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Offshoring and Professional Standards

Currently there is no federal oversight ensuring that professionals overseas doing outsourced work have a specific professional license (medical, engineering, accounting, etc.) if such a license is required for work performed in the United States. These professionals are regulated at the state level. No matter where they are located, employees working for companies in any state who do not have the required licenses would be in violation of state law. However, enforcement of professional standards and requirements with respect to offshoring is a serious problem. State regulatory agencies do not have the resources to fully monitor and enforce professional standards abroad and consumers cannot realistically be expected to conduct their own investigations before doing business with the growing number of providers that are sending specialized financial, medical and engineering work overseas. The ability to issue and revoke licenses has been critical in helping U.S. authorities maintain professional standards among domestic providers. The lack of licensing control and enforcement capability overseas invites abuse in a setting in which consumers have virtually no legal recourse after an injury or loss has occurred.

Thus, there is a regulatory gap that has truly worrisome consumer safety and economic implications. The practice of professional offshoring clearly has gotten ahead of consumer protections. The only current regulatory system is a silent assumption that professional qualifications are assured by the private company that is offshoring the work – which does not have a strong incentive to spend a lot of time or money on enforcement.

The need for professional standards is highlighted in two fields in particular:

Health Care

Massachusetts General Hospital (MGH) has offshored some MRI and X-ray work to India. If the doctors in India are not board-qualified in Massachusetts, then what work can these doctors in India do legally, and who can ensure that the limits are being followed? If a doctor in India, who is not licensed in Massachusetts, were reading and interpreting the MRIs and X-rays and this information was being relied upon by patients in Massachusetts, this would be an illegal practice of medicine without a licence. In at least one press report, MGH says that, currently, the radiologists in India are not board-qualified but that they are limited to processing the information into more readable forms for U.S. doctors to analyze. This processing work is work done in the United States by technicians, not doctors. Yet who can ensure the strict separation of these different roles? Even assuming that MGH is being incredibly scrupulous in overseeing this process, absent specific regulation of professional outsourcing, consumers will remain at the mercy of less scrupulous and ultimately unaccountable businesses.

Further reading:

 Accounting

Large firms interested in facilitating offshoring are seeking to establish a unified global accounting professional standard at the WTO – an effort that many consumer groups fear will be used to undermine existing domestic standards. Arthur Andersen was among the industry giants lobbying for the WTO standard, a process that slowed considerably when that company imploded. Currently, there is no requirement that offshored U.S. accounting work be done by someone with a CPA. Tax experts report that Indian accountants will prepare 150,000-200,000 returns in 2004 – compared to only 1,000 in 2002 and 20,000 in 2003. Ernst and Young customers must sign a document acknowledging that a foreign accountant may work on their tax return, but most U.S. firms do not make such disclosures. Ensuring that work done offshore is performed by individuals with the proper qualifications and licenses is crucial for safety and quality reasons. Filling this regulatory void would also mean that more of these jobs would remain in the United States. But of course, many high-wage professional jobs do not require licenses.

Further reading:

  • "Foreign Accountants Do U.S. Tax Returns," Associated Press (02/22/04)
  • "Your Taxes," New York Times (02/15/04)

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