Updates for the 2025 Annual Financial Report

Now that you’ve made it through budget season, and hopefully enjoyed a little respite, it’s the time of year when finance staff turn their attention to the annual financial report.

For the previous two reporting years, local governments were required to implement new GASB reporting standards that included compensated absences and subscription-based IT arrangements (SBITAs). The good news is that there are no new GASB reporting standards for reporting year 2025.

BARS Manual Updates

When preparing the annual financial report, staff should review the appropriate BARS Manual for their jurisdiction.

Every December, the SAO publishes their annual updates for the Cash and GAAP manuals. The updates for 2025 do not have major changes; rather, most involve clarification and updates to existing guidance in the BARS Manual.

The BARS Manual updates are divided into four sections: chart of accounts, accounting, reporting, and online filing. All sections should be reviewed, as they can impact successful completion of your agency’s annual financial report.

Below are a couple of noteworthy items I found in my review of the updates for the BARS Cash Manual.

Leases & Subscription-Based Information Technology Arrangements (SBITAs)

Local governments are allowed to adopt policies that set a threshold at which leases and SBITAs will be reported. Each local government should determine a threshold which meets the needs of their organization.

If a local government has adopted a policy that establishes a threshold for leases and SBITA’s, it must disclose the thresholds in the BARS Cash Manual, Note 1 – Summary of Significant Policies. Sample language can be found in Item G at Note 1.

If a local government has not adopted a policy establishing a threshold for leases and SBITAs, it should disclose that it does not have a threshold for reporting leases and SBITAs.

The BARS Manual gives the following sample language:

The (city/county/district) does not have a lease/SBITA threshold and therefore reports a liability for all leases/SBITAs regardless of their dollar amount.

Short-Term Debt

For the 2025 annual financial report, cash-basis local governments are required to include a Short-Term Debt note if they had any short-term debt activities during the year.

Short-term debt refers to debt is debt incurred for a period of less than a year. Examples of short-term debt would include short-term interfund loans, anticipation notes, lines of credit, or any other similar short-term loans.

Local governments must include all short-term debt that was issued during the year, even if that short-term debt was paid off prior to year-end.

To see sample language, a sample debt schedule, and instructions for the note, check out Note X – Short-Term Debt in the BARS Cash Manual.

Conclusion

These are just two of the updates made in the BARS Cash Manual. Again, I recommend reviewing all of the changes made in the annual update to ensure your entity is reporting items properly in the annual financial report.

If you are looking for a more in-depth discussion of the annual financial report for cash-basis entities, my colleague Cheryl Grant and I will be teaching the Annual Financial Reporting Webinar Series – Report Year 2025 (Cash-Basis) on February 24 and 25.