A chart from Harrisburg’s audited financial statements from 2013.
Harrisburg will file audited financial statements on time for the first time since 2007, city officials said this week, marking a small but important step in the once nearly bankrupt capital’s gradual return to normal operations.
Finance director Bruce Weber said the statements would be published by the end of the week, following the completion of a review by the city’s independent auditors, the Harrisburg-based firm Maher Duessel.
That will allow Harrisburg to file them with regulators by a Sept. 30 deadline, set by promises the city made in various borrowings over the years. The city has not met the deadline since 2007, and its struggles with timely filings led the Securities and Exchange Commission two years ago to charge it with securities fraud.
“The capital markets will view this very favorably as yet another step in the city’s recovery,” said Steven Goldfield, a financial advisor to the state team overseeing Harrisburg’s recovery plan.
The audit, though its timing reflects better compliance with regulators, still comes later than a June 30 deadline generally viewed as ideal, said deputy controller Bill Leinberger. And it comes only weeks after Mayor Eric Papenfuse warned of a possible $6 million deficit in 2016 and a city hall that remains “starved for capacity.”
The financial statements give a comprehensive picture of the government’s financial standing and general operations at the close of the prior fiscal year. In addition to providing financial details, they are a font of information about the city, including data like demographic and employment trends and government staffing levels.
Their scope may prove forbidding to the average citizen, who likely doesn’t have the time or expertise to wade through the hundred-plus pages of city hall minutiae. “It’s like drinking from a fire hose of information,” Weber said.
But investors in city-backed bonds may rely on them for an accurate picture of the city’s financial health, which is why the SEC cited Harrisburg’s late statements and notices between 2009 and 2011 in charging the city with fraud.
“Timely and complete disclosure of financial information by state and local governments plays a key role in ensuring a fair and efficient municipal market,” said Lynnette Kelly, executive director of the Municipal Securities Rulemaking Board, which regulates the municipal bond market. “When cities meet their disclosure requirements, investors have the information they need to make decisions that are right for them.”
In various borrowings, Harrisburg promised to provide market regulators with up-to-date financial statements 270 days from the end of each fiscal year, or to notify investors if the city was running late on its filing.
The SEC claimed that, by failing to file timely statements or notices, the city left the market with “incomplete and outdated” information from January 2009 to March 2011. Furthermore, budget reports and public statements in 2009 by then-Mayor Stephen Reed gave “misleading” information at a time when the city government was facing increasing financial difficulties, the SEC said.
The SEC ultimately settled without Harrisburg admitting or denying the charges. The city now operates under a cease-and-desist order requiring timely disclosures to investors.
In recent years, as the city played catch-up, it submitted financial statements after the Sept. 30 deadline but complied with the order by filing a notice with regulators. This year marks the first under the order in which Harrisburg will not have to file such a notice, because the audited statements themselves will be submitted on time.
