After reporting on daily accounting mistakes and embarrassing earnings corrections, we thought we were done being surprised by stories about the effects of the accountant shortage.
But as difficult as it is for private accountants, the talent shortage hits even harder for the folks responsible for keeping up roads, schools, and public safety, local government experts told CFO Brew. In fact, the shortage of government finance workers has been growing faster than the gap in the finance sector overall, according to a 2022 review from the Government Finance Officers Association, its most recent.
Mistakes tied to unmet demand for accounting talent can be drastic and have a dramatic effect on communities. So we took a look at how the shortage happened, the effects it’s having on cities and towns, and the ways—both helpful and less so—that finance teams have responded.
What happened? Brian Camiller, a partner at Plante Moran who runs the accounting firm’s governmental practice, which does work for municipal governments around the country, said the shortage has developed gradually, “but it really started picking up probably around 2008.” When the Great Recession hit budgets, governments started leaving positions open after people retired.
Plante Moran’s local government practice has benefited from the shortage of public accounting staff. “We have been very successful because of the need,” Camiller told CFO Brew. “But at the same time, it’s hard for me to find good accountants to do the work.” The practice, which has a team of about 30, would be able to take on more work if there were enough qualified staff, but “the people are just not out there.”
Slow boil. The rise of remote work during the pandemic took away some of the appeal of public employers, according to Mike Mucha, deputy executive director of the Government Finance Officers Association, a trade group. Remote work opened private-sector opportunities for accounting professionals who might previously have seen their local government’s finance department as a good option, Mucha told us, while that same finance department might not offer the remote work that could draw candidates from outside that community.
“Local government doesn’t pay anywhere near what the private sector does, and never has,” Camiller told CFO Brew, and “the budgets for local units of government have not grown at anywhere near the same rate.”
Not only have towns and cities not kept up with salaries, they’ve had to make bigger cuts to their headcount, Camiller said. (States and localities lostfinance jobs between mid-2019 and mid-2022, according to the GFOA report, while private-sector finance “has been growing steadily for more than a decade.”)
Poor Mayberry. The biggest victims of the shortage are smaller, typically less wealthy cities, Camiller said. Last year S&P put 149 municipal ratings, including for many small cities, on a negative credit watchlist because they were too-short staffed to file financial statements on time, Bloomberg reported. Larger cities aren’t immune—Jersey City and Santa Fe were also on the list—but “there is a direct correlation” between the size of a community and the timeliness of its annual audit filings “for roughly half of the municipal bond sectors,” according to a 2023 study from the University of Illinois-Chicago and Merritt Research, which found that the median audit took 19 days longer in 2021 (166) than in 2010 (147), an increase of 13%.
Small city finance departments have been hollowing out for decades, Camiller said. When he first joined Plante Moran 26 years ago, a city of about 90,000 people would have “had a finance director, a budget director, a comptroller, then multiple clerks for accounts payable and payroll and water billing,” among others.
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Today that city probably has a finance director—possibly one with decades in the role, nearing retirement—and then, at the entry level, clerks doing payroll and accounts payable. “Those middle jobs are gone,” he said, with no rungs for the lower levels to climb and provide a pipeline of future staff to lead the department. “When that finance director leaves, they have to hire somebody from the outside, and the pool of talent is much more shallow than it was.”
Deep cuts. Even if a city had the money to staff up their finance and accounting teams, there are other obstacles to overcome. Local governments can’t raise salaries as quickly as the private sector can to meet demand, because they must stick to established pay scales, Mucha told CFO Brew. Because changing those scales takes time, “you wouldn’t have the opportunity to offer signing bonuses or competitive salaries if it was outside of the published range.”
Then there are differences between public and private sector accounting, including separate standards. According to Mucha, the Governmental Accounting Standards Board (GASB) has more complicated standards than the Financial Accounting Standards Board (FASB).
What not to do. Smaller municipalities may have to hire people who don’t have government accounting experience, which sets them up for mistakes, Camiller told us.
While there’s “usually more than one thing” that’s gone wrong, overdue bank reconciliations are a big one. It’s not uncommon for Camiller’s team to be hired to bring a city up to date when it’s fallen six to 18 months behind on its reconciliation, he said. Others are late on their audits, endangering revenue from the state. The books in some cities get so bad that they’re “unauditable,” he said.
Tiny helps. Even if they’re outbid on qualified employees, municipalities can improve their talent search and their operations. Loosening their restrictions on working from home could draw more candidates, Mucha said. Camiller said most finance departments could become more efficient simply by using their enterprise resource planning (ERP) systems as designed.
“There is a lot of ‘Well, this is how we’ve always done it,’ and so the old paper processes have found their way into the ERP,” he said.
Play to your strengths. Beyond cash, the public sector can offer benefits that a corporate accounting job can’t match, according to Eric Mason, CFO of Quincy, MA, a city of about 100,000 outside Boston.
“It’s hard to compete wage-wise” with the private sector, he said, but “the benefits are amazing” in the public sector.
“Like, it’s insane, the types of benefits,” he added. “You have health insurance…the time off is just wild compared to what I see with my buddies in the private sector.”
Bennies aside, working for the city gives accounting and finance professionals the chance to do something that a corporate job can’t: directly improve their community. Mason, who grew up in Quincy, wants his interns to see how their teams’ work gets a road paved, a seawall built, the ball field or ice rink paid for. When they see that their work results in “real, tangible things in your neighborhood,” he said, young people “start kind of falling in love with the job.”
He described the shift in perspective that he’s trying to cultivate.
“Instead of working in the back office for some portfolio,” he says, “I’m going to be working in the back office for my city.”