If you attended the American Institute of CPA's Fall Council in October, you had the opportunity to see history in the making. Ernest Almonte, the auditor general for the state of Rhode Island, took the podium as 2008-2009 chairman of the institute - the first government official to be elected to that position in the organization's 121 years.Almonte has served as his state's auditor general since 1994 - a position where he is responsible for auditing the state's $7 billion state comprehensive annual financial report and $3 billion federal single audit. Aside from being a CPA, he is a Certified Fraud Examiner and a Certified Government Financial Manager, and holds both the Certified Information Technology Professional and Certified in Financial Forensics credentials from the AICPA. He was appointed by the U.S. Comptroller General to the Government Auditing Standards Committee. This year, the Secretary of Defense also named him to its first department-wide audit committee.
Almonte served a three-year term on the board of directors at the institute and was elected chair of its Government Performance and Accountability Committee for four years, as well as chairman for the audit and finance committees.
He met recently with Accounting Today to talk about how he views regulation, his thoughts on developing new leaders within the AICPA, and how he stays connected to legislators while on the road.
How is being chairman going to affect your day-to-day work?
Almonte: When the nominating committee asked me if I would be willing to do this, I told them I needed to ask the [Rhode Island] speaker of the House and the Senate president. They told me they would support me 100 percent.
In today's world, with technology, I travel every day with a laptop. I'm totally connected. I'm speaking to senators and representatives on the phone; when they send me a text message or an e-mail if they have a question, I get back to them. I've converted my office into being very much on the cutting edge of technology ... . They are sending me text messages so I can get right back to them. I try to be totally responsive to everybody, so that way they don't see that gap, whether I'm in the office or not.
The line between work and clients becomes very blurry because I just enjoy my whole job and everything I'm doing. I can't tell you the difference between work and play anymore. I really can't.
Under your chairmanship, what kind of goals are you going to present the board?
Almonte: We have a lot of issues that we are already dealing with, professional issues that carry over from one chair to another chair. They're pretty extensive and take a long period of time - like the pipeline issue.
We need more CPAs to come into accounting. Look at StartHereGoPlaces.com [the institute Web site that promotes accounting careers to students]. Students in high school or their first year of college would go to that site. ... There are a couple of examples on there. There's an example that you can be an accountant for a rock band, if music gets your attention. You can prepare financial statements for a band, then give them advice about how to do their advertising, how to cut down their travel expenses, increase their profits and how to attract more clientele. ... If you look at the numbers now, the students that are going to the Web site, and are in high school, are three times more likely to go into accounting. In college, if they're a freshman or sophomore and they go on the Web site, they are four times as likely to go into accounting.
What are some of your other objectives?
Almonte: One of the other things we are seeing is there is a bottleneck of Ph.Ds in colleges and universities. There aren't enough Ph.Ds to teach. We have a high interest of students wanting to go into this profession who may not even be able to get into a class because there's not enough Ph.Ds. At the AICPA, they've started a doctoral program, raising scholarships for people who want to get a doctorate in accounting to teach in the classroom. Say, ABC University is producing four Ph.Ds per year. We're looking to help fund No. 5 and No. 6. We want that incremental increase, not the same four that have already been there. I see it in the auditor general's office. I see it across the country, whether it's government, public, private companies: It's hard to hire CPAs. There is an extreme shortage. We need more out there. This helps.
Then there's the Leadership Academy. This is going to be [a program] for people with three-to-eight years' experience, the young CPAs. It's not fully defined yet. What I want to do here - keeping in mind that a lot of people, especially at a young age, don't get a lot of leadership training - this will be an opportunity for us to change the makeup of the leaders in our profession, in the Council and on the board level to be more balanced.
This will be a week's worth of training on communication skills, negotiation skills, how to get your message across and one-on-one coaching. What we are going to do is take these young graduates out of this program and hook them up with past chairs of the AICPA so we can mentor and help guide them. But the best part that comes out of all of this is a commitment from them that they will give back to the profession. They'll go back to colleges and universities, talk to students, talk to other CPAs.
We are going to take all the names of the people who are going to come out of this program and give them to the nominating committees and new chair to get them inserted in slots on boards.
What criteria do you use to determine if it's successful?
Almonte: Say five or 10 years down I'm looking out at a Council meeting and I see three, four or five graduates who came out of this program. And the best part of all is one of those people will be standing up like I am as chairman of the board. Then you know it will be a real success.
There's one more piece to it. The first group will probably be 25 people, and I have a commitment that I want it to be at least half minorities. The only way we are going to change the overall perspective is you have to tilt this academy so it's heavily weighted the other way. I didn't want it to be just a minority leadership academy, because that takes away the whole concept of it being diverse. You need to hear everybody's perspective.
The thing I ask from the AICPA is, it can't be a one-year flash-in-the pan - a new chairman comes in and something else needs the commitment from the AICPA. We are going to do it for a longer period of time and we are going to track it through an alumni group. We have to work out the actual mechanics. It may be next June or July, but it will definitely be next year.
What other issues do you see?
Almonte: Another one is International Financial Reporting Standards. The AICPA at the Council meeting in May approved the International Accounting Standards Board as the standard-setting body for CPAs who prepare financial statements from international accounting standards. That's already been done, but when you think about it, there's a lot involved in that. If this, in fact, goes forward and we have U.S. companies following international accounting standards, several things get affected.
No. 1, we need to educate the users on how to read financial statements under those standards. No. 2, we need to increase the auditors' knowledge so they can audit financial statements, [and] the preparer's knowledge so they can prepare financial statements under IFRS. We need to help educate the educators so they can teach it in the classroom, and textbook preparers. It is affecting the CPA Exam; CPA review programs have to change. There are a lot of things. It goes way beyond accounting.
That's one thing the AICPA will be doing is providing a lot of resources to help those groups be successful, including getting the message out to the companies that the change to international accounting standards is not just an accounting change. It affects legal documents like bond covenants; it can affect the way your IT structure is set up; there are several other factors that are affected by this. By the AICPA helping provide resources to the members, they can go out and help the clients and the public understand what it's all about.
One of the big things I try to tell people is it's not a big leap from U.S. GAAP to international GAAP, because over the last few years, U.S. GAAP and international GAAP have been converging. The Securities and Exchange Commission said to start in 2011. So 110 of the largest companies will switch. Well, by 2011, convergence will be even closer, so you can look at U.S. GAAP and look at international GAAP and say they're pretty similar. We're headed in that direction.
What is your view on the economic crisis?
Almonte: This is an incredible opportunity for us as CPAs and the AICPA - over 350,000 members - to use our core values: integrity, reliability, independence and accountability, to provide objective advice to the governmental leaders, the policy-makers. Not taking sides, just telling them something in a way that is nonpartisan, non-theological and fact-based to help our government work its way back to progress and prosperity again. We have the skill sets to do that. We can do that by leveraging off the financial literacy program and taking those same steps and helping our government, businesses in general, our family and friends take care of their finances.
The thing I worry about is people panicking and making bad decisions and that's why I keep sending out the message that this is a time to come to CPAs, because we can step back, go to the balcony and take perspective. We can get the whole picture and make decisions without having emotions involved. That's what we need to do as a profession - provide good advice. We don't know whether these things are successful - when the bailout package passed, the stock market went down that day. It still takes a while to move forward.
How do you think that is going to affect individual states and municipalities? How are you feeling it in Rhode Island?
Almonte: I see it across the country because I served as a national president of all the [government] auditors. But in Rhode Island, we've experienced deficits way before this took place, so now they're even more severe. Just like anything else, the economy is cyclical. We don't know where the bottom is yet, but we have to be reasonably close to the bottom.
The best thing to do is we have to understand, even as a government, the problem is very simple. Revenue minus expenses gives a surplus or deficit. Yes, revenues are going down, [but] what we need to do from a policy point of view is also reduce our expenses. Within government, we tend to want to spend whether that money comes in or not. That's why I try in my job as auditor general to get the word out. This is not really technical here. Revenue minus expenses is surplus or deficit. You see this side go down, the expenses have to go down.
And maybe what it takes, too, is for all of us, in our profession, to go again to give that nonpartisan, non-theological, fact-based advice to city councils, town councilors, state legislative bodies, federal government, to tell them, "Here's what you can do so you can get back on that road to prosperity."
Where do you see the accounting profession in five years?
Almonte: You saw the numbers about how much the public and business decision-makers rely upon CPAs, and it's very high. I think it's going to become even more prominent as we move forward and people look at what we do - our integrity, our reliability, our accountability - to be able to look at that and say, "They're the ones we want to go to."
When you look at the bailout package, the key phrases you hear all the time are transparency, accountability. That's exactly what we stand for. I think there's been this shift of people who are starting to look at who has that. We're the perfect people to come to.
