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

Required supplementary information (other than MD&A) includes budgetary comparison schedules for governmental funds, information about infrastructure assets reported using the modified approach, funding progress for other postemployment benefits and pension plans. Budgetary comparison schedules should present both the original and final cash basis financial plans for the fiscal year as well as actual inflows, outflows, and balances 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, and a Schedule of Investment Returns for the Retiree Health Benefit Trust.

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 program 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:

• Charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment;
• Grants and contributions that are restricted to meeting the operational requirements of a particular function or segment; and
• 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 the latter 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, compensated absences, and claims and judgments 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.

For additional information on the financial statements, see Chapter XVI, Section 3.A - Financial Statements of this Guide.

Guide to Financial Operations

REV. 11/13/2023