Each year, Truth in Accounting releases the Financial Transparency Score Report, which focuses on transparency in the budgets of state governments. The transparency score evaluates the comprehensive annual financial report (CAFR) of each state. The Financial Transparency Score states the total is out of 100 points, comprised of the following factors:
- Receive a clean opinion from an independent auditor (50 points)
- Include a net position not distorted by misleading and confusing deferred items (10 points)
- Report all retirement liabilities on its balance sheet (statement of net position) (10 points)
- Be published within 100 days of the government’s fiscal year end (10 points)
- Be easily accessible online (5 points)
- Be searchable with useful links from the table of contents and bookmarks (5 points)
- Be audited by an independent auditor who is not an employee of the government (5 points)
- Measure the net pension liability using the same date as the CAFR (5 points)
Alaska was the only state that saw a decrease in its transparency score from 2018 to 2019. In 2018, Alaska had a transparency score of 81, tied with several other states and near the top of the ranking; for comparison, Utah received the highest score of 85. However, in 2019, Alaska scored 69 – a 12-point decrease which landed Alaska only five places from the bottom and a far cry from Idaho’s high score of 88.
What caused such a dramatic decline in Alaska’s financial transparency? In the ranking, the CAFR received only a qualified opinion from the independent auditor, meaning that the auditor found inaccuracies. As a result, the “auditor opinion” category dropped to 35 out of 50 points. Indeed, the report claims the qualified opinion was because, “the state’s management refused to correct a $1.46 billion misstatement of the State’s Constitutional Budget Reserve Fund.” Because the state declined to make corrections, the audit score dropped from an unqualified opinion (transparent accounting) to a qualified opinion. Unfortunately, Alaska is one of only four states who failed to receive a clean audit.
Other statistics from the report found that Alaska received a 9/10 in the deferred items category, 10/10 in off-balance sheet liabilities, a disappointing 4/10 in timeliness, 3/5 on accessibility, 4/5 on ease of navigation, 2/5 on external auditing, and 2/5 on timing of pension data in 2019. Clearly, Alaska’s government shows room for improvement on financial transparency and responsible accounting.