A Timeless Question about the Timeliness of Financial Reporting.

• Author: Levine, Michele Mark

Timely financial reporting is important, which is why GFOA requires that applicants to our Certificate of Achievement for Excellence in Financial Reporting submit their CAFRs within six months of their fiscal year-end.

The Governmental Accounting Standards Board (GASB) Concepts Statement 1, Objectives of Financial Reporting, states that to be effective, information in financial reports must have certain characteristics, including "understandability, reliability, relevance, timeliness, consistency and comparability" (1) Framed right in the center of the list is timeliness. GFOA too has long recognized the importance of timely financial reporting, requiring that applicants to our Certificate of Achievement for Excellence in Financial Reporting (CAFR Award program) submit their comprehensive annual financial reports (CAFRs) no later than six months after the end of their fiscal years. (2) More practically, GFOA has a best practice with suggestions for governments to help them to plan for, prepare, have audited, and issue financial statements and CAFRs in the shortest timeframe possible. (3) Many people ask why large multinational corporations are often able to issue financial statements in less time than it takes a small local government.

After all, the total dollar amount and the geographic area of activities, the number of currencies in which business is conducted, and innumerable other indicators make the local government appear considerably less complex.

Timeliness has been examined by GASB (4) and by academics, and has been the subject of scrutiny from none other than the chairman of the Securities and Exchange Commission. (5) But looking beneath the surface quickly reveals many issues, which are specific to government, that cause or contribute to the longer production timeframe for government financial statements. Let's discuss a few of them here. (6) Diversity of Operations. Every type of activity involves nuances of recognition and measurement of the related assets, liabilities, deferred items, revenues, and expenses/expenditures (all the more so when the measurement focuses and bases of accounting differ, as discussed below). Even a small general-purpose government is likely engaged in a wide array of activities --public safety and judicial, health and welfare, transportation, recreation, infrastructure, and public records, to name a few. In contrast, even large corporations are often dedicated to a group of closely related products...