Report: lack of transparency surrounding municipal bonds

Many state and local governments are failing to provide timely financial disclosure of municipal bond borrowing, according to a report released Thursday, making it hard for potential investors to gauge risk.

Municipal bond issuers took, on average, 141 days to file audited financial reports for the 2010 fiscal year ending in June., according to a report prepared by Merritt Research Services, as reported by Reuters.

States took the longest to file, with Illinois taking a whole year to complete its audit, according to the report.

In contrast, the Securities and Exchange Commission requires that corporate bond issuers file annual audit reports within 60 to 90 days of the close of the fiscal year.

Municipal bonds have historically been seen as a safe haven for risk-averse investors. But as whispers of financial insolvency and  potential bankruptcy have grown louder in many municipalities, investors have become more cautious.

As this concern surrounding the stability of municipal finances grows, so does the need for financial transparency.

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