In the world of finance, timeliness isn't just a courtesy—it's a cornerstone of trust, accountability, and informed decision-making. Yet, when it comes to state governments, this principle seems optional. Truth in Accounting's (TIA) sixteenth annual Financial State of the States report, released in September 2025, shines a harsh light on this issue. For the first time in the report's history, seven states failed to submit their audited financial reports—known as Annual Comprehensive Financial Reports (ACFRs)—in time for TIA's analysis. These delays, far exceeding the Governmental Accounting Standards Board (GASB) guideline of 180 days after the fiscal year-end, highlight a systemic failure in government transparency. Even more concerning, as of October 2025, only California has released its FY2024 ACFR, while states such as Arizona, Idaho, Illinois, Massachusetts, Mississippi, Nevada, and Oklahoma are lagging behind. Nevada hasn't even issued its FY2023 report, leaving a multi-year gap in public insight.
This isn't a minor administrative hiccup. These ACFRs are the lifeblood of fiscal governance, providing elected officials, taxpayers, and bondholders with a clear picture of a state's assets, liabilities, revenues, and expenditures. Without them, lawmakers are essentially "flying blind" when crafting budgets that affect millions of lives—from education funding to infrastructure projects. TIA's report dedicates an entire section to the criticality of timely audited financials, emphasizing how delays erode public trust and enable poor fiscal management. However, despite these warnings, there have been zero repercussions for the offending states. No fines, no sanctions, no loss of privileges. Nothing.
The Stark Contrast: Corporate Accountability vs. Government Impunity
Imagine if a publicly traded corporation pulled the same stunt. Under Securities and Exchange Commission (SEC) rules, companies must file their annual reports (Form 10-K) within 60 to 90 days of the end of their fiscal year, depending on their size. Miss that deadline? The consequences are swift and severe. The SEC can levy hefty fines, launch investigations, or even bar executives from serving on boards. Stock exchanges like the NYSE or Nasdaq can delist the company, tanking its share price, restricting access to capital, and potentially driving it toward bankruptcy. This enforcement isn't arbitrary—it's designed to protect investors and maintain market integrity.
States, however, operate in a consequence-free zone. GASB sets the standards for governmental accounting, including the 180-day timeliness benchmark, but these are essentially recommendations without teeth. There's no equivalent to the SEC overseeing state finances. Bond rating agencies, such as Moody's or S&P, might note delays in their assessments, potentially leading to slightly higher borrowing costs, but this is far from delisting or existential threats. Taxpayers, the ultimate "investors" in state governments, are left holding the bag, with no recourse beyond the ballot box—and even then, without timely data, how can voters make informed choices?
This hypocrisy is glaring. Governments routinely impose strict regulations on businesses, demanding transparency and punishing lapses, yet they exempt themselves from similar scrutiny. If a corporation's tardiness can shatter investor confidence and trigger market chaos, why do states get a free pass when their delays obscure billions in taxpayer dollars? TIA's report highlights this double standard, noting that while private-sector accounting failures result in real-world consequences, government inaction faces none. It's a system that rewards procrastination and punishes the public.
Who Should Be Holding States Accountable?
The lack of oversight begs the question: Who is responsible for enforcing timeliness in state financial reporting? Currently, the answer is a patchwork of inadequate mechanisms.
-
State-Level Oversight: Many states have their own auditors or comptrollers responsible for preparing ACFRs, but these offices often cite resource shortages, complex pension calculations, or post-pandemic backlogs as reasons for delays. In reality, they're part of the government machinery, with little incentive to self-police aggressively. For instance, Illinois's record-breaking 774-day delay on its FY2023 report (finally released in August 2025) went unchecked internally for over two years.
-
Federal Involvement: There's no dedicated federal agency enforcing state reporting standards. The U.S. Government Accountability Office (GAO) audits federal finances, but doesn't extend to states. The U.S. Treasury Department oversees certain aspects of state fiscal health through programs such as the Coronavirus State and Local Fiscal Recovery Funds, but it doesn't mandate or penalize late ACFRs.
-
Bond Markets and Rating Agencies: In theory, markets provide indirect pressure. Delayed reports can signal fiscal instability, leading to downgraded credit ratings and higher interest rates on state bonds. However, this "punishment" is mild and uneven—wealthier states can weather it, while others pass the costs to taxpayers.
So, who should oversee this? It's time for structural reform. Congress could step in by tying federal aid—such as infrastructure grants or Medicaid matching funds—to timely ACFR submissions. The SEC already regulates municipal securities under the Securities Exchange Act of 1934, requiring issuers (including states) to disclose material financial information to bondholders via platforms like the Municipal Securities Rulemaking Board’s EMMA system. Late or missing ACFRs can violate these disclosure rules, as they’re critical for assessing creditworthiness. In theory, the SEC could expand its role to enforce timeliness, leveraging its existing authority to penalize non-compliance with fines or restrictions on bond issuances. This would align state accountability more closely with corporate standards, where the SEC swiftly punishes late 10-K filings. Since states borrow billions of dollars annually—$3.8 trillion in outstanding municipal debt as of 2023—timely reporting protects both investors and taxpayers.
Public pressure through organizations like TIA is crucial, but it needs teeth: mandatory transparency scores in election materials or citizen lawsuits for non-compliance.
Without such measures, states will continue to operate in opacity, risking fiscal mismanagement that could lead to crises, such as pension shortfalls or unbalanced budgets. Nevada's failure to release even its FY2023 ACFR exemplifies how delays compound, creating a vicious cycle of unaccountability.
A Call for True Transparency
The Financial State of the States report isn't just a collection of numbers—it's a wake-up call. The seven states' delays in 2025 mark a new low, but the real scandal is the systemic hypocrisy that allows it. Governments preach accountability to corporations while dodging it themselves. Taxpayers deserve better: timely, audited reports that empower informed governance, not excuses and impunity.
It's time for lawmakers at both the state and federal levels to bridge this gap. Demand enforcement mechanisms that mirror the private sector's rigor. Support organizations like Truth in Accounting in their push for reform. Because when states fly blind, it's the citizens who crash.