The status of the black CPA: twenty five year update.

In October 1969, the Journal of Accountancy published an article by Bert N. Mitchell that summarized his study of the status of black CPAs. At that time, black CPAs numbered 150, or .15% of all CPAs in the United States. The Editors' Notebook in that issue expressed the profession's shcok at the underrepresentation of blacks and called on the profession, as a whole, to support a national program to end discrimination in hiring practices in public accounting.

In 1976, Mitchell repeated the study, the results of which were published that year in the May Journal. He reported the number of black CPAs had tripled, numbering 450 or .3% of the total number of CPAs in the country. In summarizing the study, he recognized that significant progress had been made as a result of a commitment on the part of the profession, the universities and black accountants. Howevever, Mitchell reminded the profession to continue these efforts and set a goal to increase the number of black CPAs to 3,000 over the next decade. An update on how far the profession has come, and how far it still has to go, follows.

In 1988, the New York State Society of CPAs established a task force to reassess the status of black CPAs in light of the profession's 20-year commitment to eliminate racial discrimination and increase the number of black CPAs. The task force conducted a national survey similar to the two earlier studies. The results, completed in 1989, indicate the number of black CPAs in the country is no more than 2,500, or less than 1% of all American CPAs. As shown in exhibit 1, page 61, the percentage of black CPAs ranks far behind the percentages of blacks in the medical and legal professions. Although numerically there are more black CPAs than in the past, proportionately blacks fare no better than they did in 1968.

As in the previous studies, the current survey sought to determine the following about blacks in the profession:

* Factors affecting the growth of blacks in the profession.

* Demographic information.

* Age and sex.

* Geographical distribution.

* Level of educational achievement.

* State of certification.

* Professional experience.

* Level of income.

* Participation in professional organizations.

* Black CPAs' perceptions of the profession.

* Growth of black-owned CPA firms.

The sidebar on page 63 details how the study was conducted.

FACTORS AFFECTING GROWTH

The number of black CPAs has increased steadily over the past 20 years, with a significant proportion joining the profession during the past 10 years. Exhibit 2, page 61, shows the year of certification for the total sample, by gender, and illustrates the growth trend. More than 90% were certified after 1970 and 58% between 1980 and 1989. The most dramatic growth occurred for female CPAs, whose numbers are growing more rapidly than those of their male counterparts. In 1975, women represented 11% of the total sample, while in the current survey 33% are female.

This growth can be attributed to several factors. The civil rights movement of the 1960s and the national emphasis on equal access resulted in the increased participation of blacks in higher education.

In addition, the accounting profession accepted the challenge of increasing minority access. Since 1970, the American Institute of CPAs minority recruitment and equal opportunity committee has awarded more than $4 million in scholarship aid to some 4,000 minority students, established summer internships and developed faculty summer seminars for accounting professors from black and Hispanic colleges and universities. The scholarship initiative of the National Association of Black Accounts (NABA) also contributed to the increasing number of blacks in the profession. Similar programs are established by individual state societies and by many of the large accounting firms.

EXHIBIT 1

Number of black CPAs

vs. blacks in other professions

                 Total the      Total    Percentage
                United States   blacks    of blacks
CPAs 1968          100,000        150       0.15%
     1975          150,000        450       0.3%
     1989          400,000      2,450       0.6%
Lawyers 1988 (*1)  724,000     14,500       2.0%
Doctors 1988 (*1)  541,000     17,800       3.3%
  (*1) Bureau of Labor Statistics--Labor Force Division

Although the leadership has made a substantial commitment to increase minority access, blacks continue to be underrepresented in the profession. The survey showed only 20% of the respondents received accounting scholarships and most were influenced to select accounting by family and friends rather than guidance counselors or professors. If these blacks report receiving only minimal benefit from the profession's recruitment initiative, a reexamination of the factors affecting minority access is in order.

On reflection, we have concluded that increasing minority access requires increasing not only the supply of but also the demand for minority candidates. The AICPA reports an increase in the number of black accounting graduates, but many are choosing to go into fields other than public accounting.

The commitment to the minority recruitment and equal opportunity initiative seems to fade at the demand level. A poll of 150 of the nation's largest CPA firms was conducted as part of the current survey, with 40 firms, or 27%, responding. Of those

* Only half reported having black professionals on staff, and 86% of those black professionals are employed by 4 firms.

* Only 7 firms actively recruit on black campuses.

* Only 6 firms report having black partners.

The underrepresentation of blacks at the partnership level is strikingly obvious. The 40 firms reported having a total of 4,751 partners, yet only 16 are black.

The impact of the "up or out" policy, which has been criticized by some, may affect blacks disporportionately. The expectation for staff accountants to either become partners or leave offers little hope to minorities if their white male counterparts are abandoning the accounting profession in considerable numbers and they see so few of their peers represented at the top.

The profession must recognize an important fact: Merely facilitating access to higher education in the form of scholarships--without the sincere commitment on the part of the firms to recruit, retain and promote--continues not only to deny the profession a supply of qualified candidates

[TABULAR DATA OMITTED]

but also to perpetuate the underrepresentation of blacks.

DEMOGRAPHIC TRENDS

The survey provided the following portrait of black CPAs:

Age. The median age of black CPAs is 36, with no significant difference between males and females. The differs only slightly from the median age of 34 reported in 1975.

State of residence. The geographic concentration of black CPAs has shifted since the 1975 survey. The overwhelming majority in 1975 resided in Illinois, California and New York. Those states continue to rank among the top five, but they have been joined by Texas, Maryland and Michigan.

The most dramatic increase occurred in Texas, which now ranks second, behind California, in total number of black CPAs.

Education. Consistent with the findings in previous studies, black CPAs continue to pursue formal education beyond the baccalaureate degree. Master's degrees are held by 32%, while 3% hold law degrees and 2% have achieved doctoral degrees. We doubt that nonblack CPAs have as high a percentage of holders of postgraduate degrees as do the black CPAs represented by our sample.

These findings do not support the view of those who suggest the 150 hours of education required for membership in the AICPA after the year 2000 will be a deterrent to minorities entering the profession.

State of certification. In 1975, black CPAs were certified primarily in 26 states (plus the District of Columbia). By 1989, the black CPAs report certification in 34 states and D.C.

California, Illinois and New York led the nation in 1975 in the number of certifications for black CPAs. New York has now assumed the lead, followed by Maryland, Michigan, California and Texas.

Again, Texas reveals the largest increase. At the time of the last survey, Texas ranked near the bottom with only 3 respondents indicating certification

in that state. In the current survey 43 respondents are certified in Texas.

PROFESSIONAL EXPERIENCE

Sixty-nine percent of the respondents began their professional careers in public accounting, 16% in private industry, 11% in government accounting and 1% in education. Compared with the 30% in public accounting in 1968 and 60% in 1975, these figures indicate blacks are taking advantage of expanded opportunities in public accounting.

The survey also asked respondents about their current positions. A large number of black CPAs left the six largest firms while others elected to leave public accounting entirely. Only 44% remained in public accounting. Considering the movement of black CPAs within the profession shown in exhibit 3, page 65, local and national firms remained fairly constant, employing 3% and 2%, respectively.

The most dramatic exodus was away from the six largest firms, where 55% began their careers but only 16% remained. Minority firms had the opposite experience; only 7% of black CPAs began their careers at minority firms but 23% are currently employed by them.

With respect to the movement of black CPAs out of public accounting, industry showed a gain of 11%. The remainder were drawn to academe, nonprofit entities or other endeavors outside public accounting.

In comparing the results of the 1975 and 1989 surveys, public accounting and teaching appear to be on the decline as professional options (see exhibit 4, page 65). Black CPAs are drawn to industry or other opportunities. The respondents' perception of public accounting and factors affecting growth for blacks, discussed later, may explain the exodus from public accounting.

INCOME

The current income of the respondents ranges from approximately $15,000 to $750,000 for the total population, with median of $44,000. The income range for men was $15,000 to $750,000, with a median of $49,000. For women, the range was $15,000

EXHIBIT 3

Comparison of first position and current

position by type of employer (*)

                    First position   Current position
Type of employer    #          %     #             %
Six largest firms   330        55%    94           16%
Industry             98        16    165           27
Government           65        11     57           10
Minority CPA firm    41         7    139           23
Local CPA firm       28         5     18            3
National CPA firm    15         2     10            2
Academe               9         1     24            4
Non
Nonprofit           --         --     31            5
Other                11         2     50            8
No response           4         1     13            2
 Totals             601       100%   601          100%

(*) Percentages have been rounded.

EXHIBIT 4

Comparison of current position for 1975

and 1989 respondents (*)

                        1975           1989
                    #        %     #        %
Public accounting   124      58%   261      44%
Academe              27      13     24       4
Government           22      10     57      10
Industry             21      10    165      27
Nonprofit            9        4     31       5
Other                4        2     50       8
No response          7        3     13       2
 Totals             214     100%   601     100%

(*) Percentages have been rounded.

to $100,000, with a median of $37,000. The differences may be due to females being newer, less experienced members of the profession.

Many believe CPAs leave public accounting in general because of the more attractive salaries offered by industry. Exhibit 5, page 67, which compares the median income by current employer, does not support this contention. With the exception of national firms, all medians fell within the $40,000 to $50,000 range. There were differences noted in the range of compensation among the different types of employers, with minority-owned firms and industry offering the widest range. Black CPAs seeking to maximize their financial potential may very well view these employers as offering the greatest long-range potential.

PARTICIPATION IN PROFESSIONAL

ACTIVITY

Blacks have continued to be active participants in professional organizations, including those organized by and for blacks. For example, 75% belong to the AICPA and 78% are members of their state societies. Eighty-six percent are members of NABA, but only 16% of the females are members of the American Society of Women CPAs. The ASWCPA may not be actively reaching out to black women, or perhaps black female CPAs may find their interests are better served by other professional organizations.

Black involvement in the profession's policy-making and regulatory processes has also been increasing. Three blacks have served on the AICPA board of directors. The New York State Society and the District of Columbia Institute of CPAs both have had black presidents. Several state boards of accountancy have had black board members, including Colorado, Georgia, Illinois, Maryland, New York, North Carolina, Ohio, Texas and D.C.

HOW BLACKS FEEL ABOUT THE

CPA PROFESSION

The respondents were asked to rank the characteristics of the profession that contributed to their decision to select accounting. In order of importance, the respondents listed the following features:

1. Intellectual challenge.

2. Opportunity for advancement.

3. Income level.

4. Prestige.

Eighty-two percent found their prior perceptions to be true. Despite some disappointments, 92% believe they made a wise choice.

When asked to reflect on their progress in public accounting, 67% thought their growth had been limited. As a double minority, a higher percentage of female respondents (72%) reported limitations to growth than did male respondents (65%). Two thirds (66%) of all respondents indicated firm bias as the primary constraint. Other reported restrictions to growth were client bias (43%), limitation in engagements (35%), lack of opportunity (33%), personal issues (18%) and inadequate education (8%).

Although the rank order was the same for males and females, men (38%) seemed to be more sensitive to client bias than women (21%).

In the 1968 study, 75% of the respondents reported firm bias and 76% reported bias among clients. The more recent data suggest the respondents perceive clients as being more receptive than in the past, while firms are only slightly more receptive.

Limited growth as a result of client and firm bias has been a common experience among these respondents, and the degree to which it has affected career decisions is worthy of examination. Of the respondents who are no longer in public accounting, 74% indicated "better income" as the primary reason for leaving, 27% listed "personal issues" and 25% listed "lack of advancement." One could conclude that since bias is not unique to the accounting profession, the experience of bias alone is insufficient to influence black CPAs to leave public accounting. If the possibility for better income is

EXHIBIT 5

Current salary by type of employer

Employer            Range              Median
Minority CPA firm   $15,000-$750,000   $48,000
Industry            $25,000-$600,000   $46,000
Largest six firms   $20,000-$250-000   $43,000
Nonprofit entity    $27,000-$150,000   $50,000
National CPA firm   $24,000-$140,000   $28,000
Local CPA firm      $15,000-$120,000   $40,000
Government          $19,000-$100,000   $42,000
Academe             $30,000-$ 85,000   $46,000
Other               $15,000-$ 46,000   $35,000

added to the formula, the opportunity to pursue their careers in an environment that offers the potential for greater compensation is very appealing.

GROWTH OF BLACK-OWNED CPA FIRMS

The growth of blacks in public accounting can also be measured by the success of black-owned firms. The survey of 162 black-owned firms throughout the nation yielded a response from 61 firms located in 21 states and D.C. The largest concentrations are in states with the largest number of black CPAs, including California, New York, Illinois and Michigan.

Although the firms range in size from sole practitioner to 124 employees, half had fewer than 10 employees. These firms also reported a total of 133 partners (or owners), of whom 21 were female and 11 white. Women and whites were represented at the partnership level in 30% and 13% of the firms, respectively.

The black-owned firms have a high concentration of their business in the nonproit and government areas. The Small Business Administration's section 8(a) set-aside program-under which a certain number of federal government contracts could be granted to minority firms without competitive bidding--was a major boost to the growth and development of minority-owned firms during the decade of the 1970s. However, during the Reagan administration new rules were instituted and most of the firms have since graduated from the program. Many firms suffered severe revenue declines after graduate, and at present almost 60% of the firms have fewer than 10 professionals.

In 1970, 15 black- and Hispanic-owned firms established the National Association of Minority CPA Firms (NAMCPAF), headquartered in Washington, D.C., to provide a forum for the exchange of ideas and to encourage the establishment of more minority-owned firms. Funded by the federal government (Office of Minority Business Enterprise) at levels between $100,00 and $200,000 per year, the association played a significant role in fostering the creation of new minority-owned firms, resulting in the development of over 50 new black-onwed firms in its first 10 years.

The association was also instrumental in opening federal markets to minority firms. However, during the Reagan administration, federal funding was cut off and the member firms were unwilling to contribute the funds necessary to continue the work of the association. As a result, NAMCPAF went out of business in 1982.

The data suggest that black-owned firms are not enjoying the same robust growth experienced by public accounting firms as a whole; over 60% of the respondents reported either a decline or no change in size between 1987 and 1989, and only 25% predicted major growth in black-owned firms in the near future. It is interesting to note that 55% of these firms have been in existence for less than 10 years, but only seven firms, or 11%, were established within the last four years.

The decline in growth of black-owned firms in size and in number may be the result of their unwillingness to provide support for an organization to lobby on their own behalf. In the current survey, when asked if they were willing to join a national association of black CPA firms, 79% responded affirmatively but only 41% would be willing to pay annual dues of $1,000. Unless black-owned CPA firms, individually and collectively, accept the responsibility for their prosperity, the decline observed in the 1980s will continue.

Black-owned firms report they have difficulty recruiting both entry-level and experienced staff, a problem shared by the majority-owned firms. While 41% of the firms recruit at college campuses, only 18% recruit at historically black colleges; 41% of the minority firms provide internships or scholarships to black students.

CHALLENGES REMAIN

Twenty years ago the AICPA council passed a resolution calling for full integration of the CPA profession "in fact as well as in ideal." During the ensuing period the number of black CPAs climbed from 150 to 2,500--admittedly a significant accomplishment--yet we are a very long way from achieving true integration, considering there are about 400,000 CPAs in the country today. Despite the 15-fold increase, blacks continue to represent less than 1% of the accounting profession as compared with 3.3% of medicine and 2% of law.

The accounting profession faces many challenges as we head into the 21st century, not the least of which is how to harness the human resources it will need to meet the growing demand for services. Federal government estimates show the future work-force will experiences a sharp decline in the supply of white males, the traditional backbone of the CPA profession. The profession will have to look to nontraditional sources for its labor supply, which will be primarily women and minorities.

Herein lies an awesome opportunity for both the profession and the black community. A true win-win situation looms. The CPA firms must immediately seize this opportunity by investing heavily in efforts to encourage more blacks to study accounting and by providing more opportunities for black accounting students to participate in internships--while continuing to offer financial support to needy students. In addition, the firms must recruit blacks aggressively and institute in-house programs to retain blacks.

At the same time, the black community and educational institutions must redouble their efforts to make blacks aware of these opportunities. Simply by virtue of enlightened self-intrest, the profession should be committed to having at least 5% representation of blacks within the first decade of the 21st century. Given the expected growth in the profession as a whole, this could mean upward of 50,000 black CPAs within the next 20 years. The firms should have blacks in key management positions as well as more black partners to demonstrate that making a commitment to these firms has a real payoff.

The profession can take some pride in what it has achieved in increasing the number of black CPAs over the last 20 years. Let's hope that the next two decades will see such a positive outcome that the reality of equality will approach the ideal.

BERT N. MITCHELL, CPA, is managing partner of Mitchell/Titus & Co., CPAs, New York, New York. A former president of the New York State Society of CPAs, he has served on the AICPA board of directors and is a former chairman of the New York State Board for Public Accountancy. Mitchell was also chairman of the New York State Society's advisory task force to study blacks in the CPA profession. VIRGINIA L. FLINTALL, Ed.D, is a licensed psychologist practicing educational psychology and an educational consultant at the New York State Society of CPAs.