By: Mark Glennon*
The key numbers on a governmental unit’s financial status and performance are in its ACFR (Annual Comprehensive Financial Report, previously called Comprehensive Annual Financial Report or CAFR). That’s because they include audited financial statements, mostly on an accrual basis. Those financial statements are different from misleading budgets, which are on a cash basis that ignore growing debts and count borrowed money and asset sales as if they are income.
But the last period for which the State of Illinois has published a ACFR ended over two and a half years ago on June 30, 2022.
That’s exceptionally late and we have seen no explanation for the delay. That’s unacceptable.
States have averaged just 200 days to publish their ACFRs, according a study on them. But Illinois still has no ACFR for 2023, a fiscal year ended that over 565 days ago. Compared to the national average, Illinois would be late even on its ACFR for the 2024 fiscal year that ended over 200 days ago. Many other states are indeed over a year ahead of us, having already published 2024 ACFRs, including New York, Wisconsin, Michigan, Iowa and Indiana. Only Nevada has yet to file its 2023 ACFR.
For big, publicly traded companies, the deadline is even stricter. The Securities Exchange Commission requires them to file 10K financial statements 60 to 90 days after year end.
Why the delay for Illinois?
We have no idea. I recently pinged Illinois Comptroller Susana Mendoza, whose office publishes the ACFRs, for an answer. She responded that it’s because the needed audited financial statements are not complete, and that’s in the hands of the Illinois Auditor General, Frank Mautino. Mendoza then posted the following on the Comptroller site, in red: “The Comptroller cannot issue the Annual Comprehensive Financial Report until the Auditor General has completed their audit. The audit for Fiscal Year 2023 has not been completed yet by the Auditor General. For the sake of transparency, the Comptroller has issued an Interim Report while awaiting the completed audit.” Mendoza did issue an “interim report” for 2023 earlier, but it’s abbreviated and not based on audited financial statements, so it’s of little value.
Mautino, however, has a legitimate reason for not explaining the delay, which is that auditors do not discuss audits until they are completed. Moreover, he may have a good excuse, which may be that the underlying records are mess for him to sort out. That was the case for 2022, for which he could not issue a qualified opinion on accuracy and completeness of the financial statements. That’s highly unusual for a major governmental unit or a public company. The problem area was the state’s unemployment trust fund, which was riddled with fraud during the Covid pandemic. From Mautino’s report, which is part of the 2022 ACFR:
Disclaimer of Opinion on the Unemployment Compensation Trust Fund Statements of Revenues, Expenses, and Changes in Net Position and Cash Flows
Because of the significance of the matter described in the Basis for Disclaimer of Opinion on Unemployment Compensation Trust Fund Statements of Revenues, Expenses, and Changes in Net Position and Cash Flows paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the statements of revenues, expenses, and changes in net position and cash flows of the Unemployment Compensation Trust Fund. Accordingly, we donot express an opinion on these statements.
Illinois’ tardiness with its ACFR is part of why Truth in Accounting graded it an ‘F’ in its most recent Financial State of States. From that report:
Illinois is extremely tardy with its annual financial report. The Government Finance Officers Association standard for timeliness is 180 days after the fiscal year-end. Truth in Accounting believes governments should release their financial reports within 100 days of the fiscal year-end. Without the 2023 financial report, citizens and elected officials are missing crucial information needed to make informed decisions regarding budgets, future legislative actions, and tax collection.
Next month, Gov. JB Pritzker will deliver the annual, combined State of State and Budget Address, including his proposal for the next budget. Timely ACFRs including audited financial statements with unqualified opinions are essential to assessing any new budget proposals, but we aren’t getting them when needed. An explanation for the delay is obviously also long overdue.
*Mark Glennon is founder of Wirepoints.
This column was updated to reflect Mautino’s reasons for not discussing the delay in public.
With $162 billion more from taxpayers, couldn’t you deliver a few bond upgrades, too
Audio and summary 
A largely unasked question is becoming glaring: Is Illinois doing all it should to use artificial intelligence to make government cost less and work better? So far, the evidence says no.
Propose federal funds be withheld from any State or local recipients which do not have current audit requirements fulfilled?
As it is, no adverse consequences attend failure to follow legal requirements for audits of public funds’ uses by local governments and so-called nonprofit agencies which receive publicly funded grants.
An audit puts consequences on someone: an accountant may be civilly liable for malfeasance and lose his license to practice.
Job #1 of the Illinois State Comptroller and Treasurer may be to facilitate spending on corruption, patronage, and vote buying, but concomitant with that is the even more important obsfucation of that spending from public scrutiny!
While state Auditor General suspiciously can’t issue ACFR, the state Commission on Government Forecasting and Accountability (CGFA, https://cgfa.ilga.gov/) can issue endless reports on Illinois gov performance:
It’s a complete PR con job for the FEW dopey taxpayers (me) paying attention.
How do they get away with this? Do they think the people of Illinois are stupid? Oh wait, never mind.
For politicians, no news is good news. They are obviously hiding something bad here.
What’s the surprise about the delay in releasing the report? Do you think they are delaying good news, or are they massaging the language in the bad news to spin it so the public doesn’t throw up?
Questions for Standard & Poor’s Global Ratings, Moody’s, and Fitch Ratings:
Still think Illinois bonds are investment grade?
How do you know?
Boarders on fraudulent activity. How can smart investors make investment decisions with no information?
Gosh, when will they ever be this late sending me a property tax bill?
How do you deliver the state of the state if you don’t have it?
It takes a while to jimmy the numbers around enough to prevent a full scale revolt and investigation.
If the State’s financial records are too complicated for Mr. Mautino to complete the audit and issue an opinion in a timely manner, perhaps independent external auditors should be brought in. The Auditor General serves a 10 year term, and Mr. Mautino’s term is up in 2026. Does he intend to complete any reviews before his term expires? At a minimum, failure to complete the 2023 ACFR is a very bad look. What’s going on here?
I suspect that the delinquency is, at least in part, caused by reluctance to disclose bad news. It then follows that one motive is to maintain bond ratings that disguise investment risk. If state finances are as bad as they appear to be, then bondholder losses are likely to grow. I suppose that these risks are disclosed in offering statements in a way that obfuscates the risks sufficiently that the lawyers, accountants, actuaries, underwriters etc. are able to dodge or settle liability for losses while continuing to rake in fees at the front end and skate to other firms when… Read more »
And little Suzy’s whole shtick is to zoom around telling the few dopey taxpayers awake what a great job the states, she’s, doing raising the bond ratings by paying down all the debt from the disastrous Rauner years without even mentioning all the ARPA-COVID stimulus….all while you got public sec union grifters pushing TIER II “fix”, zero cutbacks in state budget from all the COVID $, etc, etc, etc…..,it’s a complete con job. When are the feds going to step in and rescue us everyday chumbalones.
So it’s willfull fraud to dupe bond buyers – sounds like the Treasury and SEC and DOJ should get involved.
Agree. Illinois received a huge influx of government handouts and used SOME of it to pay down bills, which helped their credit rating. The state also got funding for the CHIPS act, which may have lead to rosier financial outlook than what will be with a new, stingier administration. However, not including the future loss of free government money is akin to an ostrich with its head in the sand. The website capitalmarkets.illinois.gov has links to Illinois Economic Reports. It reads like a reelection campaign. The bond ratings are suspect as is the way the tale is told.
What are the state bond ratings based on without ACFR?
IMO, that makes them inadequately informed.
I think that the Bond rating companies are culpable in the multi trillion dollar fraud of state and local government financial shenanigans. They have no skin in the game. A bondholder lawsuit ought to kick them to path of accuracy
Of course, rating agencies can ask for non-public information as part of their rating process, but one wonders why there should be any non-public financial information when it’s a government entity.