The City Railway Authority (CRA) was established by the City to construct, opera
ID: 2710494 • Letter: T
Question
The City Railway Authority (CRA) was established by the City to construct, operate, and maintain the City’s mass-transit subway system. The CRA was created by the City as a separate legal entity, with powers to issue revenue bonds payable from railway fees and other revenues.
The 9-member governing body of the CRA consists of six members appointed by the mayor for fixed 10-year terms, and three City officials serving ex officio – the elected City treasurer, the elected City comptroller, and the appointed superintendent of transportation.
The CRA is financially self-sufficient, and it sets its own rates and approves its own budget. The City cannot access its assets or surpluses, nor is it obligated to subsidize deficits of the CRA.
The CRA has issued bonds to help fund recent construction and renovation projects. The related bond agreement states that the debt of the CRA is not an obligation of the City. However, City statutes authorize the City’s budget director to include in the budget submitted to the City council an amount sufficient to make the principal and interest payments on the CRA bonds, in the event CRA revenues are insufficient to meet debt service requirements.
Is the CRA a component unit of the City? If so, how should the City present the financial activities of the CRA in its financial statements? Explain your analysis and document your conclusion fully, including specific references for relevant technical literature section(s) within the GASB Codification that were utilized in reaching your decisions.
Explanation / Answer
CRA is a component unit of the CIty. As per GASB 14, paragraph 20, as amended by GASB 61, paragraph 4b, defines component units as legally separate organizations for which the elected officials of the primary government here the City are financially accountable. In addition, component units can be other organizations of which the nature and significance of their relationship with the primary government is such that exclusion of these organizations from the primary government’s financial statements would be misleading..
Let us try to understand based on following question:
Presentation: Discrete Presentation is used when the criteria for blended presentation are not met. In Discrete Presentation displays the component units in seperate column.