Reporting Requirements for Annual Financial Reports of State Agencies and Universities
Notes & Samples
NOTE 27 – Public-Private and Public-Public Partnerships
Sample (Illustrative, may not tie to exhibits)
Sample Agency has four arrangements that fit the criteria of a public-private and public-public partnership (PPP).
Sample Agency may enter into PPP’s with both public and private operators. Fees the operator collects are in the form of tolls. At the end of these arrangements, operations and maintenance of the projects will transfer to Sample Agency and the state of Texas retains ownership rights and title to all assets associated with the SCA.
A general description of each PPP, including status, term and duration, is presented in the following table:
Public-Private and Public-Public Partnerships
Aug. 31, 20CY
| Partnerships Name | Construction Status | Term of Concession |
Contract Begin |
Contract End |
|---|---|---|---|---|
| IH Managed Lanes | Complete | 46 years | 2010 | 2055 |
| State Highway | Complete | 50 years | 2012 | 2062 |
| State Highway Concession | Under Construction | 50 years | 2009 | 2059 |
| Expressway Segment | Under Construction | 52 years | 2009 | 2061 |
At the commencement of the PPP term, if an underlying PPP asset is an existing asset, Sample Agency continues to recognize it. Sample Agency also recognizes:
- A receivable for installment payments (if any)
- A deferred inflow of resources
- An asset for improvements (an increase in the capacity or efficiency) made by the operator to an existing underlying PPP asset
- A deferred inflow of resources when the improvements are placed into service.
If an underlying PPP asset is a new asset purchased or constructed by the operator and the PPP does not meet the definition of a service concession arrangement (SCA), when the underlying PPP asset is placed into service, Sample Agency recognizes:
- A receivable for the PPP asset
- A receivable for any installment payments in relation to the PPP
- A deferred inflow of resources
If an underlying PPP asset is a new asset purchased or constructed by the operator and the PPP does meet the definition of an SCA, when the underlying PPP asset is placed into service Sample Agency records the capital assets acquired under the SCA at their acquisition value with a corresponding entry to deferred inflows of resources. Up-front concession payments received are recorded as assets (cash and cash equivalents) with an offset to deferred inflows of resources on the government-wide financial statements.
Beginning when the infrastructure assets are placed into operation, the:
- Deferred inflows of resources balance is reduced
- Revenue is recognized in a systematic and rational manner over the term of the PPP
Sample Agency initially measures the receivable for installment payments at the present value of PPP payments expected to be received during the PPP term (reduced by any provision for estimated uncollectible amounts). The receivable includes:
- Fixed payments
- Variable payments that are fixed in substance
- Residual value guarantees that are fixed in substance
- Initial measurements of variable payments that depend on a rate or index
Any other variable payments that cannot be determined initially will be recognized as inflows of resources in the period incurred.
PPP amounts reported as of Aug. 31, 20CY, are presented in the following table:
Public-Private and Public-Public Partnership
Amounts Recognized in Financial Statements
Governmental Activities
Aug. 31, 20CY
| Arrangement Name | Receivable for Installment Payments* | Receivable for PPP Assets | Deferred Inflows of Resources** |
Variable and Other Payments ** |
|---|---|---|---|---|
| IH Managed Lanes | $ | $ | $ 222,826,000 | $ 103,490 |
| State Highway | 119,248,125 | 1,444,038,222 | 1,467,996,568 | 452,605 |
| State Highway Concession | 1,611,185,998 | 1,322,027,627 | 3,411,487,156 | |
| Expressway Segment | 658,919,012 | 38,771,068 | 14,668 | |
| Total | $ 2,389,353,135 | $ 2,766,065,849 | $ 5,141,080,792 | $ 570,763 |
|
*PPP asset is recognized at acquisition value when it is put into service. ** Payments not included in the measurement of the receivable for installment payments. | ||||
Availability Payment Arrangements (APA)
Sample Agency has one APA related to designing, constructing and financing Spare Bridge in which the ownership transfers by the end of the contract. Sample Agency accounts for the APA as a financed purchase. On the date Spare Bridge is placed into service, Sample Agency recognized a:
- Capital asset for the bridge and applied existing capital asset guidance (including depreciation)
- Liability to the builder for the present value of the future annual payments
- Monthly expense for payments related to toll collection
For more information, see Note 5, Long-Term Liabilities.