WASHINGTON — The chairman of the Governmental Accounting Standards Board plunged into the debate over municipal market disclosure Thursday, urging state and local governments to generate more timely financial reports.
In an opinion piece in the summer issue of the Journal of Government Financial Management, Robert Attmore said issuers should release audited financial statements, prepared in accordance with generally accepted accounting principles, or GAAP, within three to six months of the end of their fiscal years.
“There is no question that it can be done,” Attmore wrote. “The only question is whether state and local government policymakers will consider the benefits sufficient to warrant making timely financial reporting a priority.”
Attmore’s remarks come amid an ongoing Securities and Exchange Commission review of the state of the municipal securities market, spearheaded by commissioner Elisse Walter. A report stemming from the SEC’s review, targeted for release later this year, may recommend legislative or regulatory changes.
In March, David Bean, GASB’s director of research and technical activities, spoke with Walter and the SEC staff about a board research report focused on the timeliness of issuers’ financial reports. The report found that state and local governments who released annual financial reports more than six months after the close of their fiscal years “seriously diminished” the usefulness of the information to users, including financial analysts.
GASB’s mission, according to its website, is twofold: to establish and improve standards of state and local governmental accounting and financial reporting that will result in useful information for users of financial reports; and to guide and educate the public, including issuers, auditors and users of the reports.
In his essay, Attmore said “few would disagree” that annual financial reports, prepared in conformity with GAAP, are “timely” if released within three to six months of the fiscal year end.
However, he said, “thousands of governments” fail to release financial reports within six months of the close of the fiscal year and “some take significantly longer.”
“The point,” Attmore added, “is that nearly all of these governments could report more quickly if their policymakers decide it is a priority.”
New York State and New York City, he said, “routinely” release audited financial statements within four months of their year-ends, as they are required to do by state law.
In addition, Attmore said, as state and local governments struggle with budget cuts and dwindling resources, they will reap dividends from more timely disclosure: enhanced access to the capital markets and possible lower borrowing costs.
By contrast, governments that fail to release timely financial reports compel users, such as muni analysts, to “extrapolate from aging data” and make “educated guesses.”
“In doing so, these governments can diminish public confidence and trust, and may even cause residents and taxpayers to be subjected to higher borrowing costs and higher related debt service payments,” Attmore said.