Government Financial Reporting: Blending, Components, and Statements

Related Organization

Primary government appoints a voting majority of its governing board.

Affiliated Organization

Raises funds for a university.

Blending

Blending occurs when the component unit's debt must be repaid by the primary government, the unit provides services exclusively to the primary government, or the governing body is substantially the same as the primary government.

Introduction Section

Consists of:

• Cover page
• Table of contents
• Letter of transmittal

Financial Section

Consists of:

• Auditor's report
• Management's Discussion and Analysis (MD&A)
• Basic financial statements
• Required Supplementary Information (RSI)
• Combining statements
• Individual fund statements
• Schedules

Financial statements include:

• Statement of Net Position (Balance Sheet)
• Statement of Activities (Statement of Revenues and Expenses)

Governmental Funds:

• Balance Sheet
• Statement of Revenues, Expenditures, and Changes in Fund Balance

Proprietary Funds:

• Balance Sheet
• Statement of Revenues, Expenses, and Changes in Net Assets
• Statement of Cash Flows

Fiduciary Funds:

• Statement of Fiduciary Net Assets
• Statement of Changes in Fiduciary Net Assets

Component Unit

A component unit cannot enter into any debt agreement without the approval of the primary government, leases a building exclusively to the state, is responsible for its own debt repayment, requires county approval of its budget, and the city council cannot impose its will.

Related Organization

A related organization has no potential to provide a benefit or impose a burden on the primary government. For example, landfill revenues are insufficient, or the primary government cannot impose its will, requiring only note disclosure of the relationship.

Government-Wide (GW) Statements

GW statements include the Statement of Net Assets and Activities.

Discretely Presented: Most component unit data (for those not blended) should be presented separately from the primary government through “discrete presentation.” All assets, liabilities, equities, revenues, expenses, and transfers relating to the government’s business and quasi-business activities are accounted for through proprietary funds.

Joint Ventures

A joint venture is a contractual arrangement that is owned, operated, or governed by two or more participants as a separate and specific activity subject to joint control, in which all participants retain an ongoing financial interest or responsibility. Joint venture participants should disclose the nature of their accountability in the notes to the financial statements.