California improves its audit reporting timeline as Nevada lags

California's state controller and auditor did a victory lap recently after they announced, after several years of extremely late audited financial statements, the state has caught up.

Releasing California's audited comprehensive financial report on May 12 for the fiscal year ended June 30, 2025, represents a vast improvement for a state government that had been plagued by audited financials released as late as 631 days after the end of the fiscal year they described.

The most recent unmodified audit came 316 days after the end of the fiscal year. By coming in May, it meant that California lawmakers had the information available as they weighed Gov. Gavin Newsom's proposed May budget revisions and before lawmakers announced a budget agreement. 

"As the state's chief fiscal officer, my job is to make sure Californians can clearly see how their dollars are being managed, where we are making progress, and where we face real challenges," State Controller Malia Cohen said in a statement. "Transparency is how we build trust and move California forward. This is not just a report for accountants or the bond markets, it's a report for the people of California."

The FY 2024-25 ACFR "represents the fastest turnaround on record for a financial report of California's size and complexity, completed just eight months after the prior report and returned to its Spring publication target," said Cohen, who is running for re-election.

The Government Finance Officers Association recommends that issuers release audited financial documents within six months after the end of the fiscal year. California's was released more than 10 months after the end of the fiscal year, but it indicates a vast improvement of its prior ACFRs.

The rating agencies have responded with mixed reviews on the importance of states producing a timely ACFR, particularly in the case of California, which provides investors with a wealth of other information.

Nonetheless, credit analysts say that a late ACFR can be indicative of hidden problems and it also means those issues might result in making riskier decisions.

"On the trading side, it's often more relevant to see current ratings/past histories, but financials don't usually play a large role," said Kim Olsan, senior fixed income portfolio manager of NewSquare Capital, LLC.

"Market spreads and liquidity take precedence," Olsan said. "From the buy side, putting a bond in an investor's account has a much longer-term impact."

Without updated financials, Olsan said, however, investors have to rely on prior filings and assume a stable or positive revenue trend continued in the most current fiscal year. 

"Most times that is the case, but there are scenarios where that turns out not to be true," Olsan said. "An issuer may have had a revenue impairment (unexpected repair cost i.e. utility system, school district or loss of a major taxpayer for GOs) that affected the budget, or taken on a loan outside of the markets that hadn't yet been disclosed."

"The availability of public filings is key," Olsan said.

"Various sources exist, but the more available a range of financial data is, the better informed we are," she said. "That's especially relevant for infrequent issuers where ratings aren't updated as often as for those in the market on a regular basis."

Richard Ciccarone, president emeritus of Merritt Research Services, an Investortools company, created a database to track the issue of late audited financial statements and has been tracking the issue for decades. He is not so sure a victory lap is warranted.

Ciccarone, who co-authors an annual report on audit timeliness with Deborah Carroll, director of the University of Chicago Government Finance Research Center, has long held that state and local governments can get their ACFRs out faster than they have traditionally.

"It's not only that 180 days isn't an ideal time span, but so many are averaging 250 or 300 days," Ciccarone said. "The California auditor got so excited over the state reducing the ACFR release to 300 days and said it's a good thing, but it's not a good thing."

Malia Cohen for Controller 2026

The issue with California's tardy ACFR release, according to past Bond Buyer interviews with former State Controller Betty Yee, started when the state launched its FI$CAL program to digitize all of its financial documents.

Yee issued an early warning to state lawmakers in 2019 that she wasn't receiving documents from the state agencies in a timely enough fashion for her to get the report out. 

Yee raised the flag on the issue, made sure it was documented on the Municipal Securities Rulemaking Board's EMMA website and worked with the State Treasurer's Office to make sure it was disclosed to the municipal bond market. But she wasn't able to tighten up delivery of the report.

When Cohen took the reins as controller in January 2023, she prioritized speeding up the process, building on Yee's efforts.

While California is making progress on its audited comprehensive financial reports, and another poster child for late audits, Illinois, is also showing improvement, Nevada has cemented its position as the slowest state at issuing audited financial statements.

The Silver State has yet to release its ACFR for fiscal 2024.

The financial reports link on the Nevada State Controller's website goes to a statement saying "ACFR documents are currently being remediated. You may request access to these documents, by submitting a public records request." 

State Controller Andy Matthews this week said Nevada plans to publish the ACFR for fiscal year-end 2024 by the end of June.

When The Bond Buyer talked to Matthews in September, he had hoped to release that document by March, and the fiscal year-end audited financials for year-end 2025 by the end of this year.

"In 2025, we were successful in getting the resources we needed through the budget process to address this," Matthews said Tuesday. "That was a pivotal moment, because it stopped the bleeding. Though we are delayed obviously, we have broken that cycle and the ship is heading in the right direction."

He said his office is exploring some options to quicken the pace and is planning to ask the Legislature for additional resources, but said he didn't want to sour the process by revealing what it is the office plans to ask for before he speaks to lawmakers. 

"We plan to publish the 2024 report by the end of the month, barring any unforeseen circumstances," he said.

In September, the state had been the subject of a hack attack, and most of the state's websites were shut down.

Matthews this week said that situation isn't what caused the delay. He said, like other states, California included, the movement of financial documents to a digitized system is the reason for the logjam.

"We have made progress, but it is modest compared to what California did," Matthews said. "It's progress, but not as aggressive as other states. We are improving, but other states are throwing more resources at it and improving at a faster rate."

The state posted its annual comprehensive financial report for the year ending June 30, 2023, on the Municipal Securities Rulemaking Board's EMMA website on Aug. 18.

That meant the Silver State's financials were released 777 days after the fiscal year ended.

That is a long time," Ciccarone said. "And, the year before came out 559 days after the end of the fiscal year."

Most of the 2025 ACFRs are out, he said; 52 of the 56 states and territories have released their audits.

Nevada hasn't been under 120 days since 2016, Ciccarone said. California's most recent somewhat speedy ACFR was the release of its 2009 audit, which was released 215 days after fiscal year-end, he said. In addition to Nevada, Arizona, Oklahoma, Rhode Island and Mississippi also haven't issued their ACFRs for fiscal year-end 2025.

Giving credence to Ciccarone's belief that states can get the documents out is a law passed by Texas lawmakers tying property tax hikes to city audit timeliness. Since the law passed, Texas local governments audit delivery times have vastly improved, he said.

"Because of the Texas example, it's a perfect time to show, if they have to do it, they can do it," Ciccarone said. "The market should incentivize it (in pricing), but it has not."

The Texas laws shows that municipalities will improve, most of the time, "if they have a tangible target, like a carrot or a stick," he said. "If they saw the market paying up for faster audits; or in Texas they get penalized."

It doesn't seem to make a difference in the market, because frequent shortages of municipal bond issuance result in investors buying bonds even of credits who have late ACFRs.

"They rationalize that "these should be safe, even if the audit is late,'" he said.