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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
Build America Bonds

As part of the ARRA federal legislation, a bond program called Build America Bonds (BABs) was created. The program’s purpose has expired. However, disclosures for existing BAB debt continues until the debt is extinguished. Taxable bonds were issued by agencies as tax credit BABs or as direct payment BABs.

  • Tax credit BABs provide a federal tax credit to investors equal to 35 percent of the interest received from the bond issuer.
  • Direct payment BABs provide a direct federal reimbursement to state and local governmental issuers equal to 35 percent (until March 1, 2013, after which this federal subsidy percentage was reduced) of the interest paid on the bonds. Reimbursements received on direct payment bonds’ taxable interest paid must be reported as non-operating federal revenue. Interest expense on the BABs is reported at the taxable rate paid.

Under the Budget Control Act of 2011, across-the-board sequestration took effect on March 1, 2013 — resulting in a reduction of the 35 percent federal subsidy for BABs interest payments. Disclose at the current year’s rate of interest paid.

At the end of the fiscal year, agencies must disclose the following information for both the direct payment BABs program and the tax credit BABs program:

  • Dollar amount of bonds issued
  • Type of bonds
  • Outstanding amounts
  • Federal program changes (including interest reimbursement rate)