Institute Spreads Financial Literacy


Individuals of all socioeconomic classes are spending too much and saving too little. So when a Roper consumer poll commissioned in May by the AICPA found that “Americans generally do not show great familiarity with a range of things that can impact their financial planning,” the Institute intensified its already considerable pro bono efforts to broaden the public’s understanding of money matters and encourage people to plan for their financial futures.

At a May 17, 2004, press conference introducing the Institute’s 360 Degrees of Financial Literacy campaign, U.S. Comptroller General David M. Walker joined AICPA President and CEO Barry C. Melancon and Chairman S. Scott Voynich in calling attention to the fiscal challenges Americans face collectively and individually. Recognizing the importance of capable leadership, they agreed that CPAs’ experience, objectivity and integrity ideally qualify them to spearhead the new campaign’s wide range of programs. Melancon said the Institute would use the campaign to forge a network of partnerships with state societies, schools, small businesses and local organizations to help CPAs deliver the benefits of financial literacy to people across the country.

Widespread doubts about the reliability of government- and industry-funded retirement and health care programs—including Social Security, Medicare and private medical insurance and pension plans—have made the situation even more urgent.

AICPA members expressed the same sense of urgency in a recent poll. Ninety-five percent of respondents said the financial literacy of the American public was an “extremely” or “very” important goal. Fifteen percent already were actively working as volunteers to increase such knowledge in their communities, and of the rest, 87% said they were eager to participate. Three-fourths of respondents said the AICPA and/or state societies should devote resources to financial literacy programs.

In his remarks Walker described the dangers inherent in a lack of fiscal awareness from a variety of perspectives. “As a CPA and member of the AICPA, as comptroller general of the United States and as a father and grandfather,” he said, “I believe Americans need to understand how their financial futures will be shaped by the U.S. government’s worsening financial condition.”

The nation’s total burden—including the present value of its massive unfunded obligations for Social Security and Medicare benefits and other programs—currently stands at about $42 trillion. That’s 18 times greater than the federal budget and 3.5 times the size of the U.S. gross domestic product. On a per capita basis this exceeds $140,000. (For additional information, see “ Truth and Transparency: The Federal Government’s Financial Condition and Fiscal Outlook ,” JofA , Apr.04, page 26.

Under these conditions, Walker said, “Americans no longer can take for granted that federal entitlement programs will continue in their present form. Already we’re seeing steady erosion in the benefits employers offer to workers,” and only half of all workers now are covered under a private pension plan. Federal benefits will be revised over time due in large part to a major demographic shift. In 1950 more than 16 employees paid Social Security tax for every retiree drawing benefits, but by 2040 that ratio will be just two to one.

To maintain their current standard of living after retirement, Americans must plan better and save more, and—to take advantage of the power of compound interest—they must make these changes immediately.

Strong leadership is essential to the effectiveness of any volunteer effort. In recognition of this, Voynich said that “the 360 Degrees of Financial Literacy campaign is a call for CPAs to get involved, and the AICPA is leading the charge.”

Melancon agreed that the public needs financial guidance now more than ever before. The AICPA’s Roper report, “Americans Talk About Personal Finances,” ( ) found, for example, that many families would be severely strained financially by a medical emergency involving more than $15,000 in uninsured expenses, and that even those with household incomes of $75,000 or more were unlikely to feel particularly financially secure.

Melancon called the statistics “shocking” and noted: “They tell us Americans need guidance in taking control of their financial destiny. The AICPA and its members long have been dedicated to addressing this problem. And now, with a series of initiatives, we’re laying the foundation for a nationwide financial literacy program.”

Part of that effort is the formation of a National CPA Financial Literacy Commission, which the Institute established in May. Led by Carl R. George, CEO of Clifton Gunderson LLP, a regional firm headquartered in Peoria, Illinois, the commission will provide strategic guidance to, and develop synergies with, key organizations promoting financial literacy.

The AICPA also established a new Grassroots Mobilization Team led by Jimmy L. Williamson, a small-firm practitioner in Alabama. It will develop models, record best practices and in other ways collaborate with the state societies to expand their capabilities and facilitate CPA volunteer activities.

The AICPA also has launched: the Certificate for Volunteer Financial Literacy Service, which will honor members working to advance the public’s understanding of personal finance; a Web-based Financial Literacy Hotline staffed by CPAs holding the personal financial specialist (PFS) credential ( ) and moderated in conjunction with USA Today ; a national program focused on women’s financial literacy, jointly sponsored with the National Endowment for Financial Education (NEFE) and The Advertising Council; the CPA Ambassador program ( ), which trains CPAs to speak before audiences across the country about the profession’s depth of financial knowledge and the Institute’s and state societies’ effectiveness as public-interest advocates; the Project for Financial Independence ( ), formed with leading financial planning organizations to provide free services to those who cannot afford them; and the 360 Degrees of Financial Literacy Web site ( ), which in the coming year will provide an increasing array of financial-education tools that match financial planning strategies to the 11 stages of a person’s life, from grade school to retirement.

In a major contribution, Mark P. Altieri, CPA/PFS, a prominent expert in financial education and planning, has permitted the Institute to display on the financial literacy site portions of his new book, Financial Guidance for Every American, which explains tax planning, home ownership and financing, accumulating retirement wealth, educational savings and financial aid, legal protections and life insurance planning—all topics critically important to individuals and families. “The book provides fundamental but directed guidance to ordinary Americans who have no special expertise in these areas,” Altieri said.

Two other AICPA educational programs serve members of the business community. One, the Web-based AICPA Audit Committee Effectiveness Center ( ), helps audit-committee and company-board members find the guidance they need to oversee their organizations. Another, a collaborative effort with the Department of Labor, educates employers and pension plan service providers on their fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA).

Recalling the Institute’s long-standing commitment to financial education, Melancon said these initiatives complement existing AICPA programs that together now make up the 360 Degrees of Financial Literacy campaign. Earlier Institute financial-education efforts include: the Disaster Recovery Guid e, jointly produced by the AICPA, the AICPA Foundation and NEFE in 2003 and distributed by the American Red Cross to help disaster victims regain financial security; the Women’s Financial Health Week public-education campaigns sponsored by the Institute and Money Magazine in 2002 and 2003 that reached an estimated 80 million consumers; the CPA Information Package (iPack), designed to help educators teach basic financial concepts and the AICPA’s Start Here, Go Places student recruitment program, which among other things explains money management principles. Another program, “Financial Smarts for Teachers,” helps instructors understand their own finances. It was funded by the AICPA Foundation and created, in association with the California Society of CPAs, by the California Jump$tart Coalition for Personal Financial Literacy, whose leader, National CPA Financial Literacy Commission member Stanley H. Breitbard, CPA/PFS, recently wrote about the program (See “ Jump-Starting Financial Literacy ,” JofA , Dec.03, page 56.

“The 360 Degrees of Financial Literacy campaign is ambitious,” Melancon acknowledged, “but we must empower Americans to plan effectively for the milestones of their lives.”


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