AICPA looks to ease accountant shortage in public sector

The American Institute of CPAs teamed up with the National Association of State Auditors, Comptrollers and Treasurers on a joint report calling attention to the urgent need for accountants in state and local governments.

The report points to the talent shortage that’s affecting not only accounting firms and private sector businesses, but the public sector as well. It recommends a number of possible remedies, such as 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.

“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, the AICPA’s CEO of public accounting, in a statement last week. “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.”

The AICPA has also been pursuing efforts to encourage more young people to join the accounting profession. In May, an independent panel convened by the AICPA, the National Pipeline Advisory Group, delivered a series of recommendations in its Accounting Talent Solutions Draft Report on addressing the accounting talent shortage. Those recommendations were later discussed by a panel at the AICPA Engage Conference in June.

The new report points out that government and private sector accounting and auditing standards often differ, so CPAs who work in the public sector require specialized expertise. However, salaries and audit fees are often well below those offered in the private sector, the report found. State and local governments 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, without recognizing the qualifications that an experienced staff accountant or outside auditor could bring.

Salary is a big hurdle. The report recommends making government pay more competitive with the private sector. Government entities should use the 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.

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, the report recommends. State and local governments should support internships, mentorships and financial incentives for accountants who want to work in government and pursue a CPA.

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 NASACT executive director Kinney Poynter in a statement. “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.”

The report recommends aligning and simplifying accounting and auditing 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, the report suggests.

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).

States should consider ways to provide accounting and auditing resources and/or financial assistance to local governments to help them prepare for and undergo a timely audit.

When considering outside auditors, governments should look at CPA firm qualifications, not only the proposed fees, according to the report. And to broaden the pool of potential auditors, government entities should consider eliminating geographical limitations on permissible firms.

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, as well as the risks of failing to make that investment.