State Board of Accountancy CPE Requirement
By Neal R. VanZante and Ralph B. FritzschOCTOBER 2006 - CPAs in 52 of the 54 U.S. jurisdictions (the 50 states plus Guam, Puerto Rico, the Virgin Islands, and Washington, D.C.; a 55th jurisdiction, the commonwealth of the Northern Marianas Islands, has just begun operations but information on CPE was not available at press time) must meet specific continuing professional education (CPE) requirements in order to maintain their licenses (Wisconsin and the Virgin Islands are the two exceptions). Although the requirements in these jurisdictions have certain similarities, major differences exist concerning the specific content of required courses, the number of hours required in various subjects, and the timing for completing the requirements. These differences are of special concern to CPAs who maintain licenses in more than one jurisdiction. Those individuals must carefully consider each jurisdiction’s requirements when making CPE decisions.
Different jurisdictions’ CPE requirements are also important to accountants considering a move from one jurisdiction to another, as well as to accounting students who plan to obtain the CPA in one state before seeking reciprocity in another state at a later date. Individuals interested in promoting more-uniform national rules for the accounting profession should also be interested in these differences.
The Exhibit (Part I, Part II, Part III, Part IV, Part V) summarizes each jurisdiction’s continuing education and ethics requirements. These details were extracted from each state board of accountancy’s website, e-mails and phone calls to some of the boards, and the National Association of State Boards of Accountancy’s (NASBA) CPE website (www.cpemarket.com). The dates shown for each jurisdiction represent the end of the CPE year, as distinct from the calendar year. Other information includes maximum and minimum hours for various subjects, limits on credit for instructing courses and authoring books and articles, and other provisions specified in the boards’ webpages.
Comparing CPE Requirements
Nearly every jurisdiction requires an average of 40 hours of CPE per year for CPAs who perform attest functions. Some jurisdictions require 40 hours each year, others require 80 hours each two-year period, and still others require 120 hours each three-year period. In some states, the multiple-year time periods are “rolling” or “floating.” In other states, the multiple-year period is “fixed.” For example, Texas requires annual registration with a minimum of 120 hours in the preceding three-year period, while Oklahoma’s three-year periods represent specific three-year increments. Most jurisdictions require a minimum of 20 hours each year during their biennial or triennial periods. Most jurisdictions do not allow for carryover of surplus CPE, but some allow 10 to 60 hours to be carried over, usually with limitations on how the hours are counted in future periods.
Differences in the number of CPE hours required each period do not create a major problem as long as an individual CPA is willing to obtain 40 hours of CPE each year. For those who must meet the requirements of more than one jurisdiction, however, different time periods represent a potential problem. For example, an individual licensed to practice in both Illinois and Indiana would use the period from October 1 to September 30 in Illinois, but use the calendar year for Indiana. To avoid taking excess CPE hours, this individual would need to time CPE to simultaneously satisfy both time periods.
In some jurisdictions, the specified subject matter or number of required CPE hours depends on job classification or specific duties. For example:
Most jurisdictions allow credit for serving as a course instructor, up to a limit most commonly set at 50% of the CPE requirement, but the ways in which this credit is computed vary. While some jurisdictions allow up to twice the number of contact hours for preparation, others allow no credit for preparation. Therefore, an instructor of an eight-hour CPE course may earn anywhere from eight to 24 hours of CPE, depending on the jurisdiction.
Most jurisdictions have minimum requirements for technical hours or for accounting and auditing hours, although definitions of technical courses are not always consistent. One jurisdiction may classify a subject as technical while another jurisdiction might not. Some jurisdictions allow no credit for personal development courses, while most jurisdictions simply limit the number of hours granted for nontechnical courses. Other jurisdictions allow no credit for practice development courses.
Some jurisdictions place no limits on self-study CPE hours. Other jurisdictions allow no self-study, or severely restrict the number of self-study hours. Furthermore, some jurisdictions differentiate between interactive versus noninteractive self-study hours. For example, California allows credit only for interactive CPE. Other jurisdictions (e.g., Louisiana and Montana) allow only half credit (100 minutes for each CPE credit-hour instead of 50 minutes per CPE hour) for noninteractive CPE courses.
While most jurisdictions allow only full hours (50 minutes) of CPE credit, some jurisdictions allow half-hour credits for courses that are longer than 50 minutes. In most jurisdictions a 75-minute course qualifies for only one hour of CPE. Other jurisdictions allow 1 Qs hours for each 75-minute course, so that two 75-minute courses would count as three hours of CPE.
Two jurisdictions have unique restrictions on CPE credit. North Carolina does not accept credit for reading and taking tests offered through magazines and journals. To receive credit for “authoring” in New Jersey, the scholarly work must appear in a peer-reviewed publication. New Mexico is also unique in allowing registrants who reside in other jurisdictions to fulfill their CPE requirements by meeting the requirements of the other jurisdiction.
Comparing Ethics Requirements
Just a few years ago, only a handful of jurisdictions required ethics subject matter to be included in CPE hours. With the addition of CPE ethics requirements taking effect in eight states during 2006, 39 jurisdictions now require CPE professional ethics hours. Significantly, ethics requirements represent the subject matter on which jurisdictions differ most.
Currently, CPE ethics requirements range from two hours every three years in several states to eight hours every three years in Minnesota. The most common requirement is two CPE ethics hours per year. Some jurisdictions allow for CPE ethics credit for a large variety of courses or even, in some cases, for parts of courses. Many jurisdictions specify the course content, including requiring jurisdiction-specific subject matter. California, for example, requires eight hours every six years, consisting of a specific ethics course designed for California CPAs. Texas, Montana, and Ohio also require jurisdiction-specific courses. Other jurisdictions, such as Oklahoma, Oregon, and Arkansas, allow for a wide range of courses to satisfy the ethics requirement. At least one jurisdiction, North Carolina, differentiates the number of required ethics hours by requiring twice as many hours (four instead of two) if the course is self-study.
Guidance for CPAs to Satisfy Multi-Jurisdiction Requirements
As mentioned earlier, CPAs who must satisfy the CPE requirements of more than one jurisdiction should plan carefully to remain in compliance with each jurisdiction’s requirements while attempting to avoid wasting CPE hours. The degree of difficulty in planning CPE depends on the jurisdictions involved and, in some cases, the individual’s birthdate.
For example, a CPA licensed in California and Utah could potentially run into a small problem by having been born in December of an even-numbered year, because the biennial period would end in even-numbered years in California and odd-numbered years in Utah. This individual can overcome this, however, by simply taking 40 hours each calendar year and making certain to satisfy the more-specific California requirements. If the same individual had been born in another month, the solution would not be quite as easy because California’s year depends on an individual’s birthdate. In this case, the individual would want to time the courses to make certain he earns 40 hours each calendar year for Utah and each birth year for California. In either case, the individual should concentrate most of his effort on California’s requirements (which are more restrictive than Utah’s), while making certain to satisfy Utah’s 80-hours-in-two-calendar-years requirement.
For another example, consider the requirements of an individual licensed to practice public accounting in Colorado, Oklahoma, and Texas. Colorado requires 80 hours for each two calendar years (ending on even-numbered years), of which 32 hours must be in technical courses and two hours of ethics. Oklahoma requires 120 hours (with at least 72 hours related to public accounting practice) each three calendar years, with a minimum of 20 hours (including at least two hours of ethics) in each year. Texas requires 120 hours every three years (marked by the end of the birth month), with a minimum of 20 hours in each year and four hours of ethics each two years. At least half of the CPE hours must be in technical subjects.
Assume that the individual was born in October, making the time period for counting hours November 1 to October 31. To minimize the number of CPE hours required, the individual might take all 40 hours between January 1 and October 31 each year. If the individual wishes to consider taking courses in November and December and also wishes to minimize the total required CPE hours, he must take care to time these courses in a manner that will satisfy all three jurisdictions.
Because Colorado’s two-year CPE requirement is for a fixed period (end of each even-numbered year), CPE hours completed during November and December of even years may be lost. For example, assume that the individual had already completed 40 hours in January to October 2005. He then takes another 20 hours of CPE in November 2005. He could then complete 20 hours during January to October 2006, and the 20 hours taken in November would count toward the minimum requirements in all three jurisdictions. If, however, he had already completed 40 hours in January to October 2006, then taking an additional 20 hours of CPE in November 2006 would be lost for Colorado purposes.
To satisfy the most-restrictive technical hours requirement (in Oklahoma, at least 60%), he would need to make certain that at least 24 of the 40 hours qualified as technical courses as defined by Oklahoma, with at least 20 of the 40 hours satisfying the Colorado and Texas technical-course definitions.
Regarding ethics, Texas is the only one of the three jurisdictions that requires particular courses, while Oklahoma and Colorado accept most ethics courses. Taking the required four-hour Texas ethics course every other year satisfies both Colorado and Texas requirements. To satisfy the Oklahoma requirements (two hours every year), he could take any acceptable two-hour ethics course in alternate years.
The key to resolving complications arising from different CPE requirements is to focus on the most-restrictive factors first. This may be the reporting year, specific subject requirements (or limitations), or the number of hours required in specific periods. Other factors should then be considered in order of the degree of restriction.
More Uniformity Would Be Welcome
Many CPAs find that scheduling appropriate courses to satisfy the requirements of multiple jurisdictions often results in great inconvenience, waste, or frustration. With careful planning, however, this may at least be minimized.
Most CPAs who have had to personally manage the different CPE requirements would probably agree with the authors that efforts to promote a greater degree of uniformity among jurisdictions would be a welcome development. Little justification exists for such wide differences in many of the specific requirements, especially as currently exist for acceptable ethics courses. Perhaps if more uniformity existed, CPAs could concentrate on more important things, such as providing high-quality services to their clients.
Neal R. VanZante, PhD, CPA, CMA, CFM, is a professor of accounting at Texas A&M University—Kingsville. Ralph B. Fritzsch, DBA, is a professor of accounting and chair of the department of accounting, division of business administration, at Midwestern State University, Wichita Falls, Texas.