State and local governments are being squeezed by a shortage of accounting professionals, making it difficult at times to find staff CPAs who can prepare critical financial information or outside firms to conduct audits.

Addressing this problem will require a multifaceted approach, including educating legislative bodies about the value of the CPA, offering competitive salaries for CPAs in government and fees paid to outside auditors, and reviewing the thresholds that trigger certain kinds of audits, according to a joint report by the American Institute of CPAs and the National Association of State Auditors, Comptrollers and Treasurers.

“We have a talent shortage in accounting that affects business as a whole, and many of the pipeline initiatives the profession is putting in place will help the public sector as well,” said Susan Coffey, CPA, CGMA, the AICPA’s CEO of public accounting. “But accountants who do government work face unique challenges that require more specialized solutions. The public deserves to know its tax dollars are being spent as intended — and that requires strong government finance teams and experienced auditors.”

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One key issue is that government and private sector accounting and auditing standards often differ, so CPAs working in the public sector require specialized expertise. Yet salaries and audit fees are often well below those offered in the private sector, the report found. State and local governments also don’t always understand the value CPAs bring to finance teams and the audit process, so hiring is often driven by a cost-savings approach, rather than a focus on the qualifications that an experienced staff accountant or outside auditor may bring.

Among the report recommendations:

Make Government More Competitive with the Private Sector

Government entities should use available data to benchmark salaries for CPAs against similar positions in the public and private sectors and consider options for remote or hybrid work and flexible hours.
Evaluation of external auditors should consider CPA firm qualifications, not just proposed fees. And to broaden the pool of potential auditors, government entities should consider eliminating geographical limitations on permissible firms.

Align and Simplify Standards

Regulators should minimize differences in accounting and audit standards for the government and private sectors, and standard setters should more routinely sound out smaller governmental entities on the impact of proposed standards.
Federal and state governments should periodically review audit threshold requirements and consider offering audit alternatives for smaller governmental entities that would still provide accountability (such as reviews, agreed-upon procedures, or compliance examinations).

Provide Support for Smaller Governmental Entities

States should consider ways to provide accounting and auditing resources and/or financial assistance to local governments to assist them in preparing for and undergoing a timely audit.
State governments should develop a program for legislative bodies and government officials (at both the state and local levels) to explain the CPA value proposition and the need for qualified, competitively paid accounting, auditing and finance functions – and the risks for failing to make that investment.

Get Accounting Graduates Interested Early in Government Work

Colleges and universities should increase the number of classes that address governmental topics and work to build relationships with government entities to increase their visibility on campus.
State and local governments should support internships, mentorships and financial incentives for accountants who want to work in government and pursue a CPA.

Get Buy-in from Audit Firms

CPA firms should emphasize to staff that working in the government practice is a good career path and adopt a staffing model that allows staff to specialize in governmental audits year-round without having to work additional hours during the more traditional busy season.

“We’re urging a renewed investment in public-sector accounting and auditing by state and local governments and CPA firms,” said Kinney Poynter, NASACT’s executive director. “Trust in government requires governments to prepare clear, consistent financial data that is backed by a strong audit function. It’s essential we make this a priority.”

Besides its work with NASACT, the AICPA is pursuing several initiatives to address the CPA pipeline. Earlier this year, an independent panel convened by the AICPA, the National Pipeline Advisory Group, delivered a series of recommendations on addressing the accounting talent shortage.

Accounting