Accounting

Bumpy political road for muni bond investors

Published

1 year ago

June 30, 2025

The politics surrounding taxes and the larger economy are revealing new opportunities in some municipal bonds and more reasons to sell others, according to a panel of experts.

Bonds connected to some universities and hospitals will likely see the biggest negative impact from the passage of the One Big Beautiful Bill Act’s package of higher taxes on college endowments and cuts to Medicaid spending. But the industry’s fear that the federal exemption for most interest income could be eliminated has proven unfounded, three portfolio managers noted in a discussion about municipal bonds at Morningstar’s conference in Chicago last week.

President Donald Trump’s trade wars may also affect municipal bonds, based on “the extent that it creates uncertainty and potentially weakens the economy,” said Courtney Wolf, a portfolio manager with Capital Group, the parent company of American Funds. However, municipal bonds include almost 21,000 individual securities across 17 different categories analyzed by Morningstar, with issuers ranging from small municipalities, colleges and hospitals to giant ones and durations and credit qualities of varying lengths and grades. So the politics could play out differently in each municipal bond, even as the sector of the investment universe remains a key source of diversification and tax savings at the federal, state and local levels for many investors.

“That’s the great thing about being active managers in the muni space is that you can get ahead of some of those things,” Wolf said. “At the end of the day, it really comes down to, are you getting paid to take that risk?”

So if investors deem barriers to one particular vehicle’s future credit and yields to be a “high probability event,” that presents them with “a real opportunity to sell that bond into the market and buy something that’s much more insulated,” she added.

Munis in general

Many investors wondering about their portfolios’ possibilities with municipal bonds pay close attention to the ratio of their yields compared to U.S. Treasury notes, the panel’s moderator, Elizabeth Foos, an associate director of fixed-income strategies with Morningstar Research Services, wrote in an analysis of the asset class last year.

That ratio typically “hovers near 80% to 90%, with anything over 100% suggesting that munis are a very good deal as they’re yielding more than a comparable U.S. Treasury,” she wrote. “While the choppy waters aren’t appealing to all investors, many municipal portfolio managers see the market volatility as an opportunity to uncover attractive valuations.”

That combination of possible volatility and tax advantages explains the appeal of municipal bonds in particular, and many of the top firms in asset management are focused on the general attraction of fixed-income products in the current environment. In a keynote at the conference, Vanguard CEO Salim Ramji specifically cited his excitement on investors’ behalf about bonds. The idea that, “if you need active management, you need to pay a higher fee to outperform” is a myth, based on the “empirical evidence just of the past decade” in bonds, Ramji said.

“Most investors, certainly most of our 50 million investors, what they probably need more of today is more fixed income. The rate environment is looking better. They’re entering retirement. There’s been a fantastic run-up in the past decades in U.S. equities, and so they need some balance in their portfolio, but they’re just paying too much for it,” he said. “Sure, there are things to do with private credit and other private asset classes, but if you look at what’s here and now, I think there’s an opportunity for investors to benefit now from better-quality, lower-cost, fixed income than exists in the marketplace as a whole.”

But municipal bond investment managers are looking much more closely at that asset class specifically and what will become of universities, hospitals and state and local governments if Trump and his Republican allies in Congress pass the giant tax and spending bill as soon as this week. Hospitals that provide care to a lot of patients through Medicaid spending are facing a lot of risks from the legislation, noted Curtis White, a portfolio manager with the Tax-Aware Fixed Income Group of JPMorgan Chase.

Hospitals and universities in focus

In that vein, bonds connected to universities may be ripe for a change to, for example, a “water and sewer bond with the same spread,” since new taxes on colleges’ endowments could affect their fixed-income issuances, White noted. That’s why the ramifications to both those parts of the municipal bond universe and state and local governments’ budgets based on “the federal policy changes that are coming through” represent important barometers, White said.

“It’s getting to a point where some of these state and local governments are going to have to start making tough decisions,” he said. “That’s just a high focus for our analyst team.”

Budgetary strains on state and local governments with the end of Covid-era federal reimbursement programs next year and the cuts to Medicaid under the legislation add up to a good time to sell many hospital municipal bond instruments, noted David Hammer, the head of municipal bond portfolio management for PIMCO.

That won’t be true, though, for all of the municipal bonds in the health care sector, and certainly not for the highest rated municipal fixed-income securities, he said.

“I think we’ve seen the worst of it in high-quality munis,” Hammer said. “The lowest-quality portions of the credit market are a very different story. … We’re likely to experience significant credit widening over the next year or two.”

Accounting

Continuous Auditing Transforms Corporate ERPs

Published

5 days ago

July 21, 2026

Business Finance News

continuous auditing transforms corporate erps

As corporate accounting departments cross the threshold into late July 2026, the adoption of continuous, automated auditing systems has reached a definitive turning point. Driven by advances in artificial intelligence and deep integration with modern Enterprise Resource Planning (ERP) platforms, leading finance organizations are moving away from traditional, periodic post-hoc audits in favor of real-time, 100% transactional verification. This technological transition is redefining internal control environments, reducing compliance costs, and eliminating the structural delays inherent in legacy quarterly closing processes.

Unlike traditional auditing frameworks that rely on statistical sampling—a process that inevitably leaves operational blind spots—continuous auditing software monitors operational data feeds continuously. Every purchase order, electronic invoice, payroll disbursement, and cross-border wire transfer is automatically cross-referenced against established corporate governance parameters, regulatory tax schedules, and anti-fraud algorithms in real time. Anomalies or unauthorized ledger entries are flagged instantly, allowing internal audit teams to investigate and remediate compliance gaps immediately rather than months after the close of a financial period.

The implications for executive financial management are far-reaching. By embedding continuous verification directly into daily transaction workflows, chief financial officers gain uninterrupted visibility into the organization’s true financial standing. Real-time balance sheet auditing eliminates the severe operational bottlenecks associated with month-end and quarter-end financial reconciliations, freeing accounting professionals to focus on strategic financial modeling, tax planning, and capital allocation rather than manual data entry and spreadsheet consolidation.

However, implementing continuous auditing requires accounting leadership to invest heavily in data governance and technical upskilling. Internal audit teams must evolve from manual ledger reviewers into system architects capable of auditing complex algorithms and validating automated data pipelines. Accounting firms and corporate controllers that master continuous auditing will establish a resilient compliance framework capable of meeting stringent international regulatory standards with total transparency.

Accounting

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

Published

6 days ago

July 20, 2026

Business Finance News

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

WASHINGTON — In a major escalation of cross-border trade friction, U.S. President Donald Trump has signed executive orders imposing new 50% tariffs on a wide selection of Canadian exports, citing discriminatory practices by Ottawa targeting American auto, dairy, and beverage industries.

The new duties, announced Monday, will take effect in 30 days. They target a broad spectrum of consumer and industrial goods—ranging from wine, liquor, and milk products to commercial cement, furniture, clothing, and hockey equipment.

Untested Legal Mechanism

To enact the sweeping measures, the administration invoked Section 338 of the Tariff Act of 1930—a rarely used legal provision allowing the executive branch to levy additional tariffs of up to 50% on foreign nations deemed to discriminate against U.S. commerce.

White House officials noted that Section 338 addresses trade discrimination rather than national security or economic emergencies. The move comes months after prior global emergency tariffs faced legal challenges in domestic courts, signaling Washington’s pivot toward alternate statutory authorities to maintain import duties.

Senior administration officials briefed reporters that the measure directly responds to Canadian provincial bans on U.S. alcohol, restrictions on American vehicle exports, and import quota disparities affecting U.S. dairy and cheese producers relative to third-party trading partners.

“While the administration continues to secure reciprocal trade agreements globally, Canada retaliated against efforts to protect domestic industry,” U.S. Trade Representative Jamieson Greer stated.

USMCA Impact and Carve-Outs

Significantly, the newly ordered 50% duties will apply to designated items even if they otherwise comply with the United States-Mexico-Canada Agreement (USMCA).

However, the administration confirmed key targeted exemptions:

Energy products (including oil and natural gas)
Potash and critical minerals
Fish and seafood
Goods already governed by sector-specific duties (such as existing steel and aluminum tariffs)

Administration representatives emphasized that the tariffs do not stem from recent disputes concerning drifting Canadian wildfire smoke, noting that policy options regarding environmental spillover remain under separate review.

Canadian Response and Market Reaction

Following the White House announcement, the Canadian dollar experienced a sharp decline against the U.S. dollar, falling approximately 0.4% during evening trading.

Canadian Prime Minister Mark Carney issued a statement emphasizing that Canada’s earlier counter-duties had merely matched previous U.S. trade actions. “Canada stands ready to engage intensively to address outstanding issues with the U.S. to the mutual benefit of our citizens,” Carney stated, pointing to detailed proposals Ottawa submitted to modernize the USMCA framework.

Ontario Premier Doug Ford took a firmer stance, urging a “dollar-for-dollar” reciprocal response if the measures go into effect on August 19.

With a 30-day implementation window before the duties officially lock in, industry associations and trade groups on both sides of the border are calling for urgent bilateral negotiations to avert further supply chain disruption across North America.

Accounting

Automated Continuous Auditing: Transforming Compliance and Real-Time Financial Oversight

Published

6 days ago

July 20, 2026

Business Finance News

Transforming Compliance and Real-Time Financial Oversight

The traditional accounting paradigm—defined by periodic monthly closures and post-hoc annual audits—is rapidly giving way to continuous, automated financial oversight. As of July 2026, forward-thinking accounting practices and multinational corporate finance departments are leveraging continuous auditing systems powered by advanced machine learning models. These systems monitor operational transactions in real time, shifting audit methodologies from sample-based post-analysis to absolute, 100% transaction-level verification.

The operational advantages of continuous auditing are transformative. Standard auditing procedures historically relied on statistical sampling, which, despite rigorous methodology, inherently left gaps where anomalies or fraudulent transactions could go undetected for months. Modern continuous auditing platforms integrate directly with enterprise resource planning (ERP) databases, instantly cross-referencing purchase orders, invoices, bank feeds, and tax records. Any deviation from established control parameters or unusual transaction behavior triggers immediate flags for internal audit teams, dramatically reducing detection lag from quarters to seconds.

Beyond fraud prevention, continuous auditing fundamentally alters internal reporting and decision-making. Executive leadership no longer has to wait weeks after the close of a quarter to evaluate precise financial standing; real-time verified ledger data provides an uninterrupted view of operating margins, tax liabilities, and cash flow dynamics. This real-time visibility enables corporate controllers to adjust capital allocation strategies dynamically, mitigating liquidity constraints and capitalizing on emerging commercial opportunities far more efficiently than competitors bound to legacy reporting cycles.

However, implementing continuous auditing requires accounting professionals to acquire new analytical capabilities. The role of the auditor is evolving from manual data reconciliation toward system validation, algorithmic model governance, and strategic risk interpretation. Accounting firms and corporate finance departments must invest in continuous technical education, ensuring that audit staff possess the data engineering skills necessary to design, maintain, and evaluate complex automated compliance systems.