Fiscal Watchdog Gives Louisiana Low Marks for Financial Transparency
BATON ROUGE – Fiscal watchdog Truth in Accounting has knocked Louisiana’s annual financial report with several low-transparency findings.
State governments release comprehensive annual financial reports every year that are audited by certified public accountants and serve as bedrock public information regarding each state’s financial condition.
The open-government nonprofit said these “important-but-obscure” documents often fail best practices found in the private sector. Its latest analysis, Financial Transparency Score 2021, explores fiscal year 2020 state data to “encourage the publication of transparent and accurate government financial information.”
Louisiana’s annual report, the group said, falls short with respect to accessibility, navigation, external auditors and pension data timing. In each area researchers assigned a score of 1 or 2 out of 10 possible points.
When incorporating high marks for the accuracy of all financial information presented, the single most important criterion, and for including off-balance sheet liabilities, which many states hide, Louisiana’s overall transparency score was 79 out of 100.
The lackluster score appears slightly better in context, as widespread transparency issues led the Chicago-based watchdog to determine a score of 80 or above was “noteworthy.”
“Overall the 50 states’ transparency scores worsened compared to the previous years,” researchers said. “Every state received funds from the CARES Act in response to the COVID-19 pandemic, which highlighted weaknesses that existed in states’ unemployment insurance.”
Other factors preventing states from receiving better scores included timeliness in reporting and the use of outdated pension information, they said.
Louisiana’s pension information received low marks for timing and non-independent review, meaning government employees audited pension data, not external auditors.
The state’s annual financial report was not easily accessible online, the group found, nor was it easily searchable when it was reviewed.
Utah, Maryland and South Dakota ranked highest with scores of 88, 87 and 87, respectively. North Carolina, Georgia and Colorado ranked last with scores of 54, 54 and 46, respectively.
Truth in Accounting emphasized the importance of accurately reporting financial information, where Louisiana excelled and the bottom three states received “flunk opinions” from their initial annual report audits.
The group also highlighted the problem of hidden liabilities, or expenses that show up in yearly financial reports but are kept out of balanced budget deliberations in state legislatures and off-the-books in local governments.
Accounting changes have made the practice more difficult in recent years, researchers noted.
“However, only 20 states reported 95 percent or more of their retirement liabilities, which is down from 34 states last year. In FY 2020, total hidden debt among the states amounted to $197 billion,” they concluded.
By William Patrick for the Center Square