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XVI. Financial Reporting

Guide to Financial Operations

XVI.3.A Financial Statements

XVI. Financial Reporting
Guide to Financial Operations

Policy Reference:

GASB Codification Section 2200 – Annual Comprehensive Financial Report (formerly comprehensive annual financial report)

Process and Document Preparation:

Financial reporting is the process of communicating information concerning the financial condition and activities of an entity. Although governmental financial reports are useful to internal government officials, they are also intended to meet the information needs of citizens, governing and legislative bodies, sellers and buyers of debt instruments, and other parties external to government. The users of these financial statements are numerous and varied. They have different objectives and use the financial statements for different purposes. Some examples of these users include taxpayers, service consumers, governing boards, oversight bodies, investors, creditors, government employees, and participants in the annual operating budget/legal appropriation process. The financial statements can benefit many users, but to fully understand the financial statements some knowledge of governmental accounting and financial reporting is necessary.

The minimum financial reporting requirements for general purpose governments include the:

  • Management’s discussion and analysis (MD&A);
  • Basic financial statements; and
  • Required supplementary information (Other than MD&A).

MD&A, which is required supplementary information, should focus on the State and include a brief discussion of the basic financial statements. Information presented should support the analysis of financial position and results of operations. Elements to be included in the discussion include:

  • Analysis of balances and transactions of individual funds;
  • An analysis of significant variations between original and final budget amounts and between final budget amounts and actual budget results for the general fund;
  • A description of significant capital asset and long-term debt activity during the year;
  • A discussion of the modified approach to report infrastructure assets; and
  • A description of currently known facts, decisions, or conditions that are expected to have a significant effect on financial position or results of operations.

The basic financial statements are comprised of both government-wide and fund financial statements and notes to those statements. The basic financial statements report aggregate data for the State, distinguishing between the governmental activities and business-type activities of the primary government as well as component units. In addition, information is provided for each major fund of the governmental and proprietary fund types and fiduciary funds.

The basic financial statements consist of the following:

  • Statement of Net Position (Reporting Government-Wide);
  • Statement of Activities (Reporting Government-Wide);
  • Balance Sheet - Governmental Funds (emphasizing major funds);
  • Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position;
  • Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds (emphasizing major funds);
  • Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds to the Statement of Activities;
  • Statement of Net Position - Proprietary Funds (emphasizing major enterprise funds);
  • Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds (emphasizing major enterprise funds);
  • Statement of Cash Flows - Proprietary Funds (emphasizing major enterprise funds);
  • Statement of Fiduciary Net Position - Fiduciary Funds;
  • Statement of Changes in Fiduciary Net Position - Fiduciary Funds;
  • Combining Statement of Net Position – Discretely Presented Component Units;
  • Combining Statement of Activities - Discretely Presented Component Units; and
  • Notes to the Basic Financial Statements.

Required supplementary information (other than MD&A) includes:

  • Budgetary comparison schedules for Governmental Funds;
  • Information about infrastructure assets reported using the modified approach;
  • Schedules for other postemployment benefits of funding progress for other post-employment benefits; and
  • Pension plans schedules.

Budgetary comparison schedules should present inflows, outflows, and balances for both the original and final cash-basis financial plans for the fiscal year, as well as actual amounts stated on the State’s budgetary basis.

Infrastructure asset information would include schedules reporting the assessed condition and assessment dates and the estimated annual amount required to maintain or preserve the asset compared with amounts actually expensed for each of the past five fiscal years. In addition, disclosures should accompany the schedules that describe:

  • The basis for the condition measurement and the measurement scale used to assess and report condition;
  • The condition level at which the government intends to preserve its eligible infrastructure assets reported using the modified approach; and
  • Factors that significantly affect trends in the information reported in the required schedules.

The schedules for other postemployment benefits (OPEB) should present changes in net OPEB liabilities and related ratios.

The required supplementary information for pension plans should include schedules of: the proportionate share of the net pension liabilities, employer contributions, and changes in the net pension liability and related ratios.

The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the non-fiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity within governmental and business-type activities has been eliminated from these statements. However, balances due and resource flows between governmental and business-type activities have not been eliminated.

Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function or programs are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Certain indirect costs have been allocated and are reported as direct program expenses of individual functions/programs.

Program revenues include: (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; (2) grants and contributions that are restricted to meeting the operational requirements of a particular function or segment; and (3) capital grants and contributions, including special assessments. Internally-dedicated resources are reported as general revenues rather than as program revenues. Taxes and other items not included as program revenues are reported as general revenues, as required.

Separate financial statements are provided for Governmental Funds, Enterprise Funds, and Fiduciary Funds, even though Fiduciary Funds are excluded from the government-wide financial statements. Major individual Governmental Funds and major individual Enterprise Funds are reported as separate columns in the fund financial statements.

The government-wide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting, as are the Enterprise Funds, Component Units and the Fiduciary Funds financial statements. Revenues are recorded when earned and most expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Taxes are recognized as revenues in the year in which they are earned. Grants, entitlements, and donations are recognized as revenue as soon as all eligibility requirements have been met.

Governmental fund financial statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered available when they are collected within the current period or collectible within 12 months of the end of the current fiscal period. Tax revenues are recorded by the State as taxpayers earn income (personal income, general business, and other taxes), as sales are made (consumption and use taxes), and as the taxable event occurs (miscellaneous taxes), net of estimated overpayments (refunds). Receivables not expected to be collected within the next 12 months are offset by an unearned revenue liability when not earned, and by a deferred inflow of resources if earned but not available.

Expenditures and related liabilities are recorded in the accounting period the liability is incurred, to the extent it is expected to be paid within the next 12 months with the exception of items covered by GASB Interpretation 6 (GASBI 6), Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements. GASBI 6 modified the recognition criteria of certain expenditures and liabilities. GASBI 6 requires that expenditures and liabilities such as debt service, claims and judgments, and compensated absences be recorded in the governmental fund statements only when they mature or become due for payment within the period.

Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met. Non-exchange grants and subsidies such as local assistance grants and public benefit corporation subsidies are recognized as expenditures when all requirements of the grant and or subsidy have been satisfied.

In order to provide financial information to satisfy the needs of a broad range of users, New York State will annually issue an easily understandable and efficiently organized Annual Comprehensive Financial Report (ACFR) that is the State's official Annual Report. It is comprehensive in the depth and breadth of its reporting detail and provides full disclosure in accordance with the requirements of GAAP.

The ACFR will contain an introductory section, financial section, and statistical section. The ACFR will be organized as follows:

INTRODUCTORY SECTION

  • Title Page
  • Table of Contents
  • Letter of Transmittal
  • Financial Overview
  • Organization Chart
  • Names of Selected State Officials

FINANCIAL SECTION

  • Independent Auditors’ Report
  • Management’s Discussion and Analysis
  • Basic Financial Statements
  • Notes to the Financial Statements
  • Required Supplementary Information (Other than MD&A)
  • Other Supplementary Information - Combining Statements

STATISTICAL SECTION

Guide to Financial Operations

REV. 01/04/2021