Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Interfund Activity

Subsidies and Transfers
Transfers Between Agencies or Funds

Transfers represent nonexchange flows of resources between funds or agencies that are not related to the pricing of goods or services. Transfers are used to finance operations, service debt or comply with statutory requirements.

Examples include transfers of:

• Dedicated receipts from fund 0001 to funds statutorily authorized to expend those resources.
• Debt service funds for repayment of principal and interest.
• Unobligated fund balances to the general revenue fund (as legally required).

Transfers must be reported on a gross basis. Do not net transfers in against transfers out. Report the full amount of each transfer as it occurs.

In accordance with GASB 103, agencies must distinguish transfers from subsidies, particularly in proprietary fund reporting. Each is defined as:

• Transfers — General nonexchange flows of resources not directly associated with the pricing of goods or services.
• Subsidies — Resource flows provided to or received by a proprietary fund that:
  • Keep user charges lower than they would otherwise be.
    –OR–
  • Recover costs that would otherwise be borne by the proprietary fund.

Subsidies are not reported as transfers and must be classified separately based on their purpose.

Fund-Level Reporting

In Governmental Funds

Report transfers as other financing sources (uses) in the statement of revenues, expenditures and changes in fund balances. Generally, subsidies are not separately identified in governmental funds and are reflected within revenues and expenditures (as applicable).

In Proprietary Funds

Report resource flows in the statement of revenues, expenses and changes in net position using the following structure:

• Operating revenues and expenses
• Nonoperating revenues and expenses
• Noncapital subsidies
• Capital contributions and capital subsidies
• Transfers (reported separately from subsidies as the final category)

Classification requirements:

• Noncapital subsidies — Report flows intended to support operations or reduce user charges.
• Capital subsidies — Report flows restricted for capital asset acquisition, construction or improvement.
• Transfers — Report flows not meeting the definition of a subsidy.

Do not combine subsidies with transfers or nonoperating revenues and expenses.

In Fiduciary Funds (including pension and OPEB trust funds)

Report transfers (when applicable) in the statement of changes in fiduciary net position as additions or deductions, depending on the nature of the transaction.

Classify resource flows appropriately as contributions, investment income or transfers based on the underlying transaction. Transfers must be distinguished from contributions and other additions.

Recognition and Measurement

Recognize transfers when the underlying transaction occurs and all eligibility requirements (if any) are met. Accrue transfers as due to/due from other funds or agencies when applicable. Measure transfers at the amount of cash or other resources transferred.

Agencies must coordinate the classification and amount of transfers with the other agency involved to ensure:

• Consistent classification between transfers and subsidies.
• Accurate reciprocal reporting of transfers in and transfers out.

Within a single agency’s AFR, transfers in may not equal transfers out; however, they must agree between agencies at the statewide level.

USAS Entries for Elimination of Transfers Within the Same D23 Fund

Eliminate transfers that occur within the same agency and D23 fund. If the agency eliminates a transfer on its AFR, the elimination must also be entered in USAS.

Accounting effect of above entry: