The Annual Financial Report for 2020
There are 56 down and 94 to go. For what, you ask? The number of days left before the deadline for when local governments in Washington State must file their annual financial report with the State Auditor’s Office (SAO). State law requires that all local governments file their annual financial report 150 days after year’s end, making the report due this year on Sunday (yes, Sunday), May 30, 2021.
As is the case with most years, there are several updates to the annual financial report as well as some new items. On its website, SAO publishes alerts and changes that agencies must follow in order to be compliant with reporting requirements for the current reporting year. The updates can be found in the BARS GAAP Manual and BARS Cash Manual under the “Alerts & Changes” tab. There, local governments can find changes with BARS accounts, reporting, and online filing. This blog will review just a few of the major updates.
Cash-Basis Entities: New Beginning and Ending Cash & Investments Classifications
For cash-basis entities, one of the changes for the 2020 annual financial report is new classifications for beginning and ending cash and investments. Similar to the fund balance classifications used by GAAP entities, cash-basis entities will now need to classify beginning and ending cash and investments as nonspendable, restricted, committed, assigned, and unassigned. Certain classifications can only be used in certain funds. For example, the classification of nonspendable may only be used in permanent and trust funds, whereas the classification of unassigned can only be used in the general fund. Using an improper classification in a fund will result in a red flag when uploading the Schedule 01.
New Schedule 01 Red Flags
This brings up another change for reporting year 2020. In December 2020, SAO's Audit Connection Blog published: New red flags coming to Schedule 01. This blog contains a list of accounts that will trigger a red flag if used in the wrong fund type, which means an entity will not be able to upload their Schedule 01.
In past years, entities may have received a yellow flag with the message, “This BARS account may not be allowable in this fund type,” on certain accounts when uploading their Schedule 01. The yellow flag is a warning but entities are still be able to upload their Schedule 01. This will no longer be the case for this particular error message when entities upload the 2020 Annual Financial Report. The error message will now be a red flag and entities will not be able to upload their Schedule 01 until the error is corrected. Be sure to review the list in in the linked SAO blog in order to avoid issues when uploading your Schedule 01.
New Notes to Financials
SAO also added two new notes for reporting year 2020. The first new note is for the COVID-19 pandemic. For reporting year 2019, COVID-19 was included under Note X – Subsequent Events. For 2020, the reference to COVID-19 was removed from the subsequent events note and a new, separate Note X – COVID-19 was added. There is also the new Note X – PFML for those entities that are self-insuring the Washington Paid Family & Medical Leave. Local governments that pay premiums to the Employment Security Department will not include this note in their report.
For More Help
Having a good understanding of all of the changes with the financial report can seem overwhelming, especially if you are new to your role or new to governmental accounting. MRSC will be providing Annual Financial Reporting Webinar Series – Reporting Year 2020 for cash-basis entities on March 8-11, 2021. This four-part webinar series will cover preparing for the annual financial report, new reporting requirements, report schedules, and notes to the financials. The webinar runs from 10 am – 12 pm each day over the 4-day period. Cost is $140 and the training is eligible for up to 6.0 CPE credits.
MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.