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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

References

Submission Requirements
Agencies That Issue Stand-Alone or Audited AFRs

GASB 34 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.

List of Agencies With Independent Audits Required by Statute

The following table specifies the reporting agencies/components that are required by statute to obtain independent audits.

Agy No. Reporting Agency/Component FY End Mailing Address
012 Texas State Affordable Housing Corporation Aug. 31 2200 East Martin Luther King Jr. Boulevard
Austin, Texas 78702
014 Texas A&M Research Foundation Aug. 31 400 Harvey Mitchell Parkway, Ste. 100
Austin, Texas 77845
315 Texas Prepaid Higher Education Tuition Board Aug. 31 P.O. Box 13407
Austin, Texas 78711-3407
323 Teacher Retirement System Aug. 31 1000 Red River
Austin, Texas 78701
326 Texas Emergency Services Retirement System Aug. 31 P.O. Box 12577
Austin, Texas 78711
327 Employees Retirement System Aug. 31 P.O. Box 13207
Austin, Texas 78711-3207
332 Dept. of Housing and Community Affairs Aug. 31 P.O. Box 13941
Austin, Texas 78711
362 Texas Lottery Commission Aug. 31 P.O. Box 16630
Austin, Texas 78761
454 Surplus Line Stamping Office of Texas
(a discretely presented component unit of Texas Department of Insurance)
Dec. 31 1601 E Pflugerville Parkway, Suite 3301 Pflugerville, TX 78660
542 Cancer Prevention and Research Institution of Texas Aug. 31 P.O. Box 12097
Austin, Texas 78711
551 Texas Boll Weevil Eradication Foundation, Inc.
(a discretely presented component unit of Texas Department of Agriculture)
Dec. 31 P.O. Box 5089, Abilene, Texas 79608-5089
551 Texas Agricultural Finance Authority
(a discretely presented component unit of Texas Department of Agriculture)
Aug. 31 P.O. Box 12847 Austin, Texas 78711
601 Texas Department of Transportation Aug. 31 Financial Management Division, Financial Reports
150 East Riverside
Austin, Texas 78704
706 Texas Permanent School Fund Corporation Aug. 31 400 West 15th Street, Ste. 1100
Austin, Texas 78701-1600
799 University of Texas System Aug. 31 210 West 7th Street, Ste. 1700
Austin, Texas 78701
930 Texas Treasury Safekeeping Trust Company Aug. 31 208 East 10th Street
Austin, Texas 78701
930 Texas Local Government Investment Pool
(an investment trust fund of Texas Treasury Safekeeping Trust Company)
Aug. 31 208 East 10th Street
Austin, Texas 78701

If an independent audit is not required, but is produced, 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 is not in compliance 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

In accordance with GASB 34, 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

GASB 34 uses the concept of presenting only major funds. A fund is considered major if its total assets, deferred inflows, liabilities, deferred outflows, revenues or expenditures/expenses are at least 10 percent of the corresponding total for all funds of that category (assets, liabilities, etc.) and at least 5 percent of the aggregate amount for all governmental and enterprise funds combined. If agency officials believe any other governmental or enterprise fund is particularly important, that fund may also be reported as a major fund.

Report major funds in separate columns on each of the fund financial statements. Report nonmajor funds in aggregate in a single column.

Note: Agencies that fully comply with GASB 34 must annually calculate both major and nonmajor funds.

Management’s Discussion and Analysis (MD&A)

The MD&A is a requirement of GASB 34, GASB 35 and GASB 37. The MD&A compares current fiscal year results to the prior fiscal year in plain language, emphasizing the current fiscal year.

The MD&A is a component of the required supplementary information that introduces the basic financial statements and provides an analytical overview of the state’s financial activities based on currently known facts, decisions or conditions. Focus the discussion on the state agency and distinguish between information pertaining to the state agency and information pertaining to its component units. When appropriate, refer readers to the financial statements issued separately by the component units.

Required supplemental information (RSI) includes the MD&A. Do not confuse the MD&A with a transmittal letter. A transmittal letter is a separate and distinct portion of the AFR or ACFR that is not audited. GASB 34, paragraph 294, explains the different purposes of the transmittal letter and the MD&A.

The MD&A provides an objective, easy-to-read analysis of the agency’s financial activities based on:

  1. Currently known facts, decisions or conditions expected to have a significant effect on financial position (net position) or results of operations (revenues, expenses and other changes in net position). Base this discussion on events or decisions that already occurred or were enacted, adopted, agreed upon or contracted. Do not discuss in the MD&A the possible effect of events that might happen (although you can address such matters in the letter of transmittal).

    A few examples of facts, decisions or conditions expected to have a significant effect on financial position or results of operations are:

    • The award and acceptance of a major grant
    • The adjudication of a significant lawsuit
    • An approved increase in a university’s tuition
    • A renegotiated labor contract with state employees
  2. In the MD&A, compare the current fiscal year results to the prior fiscal year (with emphasis on the current fiscal year) and address both positive and negative results (use charts and graphs). If basic financial statements and RSI are presented for the current and prior fiscal years, the agency is required to address both fiscal years in the MD&A. Include comparative condensed financial information and related analyses for both fiscal years for the “comparative” MD&A. A separate MD&A is not required for each fiscal year presented.
  3. Focus the MD&A on the state agency. Distinguish between information presented for the agency and that of its component units in the comments.
  4. Present only the most recent and relevant information in the MD&A — not “boilerplate” or information carried forward from the prior fiscal year. The MD&A is regarded as RSI; therefore, limit the information presented to the topics below. Each specific requirement below describes the minimum to be addressed. Additional analytical or descriptive data may be submitted if it provides additional details.
  5. Do not include information that does not address the required topics below in the MD&A; agencies may report such information as supplementary and discuss it in the letter of transmittal. The specific requirements are:
    1. A brief description of the basic financial statements, including the relationships of the statements to each other and the significant differences in the information provided. Include analyses that assist readers in understanding why measurements and results reported on the fund financial statements either reinforce information on the government-wide financial statements or provide additional information.
    2. Condensed financial information derived from government-wide financial statements, comparing the current fiscal year to the prior fiscal year. The information is disclosed to support the analysis of financial position and results of operations required in item c that follows, including the following relevant elements:
      • Total assets — distinguishing between capital and other assets
      • Deferred outflows of resources — ties to Note 28
      • Total liabilities — distinguishing between long-term liabilities and other liabilities
      • Deferred inflows of resources — ties to Note 28
      • Total net position — distinguishing between net investment in capital assets, restricted and unrestricted amounts
      • Program revenues — by major source
      • General revenues — by major source
      • Total revenues
      • Program expenses — at a minimum by function
      • Total expenses
      • Excess (deficiency) before contributions to term and permanent endowments or permanent fund principal, special and extraordinary items and transfers
      • Contributions
      • Special and extraordinary items
      • Transfers
      • Change in net position
      • Ending net position
    3. An analysis of the overall financial position and results of operations to assist users in assessing whether the financial position improved or deteriorated during the past fiscal year. Address both governmental and business-type activities in the analysis (as reported on the government-wide financial statements) and explain significant changes from the prior fiscal year. Discuss important economic factors (such as changes in the tax or employment bases) that significantly affected the current fiscal year’s operating results.
    4. An analysis of balances and transactions of individual funds. Address the reasons for significant changes in fund balances or fund net position and whether restrictions, commitments or limitations significantly affect the availability of fund resources for future use.
    5. An analysis of significant variations between original and final budget amounts and between final budget amounts and actual budget results for the general fund (or its equivalent). Include any currently known reasons for those variations expected to have a significant effect on future services or liquidity.
    6. A description of significant capital asset and long-term debt activity for the current fiscal year (including a discussion of commitments made for capital expenditures) changes in credit ratings and debt limitations that may affect the financing of planned facilities or services.
    7. When the modified approach is used, include a discussion to report infrastructure assets detailing:
      • Significant changes in the assessed condition of eligible infrastructure assets compared to previous condition assessments
      • How the current assessed condition compares with the established agency condition level
      • Any significant differences from the estimated annual amount to maintain/preserve eligible infrastructure assets compared to actual amounts spent for the current fiscal year
    8. Provide a description of currently known facts, decisions or conditions expected to have a significant effect on financial position (net position) or results of operations (revenues, expenses and other changes in net position).

The authorship of the MD&A is important. If the agency is required to comply with this statement, the management of the agency and/or staff writes the MD&A and the state auditor (or the agency’s external auditors) may perform their standard audit of that information.

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.

Present information about the state’s or agency’s discretely presented component units in accordance with GASB 14, paragraph 63, as amended by GASB 34 and GASB 61, paragraph 11b. For guidance pertaining to existing note disclosures, see the National Council on Governmental Accounting (NCGA), Interpretation 6, as amended.

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. In addition to information required as RSI under previous GASB statements, GASB 34 requires state agencies to present budgetary comparison schedules for the general fund and for each major special revenue fund that has a legally adopted annual budget.

GASB Codification 2400.105 also requires the presentation of budgetary comparison schedules for individual nonmajor special revenue funds and other governmental funds of the state agency (including its blended component units). NCGA Statement 1, paragraph 155, requires the inclusion of budgetary comparisons for funds for which an annual budget was adopted.

GASB 41 amends GASB 34 to clarify the budgetary presentation requirements for an agency with significant budgetary perspective differences that result in its not being able to present budgetary comparison information for its general fund and major special revenue funds. Such agencies are required to present budgetary comparison schedules as RSI based on the fund, organization or program structure the agency uses for its legally adopted budget.

The budgetary comparison schedule presents:

  • The original budget
  • The final appropriated budgets for the reporting period
  • Actual inflows, outflows and balances stated on the agency’s budgetary basis
  • A separate column to report the variance between the final budget and actual amounts (recommended but not required)

As per GASB Statement No. 100 — Accounting Changes and Error Corrections (an amendment of GASB 62), RSI or supplementary information (SI) may encompass more prior periods than the basic financial statements. GASB 100 has provided additional guidance on the treatment of two types of changes:

  • Changes in Accounting Principle & Financial Reporting Entity — For prior reporting period that are earlier than those in the basic financial statements, RSI or SI must NOT be restated.
  • Error Correction — If the error affects periods earlier than those in the basic financial statements, all affected information must be corrected by restating the information for those prior periods in RSI or SI, as practicable.