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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

General Introduction

The scope of the statewide audit includes tests for compliance with the covenants of bond issues of the state. Therefore, it is essential for agencies that issue bonds to include their bond schedules in their agency’s AFR. These schedules must agree with the equivalent schedules in the Bond Reporting System (BRS) web application. Agencies must identify each bond issue, as described in Schedule 2A, and disclose significant policies or requirements related to each bond issue in the note 6 narrative. Agencies must disclose detailed supplemental bond information in:

Disclose the bond issue on each of the schedules until — and including (except for the debt service requirements) — the year in which the bond issue is extinguished or retired. Disclose bond issues in the bond schedules on the full accrual basis of accounting and:

  • Provide issue-by-issue details for descriptive and debt service schedule information that is summarized in the notes to the financial statements.
  • Present analytical information related to the adequacy of the pledged revenue stream or other funding sources to meet the issuer’s obligations.
  • Disclose compliance with provisions requiring maintenance of restricted accounts in support of the bonds.

Agencies use BRS to electronically submit certain bond payable long-term liability information. For each bond issue, BRS collects:

  • General descriptive information
  • Changes in bonded indebtedness
  • Debt service requirements to maturity
  • An analysis of funds available for debt service

For more information, see the Instructions for the BRS Web Application.

The implementation of GASB 65 in fiscal 2014 requires the following changes:

  • GASB 65, paragraph 6, requires unamortized gain or loss on refunding to be recognized as deferred outflows of resources and deferred inflows of resources — rather than as a component of net bonds payable as previously required.
  • GASB 65, paragraph 15, eliminates the amortization of issuance costs, other than for prepaid insurance, by requiring these to be expensed in the year the bond is issued. Report any prepaid insurance as a noncurrent asset. With the reclassification of deferred charges to deferred outflows of resources, another asset account (such as prepaid insurance) is required.

The implementation of GASB 86 in fiscal 2018 requires agencies to disclose information regarding in substance defeasance of debt using only existing resources.

The implementation of GASB 88 in fiscal 2019 requires agencies to disclose direct borrowings and direct placements of debt separately from all other debt. For more information, see Direct Borrowings and Direct Placements.