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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 17 – Risk Management

Background

Risk is defined as uncertainty of loss, chance of loss or the variance of actual from expected results. Risk is also the subject matter of an insurance contract (for example, the insured property or liability exposure).

GASB 10 addresses the accounting and reporting requirements for risk financing and insurance-related activities of governmental entities including public entity risk pools.

GASB 66 amends GASB 10 by allowing risk financing activities to be reported under the special revenue fund when applicable. GASB 10 limited risk financing activities to the general fund and the internal service fund.

GASB 30 amends GASB 10 by changing the accounting treatment and disclosure of risk pools and entities other than pools.

GASB Interpretation 4 applies to capitalization contributions made to and received by public entity risk pools — both with and without transfer or pooling of risk. Generally, the state is not involved in public entity risk pools and retains the risk of loss. However, for reporting the risk of loss, agencies must meet certain requirements as discussed in Public Entity Risk Pool.

General Information

To determine if the agency must include its risk of loss information in Note 17, first determine if the loss fits the scope of GASB 10. Risks of loss under the scope of GASB 10 include:

  • Torts
  • Theft, damage or destruction of assets
  • Business interruption
  • Errors or omissions
  • Job-related illnesses or injuries to employees
  • Acts of God
  • Other risks assumed under a policy or participation contract by a public entity risk pool

If the risk of loss fits the scope of GASB 10 in one or more of the situations listed above, the agency must determine if it has a self-insurance plan or not. If the agency has a self-insurance plan, include the information in the risk management note because a risk of loss results when an agency agrees to provide benefits to its employees, such as accidental, health, dental and other medical coverages.

Submit a copy of the agency’s Note 17 from its published AFR through the ONDSS web application. The required format is a Microsoft Word document (latest version: docx) with header information that includes: agency name/number and note number/name. If Note 17 contains a table, include the table in the Word document — rather than as a separate Excel document or other database application file. If Note 17 does not apply, do NOT submit a note to indicate “not applicable.”