Accounting and Reporting for Debt

Submitted by: Dan Hedden, Principal

Annual reporting requirements for outstanding debt seem to get more complex each year with more and more outside parties requiring more and more information. Enough! Isn't there a simple method to account for debt and report the necessary information without having to recreate the wheel each year? The answer is YES! Successful Accounting and Reporting of debt first requires a complete accounting process. Once complete, reporting is a snap. In this article, we'll explore a couple quick tips to permanently solve this headache.

First (this is the difficult part) identify ALL of your debt. Bonds, loans, capital leases, bond anticipation notes. ANYTHING that has a structured repayment. During this stage, too much information may actually be a good thing. Valuable resources include recent audits, recent CTARs, and if all else fails, an analysis of your historical disbursement reports to look for structured repayments. Once you've identified these items, gather the following information for each item:

• First, and most important, get a repayment schedule. This will include the total amount borrowed, the interest rate or rates on the debt and the scheduled repayments. If you don't have this, contact your financial advisor or lending agency for assistance. Don't take no for an answer (especially with regard to leases)!

• Second, make sure you are accounting for principal repayment, interest repayment and paying agent fees SEPARATELY on your ledger. The State Board of Accounts manual provides guidance for account numbering.
  
  
• Third, gather the Final Official Statement, after-sale letter, loan agreement or lease agreement. These documents will help you understand the purpose of the debt as well as what funds are being used to repay the debt.

Once you have this information, put it in either an electronic directory or binder (or both) so it is always available. We also recommend that you laminate the repayment schedules as you will refer to these often over the years.

All information for outside users can be determined from the information presented in this article. The initial assembly of information is the most difficult part of this task. Ask questions and, if necessary, seek the help of advisors who worked on the transaction. If you have questions regarding annual report filing, or if we can assist you in meeting these requirements, please contact us at footnotes@umbaugh.com.