Reporting Requirements for Annual Financial Reports of State Agencies and Universities
The scope of the statewide audit includes tests for compliance with the covenants of general obligation and revenue bond issues of the state. Therefore, it is essential for each agency that issues bonds to include its bond schedules in the agency’s AFR. These schedules must agree with the equivalent schedules in the Bond Reporting System (BRS) Web application.
For each bond issue, BRS collects:
- General descriptive information
- Changes in bonded indebtedness
- Debt service requirements to maturity
- An analysis of funds available for debt service
Bonds payable balances must be positive. Generally, a negative current liability (CL) is due to the amortization of a discount with no principal payment due in that year (which is a rare instance). When the current liability portion of bonds payable is negative, the agency must provide an explanation in the comment box of Schedule 2B in the BRS Web application.
A bond issue must be included on each of these schedules until — and including (except for the debt service requirements) — the year in which the bond issue is extinguished or retired. For more information, see Schedules 2A, 2B, 2C and 2D.
Also report a schedule of defeased bonds outstanding for each advance refunded/extinguished bond issue until the associated escrow fund is exhausted and all associated debt is liquidated. For more information, see Schedule 2E.
The schedule of early extinguishment and refunding documents the current year’s early extinguishment and refunding of bonds payable — including current refunding and advance refunding. For more information, see Schedule 2F.
The bond schedules allow agencies to:
- Provide issue-by-issue detail for descriptive and debt service schedule information that is summarized in the notes to the financial statements.
- Present analytical information related to the adequacy of the pledged revenue stream or other fund sources to meet the issuer’s obligations.
- Disclose compliance with provisions requiring maintenance of restricted accounts in support of the bonds.
Commercial paper (because it typically matures in 270 days or less and is considered a short-term debt) and variable rate notes are not bonds payable. If the maturity of these two items extends beyond the end of the subsequent fiscal year, or the intent is to continue to roll the debt instrument beyond the end of the subsequent fiscal year (this effectively extends the ultimate maturity), the liability under certain circumstances may be reported as long-term liabilities — notes and loans payable. As with all long-term liabilities, amounts due within the following fiscal year are recognized separately from the amounts due in all subsequent fiscal years.
All items in the bond schedules are disclosed on the full accrual basis of accounting. For more information, see Required Schedules and Samples.