May 2000

Executive Committee Votes Against Partnering with AICPA To Launch Internet Portal

Declines Participation in Shared Services Company with Other States

The NYSSCPA Executive Committee voted on May 8 to decline at this time to join with the AICPA in launching a business-to-business Internet portal for the accounting profession. The committee decided that it needed more financial, legal, and marketplace information before the Society could participate.

The Executive Committee also voted not to join the State Societies Network, Inc. (SSNI), a consortium of state societies that formed a legal entity to address the business issues of the portal project and other shared services. Participation would have required the Society to make a financial commitment and to license its database to the AICPA, in return for future shared revenue.

The Executive Committee presented its views to AICPA Council members from New York at a special meeting on May 9 in New York City. The full Council is expected to vote on the portal proposal at its May meeting in Puerto Rico. If approved, the AICPA will position the portal as an initial public offering.

The Executive Committee's decision not to participate in the portal proposal comes after months of staff research, meetings with AICPA legal and financial representatives, and discussions with other state societies.

Portal to Target Small Businesses

According to the AICPA, the portal, tentatively named cpa2biz.com, is a vertical portal that will connect CPAs and small businesses. Vertical portals provide one-stop shopping for knowledge, products, and services for a particular industry. They differ from horizontal portals, such as America Online, which provide information on a variety of topics rather than target a specific industry.

The AICPA stated that it originally modeled cpa2biz.com after WebMD.com, which links physicians, nurses, patients, teachers, and medical office managers. One issue of concern for the Executive Committee is the recent performance of WebMD.com, whose stock has plummeted in the last year.

AICPA research indicates that CPAs and their small business clients conduct $3.3 trillion in transactions per year. The portal would capture 10 percent of this market and capitalize on the influence that CPAs have with their clients.

AICPA President Barry Melancon explained that cpa2biz.com will enable CPAs to serve small businesses in an Internet world, in much the same way the profession has for decades.

Executive Committee Cannot Lend Support

During its special meeting, the NYSSCPA Executive Committee approved a resolution that the Society will neither invest in nor license its database to the portal at this time. The committee based its decision on a lack of sufficient information to justify the required investment of nearly $100,000 of Society funds.

"As members of the Executive Committee, we have a fiduciary responsibility to Society members as a whole," NYSSCPA Vice President Nadine Gordon Lee said. "I don't feel comfortable at this point that we have sufficient information to fulfill that role."

In particular, the Executive Committee questioned the legal and independence issues and stated that a third independent party should investigate areas of concern.

State Societies Solicited as Portal Partners

The Executive Committee investigated the portal initiatives because of a solicitation of the NYSSCPA to join the other state societies already participating in SSNI. Formed in December 1999, SSNI's original focus was to pursue shared services so that the states could join together and realize savings on services such as dues processing, accounting, technology, and group purchasing. SSNI's most important asset is its national member database, which will now be leased to the portal.

SSNI and the AICPA formed a shared services LLC (SSC) as the vehicle to deliver services to state societies and members to channel back revenue from the portal. State societies pay $3 per member to join. The SSC provides the legal entity so that the AICPA and the states can jointly lease their database to the portal, passing income from portal transactions to the AICPA and SSNI. Leasing the joint database to the portal provides the revenue to operate the SSC and therefore to provide services to the states. Thirty-five state societies have paid at least part of the fee to join. The portal business plan includes financial incentives in the form of revenue, stock, and stock options for the state societies, members, and the AICPA. According to the AICPA, major equity partners are ready to fund the portal, pending a positive vote by Council in May.

The SSC would be empowered on behalf of the shareholders to negotiate and enter into agreements with outside vendors to provide certain core services that state society shareholders would be required to use, and others that would be optional.

"We are concerned about many unanswered financial and legal questions that we have, as well as by shifting information that we have received over the past several weeks," NYSSCPA President Alan E. Weiner said. "Therefore, the Executive Committee voted not to invest in SSNI at this time."

Several other state societies have voiced similar concerns. If the AICPA receives approval from Council, it plans to launch the shared services portal in June. *