Post Disclosure and the ACFR

This week we are covering the GFOA best practice of Periodic Disclosure and the ACFR, which can be found at the following link. A recent GFOA survey revealed that 55% of public sector finance professionals view financial reports positively, while the remaining 45% express neutral or negative views. This reflects a broader concern about the growing complexity of these reports and the increasing demands for transparency and accuracy in public finance.

As someone who has developed a deeper understanding of the balance sheet and income statement over time, I have come to appreciate the importance of financial reporting. However, I recognize that the complexity of these reports continues to grow, and the requirements to produce them become more stringent. Despite this, annual financial statements and audits remain critical tools for ensuring transparency, managing risk, and communicating with investors.

In my experience, much of what we learn about public accounting happens in the field, not in the classroom. It takes years to develop the necessary expertise. This is especially important given the increasing need for experienced accountants to maintain the integrity of financial statements and for auditors to ensure compliance with state and federal guidelines, particularly in the management of grant dollars. However, industry-wide shortages of auditors and accountants are making this more difficult.

 The GFOA recommends that all state and local governments prepare and publish an Annual Comprehensive Financial Report (ACFR). This is especially important for governments subject to SEC Rule 15c2-12, which requires ongoing disclosures to investors. These filings, made through the Electronic Municipal Market Access (EMMA) system, are vital in helping investors assess credit risk.

 There are additional events that require disclosure that notice must be given within a 10 day time frame from the event. You should work with bond or disclosure counsel in understanding of the different types of events that would trigger a disclosure.

 Timeliness and understandability are significant issues. Six months after the fiscal year ends is often too late for financial information to remain relevant, and the complexity of the reports makes them difficult for the public and elected officials to grasp. While financial reports primarily serve the bond market, they must also be designed to ensure accountability and transparency to all stakeholders.

 Moving forward, it’s crucial that we rethink how we approach financial reporting. We need to invest in training, leverage technology to improve the timeliness of reports, and simplify the presentation of financial data. This will not only serve the bond market but also build trust with the public and elected officials. As we continue to comply with our EMMA filing requirements, let’s push for reforms that make financial reporting more accessible, transparent, and timely.