Question

A town s library system is a legally constituted government entity. It is governed by a ten-person board. Six of the members are appointed by the town s council; the other four are selected by the other members of the board. The members serve staggered terms of three years. Once appointed, the members can be removed from office only for illegal activities. The town provides 95 percent of the library system s Resources and thereby can control the total amount spent by the system. However, the governing board adopts the system s budget, and the budget need not be approved by the town. The board also controls the day-to-day operations of the system. indicate whether and, if so, how the town should incorporate the library system into its own financial statements.

Answer 1

1.      Is the PCU (potential component unit) legally separate?  Yes.

2.      Does the PG (primary government) appoint a voting majority of the PCU's board?  Yes.

3.      Is the PG able to impose its will on the PCU?  No evidence that it can.

4.      Is there a financial benefit/burden relationship?  Yes, the town provides 95 percent of its resources and has thereby indicated (at least informally) that it has assumed responsibility to provide for the system's financial support.

5.      Are the two boards substantially the same? No.

6.      Does the CU (component unit) provide services entirely or almost entirely to the PG? No.

7.      Therefore, present discretely.