WASHINGTON — Cook County, Ill., officials say while they are striving to improve the timeliness of their secondary market disclosures, the process of coordinating financial information among different offices and departments is both challenging and time consuming.
In an interview late last week, Cook County Comptroller Constance Kravitz said while her goal is to one day qualify for a certificate from the Government Finance Officers Association, which recognizes issuers that are able to file their comprehensive annual financial report within six months, a 180-day turnaround currently would be “completely unreasonable.”
“There’s a lot of moving parts that we don’t necessarily always have control over and if one of those links breaks, then I can’t issue our report,” she said.
Kravitz’s comments — which illustrate why it may not be easy for some issuers to provide annual financial information quickly enough to satisfy investors — come after the nation’s second-largest county by population was highlighted as a poster child for out-of-date disclosure during last week’s Securities and Exchange Commission field hearing in San Francisco on the municipal securities market.
An analyst testifying about the staleness of continuing disclosures warned that a large county in the Midwest took 13 months to file its audited annual financials, among the longest periods of time for any governmental borrower. Sources later identified the issuer as Cook County.
Though many municipalities take as long as nine months to file their audited financials, Cook is up front with bondholders that it may need much more time than that, warning in its offering documents that it may not file for up to 15 months.
In fact, filings with disclosure repositories indicate that the county has historically taken significantly longer than that.
For the fiscal year ending Nov. 30, 2006, Cook County filed its comprehensive annual financial report on July 21, 2008, nearly 20 months after the end of its fiscal year, according to documents filed with Bloomberg LP, which was one of four national repositories collecting issuers’ secondary market disclosures at that time.
The county was speedier for fiscal 2007, filing its CAFR the following October, roughly 11 months later.
But in fiscal 2008, it took Cook County about 14 months to file its CAFR, posting it this January to the Municipal Securities Rulemaking Board’s EMMA website, which is now the sole official muni disclosure repository.
Just this month, the county board approved the CAFR for fiscal 2009. While officials noted it was added as an exhibit to an offering statement for a $120 million refunding last week, as of Friday the report had yet to be posted to EMMA.
That means that the most easily accessible financial information for existing bondholders and other investors was from November 2008, unless they knew to look at the OS for the refunding. Though a Sept. 22 document posted by Digital Assurance Certification LLC, the county’s dissemination agent, lists 22 different bond transactions for which “certain operating and financial data required to be disclosed on an ongoing basis” is available in the offering statement, EMMA does not link to the CAFR.
Meanwhile, a five-year forecast is posted on EMMA for some of the county’s bonds, but, confusingly, it is for East Muskingum Schools in Muskingum County, Ohio, and appears to have been erroneously uploaded in February.
Cook County officials insist, however, that they are doing their best to speed up the release of their CAFRs.
The biggest obstacle is waiting for the county’s subcomponent units to complete their own financial statements and then having them audited, Kravitz said. Compounding the problem is that some of the governmental sub-units operate on a fiscal year that mirrors the calendar year.
The Cook County Health and Hospital System has the same auditors as the county but has different financial statements that must be issued before they are incorporated into the county’s own financial statements, according to Kravitz.
The same is true for the clerk of the courts and the county treasurer, which both have separately issued financial statements that Cook must wait for before it can roll them into its own statement, the comptroller added.
The Cook County Forest Preserve District uses different auditors than the county and closes its books one month later. In addition, there are sub-units within the forest preserve — the Chicago Botanic Garden and the Brookfield Zoo — whose financials are rolled into the forest preserves numbers, and ultimately into the county’s as well.
Finally, the pension funds for both the forest preserve and the county operate on a fiscal year that mirrors the calendar year, and they must have actuary reports completed before auditors review both sets of financials and produce their own reports, Kravitz said.
“Our reliance on all of these other reports makes it very difficult to meet” a quick turnaround, she said.
Kravitz stressed that Cook is making progress. When she began her job about a year ago, it had not issued its financial statements for fiscal 2008 but she helped ensure that they were published within three months. The most recent CAFR for fiscal 2009 was completed in late August and approved by the board Sept. 15 — a three-month improvement over last year, she noted.