On Feb. 3, 2022, the state of California finally produced its audited financial statements for its fiscal year that ended June 30, 2020. The filing, known as an annual comprehensive financial report, was over a year late and came with an unpleasant surprise in the form of a qualified audit opinion.
State and local governments are normally expected to produce financial statements within six-to-nine months of the fiscal year’s end. California has now missed the nine-month municipal bond market filing deadline for three consecutive years. And, with less than two months to the deadline for its fiscal year 2021 financial reports (for the fiscal year that ended June 30, 2021), another late filing seems inevitable.
California’s financial reporting performance compares poorly with most other states. According to data from Truth in Accounting, the median U.S. state produced its 2020 annual comprehensive financial report 184 days after the end of its fiscal year. By contrast, California took 583 days, nearly 20 months, to file its annual comprehensive financial report for fiscal year 2020. For added perspective, it is worth noting that the Securities and Exchange Commission gives large corporations just 60 days to produce their audited financials.
Jelincic is challenging CalPERS’ dubious denials of two different Public Records Act requests he made. One focuses on impermissible secret board discussions shortly after Chief Investment Officer Ben Meng’s sudden resignation last August. The filing not only calls for these records to be made public but also demands that board members be released to discuss all the matters that CalPERS impermissibly covered in the August “closed session”. The second involves CalPERS’ continuing efforts to hide records showing how it overvalued real estate investments by $583 million. Yet CalPERS not only has said nary a peep about bogus valuations are larger than the total amount it was slotted to invest in a mothballed solo development project, 301 Capitol Mall, but it continues to publish balance sheets that include the inflated results.
We predicted that CalPERS would be be even more inclined than usual to fight these Public Records Act requests because the filing seeks remedies beyond release of the records. First, it requests that CalPERS be found to have violated the Bagley-Keene Open Meeting Act. Second, to the extent that the judge rules that the board discussed items in closed session that should have been agendized for and deliberated in open session, the suit asks that board members be permitted to disclose the contents of those particular discussions in public. Third, the filing calls on the court to require that CalPERS make video and audio recordings of all closed sessions and keep them for five years (this is something that CalPERS currently does but this obligation is meant to shut the door to “the dog ate my disk” pretenses down the road.)