California News:
In 2020, then-Senator John Moorlach, the Legislature’s only CPA, reported for the Globe that 49 of the 50 U.S. states had completed and published their annual audited financial statements – California was the only state which failed to complete and publish annual audited financial statements. This was not new – it was habitual.
And here we go again… a new report from Truth in Accounting finds that California ranks among bottom of 50 states for financial transparency.
Truth in Accounting explains that their transparency score for the financial reporting by state governments is to encourage the publication of transparent and accurate government financial information. (It’s not working here in California…)
“While there is a great deal of focus on state budgets, the results of those budgets are found in a government’s annual comprehensive financial report (ACFR). Certified public accountants audit this document produced annually by governments. The criteria used to develop our transparency score provide a ‘best practices’ framework for government officials and citizens that can be used to improve their government’s transparency and accountability. For forty five states, this report is based on fiscal year 2022 data. At the time the report’s research was completed 2022 data was not available for Arizona, California, Iowa, Oklahoma and Nevada, so 2021 data was used.”
Here are the top 5 states:
and the bottom 5 states:
One of the biggest issues contributing to poor State transparency scores were increased hidden retirement liabilities, including unfunded pension debt.
“A state’s Net Pension Liability is calculated by subtracting the market value of its pension systems’ investments from the estimated amount of promised benefits,” Truth in Accounting reports. “Unfortunately, 45 states reported Net Pension Liabilities for 2022 based on 2021 valuations. In 2021, strong investment markets increased the value of pension investments, resulting in a decrease in the Net Pension Liabilities.”
Here is the Criteria Truth in Accounting used:
To receive the top score of 100 points, a government’s annual report must meet the following criteria:
• Receive a clean opinion from an independent auditor (This criterion also applies to the annual report of thestate government’s largest pension plan.)
• Include a net position not distorted by misleading and confusing deferred items
• Report all retirement liabilities on its balance sheet (statement of net position)
• Be published within 100 days of the government’s fiscal year-end
• Be searchable with useful links from the table of contents and bookmarks
• Be audited by an independent
auditor who is not an employee of
the government (This criterion also applies to the annual report of the state government’s largest pension plan.)
• Measure the net pension liability using the same date as the annual report
As Sen. Moorlach said in 2020, his concern was that because of the lateness of the annual audited financial statement, the Legislature would not see the most recent CAFR until after they voted on the budget. “In fact, we were told by the State Controller’s Office that the CAFR may not be available until the month of September, a tardiness that is truly a national embarrassment.”
How is it that it is April 2024 and the 2022 certified annual audited financial statement wasn’t available for this transparency report? What about the Legislature and budget negotiations? Given that Gov. Newsom has not held his state of the state address, is this just Newsom demonstrating his lack of seriousness as California’s governor as his eye is on the Oval Office?
While it may not be good news, Californians are owed an unsparing report on the actual state of the State, delivered by a serious governor.
Click this link for the original source of this article.
Author: Katy Grimes
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