Research highlights municipal bond issuers that have the fastest audit times

Written by Andy Castillo

It’s no secret that the cogs of public service rotate at a slower rate than their private entity counterparts—when it comes to bond issuance, that lag time is significant. In comparison with corporate bond issuers, municipal bonds “typically take two-to-three times longer,” notes a report from the University of Illinois Chicago, citing research from Merritt Research Services and the university’s Government Finance Research Center.

“Corporate bond issuers have median audit times averaging 60 to 90 days,” the report continues. “By contrast, municipal bond issuers normally take two to three times longer—140 to 160 days—to complete their audits.”

For the report, researchers analyzed audit trends beginning in 2009 through 2020. Within the municipal governmental bond sector, counties had the longest audit time, averaging between 179 to 196 days depending on the year. States and territories were second (173 to 184 days), and cities were third (171 to 179 days). The report notes that COVID-19 slowed audit times across the board due to staffing shortages.

Conversely, researchers found that school districts generally had the fastest audit times.

Among the revenue bond sectors, wholesale electric, private higher education, hospitals and health care systems had the fastest audit times for fiscal year 2020. Airports, water and sewer organizations had the slowest audit time in the same sector.

The research topic is important because “Timely audit reporting is essential for credit evaluation and proper pricing in the municipal bond market and is an important indicator of good governance and stewardship,” said Deborah Carroll, director of the Government Finance Research Center at UIC, in a statement. She noted that interest groups ranging from bond investors to government watchdogs to regulators have regularly called for faster audit times from municipal bond issuers.

To that end, top auditors for the municipal revenue sector cited in the report include KPMG LLP, Pricewaterhouse Coopers, LLP, and KPMG LLP, among others. Top performers in the municipal governmental bond sector for 2020 include Eide Bailly, LLP, BST & Co CPAs, LLP and KPMG LLP, among others.

For more information and to view the full report, visit the University of Illinois Chicago’s website.