Matt Dunlap, then Maine’s secretary of state, answers questions Nov. 9, 2018, at the Elkins Building at 19 Elkins Lane in Augusta. Now the state auditor, Dunlap says Maine must step up its efforts to attract new people into the public auditing field. “We have to respond somehow,” he says. Joe Phelan/Kennebec Journal

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

In recent months, local governments are waiting longer and paying more for required financial statements. And 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 had an audit since the 2021-22 school year.

In Pittston, the audit 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.

And in Gardiner-area Maine School Administrative District 11, 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 told the MSAD 11 Finance Committee on Dec. 19 that the school district’s audit was due Aug. 31, but that it had to file an extension to Dec. 31, and then another extension to March 2025, because of the heavy workload of audit 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 a lack of order and consistency at the municipal level.

Dunlap said to understand the issue, it is 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 was not 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 back then, including that those elected to serve were usually hay farmers.

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

Additionally, communities have different fiscal years and run their municipalities differently. A city or town manager might not manage finances in the same way as an official in another community, which can elevate the work for auditors who have to make sense of 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: Not many recent college graduates are becoming auditors, as the number of people interested in accounting and, more specifically, municipal government or management is on one of the sharpest declines on record.

Overall, the United States is facing a severe labor shortage, and there are not enough skilled people to meet the demands of accounting services, according to a report from the National Association of State Auditors, Comptrollers and Treasurers, or NASACT.

Fewer people are going to college, with the nation’s total undergraduate enrollment decreasing 15% between 2010 and 2021, the report from NASACT said.

And if people are choosing to go to college, relatively few are choosing accounting as a major.

The major reason people reported they did not study accounting was a lack of interest, according to 32% of those who responded for the NASACT report. About 70% of respondents said a lack of interest was part of their reason for not having studied accounting, while 29% said they opted to major in an area with a greater starting salary.

Other responses including not wanting to study 150 hours for the Certified Public Accountant exam, difficult courses and not having the mathematics 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 cannot be completed, municipalities and school districts do not have the most accurate information possible to create an accurate budget.

Several school districts, including Regional School Unit 2 and the Augusta Schools, have not had an audit over the past two years.

Rick Amero, the superintendent of RSU 2, said not having an audit has made things more difficult. Typically, he said, one of the key tasks for a superintendent is to review the audit.

“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 by the central office, including when there are new hires. Without an audit, officials said, 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, the director of communications for the Maine Department of Education. She said that in the 2020-21 academic year, 25 audit firms served the state. That figured decreased to 16 firms in the 2022-23.

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

Federal COVID-19 pandemic relief funding has also increased the amount of paperwork that school districts must complete.

“The Maine DOE has the authority to withhold education subsidy from SAUs (school administrative units) 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,” Teboe said. “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.”

Like a school district, if a municipality does not have its most recent audit, it can affect the relevance of a budget, according to Kennebec County Administrator Scott Ferguson. 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, the former finance director for Kennebec County, has suggested an incentive program similar to what the state has done to address the teacher and health care worker shortages.

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

Dunlap said at the state level, officials have begun reducing the requirements to apply for certain accounting jobs.

He said there is not an incentive program in place to recruit students, but it has been discussed.

“One discussion is building in certifications that can be stackable towards something akin to a public administration program,” Dunlap said. “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.

“None of this is final or comprehensive, but we have to respond somehow.”