California’s Streak of Late Financial Statements Continues
Since Gavin Newsom took office, California has yet to produce its audited financial statements on time. But, on the plus side, the delay was shorter this year than last and State Controller Malia Cohen is promising a return to timely reporting next year before Newsom leaves office.
The accompanying chart shows how many days in took the State to meet its audited financial statement filing requirements over the last two years. Like most other states, large counties, and cities, California produces two reports: (1) an Annual Comprehensive Financial Report (ACFR) used by municipal bond investors, and (2) a Federal Single Audit Report. The single audit includes the ACFR as well as a list of federal grants the state used and auditor findings about whether the state managed the federal grant funds properly. As a result, the single audit typically appears at the same time or later than the ACFR.
Both reports are supposed to be released nine months (or 273 days) after the end of the fiscal year on June 30th (but ACFR releases after six months are customary for many other states).
As the chart shows, California complied with the deadlines for its 2016 and 2017 fiscal year, but not since. The problem peaked in fiscal year 2021 when California was enjoying and squandering a gusher of federal COVID-19 assistance. That year, the ACFR and single audit both appeared about a year late, in early April 2023. But the original single audit was incomplete, missing multiple federal Health and Human Services grants, and had to be resubmitted in June 2024, more than two years after the original deadline.
Over the last three years, California continued to file late, but the delays have been shrinking. Getting back on schedule for FY 2025, meaning that both the ACFR and Single Audit would be filed (accurately) by March 31, 2026, seems like a stretch. But hope springs eternal.
Although the 2024 ACFR was only 5-1/2 months late, we are still waiting for this year’s single audit. Also, the 2024 ACFR once again did not receive a clean opinion from the State Auditor. California’s Unemployment Insurance fund is still straightening out its books after the rampant benefit fraud of the COVID era. And, for California, the UI nightmare will continue for years: we’re the only state that still has an outstanding federal UI loan and our state’s high unemployment rate is heightening the fund’s red ink even today.
Unfortunately, the powers that be in Sacramento seem to have little time for such basics of good state governance as producing timely financial statements and maintaining a solvent UI fund. After all, why bother with such boring necessities, when there are so many opportunities to joust with Washington DC.
Marc Joffe is a Visiting Fellow at California Policy Center.