CPA Crisis: NASBA CEO Ken Bishop On The 150-Hour Rule & Accounting Talent Crisis
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Blake Oliver: [00:00:05] Welcome to The Cloud Accounting Podcast. This is a special interview with Ken Bishop, the President and CEO of NASBA, the National Association of State Boards of Accountancy. Welcome to the program, Ken.
Ken Bishop: [00:00:19] Blake I'm happy to be here. Thank you.
Blake Oliver: [00:00:21] We have been talking a lot on the program about the 150 hour rule. Eager to talk to you about the talent shortage. Maybe we should start with that. That vote that Nasba board took on what Minnesota is doing with the 150 hour rule. So Minnesota's got legislation, a bill to create an alternative pathway that would allow future CPAs to earn 120 hours, the regular four year college degree and then two years of work experience. Instead of going and getting that extra 30 hours and Nasba voted unanimously to oppose that. Can you give us some context on that? Because what we're hearing from the community, folks in the state boards and the societies is that they are not unanimous. There's a lot of opposition to the 150 hour rule. Can you explain the difference here?
Ken Bishop: [00:01:10] Sure. Well, first of all, we didn't have the vote at the board had was not directly related to the Minnesota legislation. So we didn't vote against Minnesota's bill. Essentially, the requirements for licensure and certification are determined by nasba. They're determined by state legislature that sets later state legislators. And ultimately, you know, they're enforced or implemented by the state boards of accountancy. Nasa's role as a board of directors as they review and essentially approve language for exposure, language that comes out of the Uniform Accountancy Act, which is a joint committee between Nasba and AICPA. So it was that form the Uniform Accountancy Act and both the and CPA board that had originally endorsed moving to 150, gosh, many years ago, you know, back in the late 70 seconds and 90 seconds or 80 seconds is when that bill took place. So essentially the vote was to continue to support the 150 because of the importance of substantial equivalency and mobility across the United States and also believing it's, you know, the right the right benchmark for education to be a CPA in this day and time.
David Leary: [00:02:27] What drove this vote like? Were there some people that said, hey, we should reconsider this? Should we change it? Like what?
Ken Bishop: [00:02:34] You know, it probably had as much to do with me as anything. And our chair, Rick Reisig. You know, we have like every board, we have rollover and turnover. And so this year we have quite a few new members. And so consistently through the years, I mean, I've been the CEO now for like 12 years and there's always been very consistent support for the 120. But I like to know the temperature of the board, you know, new, new people on the board, whether there's a change in mindset or a lessening of support for it. So really it was more of determining is our board still solidly behind, you know, the current language of the Uniform Accountancy Act? And it was.
Blake Oliver: [00:03:17] There have been numbers reported in The Wall Street Journal. Accounting today about the accounting talent shortage. 17% of US auditors and accountants quit the profession in the last few years. There is a shortage of accounting talent in small firms, in large firms, everywhere in corporations, there's strong continued demand for accountants, and we can't get enough of them. Meanwhile, in accounting accounting program, enrollments are down. In college, fewer people are taking the CPA exam every year. Why keep this 150 hour rule when there's no evidence that it increases CPA quality? I've never seen any evidence that anyone's better off because of the fifth year rule. In fact, there are studies that show the opposite, that it simply reduces the supply of accountants. I mean, this seems like something easy that we could change right away to solve this or to help solve this talent crisis we've got for sure. And let me just start off by saying I disagree with several of the premises that you that you just said, first of all.
Ken Bishop: [00:04:21] I would agree with you. This has been around now for multiple decades. And there are some, you know, studies that like what we look at. We know that people the past rates gone up, for example, since all states adopted the 150 pretty significantly. So there's you know, that's there. But I also want to say on the front end, we absolutely agree with you. There is a huge problem of this declining number of people entering the profession. And it's happening at the same time that baby boomers are retiring. People are leaving the profession. The great resignation that happened during COVID also impacted the counting staffs when couples decided when couple one half of the couple would stay home. Lots of reasons. So we know it's a big problem. And, you know, we've been working on it. We've been trying to come up with strategies of things that we can do short term, mid-term and long term to try to get more people into the profession. But but on our side, we've been trying to do that without disrupting substantial equivalency and mobility, which really took decades to achieve and is very high value to CPAs and CPA firms. But more importantly, it's a high value to clients. You know, for example, I was I was in Missouri when I started my career. I live in Nashville, Tennessee now, but my CPA in Missouri still does my work, and it's a trusted CPA I've used for years.
Ken Bishop: [00:05:44] And mobility allows that to happen. So so it's a value proposition to consumers and professionals that we're trying we're trying to maintain. And the counter argument to the evidence is there's absolutely no evidence that says that changing the education requirement to 150 would actually increase the number of people wanting to be CPAs Right now, when you know the demographics are shrinking, there's less people going to college. A lot of competition with economists, MBA programs, lots of other programs. So I'm not saying it's not possible that that's one of the impacts. But I do know of all the surveys I've seen, you know, out there, you know, from, you know, from minority groups, because there used to be an argument, maybe it was a detriment to minorities. The 150 hours, the Center for Audit Quality, the University of Maine excuse me, the State Society of Illinois, there's been quite a few, you know, surveys out there to try to find out what are the problems with people that are leaving the profession and the cost of of the examination, The amount of education never even makes the top of the list. It's always at the bottom part. The top of the list is always salaries, work life balance, leaving the.
David Leary: [00:07:03] Profession versus entering the profession, excuse me, leaving the profession versus entering or different. And this young generation entering the very same way.
Ken Bishop: [00:07:12] They they interviewed candidates for the profession and the candidates for the ones that did not list that as one of the primary or even a a significant reason why they're not wanting to enter the profession. And back when I talked to to accounting schools recently about candidates, they lose. They said these people didn't leave and go into bachelor's programs. Most of them got MBAs. They went in to get master's degrees of economics. So the type of people like you, Blake, you know, I heard you talk in one of your earlier, you know, discussions with with Jim that you talked about, you know, that you had philosophy, as did he mean, there's a lot of people that were really made more whole. I mean, you're a great communicator. Jimmy Call is a great communicator. And when I listen to your all's blog that day, I'm sitting there thinking, gosh, you know, I never really thought about Jimmy Corley, But it might be that philosophy of education that he got in addition to the accountants. What really took him over the top of being you know what? I know the great communicator and the excellent executive director. He's been in Arkansas, so. The evidence is sometimes subjective, but we do see a lot of gains with people who have the education, including you.
Blake Oliver: [00:08:27] It's what you make of it. I just object to the idea of requiring people to go get it when it's a significant cost, right? So I did some back of the envelope math and I calculated that you might spend $100,000 here in Phoenix if you go get a master's A Mac over at ASU. You know, you calculate the $30,000 in state tuition and then you add in the opportunity cost and then the room and board and all that, and you're talking 100 K, and that's not a small amount of money for a student. So I just find it hard to believe that the cost isn't something that people consider. Like if I'm a student and I can choose a four year degree that's going to pay me more than a five year program that's going to pay me less, what do I choose?
Ken Bishop: [00:09:13] I don't disagree with what you just said. I mean, I'm not saying the cost isn't an issue. I'm saying it is nowhere near the top of the range of the reasons people give. Well, so what I would also tell you also is those Mac programs, traditionally when you look at their the output, when you see the people that go into the firms that are selected from the Mac programs are selecting from the Mac programs, they do very well in salaries, you know, as well. So yeah, but, but I would never argue against the fact that education has gotten extremely expensive. Expensive that more expensive. There's a very much of a concern about student loans by by students now. So we know that's one of the challenges but but it's not we don't see that as the biggest challenge.
Blake Oliver: [00:10:00] So so David and I have discussed this on the show, and it's hard to have a rational conversation about it without more information about these surveys. Unfortunately, AICPA doesn't release the data. I wonder who they're talking to. And David has said this very well in the show where, you know, if you're talking to people who are already bought in to the whole path, Right, doing the five years, doing the CPA, of course, for them, the cost is not going to be something that they say is a problem because they've already accepted that cost. But my question is, are Nasba and AICPA talking to the people who decided never to become accountants in the first place? Those people are not in that data set. And so if you if you don't survey them, all the people who are potential accounting students, you're missing out on this. To me, it just seems like obvious that, you know, why would I go pay 25% more for a degree when I can do it in less time and be making even more money coming out of school? Like, just say that if.
Ken Bishop: [00:11:00] You want to be a lawyer, you can say that if you want to be a doctor, you can say that if you want to be a clinical social worker, a tenured teacher, I mean, there are an awful lot of jobs out there that pretty much require a master's degree or we have the 150, you know, but but yeah, I mean, people will make a life decision as to what they want to do. That's why I think that the salaries is one of the big components we see now out in social media and in the surveys we've seen is because, you know, smart people become CPAs. So they are looking at the investment versus the ultimate, you know, outcome that they have, the salary that they're going to get. So obviously, it makes an impact on their decision.
Blake Oliver: [00:11:40] We can't.
Ken Bishop: [00:11:40] Control. Back to your other question. Sure. Sure. I can tell you practically, we don't have the ability in our data to survey people who decided not to go to college to be a CPA because they're not in our mix of people that we communicate with. You know, but we do talk to the colleges. I've met with the, you know, with the someone from a big college in South Southern California yesterday and had that discussion. And they, too, are down a significant percentage. So so we know in reality there's a shrinking demographic, shrinking number of people going to college and therefore less people becoming accountants. And that is why we're trying to come up with all the remedies. But we also believe there's a real good potential that lowering the bar of entry to become a CPA may actually be a detriment to people who want to be a professional versus, you know, go into the accounting trade. So so you guys, you can make your own determination, but you say you can't go out and find the surveys. I'm pretty sure that the Center for Audit Quality is out there. I know the University of or the excuse me, the the State Society of Illinois surveys out there. I think Napa's is out there. So there's a lot of surveys out there in public domain that that is very recent, that you can see how students did respond to that.
David Leary: [00:13:00] But the. There's a test. That's how we determine if somebody is qualified to be a certified public accountant. There's actually an exam, right? Well, it's a three legged stool.
Ken Bishop: [00:13:12] There's there's the exam, there's education and there's experience. And so so there are people who could take the exam and just pass the exam without ever going to school or having experience. But they wouldn't be qualified or ready to be a CPA.
Blake Oliver: [00:13:28] So what we're talking about is adjusting that three legged stool to allow for more experience in lieu of education. And everyone that I talked to when I asked them this question, they say I asked them the question, what do you think is more valuable to a young accountant, a year of experience or an extra year of education? 100%. It's a year of experience. Well, right.
Ken Bishop: [00:13:52] And I don't disagree with that. I think that the experience that you get is good. But but let's just look at experience. And why Why they changed the law 40 years ago to the language of 150 versus the more extreme experience when when I first got into the regulation of accounting in the state of Missouri, the requirement was, you know, two years of experience, 2000 hours per year in a CPA firm certified, supervised directly by a CPA that included X amount of hours of test experience. That was that was the experience requirement. And even in those days, you could you could go to work for one firm and get great experience and you could go to another firm and have relatively no experience with the work that you were doing was not going to be valuable to your career as a CPA. So so when you when you have a licensing requirement that says we'll accept two years of experience, like the Minnesota bill that you mentioned, you know, one firm that might be highly valuable, the other that may be making copies or, you know, when I talk to to people that are early in their careers, there's a wide variety of differences of value and intensity of the experience. And the problem with that is, is in regulation and licensing, other states need to rely that there's consistency and that is just always inconsistent and doesn't. Wait, wait, wait.
Blake Oliver: [00:15:18] Sir David, I got it. I got to jump into this. So but there's the same problem in education, right? That that extra 30 hours you get could be from the best master of accountancy program in the world, and it might just be awesome. And the other 30 hours could be in basket weaving or it could be in philosophy, it could be anything, right? So there's it's the same problem. There's no guarantee that, you know, that extra year of education is going to help you at all. And that's what we see in the data. The the studies that have been done find that there's no difference in quality between CPAs who did the extra 30 and those who didn't. And 75% of the CPAs out there right now did 120 hours. Are we saying that they are like less valuable than those who did 150?
Ken Bishop: [00:15:58] No. As we just discussed, the 120 people that are out there, that huge percent of the population, Mnuchin had most of them had very intense experience, you know, that had included audit directly supervised by a CPA. And that's not not not the case anymore. It's it's it's just experience. It's verified. So it could be it could be bookkeeping, it could be lots of things that would meet the bar that's entirely different than the bar of experience back when those 120 people became licensed in the past. And again, this isn't new. A lot of people are treating it like this 150 suddenly disrupted the supply chain of candidates that's been around like in Florida. They passed it in 1983, August 3rd of those years, many of those years we had a surplus. We had a surplus of people, accounting programs all over the country raise the bar of entry through ACT scores and entry scores and and and, you know, score averages to cut down on the size of classroom until just about 2018, something like that just a little before pre-COVID. So all of a sudden we've had the anomaly of COVID. We've had this disruption of of, you know, about student loans. A lot's going on, but there's really no indicator that the 150 is the cause of it because of that. Before that, we had a surplus of candidates.
Blake Oliver: [00:17:16] Oh, no, I agree that it's not the cause, but it's certainly one of the barriers to entry that is expensive, you know, costs.
Ken Bishop: [00:17:24] A said earlier. That's any profession. The cost of education, if you call it a barrier, it's a requirement of entry. Sure.
Blake Oliver: [00:17:30] Right. But it's a it's a barrier that, you know, I would argue that law school has value and that medical school has value. But we have no evidence that the extra 30 hours has value. The the studies.
Ken Bishop: [00:17:41] That we have no evidence. We you know, there's lots of evidence. I mean, you know, I sit on the board of Vanderbilt University's Mac program and literally think like 100% of the people get hired by big firms and they talk about the the level of competency these people have. And other schools have the same University of Illinois, Champaign. I mean, I can't I don't want I don't want to leave anybody. The out. But we also know that the said the pass race on the exam have gone up since we had 150 hour requirement. There's like right now there's less people going in the pipeline of of examination but there's more people coming out because of the higher pass rates. So yeah, there's a lot of evidence that that 150 has improved overall the professionalism of the of of the profession. But there's also the outliers that we could all come up with of, you know, you said underwater basket weaving. And that's that's what anyone who poses the 150 usually brings up. But Nasba sees more so more transcripts than any other entity on the planet for the CPAs. And I can tell you you rarely see a transcript of a person who's smart enough to become a CPA that doesn't have high value coursework in that 30 hours. And I would argue your philosophy courses that you had, Blake, were high value to be a better, more well-rounded and educated CPA can now publish that to be accounting courses.
David Leary: [00:19:04] Publish those, publish that If you guys all the students you publish those those records, would that would help people to see this right. What people are using for those 30 hours.
Blake Oliver: [00:19:11] What are they actually what are their.
Ken Bishop: [00:19:13] We're seeing this we probably should do a better job of. And we are we are. This is a relatively new phenomenon, by the way, this new discussion about suddenly rolling back to 150 from one 5120 is relatively new. It's always been there's always been a group of people that oppose the 150 from from the 1970s and 80 seconds till now. But I can tell you that, you know, we do know there's a couple of state societies and maybe some board members, but there's not a single board of accountancy that has told us that they oppose 151 to go to 120 and get rid of substantial equivalency or mobility. Certainly Arkansas, where Jimmy Carter was resigned now, but where Jimmy Corley was at at Arkansas, the board only agreed to next year, have a study to look at it. So they they haven't opined against the 150 or going to 120. No state board has and one state society has has voted to do that.
Blake Oliver: [00:20:11] So if we're not going to roll back 150 to 120 to make it less expensive, to make it less time consuming to become a CPA, Well, you know, what is the solution to this shortage that we have? It doesn't seem like natural causes are going to make more people go to into accounting. Right. And we've got this succession crisis in firms. They can't find the candidates. They can't find the accountants, CPAs. You know, if I'm a partner who's 50 or 60 and I need to pass on my firm to somebody and I can't get that young person in to take over, that's my retirement. I mean, I feel like that's probably why the state boards and these state societies are getting pressure. What's what's the what's the I have heard, you know, ACP has their eight point plan. I don't know if Nasba has a plan or if it's the same thing as the ACP one, but none of those points on that plan. I can I can quantify to make like a a significant difference.
Ken Bishop: [00:21:11] Sure. Well. Significant difference. We need to make a difference and we need to make a difference soon. Right now, we're looking at short range, mid range and long range solutions that we can attract as many of the best and brightest that we can. You know, we're looking at you probably heard of this experience Learn and Earn program where people who dropped out to get a job during COVID, you know, or before COVID, it's an opportunity for them to get back in and have low cost 30 hours of additional education, say 30 hours, whatever they need to close the gap between when they graduate and 150 at a at a at a reasonable fee and also be something that's important to that that firm. So that's almost completely developed. We're going to launch it this fall. So discuss the program.
Blake Oliver: [00:21:58] Just I want to dig in more into that. So that's the program where you're working at a firm and you're taking college classes online or.
Ken Bishop: [00:22:05] It's a little deeper than that. And I'm not the subject matter expert. We have some great staff that are naspa's contributors to that and working on that with our volunteers. But essentially, is that your firm and like you just mentioned, these small firms are struggling to find someone, you know, that is a CPA to hire them. So you have someone that is working for you that would like to achieve that. But but the cost of the 30 hours is important. So this is this is an opportunity to get the 30 hours while you're earning while you're working at the firm. And it could be online or not. But right now it's designed to we're believing online at a cost that's no more expensive than like a typical two year college or junior college. No more than like $150 an hour. So so but the the third element, which is critically important, is the firm can kind of say this is the kind of education I'd like to see them get, you know, to top off to be a better for my size of firm might be focused. Stone tax, it might be focused on something else. So it's an opportunity for a lot of CPE a lot of employees of accounting firms who didn't top off with the 30 hours and could not come a CPA. It's an opportunity for them to get to a CPE at a relatively low cost and pretty efficiently because the firm will support not only the money to help with the money, but also support by paying their salary and also giving them an opportunity to take this online or whatever type of coursework it is. So it's a pretty thought out that's going to be rolled out pretty quickly. I think when you see it, you'll see that a lot of work has gone behind that particular study.
Blake Oliver: [00:23:41] So the fact that there's a need for that program seems to indicate that the 30 hours is a barrier like a significant barrier to obtaining the CPA.
Ken Bishop: [00:23:50] Well, I would say the opposite. I said I think it clearly indicates that there's a need to provide a low cost option for people who want to top off and become CPAs. We're not suggesting that we lower the bar. It's actually we want this to be very rigid, highly valued education that they achieve and become CPAs.
Blake Oliver: [00:24:09] Well, I just want to like dig into that lowering the bar phrase, because that's sort of like the corollary to the underwater basket weaving phrase, right? We use the we joke about underwater basket weaving when we talk about the credits not being valuable. And then people defending the education say we don't want to lower the bar. But. For a bar to exist, it should improve the quality. And and again, as as John said, who's watching on LinkedIn, we need to discuss systematic evidence and not anecdotes. And I know there are great programs out there that do train people to to be better CPAs with the fifth year. But there is not any evidence other than anecdotally that I've heard that says that it makes them better overall. It simply reduces the supply. And so to me.
Ken Bishop: [00:25:02] It's anecdotal evidence that people pass the CPA exam and, you know, at a higher percentage with 150, I don't think it's anecdotal that a lot of the big firms have told us that the quality of candidates are getting out of like Mac programs are excellent. And that's almost where all they were. A lot of firms only hire from select schools that you know like Mac programs. So yeah I think, you know, I can tell you that, you know, if I was on your side of this argument, I could probably come up with some ideas of, you know, there are always there are always deviations from from this. But, you know, the decision again, you're trying to imply that the 30 hours is the reason there's a drop off candidates and there is no evidence that indicates that. But it certainly, as as you all mentioned, it could be that new people coming on. And that's why I talked about we're also looking at middle ground. Long term is, okay, what can we do? I saw recently a state board just passed a scholarship program mean state boards like are looking at different ways. But no one is saying that the remedy is and again, I don't know if this is a negative comment lowering a bar. I mean, if you want me to say lowering the education requirement, to me that's the same thing. It's not meant to be. It's not mean to be a mean spirited or or or to challenge people. It's just, you know, you see that in the Army. You see a lot of places where people talk about lowering the bar of entry. It means because you've lowered one of the requirements to get to a goal. So it's, you know, not supposed to be that way.
Blake Oliver: [00:26:35] Hold on. Hold on. This is amazing. So we have John Berrios watching right now. And he was the one who commented on the systematic evidence. And this is the study that I keep talking about. He did a study, occupational licensing and accountant quality evidence from the 150 hour rule. And in the abstract to his study, he says overall, these findings are consistent with the theoretical argument that increases in licensing requirements, restrict the supply of entrants and do little to improve quality in the labor market. Labor market proxies for quality find no difference between the 150 hour rule CPAs and the rest. Moreover, rule CPAs exit public accounting at similar rates and have comparable writing quality that are non rule counterparts. Right. So this is an actual study, scientific study that was done on this.
Ken Bishop: [00:27:20] And I can show you scientific studies that say a 180 from this study. So studies are, you know, obviously, if you're going to argue issue, you're going to pull up that study. If I wanted to pull up a study to argue my side of the issue, that's all recently, in fact, as our chair, Rick Reissig has just written an article that will be going out in some forms. But you know what I am glad about? I am glad that that both sides are looking at this, you know, through a microscope that we're really looking for solutions. You know, the my goal and I'm not a CPA. So in some ways I you know, ironically, somebody said, well, NASA is just worried about the money. If I was worried about the money, I'd lower down to an eighth grade education because we make most of our money in facilitating the CPA examination. So keeping it at 150 using that argument means it's a negative financial consequence for naspa. But the reality is, is that I look back at the decades of of leaders and AICPA and nasba and state societies and state boards that work so hard to get all states and territories to be substantially equivalent and to get the mobility and coming up with a reasonable alternative.
Ken Bishop: [00:28:30] You know, that doesn't disrupt mobility. I think we're all willing to look at it. So so, you know, you know, I, I know that, you know, we're looking at is there another an alternative pathway? You probably heard of the New Jersey model. You know, the reason we struggle a little with the New Jersey model is it's not one that's scalable. And it's probably not sustainable because Pricewaterhouse is paying the full freight of that small number of candidates going through Saint Peter's. But we kind of like the concept. So we're we've got several solutions right now that we're working on, but we're not giving up on that. We're trying to come up with a solution that resolves as many of these issues as possible, but without disrupting substantial equivalency and mobility. Right? That is our goal. It's not to put a stake in the ground and say we can't change.
David Leary: [00:29:15] So So Ken, stepping back from CPAs. Right. And thinking about this as just accounting talent, so bookkeepers, IAS, tax preparers, virtual CFOs, right. The whole stack guys. Right. What is doing? To increase just the entire profession. Participation. Right. More bodies, more labor. And because obviously it's easy to focus just on the CPAs and 150 hour rule. But are you guys working together for these other parts of the profession on the whole?
Ken Bishop: [00:29:44] Well, we're not and I can only speak for Nas, but I mean, you know, our job is to nasba is to enhance the effectiveness of state boards of accountancy, to provide the tools for determining licensure and readiness set for the CPA examination. We know there are a lot of quality accountants out there that do tax, you know, enrolled agents and others, but we have absolutely no nexus at all to them. And we're not doing anything to encourage or discourage them. Our our total focus is on getting more CPAs in because we do know small firms are struggling to hire people. We have members of my Board of Accountancy are struggling to hire CPAs for their firm. They're spinning off work to other firms. So they absolutely know the problem. And so we know it's a problem. And it's not just for Minnesotans. It's it's for the entire country. And we are. But but what I want to clear is that we aren't resting on our laurels. We are working on solutions. And we put a lot of brainpower, money and others behind it, capacity behind it. And we're coming out with some some programs very, very quickly that to address it.
Blake Oliver: [00:30:52] But what programs like what's going to really make a difference We're looking.
Ken Bishop: [00:30:56] At for for that group we're looking at starting to consider a pipeline for or excuse me, a 30 hour or something like the New Jersey again. But but you know, that one is that is scalable and also affordable. We're also looking at possibly an amnesty program where people who dropped out during COVID that lost parts of the exam, an opportunity for them to come back and maybe get those parts back if they reenroll and sit for the exam. We're just trying to think out the box and come out of all solutions again without disrupting again the mobility that took so many volunteers decades to achieve.
Blake Oliver: [00:31:36] Yeah. I mean, I just. I have yet to hear of a program. Like. Like, here's my problem with CPAs number one program, right? This New Jersey thing.
Ken Bishop: [00:31:44] By the way, that is not a program they they that that is one where if you want to know the truth behind that program, the New Jersey board was having a discussion about you know the one 2150 likes motherboards fat just you know, usually a person and and and we had a conversation with the advocates of that discussion and he was sort of the genesis of coming up and developing the 150 or excuse me the 120 program with the 30 additional hours through Saint Peter's University there. And so it was a ground roots effort from the New Jersey board that actually implemented. So it's not an AICPA plan or a plan. Okay.
Blake Oliver: [00:32:26] Well, they've they've added it to their plan. They've made it seem like it's part of their described it.
Ken Bishop: [00:32:31] We've added it as a as something for us to look at the success of that model and how can we make it scalable and affordable.
Blake Oliver: [00:32:39] Right. So so here's the problem. I see with it as like why it won't work as somebody who has, you know, worked in public accounting, Is that like the biggest one of the other barriers to attracting people into the profession is the hours. So what you're saying is instead of people going and sitting in a classroom for a year, we're going to put them to work in firms and they're going to have to work and they're going to have to earn the education at the same time. So like they're just they're going to be really busy. They're going to be working. Long hours at the firm, and they're going to be spending a lot of time trying to pass these courses. So like, I don't see how that addresses the work life balance issue in the accounting profession. It just exacerbates it even further.
Ken Bishop: [00:33:19] Well, like you talked earlier about all these 120 CPAs out there and how a great job they do and they do. And many of them work very hard when they were in college, you know, when they were achieving that. I will tell you, the New Jersey plan and the plan has the firm participating participates in encouraging and giving those people the time and leniency to do the programs they need to do. And that's what we're doing in there. So, yeah, I agree with you, but it won't work if if these people are so overworked they don't have time, you know, prior to computerized tests, when those paper and pencil almost all given twice a year in November, May and November, almost every firm gave their employees, you know, study time off. They worked together as a group to pass the exam. And somehow during computer computerized examination, that just sort of went away and it just kept getting worse and worse and worse. Now that we're trying to go back to, say, firms, you've got to you've got to invest in this, too, and your employees and give them the space, the opportunity and the time to study and be prepared and to sit for the CPA exam in a timely way. So you're absolutely right. It's an issue, but we've got to resolve it.
Blake Oliver: [00:34:28] Yeah, I just in general, I feel like. The profession has made this. We've tied the CPE to a traditional education path, to college, to to traditional education. And that has gotten more and more expensive over the last decades. It is one of the biggest expenses that you will ever make AS But.
Ken Bishop: [00:34:49] That's not unique to CPAs, I mean.
Blake Oliver: [00:34:52] Right. No, I agree.
Ken Bishop: [00:34:52] I have a daughter CPE. I have a daughter who's a teacher. The teacher should be tenured in California, has to have a master's degree and.
Blake Oliver: [00:34:58] We have a teacher.
Ken Bishop: [00:34:59] Crisis.
Blake Oliver: [00:35:00] We have a teacher shortage crisis.
Ken Bishop: [00:35:01] It's tied to a traditional education. Right. Name a profession that isn't right.
Blake Oliver: [00:35:06] And I'm saying they're all we should.
Ken Bishop: [00:35:08] Let all professionals be professionals without an education.
Blake Oliver: [00:35:10] Well, I say that we change the education so that it's more flexible and not tied to these universities that are bloated, that are expensive, you know, that are not providing the value anymore.
Ken Bishop: [00:35:25] I'm probably not going to take this opportunity to be critical of our education system in the United States. But I'm not going to disagree with you either.
David Leary: [00:35:32] Other profession have done things to deal with their demand, I mean. Decade ago, nurses were going to school for free. The hospitals were footing the bill. To go back and become an RNN. Right. So the education removing the barrier to getting the the education, either the cost, the time to do it, etcetera, definitely impacts the supply. There's there's no doubt on this. And like we're just we're not seeing levers pulled. There's no levers being pulled. Like this is going to be 40.
Ken Bishop: [00:36:00] Years.
David Leary: [00:36:01] Old next week.
Ken Bishop: [00:36:02] We're having we're having respectful conversation with education. You know, some colleges aren't very happy with the. But we're proposing that they pay $150 an hour. But, you know, I just I just attended an economic an international economic conference. And they did a study about the cost of everything over a period of time. And the most dramatic increase during this, of all the things of food, of fuel, of of cars, of electronics, of houses, the most significant increase was education, which during this period of time jumped like 250%. So we do know there's a correlated cost of education. Plus students are getting smarter about not wanting to go deeply into debt. You know, our student debt. So we hear you. We don't disagree with that. And that's one of the issues that we have to also have conversations about. So I'm not disagreeing with you on that, but I don't think getting rid of education is the answer.
Blake Oliver: [00:37:01] I say I would I would change it to modify the education. Right. We still want to have education. We want to have experience. We want to have a rigorous exam, those three points. But I don't think the universities, the traditional accredited universities are doing a good job. I mean, there's there's no reason that we can't teach people to know what they need to know to pass the CPA exam in three years like they do in other countries. Why does it take five years here? It just seems so inefficient. I mean, we've got some.
Ken Bishop: [00:37:27] You have you have to be pretty careful, though. I mean, you know, we have we have co-op where we do the termination of mutual recognition agreements with countries like in the UK and and Ireland. And and what I will tell you, they have competency based education where the United States has an hourly based we're the only country on the planet that has an hourly based education system. So when you say three years, if you look at the educational experience in three years in the UK, you, you know, it looks a lot different in the United States, but the amount of total education is really not that much difference, but it certainly has a cost component. Yes, it is something that probably the future I expect the United States is going to look more like a composite based model than an hourly model. But right now we are pretty much with the hourly model and we're trying to adapt to that. Ken, I know I don't disagree with you, though.
Blake Oliver: [00:38:20] I know we're over on time. I want to know, do you have a few more minutes? We had two questions come in from our listeners.
Ken Bishop: [00:38:25] I'll give you all the time you want.
Blake Oliver: [00:38:27] How about that? Fantastic. So Mason said this is more of a this is a question. Why is there an assumption that you need a master's degree to be a CPA? I got my 150in four years with no additional cost. Is my alma mater the only school that does this? What am I missing?
Ken Bishop: [00:38:42] Well, to be clear, we don't believe that you have to have a master's degree. And let me tell you why. A lot of people that come in to become an CPAs are formerly lawyers or formerly teachers. And so they've had a four year degree in something else. So the additional time for them may be that's when they take on the back end, the the accounting courses. So that was me, 150 hours. Yeah. So they come up with 150 hours and and so they're as educated as a master's degree, but they weren't trying to see where a program, you know, from the very beginning you want to have a master's degree. But we're not asserting at all that someone needs to have a master's degree to be a CPA. A lot of the best CPAs that I know had an undergraduate degree in something else and topped off with the accounting courses to get the 150.
Blake Oliver: [00:39:30] Oh, and I love this idea of switching from an hourly based system to a competency based system. I mean, isn't that what the exam is? The exam tests for competency and the education? Yeah. And the way our education is set up, it just tests for can you sit in a seat in a classroom and pass some tests, you know.
Ken Bishop: [00:39:49] Well, you know this already, Blake. The education system in the United States, even though it's hourly, it has already moved a lot towards copsey based. When you look at things like Western governors Association, when you look at most candidates, they go to school and they don't take or they get they get coursework in for college. In high school, they they don't take English one and two, but but test advanced English and they get nine hours of credit. So it's comp based. You got credit for a course because you had the comp C to pass a test or to achieve the higher level course. So they end up with 150 hours, but they didn't spend 150 hours in a seat in a college. You know, they achieved it through a different way. So so you have to be careful when you say that that that the United States model doesn't have a lot of comps built into it. But it's not the way it's measured and we still measure ours. And and so that's why our law is written, Right.
Blake Oliver: [00:40:43] But 20,000. 20,000 students graduate from MACC programs every year. And those are typically people who went to a four year bachelor's degree and then did a fifth year. That's and they're the ones who are spending the most money. Like that's-
Ken Bishop: [00:41:00] It depends. It depends on the school. Some they they are they take their general courses, but then they get into accounting and and into the MACC program where I'm on the board at the Vanderbilt. Almost all of our students who come there for the MACC program do not have an accounting degree and their undergraduate like like you described. So I'm certainly familiar with that model.
Blake Oliver: [00:41:20] So Cody said if a person with a two year associate's degree can pass the CPA exam, why would it matter that they didn't take 150 credit hours to get just as smart as somebody who took five years?
Ken Bishop: [00:41:32] Well, yeah. I mean, we hear that argument a lot. Obviously, it's like if it's like when a lot of states now let you sit for the exam at 120 instead of 150 is it originally came out and some people say, well, you can pass the exam at 120, then why can't you go ahead and be licensed? Yeah. And I said that's that's where that's where legislatures and you know, with a lot of input from the profession and regulators a long time ago, four decades ago said we need to continue to raise the bar. And so so having the more well rounded like what you had Blake the philosophy whatever it is we believe, makes you a better a better CPA in this world where many CPAs never touch like an audit, many never touch tax. They do so many different things as CPAs anymore in the profession, so that well-rounded education wouldn't help to have additional technical accounting courses. The other work is what's important, but it has to be high value. I agree with that.
Blake Oliver: [00:42:34] Yeah. And right now it can be anything.
David Leary: [00:42:37] Yeah. Yeah. Maybe the argument here is should the 150 the mistake was 40 years ago. It never said you must get a mac. And maybe that's the problem because if I like lawyers, you can't just go take other classes. You have to go to law school. If I want to be a doctor, I have to go to residency. Like, this is just so wishy washy. Maybe that's the big flaw here, just.
Ken Bishop: [00:42:56] So you know. And you probably already know this, but when this started out, that's what the desire was, is to have a master's degree. The problem was, unlike law schools and medical schools, there weren't any accounting masters of accounting program or enough out there to handle the volume of CPAs that were needed. And there was a lot of resistance in state legislators from the four year colleges. You know, they they didn't have a master's program and they didn't want to lose. So so like any legislation, the people that are being hurt by it are there to testify against it. And so essentially the argument was, okay, let's move away from the Masters and go to 150. But it also served us well for the people who had like you, Blake, had a different undergraduate degree who was able to then become a CPA with the top off versus the opposite way.
Blake Oliver: [00:43:42] Yeah, I mean, for me, and this is something that we probably don't even have time to go into, but it's the impact on career changers of the 150. I think that the talent shortage is so dramatic in accounting that if we want to actually solve this thing, we need to get people coming in, more people from outside the profession who maybe they didn't make the wisest decision when they were in their undergraduate like me, and they majored in music. But they're smart and they could be great accountants. For me, it was extremely difficult to become a CPA because I was working and I had to take all of these 30, you know, credit hours. And I really did have to do the 30 because I didn't have a business undergraduate degree. I didn't have any of those accounting classes. So I had to work. I had to take these classes at night and I had to study for the exam and God help me, if I'd actually been working at an accounting firm. Instead, I was freelancing so I could have that flexibility. But like, I don't know how anyone changes careers into accounting. It's very, very difficult and we could make it so much easier if we dropped that requirement, if we allowed people to take the exam and have the bachelor's degree and get some work experience, it would be it would be much easier. I mean, just look at the first of all.
Ken Bishop: [00:44:55] Yeah. First of all, Blake, I'm glad you became a CPA and told your story to do that. We see a lot of CPAs though, like you who did change a career and come into it. But I will tell you that, you know, social media is so powerful. I mean, people that want to be CPAs are not they can go out there and hear about salaries and workload and things like that. And and we have work to do to get the salaries up, the work life balance, things, you know, worked out, allowing people who are sitting for the CPA exam not to kill themselves, working so that they can't get through the exam. We need the support of firms to do that. So we hear you on all of that. You know, we probably got to where we are because we could because there was such a surplus of of candidates up until just a few years ago, we weren't focused on some of the stuff that we have to focus on now because of the challenges of the pipeline. So it's kind of new. We're working on it. And and will we make some bad answers? We could, but we're at least we're I don't want anybody to think that Natsvo or CPA are working together, that anybody's resting on their laurels or does not agree. We have a serious problem because we know we have a serious problem that we have to resolve.
Blake Oliver: [00:46:05] And the. The certification that I see succeeding is the Certified Management Accountant certification. They are growing leaps and bounds, surpassed 100,000, I think. And meanwhile, you see the number of CPAs declining. And what's the difference between the CMA and the CPA? It's that CMAs only need a bachelor's degree. They pass the exam and they get, I think it's three years of work experience. So it's a very simple, streamlined requirement without specific courses, without this 150 hour rule. And people are being drawn into that. Why can't we be like that? I mean, would would anyone say that CMA has a lower bar than the CPA?
Ken Bishop: [00:46:51] Oh, I would, absolutely.
Blake Oliver: [00:46:53] Do you think do you think CMAs are less qualified than CPAs to.
Ken Bishop: [00:46:57] Do audit work and the things that CPAs do?
Speaker4: [00:46:59] Absolutely.
Blake Oliver: [00:46:59] But you said only, you know, most CPAs aren't doing audit these days, right? Only 15% of CPA. [CROSSTALK]
Ken Bishop: [00:47:05] Let's talk about. So the interesting thing about the CPA profession. Is that when you become a CPA, you can, as they say, hang the shingle. It's like if you get past the law, you can practice accounting, public accounting, which means you're the only people in the United States who can sign a test and audit. So whether or not you do it, our job as regulators is to make sure that if you do it, you're qualified to do it at entry level. You maintain the capacity to do it and that your peer reviewed that other people agree that you can do it. So that's what I'm saying. No, absolutely. There's no comparison between the capability and the and the even the allowance of what a CPA can do or management accountant can do. And by the way, we're not I'm not talking negatively about them. They do an important role and good friends over on that side, you know, and the leadership of those organizations. So I'm not being critical of them. I'm saying there's a real difference.
Blake Oliver: [00:48:00] Well, I'm a non attest CPA, right? I was licensed in California and I didn't get the A test hours, so I can't sign an audit paper.
Ken Bishop: [00:48:08] Well, as you know [CROSSTALK] California is the only state that has that. So I do know there are some unique market, by the way, we don't disagree with that, that two tier we've gotten away from the two tier and maybe it makes sense but but yeah, that's the only state where that exists.
David Leary: [00:48:22] At the end of the day, the market doesn't know nor care because a CPA forgot his name. We just he was at the CPA Educator conference. He's he's leaving, but he's the president of the State Society, the.
Blake Oliver: [00:48:34] The CFO at the State society in Washington.
David Leary: [00:48:37] He's like had a horrible GPA, did 12 years of school. I had I filled out a one university, moved the other university. But nobody cares because he has those three letters like, no, that's at the end of the day, all that really matters. And if that's what matters and the test is the proof. Because you're telling me like if I've heard this conversation correctly, ten people, the work experience they get is very variable. The education experience, obviously we know is variable because you can do anything you want with those 30 hours. If the only thing that's concrete and black and white is the test, then that's that's the the test. That's the thing.
Blake Oliver: [00:49:11] That really matters.
David Leary: [00:49:12] Like if know if you're LeBron James.
Ken Bishop: [00:49:15] I agree with that premise. We do not agree that the exam is the exam is an entry level to determine entry level skills to get into the profession. That combined with the experience which, you know, again, it we lower the bar for for the experience, the requirement of experience to increase the education back when they did 150. But no that you know there's you know the CFO you're talking about I can come up with stories on both sides of this argument, but I can tell you in the in the CPAs that I'm around on the board. Of course, it's a very competitive process to get on the board. There are some of the senior leaders of the profession, both on our board and the CPA and you, Blake, and to, you know, to like other people that I've seen you interview. I mean, there are some really significant contributors to the accounting profession in different ways, like what you you all do with this blog. I mean, it is a it's a very important, you know, service that you provide to do this. And so I do think that CPAs bring something to the table. Again, I'm not one I'm proud to have a daughter that is my best friend's CPA. But, you know, I as a consumer, back when I was a cop, in my cop days, I paid a premium to have a CPA do the work that I had done because I knew that I was dealing with the premium account. And that's I think that's what most consumers want, believe and expect out of CPAs.
Blake Oliver: [00:50:43] Have you all have you all polled CPAs to see what they think about this? Because like David and I mentioned earlier, when we post about this on social media, you know, the young CPAs are on social 30 to 50 year olds. I would say 1 in 100 people is in favor of this. It is really unpopular. So have you all.
Ken Bishop: [00:51:05] Here's what I'll tell you. Do you answer your question is no. We we have. But what we have is that we have all 55 years jurists, us jurisdictions, almost all the board members are CPAs and some public members. And we have the executive directors and executive staffs across the country. We meet with the executive directors on a monthly basis and have a call where they discuss. We meet regularly through our regional representatives with all state boards. So we talk to people who are obviously somewhat biased because they're in the regulatory side of this. But we also meet regularly with the CPA, which is the other side.
Ken Bishop: [00:51:39] The professional side. And so we do get an awful lot of input. I will tell you, I think I said it on the front end, there are always been those that have opposed the 150 from its genesis to now. And and we've always listened to them and and we have thoughtful dialog with societies, with state boards, with individuals. But the consensus in my world, the consensus in my world is support for substantial equivalency mobility. Thus the 150 or and if we're going to come up with an alternative, it has to be universally adopted.
Blake Oliver: [00:52:15] Yeah. And how many of these folks who are in your circle had to get the one? 50.
Ken Bishop: [00:52:21] Well, growing number, obviously, because as the baby boomers retire and we're seeing more and more people that had the 150, I don't know that I can give you a ratio, but I can also tell you that many of the people that I know that were CPAs prior to the 150, many of them had master's degrees and and had, you know, already MBAs and law degrees and other degrees in addition to accounting. So, you know, there's also a large number of people that just got, you know, the bachelor's degree with also the very intense experience requirement pre 150.
Blake Oliver: [00:52:57] Yeah. Well, David, I think I'll give you the last word on this and then we'll wrap it up because.
David Leary: [00:53:04] I want to make sure I heard this correctly cause it's kind of making my head explode. Okay. Did you say head explodes?
Ken Bishop: [00:53:09] So let's do.
David Leary: [00:53:10] This. So did you say that all the exam does is prove you you're an entry level CPA.
Ken Bishop: [00:53:18] Exactly.
David Leary: [00:53:18] So. So this is crazy. Like, that is insane to me. So the assumption is, as the consumer. As a consumer, as a consumer, if somebody has that, I assume they're just as good as anybody else that has that.
Blake Oliver: [00:53:31] Well, you know me, David. That's the.
David Leary: [00:53:32] Branding. That's, you know, branding.
Blake Oliver: [00:53:34] You know me. David And so I passed the CPA exam, and with one year of experience, I was a CPA.
David Leary: [00:53:42] Right. But the branding is it's all equal. That's why maybe you need plus or whatever it might be. Because if I go into a doctor's office and they have that certificate on the wall, they have those two letters. Doctor, you're kind of trusting. You're in good hands. But you're telling me that just because they got the CPA. Yeah.
Speaker4: [00:53:59] But if you go to the Barremian, you understand they're going to believe practicums and.
Ken Bishop: [00:54:03] Years of experience before they can practice medicine, right?
Blake Oliver: [00:54:07] So we we replaced like doctors have to do residencies. They, they do like, what, five, ten years of experience before they can practice. And in the CPE world, we have replaced the experience requirement with an education requirement. Essentially like one year of experience is hardly anything. And I just think that we need to go back to our roots. I mean, used to be purely experience based, right? Exam experience. I mean, we can go back a hundred years and it was you learned on the job. And I just I feel like we my my feeling is that we have replaced that very valuable experience with education. And I'm not a big fan of classroom education, Ken. Like I I've I went to a top university. I went to Northwestern University and I saw I saw how you could game the system, right? Like my degree at Northwestern has value because of the brand.
Ken Bishop: [00:55:01] Not like you're a smart guy. You're going to game the system. If you went to Harvard, I mean, so, so mean. You're smart and we're proud to have you as a CPA. But, you know, I'm not disagreeing with you about the value of good experience. I don't disagree with you on that. You know, you know, I would not be surprised if we have serious discussions about an alternative pathway that that can with that that doesn't violate substantial equivalency mobility. Right now, we're in a you know, like I said, short term, what do we what do we need to do right now? I don't think that having, you know, legislation that isn't well thought out, believing, you know, based on some people that education is the whole problem, you know, we could actually do more harm than good if we don't slow walk this and do it right. So so, you know, I don't think you all said anything in your past that I've heard you say in the past. You all make good sense. I mean, there are some valid arguments out there that we need to listen to and consider and consider change. I don't want anyone to believe that anyone I know at AICPA or Naspa has a stake in the ground that says we're never going to change, that. The education and future is going to look just like it does now, because I don't think that's the case. I think that right now we're really trying to protect the for consumers and and the profession. So equivalency, mobility and what can we do to to slow walk this and fix it, but also fast walk it enough that we can get people in the pipeline on the short term as quickly as possible?
Blake Oliver: [00:56:37] I think that's a great way to end this episode. Thank you so much, Ken. We've been talking with Ken Bishop, president and CEO of the National Association of State Boards of Accountancy. Have a great weekend.
Ken Bishop: [00:56:47] Thank you. I enjoyed it.
Blake Oliver: [00:56:49] All right. Bye, everyone.