2018-0332, Ron L. Beaulieu & Company v. New Hampshire Board of Accountancy

from 2008 - 2011. We affirm. conduct auditing services for Tri - County Community Action Program (TCCAP) to retain work papers an d records for five years and by failing to properly after concluding that the plaintiff committed professional misconduct by failing to do business in New Hampshire for three years and imposed a $5,000 fine Hampshire Board of Accountancy. The Board suspended the plaintiff ’s license a n order by the Superior Court (Kissinger, J.) affirming an order of the New HANTZ MARCONI, J. The plaintiff, Ron L. Beaulieu & Company, appeals

attorney general, on the brief and orally), for the defendant. Gordon J. MacDonald, attorney general (Seth M. Zoracki, assistant

orally), for the plaintiff. Vanacore Law Office, of Concord (John G. Vanacore on the brief and

No. 2018 - 0332 Merrimack

http://www.courts.state.nh.us/supreme. release. The direct address of the court’ s home page is: Opinions are available on the Internet by 9:00 a.m. on the morning of their reported by e - mail at the following address: reporter@courts.state.nh. us. corrections may be made before the opinion goes to pre ss. Errors may be Doe Drive, Concor d, New Hampshire 03301, of any editorial errors in order that requested to notify the Reporter, Supreme Court of New Hampshire, One Charles as formal revision before publication in the New Hampshire Reports. Readers are NOTICE: This opinion is subject to motions for rehearing under Rule p. 2 22 as well 2

findings. . . . However, [Beaulieu] did not even ensure that the required work limited to his work file, that recorded his notes documenting the basis for his he should have ensured that no records were destroyed, including bu t not received notice in January p. 2 2013 that TCCAP may file a claim, “at a minimum, such records for a longer period.”). The B oard reasoned that after Beaulieu minimum of 5 years after creation unless the C P A is required by law to retain created in the performance of an engagement for a client are retained for a Ac 404.03(g) (“A CPA shall ensure that the work product and the work p apers for a five - year period constituted professional misconduct. See N.H. Admin. R., papers and/or all records of [its] work file for all audits conducted of TCCAP” TCCAP for a minimum of five years, and, therefore, its failure to “retain work Ac 404.03(g) required the plaintiff to keep all records related to the aud it s of B oard unanimously concluded that New Hampshire Administrative Rule, In July 2017, the Board issued its Final Decision and Order. In it, the

Chair stated the Board would give “weight to them as [it] deem[ed] appropriate.” exhibits, including the R eport, were admitted into evidence, and the Board therefore recused from deliberating with the B oard, testified. A number of Musgrave, a member of the Board who assisted with the investigation and was I ( p. 2 2015), and held a hearing in April 2017 at which Beaulieu and Thomas was probable cause to commence a disciplinary proceeding, see RSA 309 - B:12, services for TCCAP. S ee RSA 309 - B:11, I (2015). The Board found that there aware of allegations that the plaintiff had failed to properly conduct auditing T he Board of Accountancy initiated an investigation after it became

improper accounting procedu res.” reports” and failure “to detect or report internal control weaknesses and TCCAP’s financial failure, including the plaintiff ’s “incomplete and inaccurate issued a report (Report) revealing that a number of factors contributed to for TCCAP.” I n July p. 2 2015, following the investigation, the Attorney General potential claims from TCCAP based upon the audits and services [it] performed General advising it to “immediately place [its] insurance carriers on notice of appointed by the Probate Court at the behest of the New Hampshire Attorney January 2013, the plaintiff received a letter from a Special Trustee for TCCAP financial problems at TCCAP and subsequently initiated an investigation. In In December 2012, the Attorney General received notice of serious

as of June p. 3 30. year the plaintiff performed financial statement audits and compliance audits Beaulieu to provide auditing services for the agency from p. 2 2008 to 2011. Each Charitable Trusts Unit (CTU) of the Attorney General’s Office. TCCAP retained New Hampshire voluntary corporation registered as a charity with the Company, which is licensed to do business in New Hampshire. TCCAP is a certified public accountant (CPA) in Maine who owns Ron L. Beaulieu & The trial court recited the following facts. Ron Beaulieu is a licensed 3

of TCCAP constituted professional misconduct because the Board had to court lacked “substantial evidence” demonstrating that the 2008 - 2011 audits therefore exceeds the Board’s rulemaking authority. It also contends that the auditor work papers, the rule is unlawful because it adds to the statute and Work Papers.” Alternatively, it asserts that if Ac 404.0 p. 3 3(g) does apply to five years but do not “define a retention period for auditor s ’ proprietary Audit Ac 404.03(g), when properly interpreted, require retention of client records for On appeal, the plaintiff argues that RSA 309 - B:19 (2015) and

followed. those portions of the Board’s order at issue in this appeal and this appeal proving that it had not engaged in professional misco nduct. The court affirmed unlawful, and that the Board unlawfully shifted to the plaintiff the burden of conclusions regarding the quality of its audit work were unreasonable or statutes and administrative r ules related to record retention, that the Board’s argued, among other things, that the Board misinterpreted the relevant hearing to appeal by filing a written petition with the superior court). I t (allowing a person or firm adversely affected by a Board order entered after a The plaintiff appeal ed to the superior c ourt. See RSA p. 3 309 - B:12, X (2015)

charges of misconduct. subsequently denied the plaintiff ’s motion s to reconsider, stay, and dismiss including a three - year license suspension and a $5,000 fine. The Board accounting procedures. T he Board unanimously voted to impose sanctions otherwise failed to detect certain issues with TCCAP’s internal controls and indicated that the plaintiff prepared incomplete and inaccurate reports and referred to a statement in the Report about TCCAP’s financial failure which that TCCAP was low risk for those years was inaccurate.” Finally, the Board of internal controls of the agency,” and th erefore the plaintiff ’s “audit finding than twenty “material weaknesses specifically related to the findings of systems the hearing. The Board also noted that the subsequent auditor identified more Beaulieu was “unable to ex plain” these “unfavorable periods of adjustments” at including [an] overstatement of cash of $460,000.00.” The Board stated that $516,000.00 of unfavorable prior period adjustment [s] for the FY 2012 audit, audit “misstated the financial condition of [TCCAP] resulting in over a disclosure was a mistake. The Board also found that the plaintiff ’s 2011 adjustment, and that Beaulieu agreed at the hearing that the failure to include plaintiff ’s 2008 aud it did not disclose the reason for a $ 1.6 million prior period TCCAP for fiscal years 2008 through 2011.” The Board noted that the professional misconduct in failing to properly conduct auditing services for violation of. . . RSA p. 3 309 - B:10, I - a(e) and/or (j) in that he committed The Board also unanimously concluded that the plaintiff “was in

was applicable under federal law] as he himself conceded.” file [was retained] for three years [the time period he told the Board he thought p. 4 4

applies solely to client records and not audit work papers. Although the rule refutes the plaintiff ’s argument that the five - year retention period therein Ac p. 4 404.03 is titled “Retention of Client Records,” the plain text of the rule regarding the applicable retention period for auditing work papers. Although W ith these principles in mind, w e first consider the plaintiff ’s arguments

N.H. p. 4 490, 493 (2018). see fit to include. See Appeal of New England Police Benevolent Ass’n, 171 enacting body might have said or add language that the enacting body did not intent from the statute or rule as written and will not consider what the ascribe the plain a nd ordinary meaning to the wor d s used. Id. We interpret 92 (2016). In construing rules, as in construing statutes, where possible we statu t es and administrative rules. Bach v. N.H. Dep’t of Safety, 169 N.H. 87, We use the same principles of construction when interpreting both

N.H. p. 4 403, 412 (2018). of both statutes and administrative rules de novo. See Appeal of Cole, 171 review of planning board decision). At the same time, we review interpretations Hebron, 162 N.H. 488, 491 (2011) (applying standard in appeal of trial court court review of zoning board decision); Ltd. Editions Properties v. Town of Tuftonboro, 171 N.H. 614, 618 (2019) (applying standard in appeal of trial unsupported by the evidence or is legally erroneous. See Dietz v. Town of administrative board, we will uphold the superior court’s decision unless it is other cases where the superior court has deferentially reviewed a decision of an reviewing appeals of the superior court’s decision. Therefore, as we have in RSA 309 - B:12, X does not specify a standard for us t o apply when

record. Appeal of Dell, 1 p. 4 40 N.H. 484, 498 (1995). determine whether the findings were supported by competent evidence in the would have found differently or to reweigh the evidence, but rather to 541:13 (2007). The superior court’s task was not to determine wheth er it aside its decision absent unreasonableness or an identified error of law. RSA findings of the Board as prima facie lawful and reasonable and could not set exercise its right to order a trial de novo — was obligated to treat the factual 541.” RSA 309 - B:12, X. Therefore, the superior court — having chosen not to brought under the statute “pursuant to the proc edures and standards of RSA RSA 309 - B:12, X specifies that the superior court reviews an appeal

matter of law because it improperly shifted the burden of proof. by [the plaintiff] to rebut [evidence of professional misconduct],” erred as a the Boa rd, in stating that “[t]here was insufficient evidence, if any, submitted conclusion that it committed professional misconduct. It further asserts that evidence. The plaintiff contends that no other evidence supports the upon conclusions in the Report which, it asserts, was not admitted into identify “facts which constitute professional mis conduct,” and not just rely p. 5 5

administration and enforcement of” RSA chap ter 309 - B. RSA 309 - B:4, I The legislature charged the Board with the “responsibility for the

the practice of public accounting, see RSA 309 - B:14 (Supp. 2018). licensees, see, e.g., RSA 309 - B: p. 5 5 (2015), and lists unlawful acts pertaining to N.H. at 474. For example, the Act sets forth required qualifications for profession, including public accountants, CPAs, and CPA firms. Mays, 161 accounting and comprises a certification or licensing system for that RSA 309 - B:2 (2015). The Act as a whole re gulates the practice of public performance of commercial, non - commercial, and governmental enterprises.” financial transactions or for accounting for or assessing the financial status or is “to promote the reliability of information that is used for guidance in The stated purpose of the Accountancy Act of 1999, RSA chapter 309 - B,

Board’ s statutorily prescribed authority. Id. at 473 - 74. statute at issue, RSA 309 - B: 19, in the context of other statutes relevant to the Accountancy Act of 1999. Id. In so doing, we revie w the plain language o f the making power granted by the legislature to the Board, and the purpose of the Board’s rule - making authority, we first look to the intended scope of the rule - Id. To discern whether Ac 404.03(g) constitutes a proper exercise of the add to, detract from, or modify the statute that they are intended to implement. effectuate the purpose of the statute. Id. Thus, administrative rules may not regulations is d esigned to permit the B oard only to fill in the details to Mays, 161 N.H. 470, 473 (2011). The authority to promulgate rules and promulgate rules necessary for the proper execution of the laws. Appeal of settled that the legislature may delegate to administrative agencies the power to it impermissibly adds to the statute it was intended to implement. It is well The plaintiff next argues that if the rule applies to licensee work papers,

not see fit to include. See Police Benevolent Ass’n, 171 N.H. at 493. plaintiff’s interpretation add s language to the rule that the enacting body did client records but not work papers other than a client’s records because the the plaintiff’s contention that the rule’s five - year retention period applies to . . ..” N.H. Admin. R., Ac. 404.03(g) (emphasis added). Accordingly, we reject engagement for a client are retained for a minimum of p. 5 5 years after creation that the work product and the work papers created in the performance of an whether those work papers are part of a client ’s record s: “A CPA shall ensure establishes a five - year retention period for “work papers,” without reference to work papers and shall not be the prope rty of the client.”). The rule then the records ordinarily maintained by such clients, shall be solely the CPA’s not result in changes to the client’s records, or are not in themselves part of N.H. Admin. R., Ac 404.03 (f) (“W ork papers developed by the CPA. . . which do considered part of the client’s records shall include but not be limited to . . . .”); of the client’s records. See N.H. Admin. R., Ac. 404.03 (e) (“Work papers does not define “work papers,” it recognizes that not all “work papers” are part p. 6 6

also on Mr. Beaulieu’s own testimony at the hearing.” The court observed that not only on the Report produced following the investigation [of TCCAP], but finding of professional misconduct,” and further noted that “the Board relied that the Board “describe[d] in detail the facts relied upon in support of its mi sconduct by failing to properly conduct auditing services.” T he court noted or unlawful for the Board to find that the plaintiff committed professional court concluded that the plaintiff had “failed to establish [] it was unreasonable supported by competent evidence in the record. Dell, 140 N.H. at 498. The reasonable,” RSA 541:13, and then determine whether those findings were decision, had to accept the Board’s factual findings as “prima facie lawful and constituted professional misconduct. The trial court, in reviewing the Board’s conclusion that Beaulieu’s auditin g work for TCCAP from 2008 through 2011 We next consider whether the court erred in affirming the Board’s

I - a(g) and/or (j) and Ac 404.03(g). conducted of TCCAP,” for a period of five years in violation of RSA 309 - B:10, to retain work papers and/or all records of his work file for all audits the conclusion that the plaintiff committed professional misconduct by “failing of its work files for even three years. Accordingly, we find no basis to reverse 404.03(g). However Beaulieu conceded that the firm did not ensure retention retained for a minimum of 5 years after creation.” N.H. Admin. R., Ac the work papers created in the performance of an engagement for a client are Ac 404.03(g) required the plaintiff to “ensure that the work product and

N.H. at 47 5. broad authority to promulgate such rules. RSA 309 - B: 4, VIII(k); Mays, 1 p. 6 61 the five - year record ret ention requirement in Ac 404.03(g) exceeds the Board’s details of applicable statute). In light of the foregoing, we cannot conclude that use of “open - ended language” in delegating authority to the Board to fill in Board to “fill in the details.” Mays, 161 N.H. at 475 (highlighting legislature’s retention requirement entirely to the Board and left significant room for the retention,” RSA 309 - B:4, VIII(k), the legislature left the creation of a record to the Board the responsibility and authority to adopt “[r]ules for records a durational requirement for records retention, while simultaneously delegating a requirement on licensees. See RSA 309 - B:19, III. By choosing not to specify requirement but acknowledges that other applicable statutes may impose such authority, we note that RSA chapter 309 - B does not specify a record retention In analyzing whether Ac 404.03(g) is within the lawful bounds of that

authority to “fill in the details” with respect to records retention requirements. records retention.” RSA 309 - B:4, VIII(k). Thus, the Act gives the Board specific areas in which the Board is to adopt rules, including “[r]ules for conduct of li censees.” RSA 309 - B:4, VIII (201 5). The Act identifies numerous Board’ s] administration, the enforcement of [RSA chapter 309 - B] and the (201 5). T he legislature also required the Board to adopt rules “governing [the p. 7 7

because the plaintiff did not raise them before the Board in its motion for Any remaining arguments raised by the plaintiff are either not preserved,

Committee v. Lisbon Ed. Ass'n, 438 A.2d 239, 243 (Me. 1981). demonstrated that it engaged in professional misconduct. See Lisbon School for the Board to note that the plaintiff had not rebut ted the evidence which evidence and witnesses on the licensee’s behalf. T herefore, it was not improper noted, RSA 309 - B:12, III (2015) expressl y permits a licensee to present unlawfully shifted the burden of proof. However, a s the trial court correctly plaintiff] to rebut [evidence of professional misconduct],” that the Board that states that “[t]here was insufficient evidence, if any, submitted by [the Finally, the plaintiff argues, based on the portion of the Board’s order

its audit of TCCAP. finding that the plaintiff committed professional misconduct in connection with files. Therefore, we conclude competent evidence in the record support s the not keep records of when it deleted files and that it had no system to back up individual adjustment - by - adjustment basis.” H e also testified that his firm did reason for the adjustment because he had not “looked at those on an accuracy of the numbers in his audit, but that he had “no idea” as to the plaintiff ’s 2011 audit of TCCAP, Beaulieu testified that he stood by the unfavorable prior period adjustment that the 2012 auditor made to the an “additional disclosure in the notes.” With regard to the $516,000 conceded it was a “mistake on my part” to not have require d TCCAP to provide for the $ 1.6 million prior period adjustment from the 2008 TCCAP audit and professional misconduct. Beaulieu testified that he could not recall the reason testimony in addition to the Report in concluding the plaintiff had committed admissibility of evidence). Moreover, the Board relied on Beaulieu’s own (2011) (administrative agencies have broad discretion in determining the shall be excluded.”); Ruel v. N.H. Real Estate Appraiser Bd., 163 N.H. 34, 45 admissible, except that irrelevant, immaterial, or unduly repetitious evidence data that will reasonably assist the board arrive at the truth shall be bound by the technical rules of ev idence.”); N.H. Admin. R., Ac 210.04(b) (“All 309 - B:12, VI (2015) (“In a hearing under this section, the board shall not be into evidence at the hearing, and that it had the authority to do so. S ee RSA T he trial court correctly noted that the Board admitted the entire Report

warrant a finding of professional misconduct.” We disagree. excluded from evidence, were sufficient, despite the lack of supporting facts, to rep eated the Board’s rationale that the Report’s conclusions, which had been The plaintiff argues that the superior court erred because it “merely

Bloomfield, 166 N.H. 4 p. 7 75, 4 p. 8 81 - 82 (2014). unprofessional conduct within their profession. See In the Matter of I(a), and that professionals are expected to recognize conduct constituting five of the seven members of the Board hold CPA certificates, see RSA 309 - B:4, 8

LYNN, C.J.