Attestation Engagement: Is There A Future For “Social Audits”?

When selecting a potential faculty member for our Summer newsletter, Melissa and I noticed that one department was missing across the gamut of professors whom we had interviewed to date— Accounting & Information Assurance. It’s not a coincidence that this was our last field to cover within the Smith School, as it is a bit difficult to imagine on first thought what might be the possible intersection between social value creation and accounting practices. Does the role of accountants and CPAs in social value go beyond the substitution below?

In sitting down with Professor Gary Bulmash, he admitted to me that in preparing for our interview he himself had searched Google for “social value” to find some subject matter for talking with me.

“The heart of the matter when you are thinking of accounting and social value is that accounting at its core is a system to track value. The principal question at the heart of that is first of all, what you are measuring, and second of all, how you measure it. And that isn’t as clear with ‘social value.’”

That is at the heart of many questions regarding social value, or as the buzz word would phrase it, “social capital.” Businesses and non-profits provide both direct and auxiliary benefits to society beyond that which is captured on a balance sheet, income statement, or cash flows statement. But the question is measurement of those benefits, be they lower carbon emissions, increased jobs for the difficult to employ, or even the value of services themselves.

Gary had just returned from a series of academic conferences in the Midwest and told me that to his surprise, some of these questions of “social value” in accounting that he’d been wrestling with came up through the words of a lecturer. This particular lecturer, he explained, had been covering “attestation engagements,” which are often non-financial subject matters.

What intrigued Gary, however, was the future possibility of such reports to be applied to social value.

“It’s a good question to consider. For CPA’s, is there a future in ‘audits’ of social value? What sort of programs would they be involved in? Regardless of how it manifests itself, I believe it is very possible that ten years down the line we might have a ‘social auditor’ of sorts. But the efficacy of such a role is contingent on the internal controls that define an organization’s social value. You would need to present this ‘auditor’ with a system of standards and measurement benchmarks.”

The difficulty with putting numbers to social value is nothing new to the accounting world. Gary explained to me that the separate accounting standards for not-for-profit organizations first emerged in the 1980s, and a principal controversy was the issue of whether or not volunteer hours should go to revenue and expenses. The final compromise was to include most volunteer hours as a footnote. This then begs the question of whether these traditional not-for-profit reports, standing alone, truly represent an organization’s capital and utilization of resources.

“It depends. Let’s say, for example, I am an organization that gets substantial government grants. In that case, I would have to file an A133 form to the Office of Management and Budget on top of the Tax Form 990, and the A133 includes more diligent standards and reports. But only in that specific case— as it stands, there isn’t a standard for these organizations. Reporting specificity depends on how you are funded.”

Is there a future standardized procedure for these questions? Only time will tell. In the meantime, our conversation turned to lighter topics, and Gary and I discovered we had both participated in Big Brother-Little Brother programs in our past.

“It’s so funny to think about, I remember meeting with the social worker involved in the program when I was mentoring. I literally told her, ‘I’m worried this program doesn’t work the way it’s supposed to, I think I’m getting more out of this than my Little Brother is.’”

In closing, Gary also let me know that he has a daughter who is 27, a son who is 23, and that he has been to Disneyworld in Florida at least 50 times. He and his family even went last year. And perhaps the most impressive part of this statistic is the fact that he almost always drives. Let’s hope it’s a hybrid! -GO