Note X – Risk Management
A template for this note is not available. See “Instructions to preparer:” for various disclosures that may be required.
Instructions to preparer:
A city/county/district should disclose:
a description of the types of risk the city/county/district faces and how it is handling those risks; and
any significant reduction in insurance coverage from the previous year (by risk category); and
an indication whether the total amount of settlements exceeded insurance coverage for each of the past three fiscal years.
If the city/county/district participates in a risk pool, it should describe that arrangement. The description should specifically address the rights and responsibilities of the government and the pool.
If a city/county/district retains some risk of loss, it should make the following disclosures:
1. a description of what the liability for unpaid claims represents and how it is calculated (this discussion should mention whether non-incremental claims adjustment expenses have been included as part of the liability for claims and judgments);
2. if the city/county/district exercises its option to discount claims liabilities or has entered into any structured settlements, the nondiscounted carrying amount of any liabilities reported at a discounted value and the range for interest rates used for discounting;
3. claims defeased through annuity contracts (unless beneficiaries have signed an agreement releasing the government from all further obligation, and the likelihood of further payments is remote); and
4. a tabular reconciliation of the claims liability for both the current fiscal year and the prior fiscal year, using the following format:
claims liability (beginning of year)
claims incurred during the year
changes in the estimate for claims of prior periods
payments on claims
other (for example, change in the methodology used to estimate claims)
claims liability (end of year).
For more information refer to the GASB Statement 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues.