Part I: Melancon answers institute's critics

This is the first in a series that examines the state of the American Institute of CPAs, its successes and failures, its reaction to an increasing number of dissident factions demanding changes in leadership and direction, and where the organization is headed in a landmark year of legislation and oversight.

by Tracey Miller-Segarra

New York - When asked whether the American Institute of CPAs is run by the Big Four, or is held captive to their interests, president and chief executive Barry Melancon responded with a resounding, “No.”

“That perception just doesn’t hold up in reality,” Melancon said during an exclusive interview with Accounting Today.

While Melancon acknowledged that the diversity of the AICPA’s members sometimes makes it difficult to set an agenda that pleases everyone, he said the oft-repeated criticism that the Big Four firms are running the institute is not accurate. He noted that only two of the 23 board members hail from Big Four accounting firms, and that only four of the 15 heads of technical committees come from the largest firms.

“Influence can be delivered in a variety of different ways. People who are articulate, who are armed with facts, and are more active can exert greater influence than someone who is more passive. Influence is a measure of individual action.”

2003 could prove to be a watershed year for the AICPA. Roiled by two years of accounting-related scandals mainly involving the profession’s largest firms, rocked by internal discord, and bracing for the impact of the new Public Company Accounting Oversight Board, it’s clearly an organization at a crossroads.

In this, the first of a series of stories examining the institute, Melancon stated his commitment to serving all of the group’s members and said he’s confident that he’s the captain to steer the ship as it adjusts to its changing role in a new regulatory environment.

“I believe I have the passion for the profession and I live it and I work very hard at it and I’m totally committed to it,” Melancon said. “I’m committed to the vision that our members affirmed for our profession and believe that in today’s world, it’s still absolutely applicable.”

Melancon feels it’s vital that the institute carve out a role as an advisor and/or sounding board for the PCAOB and the SEC this year to make sure the profession’s interests don’t get trampled underfoot.

“We’re going to have to become more effective at dealing through others to achieve those concerns and we’re going to have to be very articulate when something is proposed about why it can’t work,” he said. “Sometimes things sound right at 50,000 feet, but at the execution level, it’s not always that clear cut. We have to be strong enough and committed enough to say that. To that extent, I’m best positioned to do that - I have proven that I can take criticism.”

CPA2Biz

Aside from the headline-grabbing changes going on at the federal level, the institute has been criticized internally by members for creating and continuing to support its for-profit subsidiary and Web portal, CPA2Biz. The AICPA’s 2001-2002 financial statements include a footnote stating that CPA2Biz has suffered “significant losses” and “may be unable to continue as a going concern.”

Melancon acknowledged that the timing of the portal’s debut - at the beginning of the dot-com bust in 2000 - the speed with which it was rushed to market, and certain execution issues have all warranted some criticism. “But I think the management of CPA2Biz is very quietly and very deliberately building a track record and proving the critics wrong,” he said, noting that the site currently has 125,000 registered users and that sales of products and services are up “significantly.”

“One of the errors we made with CPA2Biz was that it was funded in January and in June it launched,” he said. “In retrospect, I think we rushed that date and caused execution issues up front.”

But, he said, the AICPA, which has a 55 percent ownership interest in the portal, was not ready to throw in the towel, especially just two years into what is essentially a new business. “It has addressed the technology issues, and we’re hearing that people like the stability and modern aspects of the site. People are giving it a second look and much better feedback,” Melancon said.

As for the going concern language in the annual report, Melancon said it was “just a consideration in the footnote.”

“If this business were not associated with the AICPA and accountants were looking at a business less than two years old [that had CPA2Biz’s financials], all auditors would do that,” he said.

Since the report was issued, CPA2Biz spun off former subsidiary Capital Professional Advisors, a consortium of larger accounting firms which helped smaller member firms set up and run financial planning practices. And its payroll provider, InterPay, was recently acquired by Paychex. The company said that the payroll service would be unaffected by the ownership change.

At press time, CPA2Biz president Erik Asgeirsson was scheduled to give a presentation at the institute’s Spring Meeting of Council in late April to give institute members an update on the portal’s fiscal health and new sources of capital funding, if any.

Melancon also sought to allay any fears that if the portal does go bankrupt, people who have bought products or AICPA conference registrations there would be left in the lurch.

“When people buy registrations to one of our conferences, that money goes to the AICPA, not CPA2Biz,” Melancon said. “CPA2Biz is compensated for marketing the products, but our conferences and products that bear the AICPA name are ours, so buyers would be unaffected.”

He also downplayed the significance of the $5 million that the AICPA gave to the portal last year to secure a stake in the site’s technology.

“When we restructured CPA2Biz last year, we wanted to ensure that if CPA2Biz didn’t make it that the Web site would go back to the institute for the benefit of the members. If CPA2Biz goes under, it has far greater value than $5 million and that would come to the institute,” he added.

Specialty credentials

The AICPA has also come under fire for re-examining the viability of the institute’s three specialty credentials - the Personal Financial Specialist, the Accredited in Business Valuation and the Certified Information Technology Professional.

“This is just good management,” Melancon said. “One of the hardest things associations ever have to do is to ever stop doing anything. If you’re affecting any number of members, you’re taking away a valuable service to them and it’s hard to overcome. If this were a for-profit company and we looked at a business unit, the decision on credentials would be very easy, because they don’t have market predominance.”

He assured members, however, that the Council will be looking at the issue more “holistically” and not just at the finances.

“We’re asking Council to focus on strategically whether the institute should be in a credential area if that credential isn’t gaining market acceptance.”

That issue will also be up on the agenda at the Council meeting, as will AICPA Chairman William Ezzell’s new task force examining whether the institute’s governance structure is responsive to its members.

For now, Melancon said to stay tuned for some new initiatives that will be introduced at Council to help further the organization’s “Vision Project.”

He also brushed aside the incessant calls for him to step down.

“Yes, all the criticism bothers me, but at the same time, I try to take points of differences and internalize them within the institute to make both the profession and the institute better,” he said.

Next issue: Inside CPA2Biz

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