Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 5 – Long-Term Liabilities
Sample (Illustrative, may not tie to exhibits or other tables)

Changes in Long-Term Liabilities

The following changes occurred in liabilities during the fiscal year ended Aug. 31, 20CY:

*Must tie to Exhibit II, total Governmental Funds column, “Increase in Obligations – Leases“ line item.

** Must tie to Exhibit II, total Governmental Funds column, “Increase in Obligations – Subscriptions” line item.

***Report amortization of premiums and discounts along with restatements and any other adjustments in the “Restatement/Adjustment” column.

Note: Each agency, independent university and university system must enter the liability transactions in USAS to support amounts reported in this note. Report actual transactions (not reversal of beginning balance and addition of ending balance).

Note: Enter all amounts in dollars and cents.

Notes and Loans Payable

Notes payable consists of amounts used to finance the acquisition of mainframe computer equipment. The following are debt service requirements for notes payable in the governmental activities, business-type activities and component units:

Note: Enter all amounts in dollars and cents.

Variable rate interest equaled 6.125 percent at Aug.31 20CY and will fluctuate based upon current market conditions.

Notes and Loans – Direct Borrowings and Direct Placements

The following are debt service requirements for notes and loans — direct borrowing and direct placements in the governmental activities, business-type activities and component units:

Note: Enter all amounts in dollars and cents.

General Obligation Bonds – Direct Borrowings and Direct Placements

The following are debt service requirements for general obligation bonds — direct borrowing and direct placements in the governmental activities and business-type activities:

Note: Enter all amounts in dollars and cents.

Revenue Bonds – Direct Borrowings and Direct Placements

The following are debt service requirements for revenue bonds — direct borrowing and direct placements in the governmental activities, business-type activities and component units:

Note: Enter all amounts in dollars and cents.

Claims and Judgments

Sample Agency was involved in litigation regarding an employee dispute. The settlement of $125,000 was accrued but unpaid as of Aug. 31, 20CY.

Employees’ Compensable Leave

If a state employee had continuous employment with the state for at least six months, the state employee is entitled to be paid for all unused vacation time accrued in the event of the employee’s resignation, dismissal or separation from state employment.

Expenditures for accumulated annual leave balances are recognized in the period paid or taken in governmental fund types. For these fund types, the liability for unpaid benefits is recorded in the statement of net position. Both an expense and a liability for business-type activities are recorded in the proprietary funds as the benefits accrue to employees. No liability is recorded for non-vesting employees accumulating rights to receive sick pay benefits. This obligation is usually paid from the same funding source(s) from which the employee’s salary or wage compensation was paid.

Pollution Remediation Obligations

Sample Agency is responsible for the cleanup of leaking petroleum storage tanks and is currently managing five active sites. Sample Agency calculates expected outlays related to this pollution remediation by calculating the average cost of cleanup and multiplying that cost by the number of active sites. Sample Agency has over 20 years of experience in estimating these types of cleanups. The amount of the estimated pollution remediation liability assumes there will be no major increases in the cost of providing these cleanup services.

Recoveries are made through fees assessed for the delivery of petroleum products and federal funding formulated to offset the costs of petroleum storage tank cleanups. Realizable recoveries are recognized as cash on the balance sheet and revenues on the operating statement. Sample Agency estimated that $300,000 of expected recoveries will be made. These expected recoveries reduced the recorded pollution remediation obligation and related expense.

Asset Retirement Obligation

Sample Agency purchased x-ray machines with retirement obligations. Sample Agency must estimate the new obligation amount using probability weighting and record the initial measurement as a deferred outflow ARO and a noncurrent ARO. Sample Agency must assess any relevant factors annually to determine if a significant change in current value has occurred – if so, record the change in ARO deferred outflow and noncurrent ARO. When the x-ray machines reach the end of their useful life, the value of the ARO is moved to current ARO. Current ARO is then reduced by the amount of actual expenditures to retire the asset, with an offset to deferred outflows of resources.

Liabilities Payable from Restricted Assets

Sample Agency has long-term liabilities associated with the acquisition of restricted assets or has long-term liabilities that will be liquidated with restricted assets. These liabilities are classified as liabilities payable from restricted assets.

Direct Borrowings and Direct Placements

Sample Agency’s outstanding notes and loans from direct borrowings and direct placements related to governmental activities of $36,435,000.00 contain a provision that in an event of default, outstanding amounts become immediately due if Sample Agency is unable to make payment.

Sample Agency’s outstanding notes and loans from direct borrowings and direct placements related to business-type activities of $56,715,000.00 are secured with collateral of an undeveloped lot zoned for commercial use. The outstanding notes and loans from direct borrowings and direct placements related to business-type activities of $56,715,000.00 contain two provisions:

• First provision: in an event of default, the timing for repayment of outstanding amounts become immediately due if pledged revenues during the year are less than 120 percent of debt service coverage due in the following year.
• Second provision: if Sample Agency is unable to make payment, outstanding amounts are due immediately.

Sample Agency’s outstanding notes and loans from direct borrowings and direct placements related to business-type activities of $56,715,000.00 contain a subjective acceleration clause that allows the lender to accelerate payment of the entire principal amount to become due immediately if the lender determined that a material adverse change occurred.

Sample Agency also has an unused line of credit in the amount of $1,500,000.33.

Availability Payment Arrangements (APAs)

Sample Agency has two APAs; one for the building of a new dormitory and one for services to operate a parking garage. Sample agency contracted with XYZ corporation to design, construct and finance a new dormitory for the west campus expansion. The contract is for $3,518,000.00. Payments are based on milestones in the construction schedule. The dorm is scheduled to open in time for the 2024-2025 school year.

Sample agency contracted with ABC Service Company to operate the parking garage across from the student union. The contract is for 5 years, worth $1,265,000.00. Payments are made on an annual basis.

Pledged Future Revenues

GASB 48 makes a basic distinction between sales of receivables and future revenues and the pledging of receivables or future revenues to repay a borrowing (a collateralized borrowing). The following table provides the pledged future revenue information for Sample Agency’s debt for which a revenue pledge exists.

Pledged Future Revenue — Governmental Activities

Note: Enter all amounts in dollars and cents.

* Existing debt. Refer to your agency’s Debt Service Requirements Schedules.

** Year of final maturity.

*** The gross pledge calculation is 100 percent (gross pledged revenue divided by gross pledged revenue). The net pledge calculation is net pledged revenue divided by total pledged revenue and other sources.

Pledged Future Revenue — Business-Type Activities

Note: Enter all amounts in dollars and cents.

* Existing debt. Refer to your agency’s Debt Service Requirements Schedules.

** Year of final maturity.

*** The gross pledge calculation is 100 percent (gross pledged revenue divided by gross pledged revenue). The net pledge calculation is net pledged revenue divided by total pledged revenue and other sources.

Pledged Future Revenue — Component Units

Note: Enter all amounts in dollars and cents.

* Existing debt. Refer to your agency’s Debt Service Requirements Schedules.

** Year of final maturity.

*** The gross pledge calculation is 100 percent (gross pledged revenue divided by gross pledged revenue). The net pledge calculation is net pledged revenue divided by total pledged revenue and other sources.

Pledged revenue sources

• Governmental activities — state appropriations and rental income on office facilities
• Business-type activities — operating income from residential housing and bookstores
• Component Units — sales and services of XYZ Foundation