I think the word "isolated" has been used in several cases, but th is not the word in this act. Mr. GLICK. I think in the case you have in mind, Congressma Sickles, the firm would be content to hold itself out as a partnersh of certified public accountants of the State of Maryland and, und the section Mr. Bernstein has just read, it would be able to perfor transactions within the District of Columbia incident to the perfor ance of their work, but it would not be able to hold itself out as partnership of certified public accountants of the District of Columb unless at least one of its partners was qualified and registered und the act in the District of Columbia. Mr. SICKLES. But you are not going far enough. It says fu time practice in the District. In effect, you are saying this o partner has to establish an office and practice in the District. Mr. BARNES. Only if you wish to hold yourself out in the Distri as a firm of CPA's. Mr. SICKLES. But let us say you would allow a partnership Silver Spring, to use the same example, to do 35 or 40 percent of the work in the District of Columbia without any problem, witho having any office. Mr. BARNES. I think it might get ticklish if it were 10-90, if established his office 50 feet across the District line and 90 percent. his work was in the District of Columbia. Mr. SICKLES. He would have to move his office? Mr. BARNES. I think he would have to qualify. We would say was in the full-time practice in the District and he would have to g a reciprocal certificate and abide by the rules. He would not have move his office. Mr. SICKLES. I think perhaps it is a very desirable thing that the be some contact with the governing authorities, in effect the polici authorities of the profession. I am just concerned Mr. BARNES. I think we would say in the hypothetical case th that person was in full-time practice in the District of Columbia ev though his office was situated in Maryland. He would not ha physically to move his office, but he would have to meet the requi ments. Our next witness, Mr. Millard T. Charlton, will summarize our ca for passage of this bill. Mr. ABERNATHY. You may proceed, sir. STATEMENT OF MILLARD T. CHARLTON Mr. CHARLTON. Mr. Chairman, my name is Millard T. Charlt I have been a certified public accountant of the District of Colum since 1935. I am the senior partner of Millard T. Charlton & with offices in the Perpetual Building, Washington, D.C. I v president of the District of Columbia Institute of Certified Pub Accountants during 1943-44 and am currently serving on the legis tive committee of that organization. I was a member of the Board Accountancy for the District of Columbia during the period 1944Our previous witnesses have discussed why CPA standards important to the public; the trend in recent legislation in the States; the shortcomings of existing law in the District of Columb and the specific ways in which the proposed legislation will elimina existing defects. I should like to summarize our case for passage of this bill. 1. Raising professional standards: The bill would raise the requirements for education and experience approximately to the levels that now are required in 30 of the 50 States. This bill would not attempt, in one big leap, to move from the present requirements to the high requirements of the laws now in effect in several States, including California, Massachusetts, New Jersey, and New York. These States now require the completion of 4 years (120 semester hours) of college-level study in accountancy plus 3 years of professional employment in the office of a certified public accountant. The bill would, however, raise the requirements adequately to assure high professional competence. We believe that the three alternatives provided in the present bill, each of which requires a total of 6 years of preparation, ranging from 2 years to 4 years of college-level study and ranging from 2 years to 4 years of professional experience, with each year of college education after the second year being equivalent to 1 year of professional experience, will satisfy the public interest without discouraging the aspiring professional practitioner. Today, 13 States require 4 years of college-level study. These are Arizona, California, Colorado, Connecticut, Florida, Hawaii, New Jersey, New Mexico, New York, Ohio, South Dakota, Utah, and West Virginia. In addition, 13 States have enacted laws that will require 4 years of college-level education after specified dates. These are Arkansas, Georgia, Idaho, Illinois, Massachusetts, Nevada, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, Wisconsin. I should like to call attention to the fact that Virginia, a neighboring State, is one of those States, and it revised its laws upward in July of 1964. Thus, as of today, 26 of the 50 States require or will soon require 4 years of college-level study-where the present District of Columbia law does not even firmly require a high school diploma. Four States now require 2 years of college-level study. These are Alaska, Iowa, Maryland, and North Carolina. In the 26 States that require 4 years of college-level study, all but 1 require in addition professional experience in the office of a CPA that ranges from 1 to 3 years-4 States require 3 years, 15 States require 2 years, 1 requires 11⁄2 years, and 6 States require 1 year. In addition to the 26 States just referred to, 4 States now require 2 years of college-level study. They are Alaska, Iowa, Maryland, a neighboring State, and North Carolina. We live in a period of rapid transition in this area. Legislation to raise these professional standards is being introduced and passed in State after State. Now is the time for the District of Columbia to act. If we wait only a few years longer the standards of the District will be so much lower than those in the great majority of the States that the public interest will suffer and the CPA's of the District will be discriminated against. 2. Registration through reciprocity: It is a striking fact that most of the CPA's in the District of Columbia, even at the time that they sit for their examinations, have completed more years of education and professional experience than the existing law requires. This does not mean, however, that the lower standards of the existing lav are creating no problems. One major problem created by this legislative lag is the fact tha CPA's who have been certified by the District of Columbia some times find it difficult to obtain reciprocity registration in other States because nearly all the State laws permit reciprocity registration o persons certified in their home States only when the statutory require ments of the two States are "equivalent." As a matter of cold fact, if the boards of accountancy in the variou States were today strictly interpreting the statutes they administer District CPA's would be unable, as of now, to obtain reciprocity certification in at least 30 States. Almost by tacit consent, most of the boards of accountancy hav been tolerant of technical deficiencies in eligibility. They have looke to the qualifications possessed by the individual applicant rather tha to those required by the law of his State or jurisdiction. But th boards of accountancy are only giving the States time to raise thei standards. If our present law is not amended, now or in the ver near future, even the best educated and best trained men among th District CPA's will find it increasingly difficult, and sometime impossible, to obtain reciprocity registration. 3. The District as a haven: The Board of Accountancy of th District has informed us that some 45 percent of the persons who tak the CPA examination in the District come from other States, and ar neither resident nor employed in the District of Columbia. Man men who are not able to satisfy the requirements of their own Stat now take the examination in the District because of our lower require ments. We do not believe that the Congress wants the District t continue to serve as an instrument for circumventing the legislativ standards and requirements of the majority of the States. When a nonresident becomes thus certified in the District, he ma then be able to use the District certificate to apply for reciprocit certification in other States. This, too, is an undesirable practic that the present bill would terminate. Section 6 of the bill woul require that the applicant shall actually and continuously hav resided or been regularly employed in the District for not less tha 1 year immediately prior to filing his application. 4. The registration requirements: Sections 9 and 10 of the hi provide for biennial registration by all CPA's and by all CPA partner ships, which maintain an office in the District. In the case of part nerships, each partner will be required to have been certified eithe in the District or in some State, and at least one partner or the residen manager will need to be a CPA of the District. With such registra tion, we shall be able to know for the first time, on a regular curren basis, the number and names of those who are eligible to practice a CPA's in the District of Columbia, and of those who are so practicing 5. Summary: The proposed legislation will protect the public inter est by increasing the educational and experience requirements fo CPA's in the District of Columbia to reasonable levels; it will mak it easier for CPA's of the District to obtain reciprocity registration in other States; it will prevent the District from being used as a instrument for evading the legislative standards of the States; and it will simplify the work of the Board of Accountancy by providing for registration of all CPA's practicing in the District. Mr. ABERNETHY. Thank you very much, gentlemen. Are there any questions by members of the committee? (No response.) Mr. ABERNETHY. Gentlemen, I think you have given us a very good summary of this legislation. We appreciate your appearance. You may retire from the table, and the next witness will be Dr. Herbert. Prior to the testimony of Dr. Herbert, I would like to insert in the record a letter from the Comptroller General of the United States, wherein he states that his office is in general agreement with H.R. 7624 and recommends its enactment. (The letter follows:) COMPTROLLER GENERAL OF THE UNITED STATES, Hon. JOHN L. MCMILLAN, Chairman, Committee on the District of Columbia, House of Representatives. DEAR MR. CHAIRMAN: Your letter of May 12, 1965, requests our comments on H.R. 7624. This measure would provide for the regulation of the professional practice of certified public accountants in the District of Columbia and repeal the existing law on the subject which was approved February 17, 1923 (Public No. 427, 42 Stat. 1261). While the present law vests complete authority in the Board of Accountancy, H.R. 7624 would vest the authority in the Commissioners of the District of Columbia, who under section 4 of the bill, would be authorized to establish a Board of Accountancy composed of three certified public accountants of the District of Columbia, to serve as their agent, and to delegate to such Board of Accountancy any of the technical and professional functions vested in the Commissioners by the proposed legislation. We are primarily concerned with subsection 7(c) of the bill since it is only under the provisions of this subsection that the experience of the accountants and auditors of the General Accounting Office can qualify as the experience required for the issuance of a certificate of certified public accountant in the District of Columiba. We feel very strongly that the experience of accountants and auditors in our employ is fully comparable to experience obtained in the employ of a certified public accountant. While subsection 7(c) specifically provides that it shall not be interpreted as precluding consideration of Government experience, we are of the opinion that because of the importance of the work of our accountants and auditors to the Congress, to its committees, and to individual Members of Congress, the experience obtained while employed by the General Accounting Office should be specifically recognized in the bill as qualifying for the CPA certificate. As you know, the Comptroller General is required by law to make independent examinations in behalf of the Congress of the manner in which Government agencies discharge their financial responsibilities with regard to public funds appropriated or otherwise made available to them by the Congress, and to make recommendations looking to greater economy and efficiency in public expenditures. The financial responsibilities of Government agencies are construed as including the expenditure of funds and the utilization of property and personnel only for authorized programs or activities and the conduct of programs or activities in an effective, efficient, and economical manner. The comptroller General also audits Government corporations in accordance with the principles and procedures applicable to commercial corporate transactions and under such rules and regulations as he may prescribe. He also makes such investigations and reports as shall be ordered by either House of Congress or any committee of either House having jurisdiction over revenues, appropriations or at the request of any committee to direct assistance by the General Accounting Office to furnish the committee with any information they request. In addition to auditing Government agencies, the General Accounting Office audits the records of contractors who have been awarded Government contracts by negotiation as opposed to formal advertising. In these audits, a review is made of the manner in which the contracting agency and the contractor have discharged their responsibilities to the Government. Maximum use is made by the General Accounting Office of the audits performed by the contracting agency's internal audit group. The Comptroller General also prescribes the principles, standards, and related requirements of accounting to be observed by the executive agencies. The demonstrated professional quality of the work of the General Accounting Office staff is the basis for the acceptance of that work by the Congress, its committees, and its Members. We believe that recognition of that work is essential to maintaining the quality and high level of performance required to discharge the accounting and auditing responsibilities of our Office. One indication of the need for recognizing the work of the General Accounting Office is that frequently we are requested to assign staff members to assist committees in their work, which staff members, at the insistence of the committees, are often times required to be certified public accountants. The Congress, when creating the General Accounting Office and designating its responsibilities, assured its independence and freedom of action by making it a part of the legislative branch and requiring it to report and be responsible to the Congress. Also, the Comptroller General and the General Accounting Office. under the responsibilities assigned by the Congress, are the principal advisors of the Congress on accounting and auditing matters. To adequately discharge these tremendously important responsibilities requires a staff of highly competent professional accountants and auditors who are capable of dealing with an almost limitless range of accounting and auditing problems. This high degree of professional competence is particularly required in Washington where our day-to-day contacts with Members of the Congress and committee staff members usually occur. In view of the foregoing, the experience of our staff members should be recog nized by various jurisdictions as qualifying for the CPA certificate. We feel strongly that this recognition is especially important in the District of Columbia in which our headquarters office is located and to which about 35 percent of our professional accounting and auditing staff is assigned. At the present ime, the laws of 35 jurisdictions allow our professional staff members to obtain the CPA certificate either through experience, education, on a combination of education and experience. However, the present law of the District of Columbia does not. To make the current bill more specific as to recognizing experience of General Accounting Office accountants and auditors for the CPA certificate of the District of Columbia, we recommend that substantially the following language be added to H.R. 7624 on page 8, line 16; page 9. line 18; page 10, line 18; and page 11, line 17: "*** or in the full-time employment as an accountant or auditor of the U.S. General Accounting Office". Subsection 7(c) also refers to experience in auditing the books and accounts of other persons in three or more distinct lines of commercial business in accordance with generally accepted auditing standards. To remove any doubt that the term "commercial business" includes governmental activities, we recommend that the term "commercial or governmental activities" be substituted therefor or that the committee report on the bill specifically state that the term "commercial business" is intended to include governmental activities. We agree that an individual should have experience in at least three distinct organizational units in order for his experience to be qualifying for the certificate. An organizational unit can be defined as a subordinate organization within an agency, a corporation or department of the Government or an independent private contractor who performs work for the governmental unit. As illustrative of the above, in the Department of Agriculture, there are such organizational units as the Agricultural Stabilization and Conservation Service, the Forest Service, and the Rural Electrification Administration. In the housing area are such units as the Federal National Mortgage Association, the Public Housing Administration. the Federal Housing Administration, the Urban Renewal Administration, and the Community Facilities Administration. In the Department of Defense, there are, in addition to the many units and various activities in the Army, the Navy and the Air Force, several within the Department of Defense itself such as the Defense Supply Agency, the Defense Atomic Support Agency, and the Defense Communications Agency. In addition to the many agencies within the Department of Defense, there are also many related industrial activities such as arsenals, Government manufacturing establishments, and the work done by private corporations under defense contracts. It is a well-established principle that ultimate responsibility should be placed in the head of an organization with a clear and direct line of responsibility, command, and supervision down through the heads of the suborganizational units to every employee. This principle was recognized in the report to the Congress entitled "General Management of the Executive Branch" of the Commission on Or |