By William J. Hayes, managing editor, Pennsylvania CPA Journal
For Cynthia R. Bergvall, CPA, director of Bee Bergvall & Co. in Warrington, Pa., numbers tell a story, and it’s important for an auditor to share with clients what the story means and how they can put those lessons into action to improve their businesses. In other words, be a consultant. In advance of Bergvall’s presentation at the July 9-10 Government Accounting Conference, we sat down to discuss how auditors can bring value to local government organizations through consulting services.
PICPA: The description of your course for the PICPA Government Accounting Conference says “Numbers tell a story.” It would be easier for an auditor to just report back on the numbers, so how important is it for an auditor to help clients figure out what those numbers mean toward their future success?
Bergvall: An audit looks at the past. Our role is to determine if the financial statements are materially misstated and reported in accordance with GAAP. So, we can get caught up in following the audit checklists. A good auditor, though, is looking at the big picture—do the numbers really make sense?
Helping clients look toward the future is not “auditing,” but it is a natural outgrowth of our audit role.
When moving beyond the typical role of the auditor, where, as a consultant, are you restricted?
Auditors need to make sure that they are independent. There are a variety of elements of independence, but when we look at consulting the one big element is that you cannot make management decisions. From that end, we need to make sure that we aren’t bypassing management and directly advising the board.
Auditors want to make sure they are independent in form and substance.
There is quite a bit that you can do as the auditor to provide consulting services to clients, but it is a lot easier to provide a robust variety of services to a nonaudit client.
Let’s talk about some of the areas an auditor can move into to help bring value to new and existing local government clients. What role can a consultant play in debt management?
A local government has to evaluate the following: do we save for capital projects, borrow, or rely on a mix of saving and borrowing? With interest rates so low in past years, most municipalities have chosen to borrow. Local governments with a rolling five-year capital budget can identify how to structure borrowing so they can keep their debt service steady.
We can summarize their budgets and compare the budgets to the debt service schedule to help them identify ways to stabilize the annual debt service.
Budgeting: Does access to and deep examination of the numbers make auditors who have moved into a consulting role particularly qualified to help with budgeting discussions?
In a smaller municipality or with one that has experienced growth, we can provide insight on how the different line items relate to each other; help them set up budget worksheets; and work through the process of budgeting for new programs.
For more sophisticated municipalities, we can explore goals-based budgets. Instead of budgeting by looking at what was spent or received in the past, look at what they plan on doing and determine what that costs.
In the area of board training, what areas prove to be the most troublesome, and how can a consultant bring value there?
Accountants tend to look at things objectively. Conflict on a board can arise over subjective matters. Where the accountant can quantify elements of decision making, he or she can help boards move away from emotions and sound bites to look objectively at a situation.
Where boards do not have conflict, the practice of looking at decisions using objective measures can still be very valuable. It provides the board with the confidence that the decisions they are making have a strong foundation.
When we talk about outsourced financial services for a local government client, what’s the process where a consultant can bring value?
We can counsel an audit client on how this could be done and introduce them to people we know who provide these services. Or if we connect with a nonclient, and we can provide those services. Typically, a CPA firm would serve as an outsourced controller—coming in for the month-end close and to reconcile the bank statements.
How involved of a process is it for an auditing firm to get consultancy services off the ground?
A few years ago, I attended a session on planned giving called “Go See People.” That is what this is about. Spending time with clients and nonclients, and talking to them about their goals and their challenges.
Is it a major undertaking, or are the basics already there and it just requires a shift of mindset?
It really is a shift of mindset. We get used to wearing our audit hat. We can start talking to our clients about their goals, or what the local government wants to do to impact the community. What are their challenges? What decisions do they wrestle with?
For more information on adding value to audits with consulting services, check out Bergvall’s presentation at the July 9-10 PICPA Government Accounting Conference.