The state of California was recently crowned with the Tortoise Award for the slow publication of its Comprehensive Annual Financial Report (CAFR).
“It’s a hokey award,” said Bill Bergman, director of research with Truth in Accounting, a government accountability group responsible for poking fun at the state. ”We want to incentivize governments to do their best to get the information to citizens on time.”
According to Truth in Accounting, the Golden State has yet to release an audited CAFR for the 2019 fiscal year, which ended June 30, 2019.
“I suspect the problem is in the auditing process in the information sharing between the government and the auditor,” Bergman told Southern California Record. “There may be things that we don't know about in the relationship between the government and the auditor's office that are possibly contentious, which is potentially an issue.”
On Sept. 30, Bergman said California released an unaudited version of the report but it has not been officially reviewed.
“It's possible that the auditor is concerned about the quality of the accounting, which may threaten the ability of the state to get a 'clean opinion,'" Bergman said in an interview. “I'm speculating but that's one issue that might be part of the debate.”
Margarita Fernández, CPA and chief of public affairs and quality assurance with the California State Auditor’s office in Sacramento, told the Southern California Record that it will issue its independent audit report on the State’s financial statements on Friday, Oct. 30.
“We will also be issuing the Independent Report on the State of California Internal Control and Compliance as well as our report on Federal Compliance,” Fernández said in an interview.
Once submitted within the standard 180 days after the end of the fiscal year, the Government Financial Officers Association (GFOA) issues Certificates of Excellence, according to Truth in Accounting. The GFOA is a special interest group that advocates for government workers. Some 30 states were able to meet the standard so far despite the coronavirus pandemic.
The California Department of Public Health dashboard reported 886,865 coronavirus cases statewide and 17,262 fatalities as of Oct. 23. In Los Angeles County alone, there have been 294,065 cases and 6,956 deaths.
“For our purposes, the bottom line of the statement of net position, which is the net position or unrestricted net position of the state, is perhaps the most important indicator of the financial health of the state and, in California's case, it's been $200 billion in the red, which is a massive hole,” Bergman said.
Although there are no formal penalties when a state is delayed in filing their audited CAFR, Bergman says tardiness could result in higher interest rates if the capital markets become concerned.
“The capital markets apparently aren't fazed yet but for citizens and taxpayers, we all have an interest in our governments and we really don't have the information we need in many places, including California, and we'll see if this is something that people wake up and care about,” he said. “We're very concerned about this type of practice.”