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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 6 – Bonded Indebtedness
Conduit Debt

Per GASB Interpretation 2, conduit debt obligations are:

“Certain limited-obligation revenue bonds, certificates of participation, or similar debt instruments issued by a state or local governmental entity [an agency] for the express purpose of providing capital financing for a specific third party that is not a part of the issuer’s financial reporting entity [state of Texas and its component units].”

Although conduit debt obligations bear the name of the agency as the issuer, the agency has no obligation for such debt beyond the resources provided by a lease or loan with the third party on whose behalf they are issued.

If an agency has any conduit debt obligations, disclose the following in Note 6:

  • A general description of the conduit debt transactions
  • The aggregate amount of all conduit debt obligations outstanding at the balance sheet date
  • A clear indication that the issuer has no obligation for the debt beyond the resources provided by related leases or loans

Do not report the debt on the balance sheet or statement of net position. GASB Interpretation 2 provides for an exception that allows continued balance sheet reporting for conduit debt previously reported and for similar conduit debt obligations that are issued in the future. This exception is permissive, but not required.