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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 30 – Nonexchange Financial Guarantees

Note Disclosures

According to GASB 70, paragraphs 14–18, note disclosure requirements for agencies that extend nonexchange financial guarantees and agencies that issue guaranteed obligations are presented below.

State Agencies that Extend Nonexchange Financial Guarantees

According to GASB 70, paragraph 14, regardless of the likelihood of payment being required, an agency that extends nonexchange financial guarantees discloses the:

  • Description of guarantee identifying the:
    • Legal authority and limits for extending the guarantees
    • Types of obligations guaranteed
    • Relationship of the agency to the issuer(s) of guaranteed obligation
    • Length of time of the guarantee
    • Arrangements for recovery payments from the issuer(s) of the guaranteed obligation
  • Total outstanding guaranteed amount at the reporting date

According to GASB 70, paragraph 15, the agency recognizing the liability or that made payments during the reporting period on the nonexchange financial guarantees discloses the:

  • Description of the timing of recognition and measurement of the liability and changes in recognized liability including (in a table format) the:
    • Liability balance at the beginning of the reporting period
    • Increases of the liability (including initial recognition and adjustments increasing estimates) during the reporting period
    • Guarantee payments made during the reporting period and adjustments decreasing estimates
    • Liability balance at the end of the reporting period
  • Cumulative indemnification payments made during the reporting period
  • Amounts expected to be recovered from the payments made through the reporting period

State Agencies that Extend Financial Guarantees Associated with Conduit Debt Obligations

A conduit debt obligation is defined as a debt instrument having all of the following characteristics:

  • There are at least three parties involved:
    • The issuer
    • The third-party obligor
      –AND–
    • The debt holder or debt trustee
  • The issuer and the third-party obligor are not within the same financial reporting entity
  • The debt obligation is not a parity bond of the issuer, nor is it cross-collateralized with other debt of the issuer
  • The third-party obligor or its agent ultimately receives the proceeds from the debt issuance, not the issuer
    –AND–
  • The third-party obligor is primarily obligated for the payment of all amounts associated with the debt obligation (debt service payments), not the issuer.

According to GASB 91, paragraphs 24-26, note disclosure requirements for agencies that extend a financial guarantee associated with a conduit debt obligation should include a general description of the issuer’s:

  • Conduit debt obligation(s)
  • Limited commitment(s)
  • Voluntary commitment(s)
  • Additional commitment(s), including:
    • The legal authority and limits for extending the commitment(s)
    • The length of time of the commitment(s)
    • Arrangements, if any, for recovering payments from the third-party obligor(s)
    –AND–
  • Aggregate outstanding principal amount of all conduit debt obligations that share the same type of commitment(s) at the end of the reporting period

State Agencies that Issue Guaranteed Obligations

According to GASB 70, paragraph 16, an agency that has outstanding obligations guaranteed by another party discloses the:

  • Name of the party providing the guarantee
  • Amount of the guarantee
  • Length of time of the guarantee
  • Amount paid during the reporting period by the party (guarantor) extending the guarantee
  • Cumulative amount paid by the guarantor extending the guarantee
  • Description of requirements to repay the guarantor
  • Outstanding amounts required to be repaid to the guarantor

According to GASB 70, paragraph 17, if the guarantor made payments for the agency issuing the guaranteed obligations and no obligation is outstanding at the end of the reporting period, the agency issuing the obligation discloses the:

  • Amount paid by the guarantor during the reporting period
  • Cumulative amount paid by the guarantor
  • Description of requirements to repay the guarantor
  • Outstanding amount (if any) required to be paid to the guarantor

Effective Date and Transition

According to GASB 91, paragraphs 27-28, the requirements are effective for reporting periods beginning after Dec. 15, 2021. Changes adopted to conform to the provisions of GASB 91 are applied retroactively by restating financial statements (if practicable) for all prior periods presented.

If restatement for prior periods is not practicable, the cumulative effect (if any) of applying GASB 91 is reported as a restatement of beginning net position (or fund balance or fund net position, as applicable) for the earliest period restated. In addition, disclose the reason for not restating prior periods presented. In the first period that this pronouncement is applied, the notes to financial statements should disclose the nature of the restatement and its effect.

Submit a copy of the agency’s Note 30 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 30 does not apply, do NOT submit a note to indicate “not applicable.”