Illinois’ Comprehensive Annual Financial Report issued 175 days late

If taxpayers don’t file their tax returns by April 15 each year they could face stiff penalties from state and federal government. But what about when government fails to file its financial report to the taxpayers on a timely basis? According to the Government Accounting Standards Board, or GASB, government agencies should release their financial...

If taxpayers don’t file their tax returns by April 15 each year they could face stiff penalties from state and federal government.

But what about when government fails to file its financial report to the taxpayers on a timely basis?

According to the Government Accounting Standards Board, or GASB, government agencies should release their financial reports within 180 days of the fiscal year-end. This document is known as a Comprehensive Annual Financial Report, or CAFR.

We raised the issue of Illinois failing to file its CAFR back in April, when the state was already 100 days late.

On June 20, the Illinois Comptroller and Auditor General finally released the 2012 Illinois CAFR – 175 days late.

This is especially troubling considering Illinois has the worst bond rating in the country. Illinois taxpayers deserve to know what’s going on with state finances in a timely manner.

The Illinois Auditor General offered some insights into the troubling problems with Illinois financial reporting process:

The State of Illinois’ current financial reporting process does not allow the State to prepare a complete and accurate Comprehensive Annual Financial Report (CAFR) or the Schedule of Expenditures of Federal Awards (SEFA) in a timely manner.

… The lack of timely financial reporting limits effective oversight of State finances, adversely affects the State’s bond rating, and jeopardizes federal funding. 

Accurate and timely financial reporting problems continue to exist even though the auditors have: 1) continuously reported numerous findings on the internal controls (material weaknesses and significant deficiencies), 2) commented on the inadequacy of the financial reporting process of the State, and 3) regularly proposed adjustments to financial statements year after year. These findings have been directed primarily toward the Office of the State Comptroller and major State agencies under the organizational structure of the Office of the Governor. 

… The Illinois Office of the Auditor General released a management audit in February 2011 that further assessed the State’s financial reporting system. The survey of 88 of 90 primary units of government revealed that 263 different financial reporting systems are used by primary government agencies. Furthermore, the agencies reported that only 16 percent of these financial reporting systems are compliant with GAAP, which drastically increases the amount of time spent by agencies during the year-end GAAP conversion process.

… Failure to establish effective internal controls at all State agencies regarding financial reporting for the preparation of the CAFR and the SEFA prevents the State from completing an audit in accordance with timelines set forth in OMB Circular A-133, which may result in the suspension of Federal funding. Delays in financial reporting decreases the usefulness of such information.

Ironically, the Government Finance Officers Association of the United States and Canada, or GFOA, awarded Illinois a Certificate of Achievement for Excellence in Financial Reporting to the State of Illinois for its 2011 CAFR. This is the 28th consecutive year that the state has received this prestigious award in governmental financial reporting.

With the troubling delays and findings in the Illinois CAFR process, taxpayers should seriously doubt the credibility of GFOA’s judgment. The Internal Revenue Service would never award a citizen a certificate of achievement for excellence in reporting if they filed their taxes 175 days late.