Changes for 2022 Annual Reporting for Cash Basis Entities

RCW 43.09.230 requires every local government in Washington State — including cities, towns, counties, and special purpose districts — to file an annual financial report with the Washington State Auditor’s Office (SAO) within 150 days of the close of each fiscal year. As is the case with most years, there are several updates to the annual financial report as well as some new items. The reporting deadline for this year is Tuesday, May 30, 2023, for both GAAP and cash basis entities.

This blog will review just a few of the major updates for the annual report for cash basis entities, while our Annual Financial Reporting Webinar Series - Report Year 2022 from March 29-30, 9:00 am-12:00 pm daily, will provide an extensive overview of changes and cover how an agency should compile and file this document.

Note Changes: Notes No Longer Required

Before I cover new note requirements, let’s talk about ones that are no longer required.

After the COVID-19 pandemic hit in 2020 March, SAO released a BARS update which required all local governments to include in the 2019 annual report a note discussing COVID-19 and its impacts on their agencies. Local governments also had to include the COVID-19-related note in their 2020 and 2021 reports. For the 2022 reporting year, SAO has removed the requirement that all local governments must include a note on COVID-19. Although the note is no longer required, the BARS Manual states, “Governments that continue to experience substantial impacts, either positive or negative, should include [the COVID-19] note.”

Finally, local governments that have previously been including the Fiduciary Activities note in their annual report will no longer do so for the 2022 annual report. The SAO has removed this requirement.

Note Changes: New Notes

The 2022 annual report will require a new lease note on which local governments must disclose information about their lease liabilities. The most common types of leases would include land and building leases, vehicles leases, and equipment leases. Short-term leases of less than a year should not be included.

The new lease note should include information such as assets leased, lease terms, the amount of monthly (quarterly/annual) payments, cancellation clauses, changes in lease terms for those previously reported, etc. Additionally, the total lease payments for the reporting period should be included, as well as a chart with future minimum lease payments broken down for each of the next five years and then in five year increments thereafter.

Another new addition is a note for telecommunication services. Local governments that provide any telecommunication services, including wholesale and retail broadband, will need to include a telecommunication services note in their 2022 annual report.

The telecommunication services note should include a description of the services provided, as well as a list of related revenues and expenses by major categories. The note should also include the local government’s current and aggregate amount of capital investment since it began providing telecommunication services.

Schedule Changes

All local governments were previously required to complete Schedule 19 – Labor Relations each year and include it in their annual report, regardless of whether or not they engaged labor relations consultants. Due to a change in state law, Schedule 19 is no longer a required element of the annual report beginning with the 2022 report.

Be Sure to Check for Late-Breaking Alerts

Although the BARS annual update is done in December, local governments should periodically review the updates page to monitor any additional changes. For instance, an Opioid Settlement Update was added earlier this month for those cities, towns, and counties that were part of the lawsuit against three companies found responsible for fueling the opioid epidemic.

The SAO’s opioid settlement update discusses the BARS code to use for receipt of the settlements and directs entities with any questions on how to spend the funds to Jeff Rupert, Complex Litigation Division Chief at the Office of the Attorney General.

Resources and Training

Our Annual Financial Reporting webpage provides a basic overview of annual financial reporting requirements for local governments in Washington State, including GAAP vs. cash basis reporting, to help local governments prepare and review their reports.

As noted above, our webinar covering 2022 annual reporting for cash basis entities is coming up at the end of March. This webinar will cover steps to prepare for compiling the annual report as well as specific reporting elements of the annual report that include changes and new reporting requirements for 2022. There are even scholarships available for counties that are members of the Washington Counties Risk Pool.