Study: Texas Ranks 38th Nationally In Financial Transparency Rankings

A financial transparency report from Truth in Accounting (TIA) awarded Texas an average score from the 2020 fiscal year. Texas’ performance indicates that the Lone Star State has room for improvement regarding financial transparency.

“To encourage the publication of transparent and accurate government financial information, Truth in Accounting has created a transparency score for financial reporting by the states,” the organization shared in a statement. “This report focuses on important-but-obscure annual financial reports on file in statehouses across the country and measures their contents against widely accepted best practices from the private sector.”

TIA scored states using a 0-100 grading system. “While no state earned a perfect score in this year’s analysis, TIA regards a score of 80 or above as noteworthy,” TIA stated.

Colorado received the lowest grade at 46, whereas Utah occupied the top spot at 86.

Texas had a score of 77 out of 100, ranking 28th in the country.

Sydney Henry of Texas Scorecard noted that states received grades on eight different factors in each state’s respective annual comprehensive financial report. Each of the factors and Texas’ ratings are listed below:

• A clean opinion from an independent auditor. Texas scored 50/50. 
• A net position undistorted by “misleading or confusing” deferred items. Texas scored 0/10. 
• All retirement liabilities are reported on the state’s balance sheet. Texas scored 10/10. 
• The state’s report was published within 100 days of the government’s fiscal year-end. Texas scored 7/10. 
• The state’s report is easily accessible online. Texas scored 4/5. 
• The state’s report is easily navigable and searchable online. Texas scored 4/5. 
• The state’s report is audited by an independent auditor who is not a government employee. Texas scored 0/5. 
• The state’s report measures the net pension liability using the same date as the annual report. Texas scored 2/5.

According to these factors that TIA measured, Texas’s score stayed roughly the same compared to 2020’s report.

“Texas scored around the national (50-state) average in our latest report. The state received a clean audit opinion on its financial statements and the highest grade on this element of our score, avoiding difficulties that afflicted more than a few other governments in a pandemic year,” Bill Bergman, Truth in Accounting’s Director of Research, said to Texas Scorecard.

“Texas continued to deliver relatively timely financial statements, but the keyword there is ‘relatively.’ Most all state governments could and should do a much better job getting audited financial statements into the hands of their citizens and legislators sooner, especially […] where governments overly rely on more timely but sometimes less-than-truthful reporting in government budget documents.” Bergman added, “Texas’ auditors are not fully external, private, independent auditors, leading it to a low score on one of our Transparency Score elements.”

Apart from financial transparency, TIA believes Texas still has to work on its fiscal policies. In September, TIA published its annual Financial State of the States report. It labeled Texas as a “Sinkhole State” and determined that its overall financial state had deteriorated even when the state government received COVID-related financial aid from the Federal Government.

Texas was ranked 33rd in this report and received a D grade compared to Alaska, the highest-ranked state with an A grade.