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Susan Combs  •  Texas Comptroller of Public Accounts

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.

List of Agencies With Independent Audits Required By Statute

The following table indicates agencies required by statute to obtain independent audits.

Agy No.AgencyFY EndMailing Address
010Texas Guaranteed Student Loan Corporation Sept. 30P.O. Box 83100
Round Rock, Texas 78683
012Texas State Affordable Housing Corporation Aug. 31P.O. Box 12637
Austin, Texas 78711
315Texas Tomorrow FundAug. 31P.O. Box 135289
Austin, Texas 78711
323Teacher Retirement SystemAug. 311000 Red River
Austin, Texas 78701
325Fire Fighter’s Pension CommissionAug. 31920 Colorado Street, 11th floor
Austin, Texas 78701
327Employees Retirement SystemAug. 31P.O. Box 13207
Austin, Texas 78711
332Dept of Housing & Community AffairsAug. 31P.O. Box 13941
Austin, Texas 78711
362Lottery CommissionAug. 31P.O. Box 1663
Austin, Texas 78761
454Surplus Line Stamping Office of Texas Dec. 31P.O. Box 160170
Austin, Texas 78716
542Cancer Prevention and Research Institution of Texas Aug. 31P.O. Box 12097
Austin, Texas 78711
799UTIMCOAug. 31401 Congress Avenue, Ste. 2800
Austin, Texas 78701
798-014Texas A&M Research FoundationAug. 31400 Harvey Mitchell Parkway, Ste. 100
Austin, Texas 77845
930Texas Local Government Investment PoolAug. 31208 East 10th Street
Austin, Texas 78701
930Texas Treasury Safekeeping Trust CompanyAug. 31208 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. 20.

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 finalization of the report and/or adjustment.

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

AFR Requirements under GASB 34

In accordance with GASB 34, agencies issuing audited stand-alone financial statements must include the following information in their AFRs:

  • 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, 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 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 year results to the prior year in plain language, emphasizing the current 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 government’s financial activities based on currently known facts, decisions or conditions. Focus the discussion on the primary government and distinguish between information pertaining to the primary government 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 CAFR 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 government employees
  2. In the MD&A, compare the current year results to the prior year (with emphasis on the current 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 year, the agency is required to address both years in the MD&A. Include comparative condensed financial information and related analyses for both years for the “comparative” MD&A. A separate MD&A is not required for each year presented.
  3. Focus the MD&A on the primary government. Distinguish between information presented for the primary government and that of its component units in your comments.
  4. Present only the most recent and relevant information in the MD&A — not “boilerplate” or information carried forward from the prior 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 in fund financial statements either reinforce information in the government-wide financial statements or provide additional information.
    2. Condensed financial information derived from government-wide financial statements, comparing the current year to the prior 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
      • Total liabilities — distinguishing between long-term liabilities and other liabilities
      • Total net position — distinguishing between invested in capital assets/net of related debt, 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 year. Address both governmental and business-type activities in the analysis, as reported in the government-wide financial statements, and explain significant changes from the prior year. Discuss important economic factors (such as changes in the tax or employment bases) that significantly affected the current 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 assets 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 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 (TxDOT is the only state agency using the modified approach for infrastructure reporting), 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 year.
    8. Providing 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 your agency is required to comply with this statement, the management of your 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 in the government-wide financial statements, except for fiduciary activities. Present separate columns for governmental and business-type activities for the primary government. Component units are presented separately from the primary government 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 primary government. 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 in 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 in 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 primary government 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 government’s discretely presented component units in accordance with GASB 14, paragraph 63, as amended by GASB 34. 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 governments to present budgetary comparison schedules for the general fund and for each major special revenue fund that has a legally adopted annual budget.

The GASB Codification 2400.105 also requires the presentation of budgetary comparison schedules for individual nonmajor special revenue funds and other governmental funds of the primary government (including its blended component units). The 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 agencies with significant budgetary perspective differences that result in their not being able to present budgetary comparison information for their general fund and major special revenue funds. These 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. Also, if an agency uses the modified approach, the agency must provide a description of the methodology used in the RSI section.

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)

Infrastructure Assets

GASB 34 also requires information on infrastructure assets to be reported using the modified approach. (TxDOT is the only agency using the modified approach for infrastructure reporting.)

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Susan Combs
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.state.tx.us
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