Shapiro, Leslie S National Public Accountant v41n9 PP: 9, 13 Sep 1996　　 ABSTRACT: 　The accounting profession has recently been confronted with thepossibility of privatization. In California, a form of privatization isbeing considered that would eliminate front end regulatory control of thepractice of accounting. This proposed legislation is the most consistentwith free enterprise and competition in the marketplace. At the other endof the spectrum is legislation enacted in Virginia, which: 1. gives theVirginia Board of Accountancy authority to contract with a private personor firm to perform a number of services on behalf of the Board, and 2.delineates the eligibility of those wishing to perform these functions. 　This would be detrimental to public and free enterprises because it couldlead to the promulgation of rules in the self-interests of certain pocketsof the certified public accountant community. TEXT: 　The regulation of the accounting profession has been in a curious butperhaps expected state of flux during the last year or so. The most recentrealization to confront it is privatization or what we havc come to know as"outsourcing." Its goal is to shift the regulation of the profession fromstate accountancy boards in whole or in part to the private sector. Theconcept in great measure extends to other licensing boards as well. Thegoal of privatizing includes deregulation and reduction of the size ofgovernment. 　The form of privatization that most reflects the goals of government sizereduction and deregulation is under consideration in California. It in factmay not be considered privatization at all since it outsources "control" ofthe practice of accountancy to the public. As previously reported in theNational Public Accountant, recommendations made by the CaliforniaDepartment of Consumer Affairs would phase out the accountancy board in theyear 2002. In the interim, the composition of the board would be changed toprovide public members the majority seats. The work of the board would belimited to conferring certification. There would be no front end regulatorycontrol of the practice of accounting. All would be free to practiceaccounting and any restrictive laws on the subject would be reversed. At the other end of the spectrum is legislation enacted in Virginia earlierthis year. It gives the Virginia Board of Accountancy authority to contractwith a private person, firm, corporation or association to perform a numberof services on behalf of the Board. The legislation also delineates theeligibility requirements of the private sector person or entity wishing toperform the functions. The legislation envisions virtually all substantiveand administrative work of the Board of Accountancy being outsourced. 　Proposed legislation in New Mexico suggests yet a third privatizationprogram. In New Mexico, state licensing boards currently operate under theumbrella of the Regulation and Licensing Department (RLD). The proposalcontem-- plates the establishment of the New Mexico State Board of PublicAccountancy independent of the RLD. Its practitioner members would beelected by the accountants licensed in New Mexico. (The public memberswould continue to be appointed by the governor.) All funds received for theprograms administered by the independent board would be used by the board,i.e. it would be selffunded. Certain other laws would continue to beapplicable, such as the Tort Claims Act and the Financial Disclosure Act.The proposal is expected to be introduced during New Mexico's 1997legislative session. 　A fourth variation of privatization is reflected in legislation introducedin Colorado early this year. The proposal would require the delegation toprivate trade organizations the supervision of professions and occupationsnow performed by the various state licensing boards and agencies. Theywould be referred to as self-regulatory organizations (SROs) with limitedoversight by the government. The Colorado Society of Certified PublicAccountants would be assigned as the SRO for the licensed accountantcommunity. This is predicated on a provision in the proposal thatcontemplates SRO status to a trade organization representing at leasttwenty percent of the participants in a profession or occupation regulatedunder such proposal. This could be interpreted to mean that NSPA's Coloradoaffiliate, the Public Accountants Society of Colorado, also could be an SROif the accountancy laws in Colorado apply to its members and it has thetwenty percent membership of all similarly situated practitioners there.The bill did not have success during the 1996 legislative session. NSPA hasbeen advised that another bill for privatization following somewhat thesame lines as the unsuccessful bill will be introduced next year. 　As deregulation and the desire to reduce the size of government continue toattract the attention of state legislatures, there is even greaterpropensity for privatization legislative initiatives. The wide range ofwhat we have seen in recent months should make all accountants sensitive tosuch initiatives. Deregulation and reduction of government is the mostevident in the California recommendations. It also is the most consistentPress to continue.with free enterprise and competition in the marketplace. 　The Virginia legislation, which has been enacted, is the type ofprivatization about which all in the profession should have concerns. Ithas been said that many state accountancy boards promulgate rules in theself-interests of certain pockets of the certified public accountantcommunity. This has resulted both in restrictions on entry into theprofession and in unneeded and unpopular restrictions on licensees insmall-size practices and on those who are not licensed. With privatizationresulting in the program being run by the certified public accountantsociety in Virginia, the situation has the potential of being exacerbated.This would be to the detriment of the public and free enterprise. 　The proposal in New Mexico seems very close to what is now in place, exceptfor the elimination of the umbrella organization having oversight for theprogram. Is this a "rose by any other name" situation? Perhaps it is tooearly to tell since the concept itself has not yet been fully developed. Anundeveloped concept also is a problem in Colorado. Clarity regarding thedirection of the proposal before it is reintroduced there would be veryhelpful. 　It is clear that the era of government reinvention is upon us and that theaccounting profession is and will continue to be directly affected. Theremust be an awareness program in every jurisdiction to determine at theearliest time possible proposals being considered. Equally important isnotifying NSPA when this occurs. This also would be a time for networkingwith counterparts in other jurisdictions that may have been faced withsimilar situations. Each proposal must be evaluated on its merits todetermine the impact on the accounting community and the position thatshould be taken. We must remember that all accountants are affected by anylegislative effort as sweeping as privatization.