A report issued Thursday by the AICPA and the National Association of State Auditors, Comptrollers and Treasurers (NASACT) details the depth of challenges that need to be overcome to ensure strong accounting, auditing, and finance functions in state and local government and to make it easier for governments to find outside auditors.

The report suggests solutions dependent on cooperation and commitment from multiple stakeholders.

"The public deserves to know its tax dollars are being spent as intended — and that requires strong government finance teams and experienced auditors," Sue Coffey, CPA, CGMA, the AICPA's CEO–Public Accounting, said in a news release. "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. But accountants who do government work face unique challenges that require more specialized solutions."

The report, Public Sector CPA Resources: The Current Landscape and Recommendations for the Future, is built on the efforts of a joint working group that gathered insights from a series of forums and a comprehensive survey. The report ranked a lack of competitive compensation and the need for specialized government technical expertise as key factors stymying governments in the hiring and retention of CPAs.

Fifty-six percent of 450-plus survey respondents employed in accounting, auditing, or finance at a state, local, or tribal government entity said compensation concerns have a large impact in this area. One respondent who works in local government commented that accounting professionals "can make double doing anything else."

Further, 63% of government respondents agreed that the technical expertise required of CPAs in the public sector had a large or moderate impact on the challenge of hiring and retaining qualified professionals.

The report also said that there may be opportunities for a second look at audit requirements. Almost 80% of government respondents indicated that their state governments had not taken steps to reduce the audit burden on other governments, and 60% of the CPA firm respondents indicated that state-established audit requirements for their governmental audit clients were excessive or somewhat burdensome.

"We're urging a renewed investment in public sector accounting and auditing by state and local governments and CPA firms," Kinney Poynter, NASACT's executive director, said in a news release. "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."

According to the survey results, opportunities exist for governments to more effectively use certain approaches to hire and retain accounting professionals, including signing bonuses, an increasing pay scale, and added compensation for passing the CPA Exam. However, more than three in four government respondents cited a lack of available budget as having a large or moderate impact on their ability to effectively execute their responsibilities. More than half of the government respondents also noted a lack of public support for funding as having a large or moderate impact.

The report also recommends that CPA firms build a future generation of leaders who are prepared and able to perform attest services within the public sector. Other steps include reconsidering staffing models, emphasizing the importance of governmental audits, and promoting work in government practice as a good career path.

In a joint letter of introduction in the report, Coffey and Poynter said, in part: "With the issuance of this report, we are hopeful that government entities, CPA firms, and other stakeholders will both better understand the public sector-specific issues impacting the pipeline and give serious consideration to the recommendations in this report to address these issues."

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.