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Drones on the Horizon for CPA Firms in 2017

DroneNew federal regulations mean CPA firms will have easier access to an unexpected tool for audits and inspections: flying robots.

Unmanned aircraft systems, commonly referred to as drones, have a wide range of commercial applications, including law enforcement and rescue operations. CPA firms are finding ways to use drones to audit and inspect land, agriculture and facilities as a safer and more cost effective alternative to manual inspections.

For the past several years, commercial drone use has been mostly limited to larger firms because of a burdensome and costly Federal Aviation Administration (FAA) approval process. But on August 29, a new FAA rule took effect that broadly authorizes commercial drone operations in the United States, giving CPA firms of all sizes an easier path to incorporating drones into their operations. For example, the new rule allows the commercial operation of drones under 35 pounds, whereas previous regulations mandated that commercial drone operators had to apply for a special license from the FAA.

While there are still many restrictions, such as a maximum air speed of 100 mph and a maximum altitude of 400 feet above ground level, the new rule greatly opens up the potential for drone operations and lowers the cost of entry for CPA firms looking to adapt their audit and inspection processes. Instead of the special FAA license, commercial drone operators can now use a remote pilot certificate and a TSA background check. The FAA also issued guidance on preparing operators for the certification and how they can then apply for waivers of certain provisions.

While there are many commercial applications for drones, inspections of large-scale physical assets are one of the biggest market opportunities. PwC estimates the global market for infrastructure inspection and agricultural surveys alone to exceed $77 billion. The firm has already set up a global drone headquarters in Poland with the intention of offering such services around the world. The drones will aid in a wide variety of business needs, including monitoring infrastructure for defects and assessing large geographical areas.

Due to the strict regulatory structure surrounding drone operations in the United States, CPA firms like PwC are currently testing drone applications in other countries. However, as the United States’ federal rules become more inclusive, CPA firms of all sizes can build and grow their drone operations for more effective and efficient audits and inspections.

With the rising interest in commercial drones, the level of regulation and legislation is also rising at the state level. Even with the expanded FAA rules, CPA firms should be mindful of how their state is regulating drones. So far, 32 states have enacted laws related to drones and five have adopted resolutions. Some states, such as Alaska, have adopted resolutions that support the drone industry and increase economic opportunities within the FAA framework, while other states, such as Arizona and Idaho, have added restrictions on drones and prohibited certain uses. Tennessee and Texas both passed legislation this year that specifies lawful drone uses and includes many commercial operations.

While states are often supportive of drone industry development, they are also closely monitoring the risks associated with extensive drone usage. Concerns include the use of drones over private land, how the data collected by drones will be stored and used, and if drones are violating property rights when traveling through the air. Firms can expect more state-level drone legislation in 2017.

While federal and state governments are loosening restrictions on drones, there is still a long way to go for commercial drone operators. For example, the new FAA rule states that drone operations must remain within a visual line of sight. To make drone use in inspections and audits cost-effective, however, accounting and auditing firms will need to operate beyond a visual line of sight when performing services like land audits. The FAA does allow some waivers, as long as a firm can assure the safety of the operations. Firms will have to wait to see how effective the waiver process is under the new rule.

Despite the remaining regulatory obstacles, the commercial drone industry continues to grow, and CPA firms will likely see expanded use of drones in commercial operations in 2017.

Julia Morriss, Project Administrator, State Regulatory and Legislative Affairs. Julia Morriss monitors trends in state legislation and regulation impacting the CPA profession. She holds a Bachelor’s Degree from American University’s School of Public Affairs, with a minor in Accounting.

Drone courtesy of Shutterstock.

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