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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Notes & Samples

NOTE 19 – The Financial Reporting Entity

The financial reporting entity of the state of Texas includes not only the primary government (state agencies and universities), but also outside organizations the primary government is financially accountable for. Also included are other organizations where the nature and significance of their relationships with the primary government are such that exclusion would cause the state’s financial statements to be incomplete. An agency may determine an outside organization to be a component unit, related organization, joint venture, jointly governed organization or related party.

For component units, the financial information of the component unit must be included in the agency’s financial statements. The required note disclosure includes a discussion of the criteria for inclusion of the component units in the financial reporting entity and how the component units are reported (for example, blended or discrete). Agencies must also include information about how to obtain the separate financial statements for the outside organizations.

When an agency is analyzing its relationship with an outside organization, it must consider the relationship from a further viewpoint than just at the agency level. For example, when an agency is analyzing if the “primary government” appoints the voting majority of the governing body of an outside organization, the appointment could be made by the governor, the Legislature, an agency commissioner or members of the agency board.

Glenn Hegar
Texas Comptroller of Public Accounts
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