Employee shortages in recent years have impacted nearly every industry, and accounting is
no exception. The shortage of qualified professional accountants affects everyone including your local government. A lack of qualified staff could result in expensive audits, loss of funding sources or opportunities, increased risk of fraud or error, and a loss of trust from the community’s citizens.
The following are reasons that qualified staff and accurate accounting records are vital to the health of your local government.
Informed Decisions Making
Your local government’s leadership relies on financial information provided by the accounting department to make decisions throughout the year. Inaccurate accounting information could result in poor decisions due to not having all necessary information. It is necessary for decision makers to have a clear picture of the financial health of the government including its revenues streams, expenditures, debts and assets in order to make informed choices about resource allocation, spending, and investments. Accurate information makes it possible for leadership to make the best decisions in planning and prioritizing projects and services that benefit the community.
The Budget Process
Colorado statutes require local governments to pass a balanced budget annually, and to comply with that budget by not overspending funds. If the government’s accounting records are not up to date and accurate, the result could be a violation of state budget law and over-expenditure of the approved budget, which is why monthly accurate budget to actual comparisons are vital to the health of the local government.
Accurate financial reporting is also critical at all stages of the budget process. Management and the board or council start early in the year prioritizing the needs of the community they serve and through the budget process identify where money should be spent to satisfy those needs. If the local government leadership doesn’t have precise financial information throughout the year, it is incredibly difficult, if not impossible, to make the best decisions regarding how money should be spent to benefit the community in the following year.
Transparency
Accurate financial information provided on a regular basis builds trust between a community’s citizens and its local government. Residents have a stake in how their tax dollars are spent, and a right to accurate information.
Risk Management
Accurate financial information and an adequate internal control structure enables the local government to identify and manage its risks. It enables the local government to identify irregularities, fraud, inefficiencies, and to identify and correct errors in a timely manner.
Planning and Sustainability
Long-term planning requires accurate financial information to determine the financial trajectory of the local government. Accurate current financial information helps ensure that leadership doesn’t make decisions today that will negatively impact the long-term health and stability of the government.
Credit Ratings
Accurate financial records and an accounting department that is free of deficiencies in internal control are able to prepare accurate and timely financial statements and footnote disclosures. This can positively affect the governments credit rating and assist the local government in obtaining favorable terms on bonds and loans, which are often necessary for funding large projects.
Compliance
Accurate financial information is critical to ensuring that the local government is in compliance with requirements related to State Statutes, regulatory agencies, grant agreements, and debt agreements. Not having timely, accurate information could put you in danger of slipping into noncompliance that could result in loss of tax revenues or granting sources.
Smooth Audit Process
The quality of the financial information provided to the audit greatly impacts the efficiency and effectiveness of the audit. An inaccurate trial balance, evidence that is not readily available to support balances, and unreconciled balance sheet accounts result in more time for audit completion and a very expensive audit. The result is extra money spent for a compliance exercise that occurs weeks or months after the end of the year when the information is old news. Audits are at their best when the audit report and management letter are provided in a timely manner and give assurance to boards and other stakeholders regarding the accuracy of the financial statements. Significant audit adjustments and management letter findings are indications that the information management is working with throughout the year may not be reliable.
What outsourcing can do for you
An outsourced third-party accounting firm that specializes in accounting and reporting for local governments can help fill in the space where you need additional accounting personnel and can add a high level of skill that you may not be able to find or afford on a full-time basis. A quality firm should be able to help you identify the areas where you have weaknesses, and propose a way to assist you in correcting those weaknesses. They can also help ensure that the financial information provided to decision makers throughout the year is accurate and timely so that informed decisions are made in real-time.
Contact our firm and we can talk about ways that outsourced accounting and reporting services can work for you and your local government.