The shortage of people entering the accounting profession and pursuing CPA licensure has reached the proportions of a crisis, and Sue Coffey, CEO for public accounting at the Association of International Certified Professional Accountants dives into why — and what accountants and firms can do about it.
Transcription:
Dan Hood (00:03):
Welcome to On the Air with Accounting Today. I'm editor-in-chief Dan Hood. In just about any recent list of challenges facing the accounting profession. Staffing is usually number one and then it's numbers two and three and four and sometimes even five. It's a big, big problem with fewer and fewer people entering what's called the pipeline, the flow of young people into college counting programs, and then the subsequent flow of them into the CPA profession.
Here to talk about the why the pipeline isn't full enough and how we can help fill it back up is Sue Coffey. She's the CEO of public accounting at the Association of International Certified Professional Accountants. Sue, thanks for joining us — again; I should mention you bet on the podcast a couple times before I'd always glad to have you back.
Sue Coffey (00:36):
Always great to be here. Thanks.
Dan Hood (00:38):
And this is, as I said, this is a big topic and I know that you, you've personally been working on a lot and I know that the A i CBA is working on a lot. Maybe we could just talk sort of set up, what do you think of the main drivers because the flow of people into the profession has sort of been declining more and maybe declining is always Edward because some of the numbers look a little weird. Maybe it hasn't necessarily been keeping up with demand. Maybe a better way to put it for some time. What do you think is driving them?
Sue Coffey (01:02):
Yeah, that's a great way to put it, Dan. There's a bunch of drivers. There are drivers that we can't control like declining birth rates or country's immigration policy that used to put more foreign students into our university system and then allow them to stay. Certainly the cost and value proposition in general of higher education, the cost has been rising. It's exorbitant now. And you know what? I think we have to look a little bit at the changing desires of the younger generation and how they work and the type of work they want to do, what their lifestyle is. So those are some of the things I would say we can't really control. But then there are drivers that I think we can control as a profession, like how we compensate people, the hours of operation they work, providing them with leadership and advancement opportunities. The younger generation doesn't necessarily see the longer term value of a career in anything and not wanting to wait, let's say 15 to 20 years to become a partner at a firm.
(02:04)
So what are some things that we can do in order to fix that? The younger generation is also really interested in the type of work. They want to make a difference, they want it to be meaningful. And sometimes I think that we don't necessarily talk to them in a way that resonates with them about our interesting clients and the interesting services and the impact that we make on local businesses and local communities. So I think, as I said, there are some that we can control, but there are certainly some factors that we can control and that we should control.
Dan Hood (02:38):
Well, it's interesting because it does, for generations leader since the 1930s, two, let's say people vary about this, but I would say mid nineties profession was in great shape. People just sort of flowed into it. You didn't really have to worry about it. Every once in a while you get a boost when times went bad because people would say, Ooh, accounting's a safe professional. I'll jump into that. But generally speaking, there was a pretty steady flow of people into the profession. And as you say, there were changes on both sides, right? Changes in things that depression can control and changes that it can control. Some of it just involves saying, okay, things have changed, we've got to react to them appropriately. But I want to divide this the problem maybe into two parts. Cause I mentioned there's right the top end of the funnel would a market sales and marketing person would call the top end of the funnel of not enough young people, even down into the high school age, age, getting interested in accounting, going, taking accounting classes, going to college for an accounting degree.
(03:30)
And then there's this sort of follow on problem of not enough people taking the exam and literally becoming CPA. Some of those people who go into college and actually take counting, don't follow on and become a CPA. Maybe we can divide that up into two problems, obviously super related, but do you think are they driven by the same factors? Is that difference between the number of people coming into accounting and then the smaller number of people taking the c b exam? Are those factors you talk, all the ones you just listed, are they different? Do they play out differently for each of those problems?
Sue Coffey (03:59):
I think some of the factors are the same and some are different. So when I think about high school students and getting them interested in accounting and then becoming accounting students, I think it's all about perception of our profession and attractiveness. We have a reputation for long hours. I mentioned earlier, sometimes the work isn't so interesting. And then compensation levels, intro courses, they're very influenced by their peers. They're very influenced by individuals in their parents and their family who may or may not have a career in accounting. And so they hear things. And then some of that, it is confirmed by stereotypes, particularly when they get into university. And they may not be an accounting major, but if they're a business major, they're going to be taking intro to accounting. And in many universities, those classes aren't taught by the most dynamic instructors. Some universities actually are changing that dynamic because they realize how important it is. And a lot of universities haven't followed quite sued quite yet.
(05:14)
The Center for Audit Quality, which is an affiliated of the AICPA has been doing a lot of research on the younger generation and they're finding that general business students want freedom and flexibility and accounting is seen as specialized in niche. Now, I would say that's not the case. I mean, if you go into account accounting is the business, the language of business. And if you go into accounting, I think you can do anything. You can pivot into any industry or you can pivot into any profession. But again, that the perception is that is not the case. I also mentioned the cost of education. It's high and the exam is hard. And so when you think about that, it all goes into a package of how do we change that vernacular and how do we help those? For example, high school students understand that it really is a great profession and we really do make a difference when it comes then to CPA.
(06:11)
So let's say now they're accounting students and they're in the funnel. The funnel is getting a bit smaller and we need to get them to CPA. What we hear and what research shows is that it that the goal that they want to achieve, there is a value proposition at the end of the tunnel, but the exam is hard. And we've been doing some things as I think you and I have talked about, our CPA Evolution, that new exam that's going to be introduced in 2024, I'm not going to say the exam is going to be easier. The exam is hard. It's designed to be an entry level exam where someone has to demonstrate minimal competencies. But the way it's being designed is that everybody will have to pass three parts that are foundational to those course services that we do, accounting, auditing, tax, and then obviously technology peppered throughout.
(07:07)
But then the individual can select one of three options to demonstrate deeper knowledge. And so if I want to be a CPA, but I'm really interested in tax and financial planning, I would select that discipline and I don't have to worry about testing on pension accounting or testing on cybersecurity controls. So we think that that will have an impact. We also know that probably the number 1, 2, 3 and four things that accounting students say in getting through that CPA exam hurdle is finding time to get it done. Okay, life takes over, they need to study, they're working, they have personal commitments, and it just makes it tough. And so when I talk to firms, one of the things I say is you really have to be very purposeful about giving your young professionals the time to study. I remember when I was going through the CPA exam, it was only offered twice a year. And I started my career with Coopers & Lybrand and Coopers & Lybrand had a, all right, we're going to put you with a cohort of people that are all going to be studying and you're all going to take the exam in November and we expect you to pass that exam because if you don't, you're in trouble. And that doesn't exist anymore, right? Because of the flexibility. And you could really take the exam anytime. You have to design your study differently and firms need to support their young professionals in that.
Dan Hood (08:41):
Well, yeah. And then that's a big part of it, right? There have been studies to shown the five men, people anecdotally talking to firms and realizing that the support levels there are maybe not what they need to be. And some of that goes to, I think, and I think we've hinting at a lot of this, which is the depression has just again been used to just how people flow in and they become accountants. And I always say to liken it to the notion of whenever we talk to accounting firms about referrals, they all say, oh, we love referrals. Yeah, we, 80% of our business comes from referrals. And we say, okay, so how many times do you ask for referrals? And they go, we don't ask for referrals, we just get them. They just show up our clients because they love us and they're dad.
(09:15)
They definitely do. But it never occurs to the firm said, oh wait, we've got to do something. Get these to flow in. Similarly, it's got to occur to more and more firms to do something and do more to get people to come in and then to stay and then to make sure as you say, all the things you need to do to get them to take the exam. One of the things I love about it, little points that somebody made, I wish I could remember who, cause I would credit them, is that one of the things is that the further away from college you get, the harder it is to pass the exam. And I think the explanation that was given was that you just, you're good at taking tests in college, you're good at studying, you're good at all. You have those sort of muscle muscles built up while you're in school.
(09:52)
When you leave, they start to act free immediately because how many tests do you take over the course of your life except for maybe the CPA exam. So there's fascinating, there's a need for proactivity. And this sort of leads me to my next point, which is obviously at the AICPA all have been pretty proactive about that and we've touched on some of the things you've talked about, change to the exam that we hope will make it more attractive. And also, sir, we should point out that's not the main purpose of CBA evolution. There's a lot of other things about it to build a new skillset set for accounts, the 21st century, et cetera. But hopefully we'll also serve the purpose of making things a little more attractive and explaining the flexibility or illuminating the flexibility that it offers. Anyway, there's a lot of other things I know that the AICPA has been doing. Maybe you can dive into some of those initiatives.
Sue Coffey (10:35):
Yeah, sure. So obviously, and you said it in the beginning, like a pipeline is my largest focus right now. I mean, I spend virtually 95% of my day on pipeline related initiatives because as we were discussing earlier, there are a lot of root causes and it's complicated and there's no simple solution. And so we need a number of initiatives that are designed that working together will make a difference. And so we've put together what we're calling a pipeline acceleration plan that has a number of elements in it that are designed to address issues like attractiveness and perception of the profession, the cost of education, helping diverse students through the process, things like scholarships. I would say probably that some of the most important ones are stem, and that is getting accounting defined under the T of STEM for purposes of federal funding. And what that really means is if we can get it defined and we can get federal funding, we can start educating students and their parents about our profession as early as kindergarten and up through 12th, 12th grade.
(11:55)
So that means we could create programs, awareness campaigns using federal dollars and have a kind of consistent messaging and training so that when they get to the point where they say, I wonder what I should do when I go to college. They have accounting front and center and they understand what it entails and they understand the opportunity. So that's one. And we are aggressively pursuing federal legislation this year. Another one is around firm strategies and business models, all those things we talked about earlier, Dan, around compensation and hours of work and type of work and opportunities for advancement and image and perception. Firms really need to be very purposeful in how they approach business, their clients and talent acquisition and retention now. And we're doing a lot of things around creating tools and resources that will help them take a fresh look at their business models, ask some hard questions about what they want to be, and then transform from point A to point B.
(13:07)
And just another one is we're calling ELA, which is experience learner. And this is a program that's really designed to bridge the gap from 120 hours of education to 150 hours of education to address the cost of the education as well as the opportunity cost that a student now has if they were to finish their 150, wait, wait and then start working with a firm or a company. And what we've been doing is building out a model that combines online learning with early work experience. So how it would work essentially is that after somebody completes their bachelor's degree, they would immediately go to work for a firm and the firm would agree to give them time during their work week to take online courses. And that course of study would be embedded through throughout their work and combined they could get up to 30 academic credit hours of education for it.
(14:09)
So we're really excited about it where developing a pilot that is going to start this fall, we're going to pilot with one university and we're this close to zeroing in on that who that university is. We've talked to a lot of firms about the program and they're very excited about it and we think it's going to make a difference combined with a whole bunch of other things. And of course we're doing that in partner with naspa, which I think is really important. So we've got the state board angle to consider and we've got a lot of support on that end as well.
Dan Hood (14:41):
Excellent. All right. So there's also another pilot program I know that PWC is working with. I was thinking St. Peter's University of New Jersey, not the same thing, but something in the same way sort of saying, let's help with the 150 hour, getting that extra 30 hour credits, 30 credit hours. And I think they're doing it as sort of a work experience thing. You come to work for a firm in Europe, what would be your fifth year? And that counts as education things. So there are, are people going out there as you are experimenting with that and trying to find new ways to help with that?
Sue Coffey (15:10):
Yeah, there are actually, and it's really exciting. I love the creativity. A lot of firms are doing things big four as well as the next tier and working with universities and how to make it more affordable and how to make it more meaningful. Candidly, at the end of the day for both the student and the firm,
Dan Hood (15:27):
This is a big topic of the hundred 50 hour rule and it's ramifications and I want to dive more deeply into it. But before we do, we're going to take a quick break and we're back. We're talking with Sue Coffee of the AI C P A about the pipeline problem, but the professions need to get more people, young people particularly coming into the profession, taking accounting degrees and then pursuing CPA licensure after that. And we've been talking about all the different drivers and all the different programs that the A C P as well as say firms of all sizes and other groups are working to try to drive more people into the profession, I should say drive more people to attract more people to the pro profession. It's a great profession. They should want to be here, they need to know more about it. But we were talking, you mentioned the 150 hour rule and a plan you guys have to help with that because the cost of education, college education has skyrocketed so much over the last 20, 30 years that if it's become a serious burden and that extra year of education can for some people present an issue.
(16:27)
So I want to dive a little bit into that and just get your sense of the 150 hour rule, how much a lot of fingers have been pointed in, let's put it this way, A lot of people what I'm talking about it saying this is the real problem. You've mentioned an enormous number of drivers, so it's pretty clear it's not the only problem by any stretch imagination, but do you have a feeling about how much of a problem it is?
Sue Coffey (16:44):
Yeah, I think candidly, I think it's being given more criti criticism than it deserves. If you look at surveys of students, it doesn't even make the top five or six reasons as to why they'd all go on to pursue C p A. The top ones, as I kind of mentioned earlier, are time to study work and family obligations. The cost of the exam and exam prep courses and even like I'll throw fear of failure in there, those tend to be the ones that are the top 1, 2, 3, 4, 5, 6. And then yes, the cost of education is certainly a hurdle, but we have important qualifications for entry. And one of them is education, obviously the examine experience. So the other ones, and I would say that it, it's important because we have a public protection role. We have an amazing brand that instills trust in the services we perform and their expectations of us as a profession. And if you think about the services that we perform every day, we audit financial statements that investors and lenders rely on. We advise on personal financial plans and help clients meet their financial goals. We complete incredibly complex tax returns that help businesses contribute no more than what is required by law. And so we play a very important role in society. And so we have qualifications for entry and education happens to be one of them. And right now that education is at 150 hours,
Dan Hood (18:27):
No rather reason why I'm diving into this one in particular, again, because some people have brought it up or people regularly bring it up as a hurdle. I say I think make some good points about why maybe it's not as much of a hurdle as people might suggest, but one of the reasons I started bringing up right now is because of this one, some legislation introduced in Minnesota to provide some alternatives to the hundred 50 hour requirement. It has not moved very far, it's still just sitting in the legislature. But the notion is that would you could either do 150 hours and then all the other things pass the exam and work experience or you could instead of the 30 extra hours could, I think it's get an extra year of work experience in addition to the one year of work, your experience that's already required or take, I think it was 120 hours of CPE to replace that 30 extra hours. You still have to have four years of college, you still have to have one year of work experience and you still have to pass it the exam, but you can replace the 30 years with either of those two things. What's your take on that?
Sue Coffey (19:31):
So I don't agree with what Minnesota's doing, but I will say that I do agree with them that we need solutions to increase our pipeline and I think the end goal is the same. It's how we get there. We just have varying, we have very different opinions on. I will tell you that I don't believe the Minnesota legislation adequately considers the significant risk whose CPA licensure across the country as well as CPA practice mobility on a national level, CPA practice, mobility is really important. What that means is that if you have a license in one state and you service clients, whether it's virtually or physically all over the country, you don't need to get licenses. In most states, if we lose CPA practice mobility and we need to serve clients in other states, we are going to have to get other licenses in states. So I remember before we had practice mobility and it was very costly. It was incredibly difficult to manage and very difficult for a firm to get all of their employees to different clients in different states on a very regular basis without candidly violating state law. And so going back, taking that step back, I don't believe is the right answer, which is why we have come up with our pipeline acceleration plan to attempt to address that in a very different way.
Dan Hood (20:57):
Thanks. Right. I mean, as you say, regardless of whether that solution is the right one, as you say, we should trying lots more solutions we should look at because it is a big problem with a lot of different, I keep going back to the long list of drivers you mentioned at the beginning, that was a long, long list. Each one of them susceptible maybe to some small board solution if we try. But the more things we could try, probably the better with that. Now we've talked a lot, you've mentioned some specific things that firms can do, making sure that their staff are supported and taking the examing is obviously a big one in a bunch of different ways. Giving them time, giving them mentorship, giving 'em access to resources, giving them money, bonuses. A lot of larger firms give bonuses if you pass, et cetera. Are there any other things you could think of the firm should be doing to help fill the pipeline?
Sue Coffey (21:40):
Yeah, so I just think in general, in general, and we talked about this, take a hard look at your business model. Are you paying competitively in your market? Are you offering flexibility at work and really walking the talk in terms of hours of operations. A lot of CEOs are saying, I don't want anybody to work over more than 55 hours during busy season. Is that really happening within your firm? That's hard. Is it really happening? Are you managing your clients and finding, say, other homes for those that maybe nobody wants to work on? All your staff knows who those clients are they are those painful clients? Should you be finding more appropriate homes for them? Are you accelerating leadership opportunities? I mentioned earlier that the younger generation may not want to wait 15, 20 years to become a partner. Are there things that you can be doing to accelerate those leadership opportunities?
(22:39)
Dan, I know you're a big tech guy. Do you have the latest technology and do you have a technology strategy that really is dynamic for your younger generation but actually helps solve your challenge problems? And then the other thing I would say is get into high schools. Send your younger professionals into high schools, local high schools to tell their stories about the impact that they have on local businesses and their local communities. Tell them to talk about how interesting their work is. Some of the cool things they may be doing in some new unique services like E S G or cyber or life planning. I think all of those things every firm can and should be doing and any individual accountant canon should be doing.
Dan Hood (23:31):
Excellent. Well that leads me to my last question was what can individual accountants do? Obviously as you say, they can get out there and proselytize the profession. They can get into high schools anytime you talk to, not any type, but a lot of times you talk to current CPAs, you say, why'd you become a cpa? And it's, you mentioned it's just because someone in their family was a CPA or a friend who was a fam or someone they knew directly growing up, an individual made that difference, right? Got them into the profession. Wasn't a broad sort of what's an interesting profession for me to go in, it was because Uncle Bob does it or my mother does it or whatever. So that kind of personal process authorization.
Sue Coffey (24:01):
Yeah, I would say walking the talk is really important. I know there are so many members of our profession that are coaches, that are local volunteers. They get involved in their local communities and that's really important for the young generation to see because those types of things resonate. They want to be able to do that when they get today and when they get older and have families. And if they see our profession doing that, that just shows that it can be done. It starts to change the vernacular.
Dan Hood (24:33):
And then we might also put a moratorium on talking about how much work you did during tax season and how hard the CPA exam was. Right? Do we need to scare people away? But just stop that. Stop bragging about how the thing you didn't see your family for three months and stop talking about how difficult the exam was and how you didn't see your friends for six months while you were studying. Just don't talk about that just
Sue Coffey (24:53):
For a little bit. Totally agree. Totally agree.
Dan Hood (24:56):
Alright, so any final dives? As we said, it's a huge issue. I think we've done you've great job sort of laying out the foundations and potential solutions. Any final thoughts on the pipeline issue?
Sue Coffey (25:05):
No, other than organizationally, we're laser focused on this, right? It is going to take a village. There are a lot of stakeholders that need to be involved in solving the problem. And there's a lot of great work going on across the profession in order to solve it. And I think that's important for your listeners to understand. State societies, state boards, NASBA, AICPA, firms of all sizes are contributing, solving this problem. And it's one of the reasons why I love this profession.
Dan Hood (25:37):
Absolutely. It's nothing known. No problem. They can't solve once they get all everybody working on it. And it will be just say a lot of great and exciting initiatives on it. So we'll look forward to seeing how all those pan out. In the meantime, Sue Coffey of the a ASCPA, thanks for joining us.
Sue Coffey (25:49):
And thanks for having me. Always good to be here with you.
Dan Hood (25:52):
Yes, it's great to have you. And thank you all for listening. This episode of On the Air was produced by Accounting Today with audio production by Kevin Parise. Rate or review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. Thanks again to our guest and thanks for listening.