Each fall, my office releases the state’s financial report for the prior fiscal year.
The Comprehensive Annual Financial Report, commonly called a CAFR, is a detailed, 300-plus page “report card” on the state’s fiscal condition. Prepared the same way businesses put together summaries for shareholders, it includes information on assets, liabilities, long-term debt, revenues, expenditures and cash flows. All states and most towns, cities, counties, school districts and colleges and universities produce such yearly reports.
Investors and credit rating agencies rely on them to evaluate the state’s ability to repay bondholders. They’re also used by state leaders to plan budgets, and by citizen-watchdogs to keep tabs on government.
Of course, they’re only useful if they’re issued promptly after the close of the fiscal year.
Much can change in the months between the end of a fiscal year and a report’s release. The sooner it’s published, the more useful and relevant its contents are to those who rely on it. The Government Finance Officers Association, which helps develop government accounting practices, considers reports released within six months to be “on time.”
But a whole lot of governments miss that deadline, often by several months. A majority of states -- 29 -- were late producing last year’s reports.
That’s a shame, because timely financial reporting is critical to good government. It promotes transparency and accountability. It allows government budget officials -- who need reliable numbers from the financial report to put together the next year's budget -- adequate flexibility and planning time. It makes it easier to detect mismanagement and head off potential problems. If fiscal trouble is ahead, an early heads-up is certainly beneficial.
Getting reports out promptly is a service to investors, who are among the most eager to get a hold of them each year. It gives them more time to analyze the information and make informed decisions. Tardy financials could give would-be investors pause.
And timeliness is a factor that ratings agencies consider when setting government credit ratings -- which is to say, it potentially impacts how much we pay to borrow for things like roads and schools.
My staff and I have worked hard in recent years to continually reduce the time it takes to produce the state’s financial report -- part of our broader effort to increase fiscal 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 that measure. In both 2018 and 2019, we ranked second nationally in timeliness – behind only New York, which is one of a handful of states with laws requiring the reports to be completed early.
In 2020, South Carolina recorded the nation’s best publication time -- a feather in our state’s cap and a gratifying payoff for a lot of hard work and long hours. The 136 days it took to produce the state’s report was nearly 11 weeks better than the national average.
A few weeks ago, on Nov. 12, I released the state’s report for fiscal year 2021. It took 135 days – one day faster than last year. Alas, our time in the top spot was short-lived; despite our improved time, South Carolina is once again second-best -- behind only New York. Those comparisons aside, however, our success bodes well for the state’s overall fiscal health. And it sets the right example for our state’s municipalities, counties, school districts and other public bodies, who also should strive to publish their financials as early as possible.
South Carolina’s annual financial report for 2021 can be viewed at cg.sc.gov. Click “financial reports” on the horizontal menu near the top of the homepage. Then click “Annual Comprehensive Financial Reports.”
Richard Eckstrom is a CPA and the state Comptroller. He’s president of the National Association of State Auditors, Comptrollers, and Treasurers.