Reporting Requirements for Annual Financial Reports of State Agencies and Universities

References

Submission Requirements
Agencies That Issue Stand-Alone or Audited AFRs

GASB 34 (as amended by GASB 103) requires complete compliance (including additional statements and disclosures) for agencies that issue audited stand-alone financial statements.

Do not send confidential information to the Financial Reporting section.

Agencies With Independent Audits Required by Statute

The following table lists the reporting agencies (and component units) that are required by state statute to obtain independent audits and the deadline/location for submitting those independent audits.

When the independent audit is completed, forward the audited AFR and audit adjustments to the Financial Reporting section for review by Dec. 15. See Deadlines for more information.

If an audited financial report or an audit adjustment does not comply with the reporting requirements, or there are issues or concerns with an adjustment, agencies must communicate with their financial reporting analyst prior to finalizing the report and/or adjustment.

The information provided below is directed to agencies that are required to prepare additional information, which is also helpful to agencies that include the information on an optional basis.

AFR Requirements Under GASB 34 and GASB 103

In accordance with GASB 34 (as amended by GASB 103) each agency issuing audited stand-alone financial statements must include the following information in its AFR:

• Management’s Discussion and Analysis (MD&A)
• Basic financial statements
  • Government-wide financial statements (GWFS)
  • Fund financial statements
• Notes to the financial statements
• Required supplementary information

Major Funds

Agencies must distinguish between governmental and proprietary fund reporting when applying the major fund determination criteria to operating statement elements.

For governmental funds, transfers in and transfers out are reported as other financing sources and uses and are excluded from revenues and expenditures used in the major fund calculations. As a result, transfers do not affect the determination of major governmental funds.

For proprietary funds, transfers in and transfers out are reported as nonoperating revenues and expenses. In accordance with GASB 103, these amounts are included in the calculation of total revenues and expenses and, therefore, do affect the determination of major proprietary funds. This represents a key clarification under GASB 103 that explicitly incorporates transfers into the measurement of nonoperating activity used in the 10 percent and 5 percent tests.

Additionally, interfund services provided and used (for example, internal service-type transactions) are not separately identified for purposes of the calculation and are reported within revenues and expenditures/expenses in the same manner as external transactions. No adjustment is made to isolate these amounts when applying the major fund criteria.

Note: Agencies that fully comply with GASB 103 must annually calculate both major and nonmajor funds.

Management’s Discussion and Analysis (MD&A)

Management’s Discussion and Analysis (MD&A) is required supplementary information (RSI) and must be presented preceding the basic financial statements. The MD&A must provide an objective, readable and decision-useful analysis of the agency’s financial position and the results of operations based on currently known facts, decisions or conditions as of the report issuance date.

GASB 103 refines MD&A by:

• Limiting content
• Reducing boilerplate
• Emphasizing explanations over repetition of financial data.

The discussion must focus on the state agency, with limited and clearly distinguished references to discretely presented component units (when applicable).

Required MD&A Structure (Five Sections Only)

MD&A must be confined to the following five required sections:

1. Overview of the Financial Statements

   Provide a clear explanation of the basic financial statements and how they relate to one another. The discussion must focus on the differences in the information each statement provides, rather than restating amounts.

2. Financial Summary

   Present condensed comparative financial information derived from the government-wide financial statements for the current and prior fiscal years. At a minimum, include:

   • Total assets (distinguishing capital vs. other assets).
   • Deferred outflows of resources.
   • Total liabilities (distinguishing long-term vs. other liabilities).
   • Deferred inflows of resources.
   • Net position (net investment in capital assets, restricted, unrestricted).
   • Program revenues (by major source).
   • General revenues (by major source).
   • Total revenues and total expenses.
   • Excess (deficiency) before transfers and unusual or infrequent items.
   • Transfers and unusual or infrequent items.
   • Beginning, change in, and ending net position.
3. Detailed Analyses

   Provide analysis of:

   • The overall financial position and results of operations of the agency.
   • Each major fund’s financial position and results.

   The analysis must:

   • Explain why significant changes occurred from the prior year.
   • Discuss economic factors, policy changes, or operational drivers.
   • Address restrictions, commitments or limitations affecting future resource availability.

   GASB 103 explicitly requires explanatory analysis, not just percentage or dollar changes.

4. Significant Capital Asset and Long-Term Financing Activity

   Describe significant activity during the year, including:

   • Capital asset additions, disposals, and commitments.
   • Long-term debt, leases, Public-Private Public-Public Partnerships and other financing arrangements.
   • Changes in credit ratings, debt limitations, or financing strategies.

   Discussion must focus on what changed and why it matters to future financial position.

5. Currently Known Facts, Decisions, and Conditions

   Disclose currently known matters expected to have a significant effect on future financial position or operations, such as:

   • Legislative or budgetary actions.
   • Economic or demographic trends.
   • Major contracts, grants or legal matters.
   • Anticipated changes impacting revenues, expenses or fund balance.

   Only include known and actionable items — exclude speculative or hypothetical events.

Basic Financial Statements

The basic financial statements include both the government-wide financial statements and the fund financial statements as described below.

Government-Wide Financial Statements

Report information about the reporting agency (as a whole) on the government-wide financial statements, except for fiduciary activities. Present separate columns for governmental and business-type activities for the agency. Component units are presented separately from the agency section. Prepare these financial statements using the economic resources measurement focus and the full accrual basis of accounting.

Fund Financial Statements

The fund financial statements are presented after the government-wide financial statements and used to report additional and detailed information about the agency. These statements present information about major funds individually and nonmajor funds in the aggregate for governmental and enterprise funds.

• Include financial information for fiduciary funds and similar component units on the fiduciary statements.
• Present governmental funds using the current financial resources measurement focus and the modified accrual basis of accounting.
• Present proprietary and fiduciary funds using the economic resources measurement focus and full accrual basis of accounting.
• Present a summary reconciliation to the government-wide financial statements. Agencies may present the reconciliation at the bottom of the financial statements or on a separate schedule.

Notes to the Financial Statements

The notes to the financial statements present information essential for fair presentation of the financial statements that is not displayed on the face of the financial statements. The notes focus on the state agency with emphasis on its governmental activities, business-type activities, major funds individually and nonmajor funds in the aggregate. For more information, see Notes & Samples.

Agencies must present information about their component units in accordance with GASB 14 (as amended by GASB 34) GASB 61 and subsequent standards, including GASB 103. Discretely presented component units must be reported separately from the agency’s financial statements. The presentation must clearly distinguish the component unit columns from those of the agency. Blended component units (if any) must be reported as though they are part of the agency. Agencies must ensure that component unit disclosures are:

• Complete
• Clearly written
  –AND–
• Consistent with GASB requirements

Disclosures must be agency-specific and avoid boilerplate language, particularly in describing the nature of relationships and financial accountability.

Required Supplementary Information (RSI) Other Than MD&A

Budgetary Comparison Schedule

Present all required supplementary information (except MD&A) immediately following the notes to the financial statements.

Agencies are required to present budgetary comparison schedules for each major governmental fund with a legally adopted annual budget. For agencies whose legally adopted budget structure differs significantly from their fund structure, budgetary comparison schedules are presented using the budgetary basis, organization, or program structure on which the legally adopted budget is based. For each required fund or reporting structure, the budgetary comparison schedule presents the:

• Original budget
• Final amended budget
• Actual inflows, outflows, and balances reported on the agency’s budgetary basis

In addition, agencies are required to present variances between the:

• Original and final budget
  –AND–
• Final budget and actual amounts

Agencies are required to disclose explanations of significant variances in the notes to the RSI, rather than on the face of the schedule.

Restatements

Under GASB Statement No. 100, Accounting Changes and Error Corrections, RSI (including MD&A) and supplementary information (SI) may be presented in more prior periods than the basic financial statements. Agencies must apply the following treatment:

• Changes in Accounting Principle and Changes to or Within the Agency
  • Periods presented in both the basic financial statements and RSI or SI, the RSI or SI must be reported consistently with the restated basic financial statements.
  • Prior periods presented only in RSI or SI, and earlier than those presented in the basic financial statements, must not be restated. If doing so creates inconsistency between periods, the RSI or SI must explain why the prior-period information was not restated.
• Error Corrections
  • If an error affects periods presented in both the basic financial statements and RSI or SI, the RSI or SI must be restated to reflect the error correction.
  • If an error affects periods earlier than those presented in the basic financial statements, all affected RSI or SI information must be corrected by restating those prior periods, (if practicable).
  • The affected information must be identified as restated or not restated (as applicable) and the RSI or SI must explain the nature of the error. If restatement is not practicable, the agency must explain why.

The treatments above align with GASB 100’s RSI/SI treatment for accounting changes, reporting entity changes and error corrections.