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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 do not issue Stand-Alone or Audited AFRs

After researching statutory requirements for agency annual financial reports (AFRs), the Fiscal Management Division and the Comptroller’s legal staff with concurrence from other oversight agencies concluded the statute does not require any individual agency to base its AFR on GAAP. However, each individual agency must provide sufficient accounting information in its AFR for the Comptroller’s office to prepare the CAFR on a GAAP basis. Most agencies are not required to fully comply with GASB 34; however, they are required to submit additional information to the Comptroller’s office for use in the CAFR. The additional information consists mainly of:

Do not send confidential information to the Financial Reporting section.

All agencies that issue audited reports must comply with all provisions of GASB 34 in its audited reports. For more information, see Agencies that Issue Stand-Alone or Audited Reports.

Agency Requirements

Fund/Government-wide Financial Statements

Each agency is required to prepare fund financial statements for all of its GAAP/appropriated funds.

Full Reporting Agencies must enter basis conversion entries into USAS for their governmental funds. Simplified Reporting Agencies are required to either enter their basis conversion entries into USAS or contact their financial reporting analyst to request the transactions be entered in USAS.

These entries convert the governmental funds from modified accrual to full accrual. This information is used by the Financial Reporting section in preparing the government-wide statements for the CAFR. Proprietary fund financial statements are based on full accrual and therefore basis conversion entries are not necessary.

The templates for preparing basis conversion entries can be found in the Annual Financial Report Working Papers.

State Agency USAS Reconciliation

Agencies are required to reconcile and be in agreement with USAS so the Financial Reporting section can extract the agency’s data from USAS for CAFR purposes.

State Agency Note Disclosure

The notes and their requirements are discussed in Notes and Samples. Agencies provide the information required for the “Management Discussion and Analysis (MD&A)” section of the CAFR via Note 18.

Major Funds

Only agencies requiring an outside audit opinion use major funds. These major funds may or may not be used at the CAFR level. A fund is considered major if its total assets, liabilities, 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 in each of the fund statements. Report nonmajor funds in aggregate in a single column.

Agencies not issuing stand-alone reports are required to prepare financials for all funds and do not need to distinguish between major and nonmajor funds. The Financial Reporting section analyzes all funds to identify the current major and nonmajor funds as these may change from year to year. All funds are reported in the CAFR — the major funds are disclosed on the face of the fund financial statements and the nonmajor funds are reported in one column with a supporting combining statement in the appropriate section.

University Requirements

University Fund Statements

Universities are allowed to report as a single column business-type activity. Present the financial statements for proprietary funds using the economic resources measurement focus and the full accrual basis of accounting. Universities are allowed to aggregate all its funds into a single column. The three proprietary statements required are:

University USAS Reconciliation

The Financial Reporting section extracts university USAS data. Universities are required to reconcile and be in agreement with USAS so the Financial Reporting section can extract the university data from USAS for CAFR reporting purposes. Hard copy financial statements, notes and supplemental schedules are required from all universities.

Independent universities and consolidated university systems are required to enter its entire AFR into USAS.

University components of a system are only required to enter certain line items into USAS and are not required to enter its entire AFR into USAS.

For additional details, see the USAS and Interagency Certification Form.

University Note Disclosures

For information on required note disclosures, see Notes and Samples. The information required for the MD&A section of the CAFR is provided via Note 18.

Special Audit Note

The State Auditor’s Office does not audit an agency’s AFR except in a few special cases. Individual agencies are audited to the extent necessary to issue an opinion on the CAFR.

You must clearly communicate in your agency’s AFR that the report is unaudited with no opinion rendered:

  1. Place the word “UNAUDITED” and the agency name and number clearly and conspicuously at the top-center of each page of the AFR.
  2. The letter of transmittal (signed by the executive head of the agency) must contain a sentence that states the following:
“The accompanying annual financial report will be considered for audit by the state auditor as part of the audit of the State of Texas Comprehensive Annual Financial Report (CAFR); therefore, an opinion has not been expressed on the financial statements and related information contained in this report.”

(See the sample Agency Transmittal Letter for Unaudited AFRs.)

Note: Any excerpts of information that make reference to the state auditor for release to third parties must have the prior written approval of the state auditor.