On Wednesday, January 23, 2013 the California Tax Credit Allocation Committee (TCAC) adopted
2013 regulation changes as recommended by TCAC staff in its January 10 Final Statement of Reasons (see http://www.treasurer.ca.gov/ctcac/programreg/20130103_notice.pdf). However, after a lengthy public discussion, including public comments at the January 23 meeting, the Committee voted to include a provision that was not part of staff’s January 10 recommendations. This memorandum is alerting you to that provision.
In its October 24, 2012 Initial Statement of Reasons, TCAC staff had proposed a provision in Section 10322(i)(2)(B) that placed-in-service packages contain a final cost certification from a Certified Public Accountant (CPA), and that:
The Certified Public Accountant or accounting firm shall not have acted in an advisory or consulting capacity as a project participant under Section 10322(h)(5).
After taking public testimony and receiving written public comments, TCAC staff withdrew this language from its proposed regulation changes and instead (a) inserted the word “independent” in referring to CPAs, and (b) recommended a requirement that final cost certifications be accompanied by the certifying CPA’s most recent peer review. Proposed regulation language established the right for TCAC to require another CPA to conduct the final cost certification in the event the peer review identified weaknesses in the initial CPA’s auditing practices or systems.
On January 23 the Committee voted to accept TCAC staff’s final recommended changes summarized above. But, they additionally adopted the original proposed language quoted above prohibiting advising CPAs from certifying to final costs. Committee members were unanimously concerned with potential conflicts of interest, or perceived conflicts of interest in documenting final project costs. However, in order to give project sponsors time to adjust to the new requirement quoted above, the Committee voted to make the provision quoted above effective July 1, 2013 (see page 20 at: http://www.treasurer.ca.gov/ctcac/programreg/20130123_regulations.pdf).
The Committee heard concerns that the prohibition quoted above may be overly broad, and allowed TCAC staff to work with stakeholders to propose a clarifying change if appropriate. Staff intends to meet with developers and CPAs to determine if any clarifying language is appropriate. Any additional language would be publicized in a new regulation change proposal, ideally before the July 1 effective date of the provision quoted above.