States' comprehensive annual financial reports (CAFRs) are important for helping governments make decisions about taxes and spending, but according to the Government Finance Officers Association (GFOA), they're only useful if they show up on time.

The GFOA generally requires reports to be finished within six months of the close of the fiscal year in order for a state to get its certificate of excellence for financial reporting. On average, states get their reports in in 190 days (a tad late), but some governments are really late.

New Mexico, for example, took 360 days to release its 2014 CAFR (which was still an improvement over the 426 days it took in 2012.) The delay stems from the disastrous implementation of a financial management system about eight years ago when the state couldn’t translate millions of lines of financial transactions into the new system. The state still can’t match accounting records to what it actually has in the bank (the difference at last count is $100 million).  

At the other end is Michigan, which took only 90 days to release its most recent report. Utah, the fourth speediest state, took 127 days, but officials there are competitive and trying to improve. 

There are many advantages to punctuality.

Having the financial report finished earlier permits greater precision in the budgeting process because it's only when a CAFR is completed that budgeters have reliable numbers available on which to base plans for the next fiscal year. A timely report allows staff more time for analysis. Finally, ratings agencies use timeliness of financial reports as one factor in their bond ratings. 

But it’s not easy to get a CAFR out promptly.

State finance or comptroller offices put out the reports, but many agencies and quasi-independent component units supply the information and frequently fail to deliver their numbers on time. In addition, states have to retrain staff and adapt their processes every time the Governmental Accounting Standards Board changes standards for disclosure of fiscal information -- which happens often. 

So how can states release their reports faster?

  A handful of states -- including New York, Virginia and Vermont -- have passed statutes requiring the state government to produce CAFRs in a timely way. Despite its incredible complexity, New York has a 120-day deadline.

Even without statutes in place, pressure from the top makes a big difference. Michigan’s ability to deliver a CAFR substantially earlier than other states began with a commitment from Gov. John Engler about 13 years ago. Support from the governor also helped Hawaii move its position from the slowest state to produce a year-end financial report (469 days in 2010) to one that’s better than average (184 days in 2014). “Basically, the governor said it was very important that financial reporting become more timely because it was affecting bond ratings,” says Jan Yamane, the acting state auditor of Hawaii.  

Basic management strategies and internal goal-setting are important, too. Utah developed a spreadsheet to identify the places in the process where the state had trouble gathering information for financial reports. Reformers worked on identifying the major tasks, when they could be done and how fast they could be done. Success depended on coordinating schedules, communicating with other agencies about the importance of timeliness and doing lots of training.

Some basic structural differences in states also provide advantages and disadvantages.

One of the prime challenges are component units, such as universities. Waiting for financial data from these organizations can be agonizing. But Michigan -- as a result of a mid-1970s budget-balancing maneuver -- has the advantage of a fiscal year that ends Sept. 30, whereas most of its component units have fiscal years that end in June. Adjusting fiscal years so that component unit financial data is finished well before the state has to begin serious work on its financial report is something that the National Association of State Auditors, Comptrollers and Treasurers recommends. But it’s not likely that’s going to happen.

“It would take a lot of political strength and willpower and I don’t think states are going to go through that,” says Kinney Poynter, executive director of National Association of State Auditors, Comptrollers and Treasurers.