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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 (MD&A)
MD&A Structure

Under GASB 103, Management’s Discussion and Analysis (MD&A) must be organized into five required sections:

  1. Overview of the financial statements
    • Provide an overview of the different financial statements and their relationship with each other.
    • Focus on the differences in the types of information the statements provide.
  2. Financial Summary
    • Provide comparative (current year vs. prior year) condensed financial information, including:
      • Total assets and deferred outflows
      • Total liabilities and deferred inflows
      • Net position
      • Total revenues
      • Total expenses
      • Change in net position
    • Provide readers with a quick high-level view of financial position and results of operations before the detailed discussion.
    • Provide key financial highlights.
  3. Detailed Analysis
    • Provide revenue and expenditure analysis of major funds and major programs.
    • Provide explanation for significant increases or decreases.
    • Provide new funding sources or reductions in funding.
    • Provide significant changes in fund balances or net position.
  4. Significant Capital Asset and Long-term Debt Activity
    • Provide description of capital asset activity during the fiscal year, including intangible assets.
    • Discuss additions, disposals, changes in commitments and policy changes.
    • Provide a description of significant long-term financing activity including debt, leases, SBITAs and PPPs.
    • Discuss new debt agreements, debt retirements, repayments, changes in credit ratings, changes in debts limitations, policy changes and economic factors.
  5. Current Known Facts, Decisions and Conditions
    • Explain economic conditions affecting revenue and expense.
    • Provide legislative appropriations changes.
    • Identify pending legislation.
    • Identify new programs, major contracts or services.
    • Highlight factors that may significantly affect future financial results.

GASB 103 removes or deemphasizes several areas where GASB 34 often led to unnecessary narrative in the MD&A. Under GASB 103, the MD&A is no longer required to include:

  • Detailed explanations of every budget variance
  • Extensive discussion of individual fund balances
    –OR–
  • Repetitive descriptions of financial statement components

Instead, the MD&A is intended to be shorter, more analytical, and focused on the major financial changes affecting the agency’s overall financial position.