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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 18 – Management’s Discussion and Analysis

Agencies that issue stand-alone or audited AFRs are required to prepare a Management’s Discussion and Analysis (MD&A) section as part of the agency’s AFR in accordance with GASB Statement No. 103, Financial Reporting Model Improvements. Some agencies voluntarily issue audited AFRs, while others are required by statute. For additional information, see Agencies That Issue Stand-Alone or Audited AFRs.

In accordance with GASB 103, MD&A must be presented as part of required supplementary information (RSI). MD&A provides an objective and easily readable analysis of the agency’s financial activities based on currently known facts, decisions, or conditions and presents comparisons between the current year and the prior year. Information presented must be limited to the related topics discussed in each of the following five sections:

  1. Overview of the Financial Statements
  2. Financial Summary
  3. Detailed Analyses
  4. Significant Capital Asset and Long-Term Financing Activity
  5. Currently Known facts, Decisions or Conditions

Agencies that do not issue stand-alone or audited AFRs are not required to prepare MD&A. However, these agencies must provide certain narrative information to support preparation of the statewide ACFR MD&A. This information is reported in Note 18 and must include material items such as:

  • Significant financial highlights of the fund, if any (for example, major changes in net position, revenues or expenses).
  • Significant operational or fund highlights (for example, new bond issuances, major contracts or program changes).
  • Explanations of significant changes from the prior year, including reasons for changes in net position, restrictions, commitments or other limitations affecting fund resources.
  • Currently known facts, decisions or conditions expected to have a significant effect on financial position.
  • Significant capital asset and long-term debt activity, including commitments for capital expenditures, changes in credit ratings or debt limitations that may affect financing of planned activities.

See Note 18 – MD&A Simplified Structure under Templates & Sample Exhibits.

Agencies must submit a copy of the Note 18 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 18 does not apply, do NOT submit a note to indicate “not applicable.”

The Comptroller’s office consolidates all of the information submitted by agencies to prepare a statewide MD&A to be included in the ACFR.