Published on : Oct 24, 2013
A report released on Tuesday claims that, U.S. states and local governments are taking nearly a year to release annual financial statements. This is because the federal regulators intimidate on giving the municipal bond investors regular financial information.
According to the Municipal Securities Rulemaking Board, in the first half of the financial year 2013, the concerned issuers on an average posted audited financial statements 339 days after the official close of their fiscal years, the $3.7 trillion market’s self-regulator. This case is exactly the same as the year 2012 that nearly took a full month longer than as compared to 2011, and approximately three times as long as what the federal securities regulators would favor.
A quick glance in the past showed that, in the year 2010, which was the first year when MSRB assembled the total data, local governments and states posted respective audited statements 329 days after the close of the fiscal year. So far it has been witnessed that even the unaudited reports are taking longer to be posted: 260 days by far in 2013 against 249 in 2012, 222 in 2011, and 226 in 2010.
Tuesday’s recent report has come amid a federal campaign by the Securities and Exchange Commission to encourage all the issuers to post accurate as well as current financial information. In May, Harrisburg, Pennsylvania was authoritatively charged by the SEC with fraud for misleading statements contrived by the city officials regarding the crumbling financial condition. The regulators were impelled to word those statements to determine the fraud as Harrisburg was miscreant in filing annually required financial information.
In addition, SEC encourages municipal bond issuers to post their annual reports within a period of 120 days of the end of their fiscal years, as there are no major federal reporting deadlines to be taken care of, no penalties for late filings, nor any publicly traded companies in the market.
Nevertheless, according to the MSRB report showed, there are still many issuers that do not file audited financial reports in anticipation of preparing a new bond sale, but later on, fill up years of information all at once. By far, such a trend of catch-up reports has resulted in about 16.4 percent of the audited financial statements filed as compared with 18.5 percent last year.
Merritt Research Services is a private firm that measures the detailed timeliness of financial reports uniquely. It was until recently, different regulators and investors majorly entrusted in this firm because it helps to analyze the overall speed of the audits by using its database of more than 8,000 official financial reports. Merritt also recently said that, in the year 2012, the median time for states to show up the audited financial reports was 174 days after the close of their fiscal years. This turns in to be nearly twice the time of their overall corporate equivalents, whereas, for cities the median was 171 days.
Richard Ciccarone, Merritt’s esteemed president, looks forward and expects issuers to pace up the annual reports in light of the Harrisburg decision, with full effects coming into the picture in the years 2014 and 2015.