time.

2. In the event that Respondent fails to undergo and complete a peer review prior to its next renewal registration, such failure to comply shall be considered noncompliance with the terms of this Order. In the event of noncompliance the Board shall direct that the matter proceed to a noncompliance hearing for the revocation of respondent’s firm registration. . . . .

4. The failure of Respondent to comply with any provision of this Order . . . shall be deemed a violation of this Order. In the event Respondent is noncompliant with any provision of this Order, the Board, in its sole discretion, may direct that the matter proceed to a noncompliance hearing for the revocation of Respondent’s firm registration.[1]

8. Mr. Edmonson testified that the March 13, 2012 Decision and Order (By Consent) required PMS to contract with a recognized peer reviewer. Mr. Edmonson explained that because there is no peer review program in Arizona, peer reviewers must submit their peer review documents to a peer review program in another state to review the documents to obtain final acceptance letters. 9. Mr. Albisani testified that because he had never been involved in a peer review, he did not know how long the process would take. Mr. Albisani testified that in December 2012, he contacted Marianne (“Mari”) DeVries of the DeVries CPA firm to request that she perform a peer review of PMS. 10. Mr. Edmonson testified that PMS did not submit a completed peer review before it submitted its next firm registration after the March 13, 2012 Decision and Order (By Consent). 11. On or about April 1, 2013, Mr. Albisani on behalf of PMS submitted a completed Firm Registration Renewal Form for March 31, 2013, through March 31, 2015 (the “March 2013 Firm Registration Renewal”).[2] PMS did not submit a peer review document with its March 2013 Firm Registration Renewal. 12. Instead, Mr. Albisani attached a letter to the March 2013 Firm Registration Renewal that explained as follows: The peer review of this company, due March 31, 2013[,] will be completed during the first week of April 2013. At that time the reviewer, Mari DeVries, will submit the report to both the Arizona Board and CAL CPA.

13. Mr. Edmonson explained that the California State Society of Accountants, known as “Cal CPA,” is California’s state-sponsored program for review of peer review documents. 14. Mr. Edmonson testified that as of the date of the hearing, PMS had not complied with the March 13, 2012 Decision and Order (By Consent) by submitting a peer review. 15. Mr. Albisani testified that Ms. DeVries initially had some trouble getting qualified by Cal CPA and that it did not qualify her to perform a peer review for its review until the end of January 2013. 16. Mr. Albisani testified that Ms. DeVries completed her peer review during the first week of April 2013. Mr. Albisani acknowledged that as of the date of the hearing, Ms. DeVries’ peer review document had not been submitted to the Board. 17. Mr. Albisani acknowledged that PMS had not complied with the March 13, 2012 Decision and Order (By Consent). Mr. Albisani testified that he understood that the order required PMS not only to obtain a peer review, but to have the peer review accepted by a peer review program. Mr. Albisani testified that Ms. DeVries submitted her peer review of PMS to Cal CPA for review, but that she had informed him that Cal CPA’s deadline for review was “open- ended,” that it could not be contracted to expedite its review, and that she had not heard anything from Cal CPA. 18. Mr. Edmonson testified that the Board’s March 13, 2012 Decision and Order (By Consent) did not require a final acceptance letter from a peer review program. Mr. Edmonson testified that in other cases, the Board has issued orders that included such a requirement. 19. At the Board’s May 6, 2013 meeting, it voted “to direct the Assistant Attorney General to file a Complaint and Notice of Hearing for revocation and for non-compliance.”[3] 20. Mr. Albisani did not contact the Board to clarify the requirements of the March 13, 2012 Decision and Order (By Consent) or to request additional time for PMS to comply with the order. Instead, Mr. Albisani on behalf of PMS sent a letter to the Board, which it received on July 3, 2013, informing the Board that “[t]he required Peer Review has been completed by DeVries CPAs of Tucson Arizona as of May 2013. The report was given to CALCPA and we are currently waiting for their response.”[4] CONCLUSIONS OF LAW The Board has been created and authorized to regulate and control the profession of Certified Public Accountancy in Arizona.[5] This matter lies within its jurisdiction. The Board bears the burden of proof to establish cause to discipline PMS’s firm registration by a preponderance of the evidence.[6] PMS bears the burden to establish affirmative defenses or factors in mitigation of any penalty by the same evidentiary standard.[7] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[8] Mr. Albisani did not dispute that PMS did not undergo and complete a peer review prior to submitting the March 2013 Firm Registration Renewal to the Board. Therefore, the Board established that PMS failed to comply with the March 13, 2012 Decision and Order (By Consent), thereby providing grounds under A.R.S. § 32-741(A)(9)[9] and (15)[10] for the Board to discipline PMS’s firm registration. As factors in mitigation of the penalty, Mr. Albisani credibly testified that shortly after he submitted PMS’s March 2013 Firm Registration Renewal, Ms. DeVries conducted a peer review of PMS and that he understood that the March 13, 2012 Decision and Order (By Consent) also required a final acceptance letter from a peer review program. Mr. Edmonson testified that Mr. Albisani’s understanding was mistaken. Mr. Albisani did not request clarification of the March 13, 2012 Decision and Order (By Consent) and did not ask the Board for additional time to comply with the order’s requirements. As of the date of the hearing, PMS had not submitted Ms. DeVries’ documentation of her peer review of PMS to the Board. A.R.S. § 32-742(B) allows the Board some discretion as to whether to unconditionally discipline or to impose a lesser penalty on PMS’s firm registration.[11] It appears that Mr. Albisani attempted to comply with the March 13, 2012 Decision and Order (By Consent) and it does not appear that PMS’s accounting practices endanger the public interest.[12] RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the final Order in this matter, the Board revoke Respondent PMS Management Services, PC’s Certified Public Accounting Firm Registration No. 2184-C. It is further recommended that the Board require PMS to reimburse the Board’s costs of investigating and proceeding to hearing in this matter under A.R.S. § 32-701(6)(f). It is further recommended that if on or before thirty (30) days after the effective date of the final Order, PMS has provided evidence that is satisfactory to the Board that it has obtained a peer review and has reimbursed the Board for its costs of investigating and proceeding to hearing, the Board shall reinstate PMS’s firm registration and deem it to have remedied its acknowledged failure to comply with the March 13, 2012 Decision and Order (By Consent). In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification. Done this day, July 17, 2013.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Monica L. Petersen, Executive Director Arizona State Board of Accountancy ----------------------- [1] The Board’s Exhibit 1 at 3-4. [2] See the Board’s Exhibit 2. [3] The Board’s Exhibit 3 at 17. [4] The Board’s Exhibit 4. [5] See A.R.S. § 32-701 et seq. [6] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119(A) and (B)(1); see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [7] See A.A.C. R2-19-119(B)(2). [8] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [9] A.R.S. § 32-741(A)(9) provides that after notice and an opportunity for hearing, the Board may suspend, revoke, or otherwise discipline the holder of any certificate for “[k]nowing violation of any decision, order or rule issued or adopted by the board.” [10] A.R.S. § 32-741(A)(15) provides that after notice and an opportunity for hearing, the Board may suspend, revoke, or otherwise discipline the holder of any certificate for “[f]ailing to respond or furnish information in a timely manner to the board or its designated agent, if the information is legally requested by the board and is in the registrant’s possession or control.” [11] A.R.S. § 32-742(B) provides in relevant part: After notice and an opportunity for a hearing, the board may revoke or suspend a firm's registration to practice public accounting and may additionally take disciplinary action concerning the registrant for any of the causes enumerated in section 32-741, subsection A . . . . (Emphasis added.) [12] The Board’s purpose is “to ensure that the public is protected from the incompetent practice of accountancy.” Laws 2005, Ch. 27, § 3.

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