Matt Dunlap, then secretary of state, answers questions Nov. 9, 2018, in the Elkins Building in Augusta. Now the state auditor, Dunlap said Maine has to step up its efforts to attract new people into the public auditing field. “We have to respond somehow,” he said.

Across central Maine, government agencies regularly seek the services of audit firms, which inspect financial records to ensure they are accurate and ensure financial procedures are being followed.

But in recent months, local governments have been waiting longer and paying more for required financial statements. Without an up-to-date audit, as required by law, municipalities and school districts lose an important tool for keeping their budgets in line.

This raises the question: If an audit is required by the state, but no one is available to complete it, what happens?

“We don’t know,” Matthew Dunlap, Maine’s state auditor, said. Local entities, however, are starting to see the consequences as school and municipal audits are in some cases years behind.

In Hallowell-area Regional School Unit 2, the school district has not received an audit since the 2021 school year.

In Pittston, the auditing firm the town used to complete its annual audit will no longer do municipal audits, and the Board of Selectmen recently had to choose a new firm to use for the service.

And in Gardiner-area Maine School Administrative District 11, the business manager, Andrea Disch, said that for the first time in her 30 years in school finance, she had to file an audit extension. Disch said to the MSAD 11 finance committee on Dec. 19 that the school district’s audit was due Aug. 31, but that they had to file an extension to Dec. 31 and then another extension to March 2025 because of the heavy workload of the auditing firms.

“They are struggling to hire people out of college as their partners retire,” Disch said. “When I say we are having a governmental auditing issue, we are having a governmental auditing issue.”

Experts chalk the reason up to two main points: fewer people are becoming auditors and at the municipal level, a lack of order and consistency.

Dunlap said to understand the issue, it’s important to look to history.  

A SHORT HISTORY OF AUDITS 

Even when audits were first mandated in Maine, there were hurdles.

While the requirement to conduct audits was established in 1883 when a three-member committee was appointed to examine the accounts of the state treasurer, it wasn’t until 24 years later that the Office of State Auditor was created in Maine law, Dunlap said.

A 1923 state law required cities and towns to make an annual report to the State Auditor and in 1931, the Department of the Audit was created.

There were challenges: the people elected to serve back then were usually hay farmers.

Those challenges persist. Though today most municipal officials have some type of understanding of municipal government, the vast majority are not accountants.

Additionally, towns have different fiscal years and run their municipalities differently. A town manager might not manage finances in the same way as another town, or city, which can elevate the work for auditors who have to make sense of the municipal reports.

“In today’s world, as government services get more complex, the nature of people who run for office, not besmirching anyone, really hasn’t changed,” Dunlap said.  

WHO IS BECOMING AN AUDITOR?

The short answer is that there are not many recent college graduates, as the number of people interested in entering accounting, and more specifically city government or municipal management, is on one of the sharpest declines ever recorded.

In general, according to a report from the National Association of State Auditors, Comptrollers and Treasures, the U.S. is facing a severe labor shortage and there aren’t enough skilled people to meet the demands of accounting services.

Fewer people are going to college, as the undergraduate enrollment between 2010 and 2021 dropped by 15%, the report from NASACT said.

And if people are choosing to go to college, they aren’t by and large choosing accounting as a major.

The major reason people reported they do not want to study accounting is for a lack of interest, said 32% of respondents and 70% said it was part of the reason and the second major reason reported by 29% of respondents is a higher starting salary in a different major. Other responses included not wanting to study 150 hours for the Certified Public Accountant exam, difficult courses and not having the math skills to complete the degree.

Accounting degree completions went from 52,297 undergraduate and 22,856 master’s degrees in the 2017-18 academic year to 44,403 undergraduate and 12,915 master’s degree completions in 2021-22, according to NASACT.

HOW DOES THIS AFFECT PUBLIC ENTITIES?

If audits can’t be completed, municipalities and school districts do not have the most accurate information possible to create an accurate budget.

Several school districts, like Regional School Unit 2 and Augusta Schools have not received audits for the past two years.

Rick Amero, superintendent of RSU 2, said not having the audit has made several tasks more difficult. One of the first things advised when a superintendent enters the district is to review the audit, he said.

“Since these have been delayed, I have unable to accomplish this important task,” Amero said. 

Additionally, the audit can catch mistakes made in coding or the central office when there are new hires. Without the audit, mistakes can be passed from year to year. It also reduces a school district’s ability to secure bonds, loans, or lines of credit.

School districts are required to submit audits within six months after the fiscal year, which for most schools is by Dec. 31, said Chloe Teboe, director of communications for the Maine Department of Education. She pointed out that in 2020-2021, 25 auditing firms served the state. That figure decreased to 16 firms in the 2022-23 school year.

Teboe said several issues have made it difficult for schools to get their audits completed, including the decline in auditors and auditing firms, as Dunlap said.

And, the increase in federal pandemic relief funding has also increased the amount of paperwork a district has to complete.

“The Maine DOE has the authority to withhold education subsidy from SAUs if they are not in compliance with audit requirements, but we try to work with them as best we can to ensure education for students is not disrupted. Therefore, we will allow SAUs to request extensions of time to submit an audit, and we try to maintain communication with them and their audit firm regarding audit status,” Teboe said.  

Like a school district, if a municipality does not have its most recent audit, it can affect the relevance of a budget, said Scott Ferguson, Kennebec County administrator. An audit can also tell management where to catch mistakes or issues in the budget. 

“A delayed audit also delays the usefulness of information,” Ferguson said. “If an audit is a year and a half late, the information is not relevant anymore if we are already past the next fiscal year and the numbers have changed. I consider the management letter in the audit as the most important piece, where they identify the issues in the financial statements.”

HOW DO WE GET MORE AUDITORS?

Cynthia Ferguson, former finance director for Kennebec County, suggested an incentive program like the state did for the teacher or health care worker shortage.

“Maybe what they need to do is to have incentives,” she said. “Like they have for dentists where you get a tax return or special enhanced credits.”

Dunlap said at the state level, they started to minimize the amount of requirements needed to apply for certain accounting jobs.

He said there isn’t an incentive in place to recruit possible students, either, but that it’s something that’s been talked about.

“One discussion is building in certifications that can be stackable towards something akin to a public administration program; and while an accountant or an auditor is an accountant or auditor, finding people who possess the needed certifications has begun to take something of a back seat to people who may be capable of the certification and who can earn it while learning the trade,” he said. “None of this is final or comprehensive, but we have to respond somehow.”