Every fall, my office publishes the state’s financial report for the previous year.
The full annual financial report, commonly known as CAFR, is a detailed “report card” of over 300 pages on the state’s financial situation. Prepared the same way companies prepare summaries for shareholders, it includes information on assets, liabilities, long-term debt, income, expense, and cash flow. All states and most cities, counties, school districts, colleges and universities produce such annual reports.
Investors and rating agencies rely on them to assess the government’s ability to repay bonds. They are also used by heads of state to plan budgets and by citizen watchdogs to keep an eye on the government.
Of course, they are only useful if they are issued soon after the end of the financial year.
Much can change in the months between the end of a fiscal year and the publication of a report. The sooner it is published, the more useful and relevant its content to those who trust it. The Government Finance Officers Association, which helps develop government accounting practices, considers reports released within six months to be “on time.”
But many governments miss this deadline, often by several months. A majority of states – 29 – filed last year’s reports late.
It is a shame, because timely financial reporting is essential to good government. It promotes transparency and accountability. It allows government budget officials – who need reliable financial reporting figures to prepare the next year’s budget – with adequate planning time and flexibility. This makes it easier to detect management errors and avoid potential problems. If budgetary problems are to come, an early warning certainly helps.
Prompt dissemination of reports is a service to investors, who are among the most pressing to get them each year. This gives them more time to analyze the information and make informed decisions. Late financial data could give potential investors pause.
And speed is a factor that rating agencies take into account when establishing government credit ratings, that is, it potentially has an impact on how much we pay to borrow for loans. things like roads and schools.
My staff and I have worked hard over the past few years to continuously reduce the time it takes to produce the state financial report, as part of our larger effort to increase tax transparency in state government. And I’m proud to note that South Carolina’s report has become one of the best in the country by this measure. In 2018 and 2019, we ranked second nationally in speed of execution – behind only New York, which is one of a handful of states with laws requiring reports to be completed early.
In 2020, South Carolina recorded the country’s best post time – a feather in our state’s hat and a rewarding reward for a lot of hard work and long hours. The 136 days it took to produce the state report was almost 11 weeks better than the national average.
A few weeks ago, on November 12, I released the state report for fiscal year 2021. It took 135 days – one day longer than last year. Sadly, our time in first place was short-lived; despite our best time, South Carolina is again second best – behind New York. These comparisons aside; However, our success bodes well for the state’s overall financial health. And it sets a good example for municipalities, counties, school districts and other government agencies in our state, which should also strive to release their financial data as early as possible.
South Carolina’s annual financial report for 2021 can be viewed at [cg.sc.gov]cg.sc.gov. Click on “Financial Reports” in the horizontal menu near the top of the home page. Then click on “Full Annual Financial Reports”.
Richard Eckstrom is a CPA and State Controller. He is president of the National Association of State Auditors, Controllers and Treasurers.