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CHAPTER 8.2
REQUIREMENTS FROM DISCRETELY PRESENTED COMPONENT UNITS
OVERVIEW
The discretely presented component units have financial reporting requirements due to the Office
of the Chancellor (CO). Refer to the audit master timeline in the SFSR website
http://www.calstate.edu/SFSR/Workshops/index.shtml for detailed information.
The discretely presented component units’ data will continue to be reported in the basic financial
statements of the CSU consolidated and in the individual campus’ financial statements
(supplemental schedule). In accordance with the provisions of GASB Nos. 34 and 35, the
campus’ statements will include:
 Statement of Net Position (SNP)
 Statement of Revenues, Expenses, and Changes in Net Position (SRECNP)
 Statement of Cash Flows
Note that with the CSU’s implementation of GASB No. 39 effective July 1, 2003, the discretely
presented component units’ statement of cash flows is no longer required to be included in the
campus’ financial statements.
The discretely presented component units’ data may also be included in the CSU’s consolidated:
 Notes to the Financial Statements
 Management’s Discussion and Analysis
Specific supplementary information is prescribed for the discretely presented component units’
submission of data to their campuses. This supplementary information is detailed in the financial
reporting requirement memorandum which is included in this chapter.
Highlights of the significant differences between the discretely presented component units’
financial statements and the campus’ required reporting format include:
 Statement of Cash Flows is not included in the campus’ financial statements
 Classification of assets and liabilities into current and non-current portions
 Lower level of detail in many line items
Please read the discretely presented component units’ financial reporting requirements
memorandum for detailed instructions.
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PLANNING AND COORDINATION WITH DISCRETELY PRESENTED COMPONENT UNITS
Due to the significant resources needed to complete an audit, it is essential that the campus plan
properly for the audit process, including coordination with the discretely presented component
units. It is the responsibility of the campus to ensure that the discretely presented component
unit’s resident on the campus complete their audits in the required timeframe and manner that is
necessary for inclusion in the basic financial statements of the campus. The campus must also
allow adequate time within the schedule to review of the discretely presented component unit’s
financial statements in order to properly incorporate the necessary data into the campus’
reporting package.
It is strongly recommended that a member of the campus attends the entrance and exit
conferences of the discretely presented component units and their independent audit firms or
develops another method of monitoring the discretely presented component units’ audit process.
Additionally, the campus must notify the discretely presented component units of the timing of
the campus audit well in advance in order to ensure that key personnel are available during audit
fieldwork and, more importantly, during the time surrounding the submission deadline of the
campus reporting package to the CO.
The discretely presented component units are required to complete a GAAP financial reporting
checklist (Chapter 8.03.01). This checklist must be initialed and signed by the discretely
presented component unit’s preparer and reviewer, respectively, and submitted to the campus
along with the audited financial statements.
RECONCILIATION OF BALANCES WITH DISCRETELY PRESENTED COMPONENT UNITS
In order to facilitate timely coordination with the campus, it is important that all inter-entity
accounts and transactions be reconciled with the respective discretely presented component unit
prior to the issuance of the financial statements. Likewise, it is important that the discretely
presented component units reconcile inter-entity accounts and transactions among the discretely
presented component units. The campus may wish to assist in this process so that the discretely
presented component units and the campus are able to meet the deadlines that have been set by
the CO.
Additionally, the above reconciliation processes are necessary in order to facilitate the
identification of nonexchange transactions between the campus and the respective discretely
presented component units, which must be eliminated from the total column in a separate
eliminations column in the campus’ reporting package.
a. Reconciliation of Related Entity Transactions with the Campus
It is important that significant related entity transactions between the discretely presented
component unit and the campus are disclosed in the related entity transactions footnote in the
proforma supplementary information template (note 8 in “Other information” tab of Chapter
8.03.01). Below are definitions of the line items listed in note 8:
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Payments to University for salaries of University personnel working on contract,
grants and other programs:
Cash payments made by a discretely presented component unit to the campus during the
time period from 7/01/PY to 6/30/CY, regardless of the period the billings relate to. The
keyword for this category is "cash". The payments must be paid for campus personnel’s
salaries (i.e. release time and director salaries). The payments must be made by check,
and as such, constitute a "cash" payment. Accruals should not be included.
Payments to University for other than salaries of University personnel:
Cash payments made by a discretely presented component unit to the campus during the
period from 7/01/PY to 6/30/CY, regardless of the period the billings relate to. The key
word for this category is "cash". The payments must be made by check, and as such,
constitute a "cash" payment. The payments must be paid for expenses that the campus
has initially paid (included both transactions that eventually reduced the expense or
recorded as cost recovery revenue by the University). Accruals should not be included.
Payments already disclosed in other footnotes should not be included (e.g. capital lease
and salaries of any kind). Agency transactions should not be included (e.g. transfer of
collected student fees).
Payments received from University for services, space and programs:
Cash payments received from the campus during the period from 7/01/PY to 6/30/CY,
regardless of the period the billings relate to. The payments must be by check, and as
such, constitute a "cash" payment. These are payments received from the campus for
space/services provided/performed by a discretely presented component unit. As such,
this category includes cash payments received from the campus for space/facility use,
operating leases, catering or any other service performed by a discretely presented
component unit for the campus. Accruals should not be included. Payments already
disclosed in other footnotes should not be included (e.g. capital lease and salaries of any
kind). Agency transactions should not be included (e.g. transfer of collected student
fees).
Gifts-in-kind to the University from Discretely Presented Component Units:
Gifts/contributions to the campus other than cash during the period from 7/01/CY to
6/30/CY (NOT reported by the campus as "gifts, capital revenue" or "gifts, noncapital
revenue" on the SRECNP). This category is for contributions/gifts to the campus that are
non-cash that can be given a cash value (for example, donated services, donated building
space, donated supplies, etc.).
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Gifts (cash or assets) to the University from Discretely Presented Component Units:
Cash or assets given to the campus during the period from 7/01/CY to 6/30/CY as a gift
(reported by the campus as "gifts, capital revenue" or "gifts, noncapital revenue" on the
SRECNP). This category is for gifts to the campus in the form of cash or assets.
Accounts payable to University (enter as negative amount):
Accounts payable to the campus balance as of year-end.
Other amounts payable to University (enter as negative amount):
Other amounts payable, excluding accounts payable, or accrued as other liabilities that
are due to the campus as of year-end.
Accounts receivable from University:
Accounts receivable from the campus as of year-end.
Other amounts receivable from University:
Other amounts receivable, excluding accounts receivable and leases/notes receivable
which are disclosed in other footnotes, or accrued as other assets that are due from the
campus as of year-end.
b. Capital Lease / Note Payable Transactions with the Campus
Please refer to Chapter 4.03.5, Financing of Auxiliary Organizations Projects, for discussion.
c. Other Postemployment Benefits (OPEB) Obligation Under GASB No. 45
As an agency of the State, the CSU is included in the State’s OPEB actuarial study.
Therefore, the amounts of annual required contribution (ARC), employer contributions, and
net OPEB obligation (NOO) are provided to the CSU by the State Controller’s Office. These
amounts provided by the State are related to the University only and do not include discretely
presented component units. Therefore, the discretely presented component unit should have
its own actuarial study performed in order to report the discretely presented component unit’s
OPEB obligation and related footnote disclosures in accordance with GASB No. 45 and
GASB No. 57. Note that the OPEB obligation, net of current portion is presented separately
and OPEB obligation, current portion is included in other current liabilities in the SNP in the
proforma supplementary information template (“Supplementary – SNP” tab in Chapter
8.03.01). Additionally, the NOO ending balance reported in note 9 in the proforma
supplementary information template (“Other Information” tab in Chapter 8.03.01) must be
reconcilable with the total OPEB obligation reported on the SNP.
According to GASB No. 45 paragraph 12, for financial reporting purposes, an actuarial
valuation should be performed in accordance with the following minimum frequency:
a. For plans with a total membership of 200 or more—at least biennially
b. For plans with a total membership of fewer than 200—at least triennially.
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The actuarial valuation date need not be the employer’s balance sheet date, but generally
should be the same date each year (or other applicable interval). However, a new valuation
should be performed if, since the previous valuation, significant changes have occurred that
affect the results of the valuation, including significant changes in benefit provisions, the size
or composition of the population covered by the plan, or other factors that impact long-term
assumptions. The ARC reported for the employer’s current fiscal year should be based on the
results of the most recent actuarial valuation, performed in accordance with the parameters as
of a date not more than twenty-four months before the beginning of that year, if valuations
are annual, or not more than twenty-four months before the beginning of the first year of the
two-year or three-year period for which that valuation provides the ARC, if valuations are
biennial or triennial.
d. “Underwater” Endowment Investments
Current market conditions have created a situation whereby the value of endowment
investments at year-end may have decreased below the original amount of the endowment.
FASB component units should analyze their endowment investments in accordance with
Financial Accounting Standard Board (FASB) Statements 117 and 124, and also the FASB
Staff Positions (FSP) of FASB Statements 117-1. GASB component units should review
Governmental Accounting Standard Board (GASB) Comprehensive Implementation Guide
Question 7.24.14 to ensure the net position classification is properly presented at year end.
Additionally, such decrease in value must be determined and accounted for on a fund by fund
basis and not for the endowment fund in total. Chapter 8.05.01 provides the following:
 Accounting for endowment investments under GASB and FASB
 Example of accounting entries for recording underwater endowments for FASB
component units.
 Excerpts from GASB and NACUBO on accounting and reporting of underwater
endowments for GASB auxiliary organizations.
PLEDGE REPORTING
The CO has updated the pledge reporting guidelines by referencing to the FASB Accounting
Standards Codification and GASB Statement No. 33. Please see Chapter 8.05.02 for more
details. Component units should follow these updated guidelines for reporting of pledges or
promises to give.
FAIR VALUE MEASUREMENT
The CO has provided a sample fair value classification disclosure of investment type levels
required for FASB component units. Please see Chapter 8.05.03 for more details. FASB
component units should follow these updated guidelines for note disclosure of investment type
levels.
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CONTRIBUTIONS OF SERVICES
Contributions of services between the campus and component units shall be recognized if the
services received meet any of the following criteria:
a. They create or enhance nonfinancial assets. Nonfinancial assets include land,
buildings, use of facilities or utilities, materials and supplies, intangible assets, or
services, etc.
b. They require specialized skills, are provided by individuals possessing those skills, and
would typically need to be purchased if not provided by donation. Services requiring
specialized skills are provided by accountants, architects, carpenters, doctors, electricians,
lawyers, nurses, plumbers, teachers, and other professionals and craftsmen. Specialized
skills are services that require expertise that is not possessed by most members of the
general public or that require an individual to be licensed to practice the profession or
craft.
Contributed services that do not meet these criteria shall not be recognized (FASB Codification
958-605-25).
Significant contributed / donated services (in-kind) should also be disclosed in the related entity
transactions footnote in the proforma supplementary information template (note 8 in “Other
Information” tab of Chapter 8.03.01).
ONE TIME MOVEMENTS OF AUXILIARY ORGANIZATION’S FUNDS
On September 7, 2010 EO 1052 (University and Auxiliary Organization Funds) was issued.
The EO requires auxiliaries to “. . . remit all university funds temporarily held within 90 days [of
receipt], unless an extension of time is expressly authorized and justified in writing by the
university president or his/her designee. Auxiliary organizations shall not accept or administer
university funds unless they have been specifically authorized in writing to do so by the
university president or his/her designee. Said authorization shall be granted judiciously and only
when it is advantageous to the university and supportive of the university mission.” Written
documentation of the advantages of an auxiliary administering university funds is required. As a
result of this EO, auxiliary organizations may need to move certain funds to the university.
Movement of funds should be recorded in a way that minimizes distortion of current year
operations. Distinction needs to be made between funds accumulated over the years and funds
from the current year activity.
Funds being moved that represent net position accumulated from prior years should be treated as
a non-operating expense by the auxiliary and non-operating revenue by the university, regardless
of the original funding source.
Funds being moved that come from current year activity should use a specific revenue account
(e.g., gift income, rental income, fee revenue, etc.) instead of other non-operating revenue /
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expense. The recording would be similar to what the university and the auxiliary would have
recorded in the first place.
The movement of funds should not be reported as a prior period adjustment that might result in
restatement of a prior net position balance since the transaction is not considered correction of an
error but results from the implementation of the policy set forth in the EO issued in the current
year.
More detailed instructions can be referred to EO 1052: http://calstate.edu/eo/EO-1052.html
Effective January 1, 2012, a new policy was established as set forth in Integrated CSU
Administrative Manual (ICSUAM) 13175.00 under policy title “Auxiliary Organization External
Auditor Firms Qualifications.” In order to best evaluate management’s assertions in each of the
financial statements, it is necessary that the auxiliary organizations’ external auditors possess the
minimum proficiency and experience given the unique complexities of the CSU auxiliary
organizations. For more details, refer to Chapter 8.3.
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REVISION CONTROL
Document Title:
CHAPTER 8.2 – REQUIREMENTS FROM DISCRETELY PRESENTED
COMPONENT UNITS
REVISION AND APPROVAL HISTORY
Section(s)
Revised
General
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Summary of Revisions
Previously in Chapter 8.0
Revision Date
April 2015
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