Ron L. Beaulieu & Company v. New Hampshire Board of Accountancy

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Merrimack
No. 2018-0332
RON L. BEAULIEU & COMPANY
v.
NEW HAMPSHIRE BOARD OF ACCOUNTANCY
Argued: April 18, 2019
Opinion Issued: June 25, 2019
Vanacore Law Office, of Concord (John G. Vanacore on the brief and
orally), for the plaintiff.
Gordon J. MacDonald, attorney general (Seth M. Zoracki, assistant
attorney general, on the brief and orally), for the defendant.
HANTZ MARCONI, J. The plaintiff, Ron L. Beaulieu & Company, appeals
an order by the Superior Court (Kissinger, J.) affirming an order of the New
Hampshire Board of Accountancy. The Board suspended the plaintiff’s license
to do business in New Hampshire for three years and imposed a $5,000 fine
after concluding that the plaintiff committed professional misconduct by failing
to retain work papers and records for five years and by failing to properly
conduct auditing services for Tri-County Community Action Program (TCCAP)
from 2008-2011. We affirm.
The trial court recited the following facts. Ron Beaulieu is a licensed
certified public accountant (CPA) in Maine who owns Ron L. Beaulieu &
Company, which is licensed to do business in New Hampshire. TCCAP is a
New Hampshire voluntary corporation registered as a charity with the
Charitable Trusts Unit (CTU) of the Attorney General’s Office. TCCAP retained
Beaulieu to provide auditing services for the agency from 2008 to 2011. Each
year the plaintiff performed financial statement audits and compliance audits
as of June 30.
In December 2012, the Attorney General received notice of serious
financial problems at TCCAP and subsequently initiated an investigation. In
January 2013, the plaintiff received a letter from a Special Trustee for TCCAP
appointed by the Probate Court at the behest of the New Hampshire Attorney
General advising it to “immediately place [its] insurance carriers on notice of
potential claims from TCCAP based upon the audits and services [it] performed
for TCCAP.” In July 2015, following the investigation, the Attorney General
issued a report (Report) revealing that a number of factors contributed to
TCCAP’s financial failure, including the plaintiff’s “incomplete and inaccurate
reports” and failure “to detect or report internal control weaknesses and
improper accounting procedures.”
The Board of Accountancy initiated an investigation after it became
aware of allegations that the plaintiff had failed to properly conduct auditing
services for TCCAP. See RSA 309-B:11, I (2015). The Board found that there
was probable cause to commence a disciplinary proceeding, see RSA 309-B:12,
I (2015), and held a hearing in April 2017 at which Beaulieu and Thomas
Musgrave, a member of the Board who assisted with the investigation and was
therefore recused from deliberating with the Board, testified. A number of
exhibits, including the Report, were admitted into evidence, and the Board
Chair stated the Board would give “weight to them as [it] deem[ed] appropriate.”
In July 2017, the Board issued its Final Decision and Order. In it, the
Board unanimously concluded that New Hampshire Administrative Rule,
Ac 404.03(g) required the plaintiff to keep all records related to the audits of
TCCAP for a minimum of five years, and, therefore, its failure to “retain work
papers and/or all records of [its] work file for all audits conducted of TCCAP”
for a five-year period constituted professional misconduct. See N.H. Admin. R.,
Ac 404.03(g) (“A CPA shall ensure that the work product and the work papers
created in the performance of an engagement for a client are retained for a
minimum of 5 years after creation unless the CPA is required by law to retain
such records for a longer period.”). The Board reasoned that after Beaulieu
received notice in January 2013 that TCCAP may file a claim, “at a minimum,
he should have ensured that no records were destroyed, including but not
limited to his work file, that recorded his notes documenting the basis for his
findings. . . . However, [Beaulieu] did not even ensure that the required work
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file [was retained] for three years [the time period he told the Board he thought
was applicable under federal law] as he himself conceded.”
The Board also unanimously concluded that the plaintiff “was in
violation of . . . RSA 309-B:10, I-a(e) and/or (j) in that he committed
professional misconduct in failing to properly conduct auditing services for
TCCAP for fiscal years 2008 through 2011.” The Board noted that the
plaintiff’s 2008 audit did not disclose the reason for a $1.6 million prior period
adjustment, and that Beaulieu agreed at the hearing that the failure to include
a disclosure was a mistake. The Board also found that the plaintiff’s 2011
audit “misstated the financial condition of [TCCAP] resulting in over
$516,000.00 of unfavorable prior period adjustment[s] for the FY 2012 audit,
including [an] overstatement of cash of $460,000.00.” The Board stated that
Beaulieu was “unable to explain” these “unfavorable periods of adjustments” at
the hearing. The Board also noted that the subsequent auditor identified more
than twenty “material weaknesses specifically related to the findings of systems
of internal controls of the agency,” and therefore the plaintiff’s “audit finding
that TCCAP was low risk for those years was inaccurate.” Finally, the Board
referred to a statement in the Report about TCCAP’s financial failure which
indicated that the plaintiff prepared incomplete and inaccurate reports and
otherwise failed to detect certain issues with TCCAP’s internal controls and
accounting procedures. The Board unanimously voted to impose sanctions
including a three-year license suspension and a $5,000 fine. The Board
subsequently denied the plaintiff’s motions to reconsider, stay, and dismiss
charges of misconduct.
The plaintiff appealed to the superior court. See RSA 309-B:12, X (2015)
(allowing a person or firm adversely affected by a Board order entered after a
hearing to appeal by filing a written petition with the superior court). It
argued, among other things, that the Board misinterpreted the relevant
statutes and administrative rules related to record retention, that the Board’s
conclusions regarding the quality of its audit work were unreasonable or
unlawful, and that the Board unlawfully shifted to the plaintiff the burden of
proving that it had not engaged in professional misconduct. The court affirmed
those portions of the Board’s order at issue in this appeal and this appeal
followed.
On appeal, the plaintiff argues that RSA 309-B:19 (2015) and
Ac 404.03(g), when properly interpreted, require retention of client records for
five years but do not “define a retention period for auditors’ proprietary Audit
Work Papers.” Alternatively, it asserts that if Ac 404.03(g) does apply to
auditor work papers, the rule is unlawful because it adds to the statute and
therefore exceeds the Board’s rulemaking authority. It also contends that the
court lacked “substantial evidence” demonstrating that the 2008-2011 audits
of TCCAP constituted professional misconduct because the Board had to
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identify “facts which constitute professional misconduct,” and not just rely
upon conclusions in the Report which, it asserts, was not admitted into
evidence. The plaintiff contends that no other evidence supports the
conclusion that it committed professional misconduct. It further asserts that
the Board, in stating that “[t]here was insufficient evidence, if any, submitted
by [the plaintiff] to rebut [evidence of professional misconduct],” erred as a
matter of law because it improperly shifted the burden of proof.
RSA 309-B:12, X specifies that the superior court reviews an appeal
brought under the statute “pursuant to the procedures and standards of RSA
541.” RSA 309-B:12, X. Therefore, the superior court — having chosen not to
exercise its right to order a trial de novo — was obligated to treat the factual
findings of the Board as prima facie lawful and reasonable and could not set
aside its decision absent unreasonableness or an identified error of law. RSA
541:13 (2007). The superior court’s task was not to determine whether it
would have found differently or to reweigh the evidence, but rather to
determine whether the findings were supported by competent evidence in the
record. Appeal of Dell, 140 N.H. 484, 498 (1995).
RSA 309-B:12, X does not specify a standard for us to apply when
reviewing appeals of the superior court’s decision. Therefore, as we have in
other cases where the superior court has deferentially reviewed a decision of an
administrative board, we will uphold the superior court’s decision unless it is
unsupported by the evidence or is legally erroneous. See Dietz v. Town of
Tuftonboro, 171 N.H. 614, 618 (2019) (applying standard in appeal of trial
court review of zoning board decision); Ltd. Editions Properties v. Town of
Hebron, 162 N.H. 488, 491 (2011) (applying standard in appeal of trial court
review of planning board decision). At the same time, we review interpretations
of both statutes and administrative rules de novo. See Appeal of Cole, 171
N.H. 403, 412 (2018).
We use the same principles of construction when interpreting both
statutes and administrative rules. Bach v. N.H. Dep’t of Safety, 169 N.H. 87,
92 (2016). In construing rules, as in construing statutes, where possible we
ascribe the plain and ordinary meaning to the words used. Id. We interpret
intent from the statute or rule as written and will not consider what the
enacting body might have said or add language that the enacting body did not
see fit to include. See Appeal of New England Police Benevolent Ass’n, 171
N.H. 490, 493 (2018).
With these principles in mind, we first consider the plaintiff’s arguments
regarding the applicable retention period for auditing work papers. Although
Ac 404.03 is titled “Retention of Client Records,” the plain text of the rule
refutes the plaintiff’s argument that the five-year retention period therein
applies solely to client records and not audit work papers. Although the rule
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does not define “work papers,” it recognizes that not all “work papers” are part
of the client’s records. See N.H. Admin. R., Ac. 404.03(e) (“Work papers
considered part of the client’s records shall include but not be limited to . . . .”);
N.H. Admin. R., Ac 404.03(f) (“Work papers developed by the CPA . . . which do
not result in changes to the client’s records, or are not in themselves part of
the records ordinarily maintained by such clients, shall be solely the CPA’s
work papers and shall not be the property of the client.”). The rule then
establishes a five-year retention period for “work papers,” without reference to
whether those work papers are part of a client’s records: “A CPA shall ensure
that the work product and the work papers created in the performance of an
engagement for a client are retained for a minimum of 5 years after creation
. . . .” N.H. Admin. R., Ac. 404.03(g) (emphasis added). Accordingly, we reject
the plaintiff’s contention that the rule’s five-year retention period applies to
client records but not work papers other than client’s records because the
plaintiff’s interpretation adds language to the rule that the enacting body did
not see fit to include. See Police Benevolent Ass’n, 171 N.H. at 493.
The plaintiff next argues that if the rule applies to licensee work papers,
it impermissibly adds to the statute it was intended to implement. It is well
settled that the legislature may delegate to administrative agencies the power to
promulgate rules necessary for the proper execution of the laws. Appeal of
Mays, 161 N.H. 470, 473 (2011). The authority to promulgate rules and
regulations is designed to permit the Board only to fill in the details to
effectuate the purpose of the statute. Id. Thus, administrative rules may not
add to, detract from, or modify the statute that they are intended to implement.
Id. To discern whether Ac 404.03(g) constitutes a proper exercise of the
Board’s rule-making authority, we first look to the intended scope of the rule-
making power granted by the legislature to the Board, and the purpose of the
Accountancy Act of 1999. Id. In so doing, we review the plain language of the
statute at issue, RSA 309-B:19, in the context of other statutes relevant to the
Board’s statutorily prescribed authority. Id. at 473-74.
The stated purpose of the Accountancy Act of 1999, RSA chapter 309-B,
is “to promote the reliability of information that is used for guidance in
financial transactions or for accounting for or assessing the financial status or
performance of commercial, non-commercial, and governmental enterprises.”
RSA 309-B:2 (2015). The Act as a whole regulates the practice of public
accounting and comprises a certification or licensing system for that
profession, including public accountants, CPAs, and CPA firms. Mays, 161
N.H. at 474. For example, the Act sets forth required qualifications for
licensees, see, e.g., RSA 309-B:5 (2015), and lists unlawful acts pertaining to
the practice of public accounting, see RSA 309-B:14 (Supp. 2018).
The legislature charged the Board with the “responsibility for the
administration and enforcement of” RSA chapter 309-B. RSA 309-B:4, I
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(2015). The legislature also required the Board to adopt rules “governing [the
Board’s] administration, the enforcement of [RSA chapter 309-B] and the
conduct of licensees.” RSA 309-B:4, VIII (2015). The Act identifies numerous
specific areas in which the Board is to adopt rules, including “[r]ules for
records retention.” RSA 309-B:4, VIII(k). Thus, the Act gives the Board
authority to “fill in the details” with respect to records retention requirements.
In analyzing whether Ac 404.03(g) is within the lawful bounds of that
authority, we note that RSA chapter 309-B does not specify a record retention
requirement but acknowledges that other applicable statutes may impose such
a requirement on licensees. See RSA 309-B:19, III. By choosing not to specify
a durational requirement for records retention, while simultaneously delegating
to the Board the responsibility and authority to adopt “[r]ules for records
retention,” RSA 309-B:4, VIII(k), the legislature left the creation of a record
retention requirement entirely to the Board and left significant room for the
Board to “fill in the details.” Mays, 161 N.H. at 475 (highlighting legislature’s
use of “open-ended language” in delegating authority to the Board to fill in
details of applicable statute). In light of the foregoing, we cannot conclude that
the five-year record retention requirement in Ac 404.03(g) exceeds the Board’s
broad authority to promulgate such rules. RSA 309-B:4, VIII(k); Mays, 161
N.H. at 475.
Ac 404.03(g) required the plaintiff to “ensure that the work product and
the work papers created in the performance of an engagement for a client are
retained for a minimum of 5 years after creation.” N.H. Admin. R., Ac
404.03(g). However Beaulieu conceded that the firm did not ensure retention
of its work files for even three years. Accordingly, we find no basis to reverse
the conclusion that the plaintiff committed professional misconduct by “failing
to retain work papers and/or all records of his work file for all audits
conducted of TCCAP,” for a period of five years in violation of RSA 309-B:10,
I-a(g) and/or (j) and Ac 404.03(g).
We next consider whether the court erred in affirming the Board’s
conclusion that Beaulieu’s auditing work for TCCAP from 2008 through 2011
constituted professional misconduct. The trial court, in reviewing the Board’s
decision, had to accept the Board’s factual findings as “prima facie lawful and
reasonable,” RSA 541:13, and then determine whether those findings were
supported by competent evidence in the record. Dell, 140 N.H. at 498. The
court concluded that the plaintiff had “failed to establish[] it was unreasonable
or unlawful for the Board to find that the plaintiff committed professional
misconduct by failing to properly conduct auditing services.” The court noted
that the Board “describe[d] in detail the facts relied upon in support of its
finding of professional misconduct,” and further noted that “the Board relied
not only on the Report produced following the investigation [of TCCAP], but
also on Mr. Beaulieu’s own testimony at the hearing.” The court observed that
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five of the seven members of the Board hold CPA certificates, see RSA 309-B:4,
I(a), and that professionals are expected to recognize conduct constituting
unprofessional conduct within their profession. See In the Matter of
Bloomfield, 166 N.H. 475, 481-82 (2014).
The plaintiff argues that the superior court erred because it “merely
repeated the Board’s rationale that the Report’s conclusions, which had been
excluded from evidence, were sufficient, despite the lack of supporting facts, to
warrant a finding of professional misconduct.” We disagree.
The trial court correctly noted that the Board admitted the entire Report
into evidence at the hearing, and that it had the authority to do so. See RSA
309-B:12, VI (2015) (“In a hearing under this section, the board shall not be
bound by the technical rules of evidence.”); N.H. Admin. R., Ac 210.04(b) (“All
data that will reasonably assist the board arrive at the truth shall be
admissible, except that irrelevant, immaterial, or unduly repetitious evidence
shall be excluded.”); Ruel v. N.H. Real Estate Appraiser Bd., 163 N.H. 34, 45
(2011) (administrative agencies have broad discretion in determining the
admissibility of evidence). Moreover, the Board relied on Beaulieu’s own
testimony in addition to the Report in concluding the plaintiff had committed
professional misconduct. Beaulieu testified that he could not recall the reason
for the $1.6 million prior period adjustment from the 2008 TCCAP audit and
conceded it was a “mistake on my part” to not have required TCCAP to provide
an “additional disclosure in the notes.” With regard to the $516,000
unfavorable prior period adjustment that the 2012 auditor made to the
plaintiff’s 2011 audit of TCCAP, Beaulieu testified that he stood by the
accuracy of the numbers in his audit, but that he had “no idea” as to the
reason for the adjustment because he had not “looked at those on an
individual adjustment-by-adjustment basis.” He also testified that his firm did
not keep records of when it deleted files and that it had no system to back up
files. Therefore, we conclude competent evidence in the record supports the
finding that the plaintiff committed professional misconduct in connection with
its audit of TCCAP.
Finally, the plaintiff argues, based on the portion of the Board’s order
that states that “[t]here was insufficient evidence, if any, submitted by [the
plaintiff] to rebut [evidence of professional misconduct],” that the Board
unlawfully shifted the burden of proof. However, as the trial court correctly
noted, RSA 309-B:12, III (2015) expressly permits a licensee to present
evidence and witnesses on the licensee’s behalf. Therefore, it was not improper
for the Board to note that the plaintiff had not rebutted the evidence which
demonstrated that it engaged in professional misconduct. See Lisbon School
Committee v. Lisbon Ed. Ass'n, 438 A.2d 239, 243 (Me. 1981).
Any remaining arguments raised by the plaintiff are either not preserved,
because the plaintiff did not raise them before the Board in its motion for
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reconsideration or otherwise, see RSA 541:3, :4 (2007); Appeal of Coffey, 144
N.H. 531, 533 (1999), or do not warrant further discussion, see Vogel v. Vogel,
137 N.H. 321, 322 (1993).
Affirmed.
LYNN, C.J., and HICKS and DONOVAN, JJ., concurred.
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