Institutional Federal Compliance Report 2021

56 • Notes to Basic Financial Statements __________________________________________________________________________

NOTES TO THE BASIC FINANCIAL STATEMENTS March 31, 2019

Summary of Significant Accounting Policies

Note 1

The accompanying basic financial statements of the State of New York (State) have been prepared in con- formity with generally accepted accounting principles (GAAP) for governments. Such principles are pre- scribed by the Governmental Accounting Standards Board (GASB), which is the standard-setting body for establishing governmental accounting and financial reporting principles in the United States of America. The basic financial statements have been prepared primarily from accounts maintained by the State Comptroller. Additional data has been derived from reports prescribed by the State Comptroller and pre- pared by State departments, agencies, public benefit corporations and other entities based on independent or subsidiary accounting systems maintained by them. a. Reporting Entity The basic financial statements include all funds of the primary government, which is the State, as well as the component units and other organizational entities determined to be included in the State’s financial reporting entity. The decision to include a component unit in the State’s reporting entity is based on several criteria, including legal standing, fiscal dependency and finan- cial accountability. A brief review of certain entities included in the State’s reporting entity follows. Blended Component Units The New York Local Government Assistance Corpo- ration (LGAC) was created by Chapter 220 of the Laws of 1990. LGAC is administered by seven directors con- sisting of the State Comptroller and the Director of the Division of the Budget, serving ex officio, and five directors appointed by the Governor. LGAC was created to issue long-term debt on behalf of the State to finance certain local assistance aid payments plus amounts necessary to fund a capital reserve fund and other issuance costs. LGAC is legally separate but pro- vides services exclusively to the State, and therefore is reported as part of the primary government as a blended component unit. The Tobacco Settlement Financing Corporation (TSFC) was created by Part D3 of Chapter 62 of the Laws of 2003. TSFC was created as a subsidiary of the State of New York Municipal Bond Bank Agency (MBBA). The directors of the MBBA are members of TSFC. TSFC is governed by a seven-member board, consisting of the Chairman of the MBBA, the Secretary of State, the Director of the Budget, the State Comp- troller or his appointee, and three directors appointed by the Governor. TSFC was created to issue long-term

debt on behalf of the State to finance State operations plus amounts necessary to fund a capital reserve fund and other issuance costs. TSFC is legally separate but provides services exclusively to the State, and therefore is reported as part of the primary government as a blended component unit. Discretely Presented Component Units The public benefit corporations (Corporations) listed in Note 14 were established by State statute with full corporate powers. The Governor, with the approval of the State Senate, appoints most members of the board of directors of most Corporations and either the Governor or the board of directors selects the chairman and chief executive officer. Corporations generally submit annual reports to the Governor, the Legislature and the State Comptroller on their oper- ations and finances, accompanied by an independent auditors’ report thereon. Corporations also submit to the Governor and the Legislature annual budget infor- mation on operations and capital construction. The State Comptroller is empowered to conduct financial and management audits of the Corporations. Financial assistance was provided in the fiscal year ended March 31, 2019 to certain Corporations, and such assistance is expected to be required in future years. Accordingly, the fiscal condition of the State is related to the fiscal stability of the Corporations. Since the Corporations are legally separate organizations for which the Gov- ernor and the Legislature are financially accountable, they are discretely presented as component units of the State. Related Organizations and Joint Ventures The State’s officials are also responsible for appointing the members of the boards of various related organi- zations (e.g., the Nassau County Interim Finance Authority), but the State’s accountability for these organizations does not extend beyond making the appointments. As discussed in more detail in Note 15, the State participates in several joint ventures but only reports on one due to materiality considerations. b. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activ- ities) report information on all of the nonfiduciary activities of the primary government and its compo- nent units. For the most part, the effects of interfund activity within governmental and business-type activ- ities have been eliminated from these statements.