HomeMy WebLinkAboutCommonwealth of Virginia - Public Financial ReportA REPORT TO THE CITIZENS OF THE COMMONWEALTH
Popular Annual Financial Report for the Fiscal Year Ended June 30, 2021
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FINANCIAL
PERSPECTIVE
K. Joseph Flores Ralph S. Northam David A. Von Moll
Secretary of Finance Governor Comptroller
December 15, 2021
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EXECUTIVE SUMMARY
Purpose of this Report
The purpose of this report is to summarize and simplify the presentation of information contained in the Annual
Comprehensive Financial Report (ACFR) of the Commonwealth of Virginia. The Commonwealth’s financial statements are
prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and are
independently audited by the Auditor of Public Accounts. Much of the information in the audited financial statements is
necessarily technical and complex. As a result, the full financial statements may not be particularly useful to the citizens
of the Commonwealth who wish to better understand state government finances.
Virginia began issuing simplified financial reports in 1991. These reports, commonly referred to as popular reports, are
intended to better inform the public about their government’s financial condition, without excessive detail or the use of
technical accounting terms.
This report summarizes and explains the information contained in the financial statements for fiscal year 2021 in easily
understood terms. This report represents the ongoing commitment of Commonwealth officials to keep Virginia’s citizens
informed about state finances and to be accountable, in all respects, for the receipt and expenditure of public funds.
INCLUDED IN THIS REPORT:
Virginia’s Economy
Financial Statement Information
Commonwealth Statement of Net Position and Statement of Activities
General Fund
Commonwealth Transportation Fund
Alcoholic Beverage Control Fund
Virginia College Savings Plan Fund
Virginia Lottery Fund
Debt Administration
Award for Outstanding Achievement in Popular Annual Financial Reporting
Organization of Government
All photos courtesy of Virginia Tourism Corp. On the cover: Scenic Drive Draper Valley Overlook, Photo by Michael Speed
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Virginia’s Economy
During the fiscal year, many of the restrictions imposed to slow the COVID-19 virus transmission were relaxed, vaccines
were introduced, federal fiscal stimulus and relief spending was rolled out, and consumers began to resume normal
routines. Meanwhile, the Federal Reserve continued to be accommodative in its policy. Thus, many measures of economic
activity such as gross domestic product, personal income, and consumer spending showed improvement. Meanwhile,
housing demand was buoyed by low mortgage interest rates and increased consumer demand for suburban homes for
remote work. Home prices jumped due to increased demand and restricted inventory, while housing construction rose.
However, scars remained on the labor market due to the residual effects of the pandemic on demand and supply.
Nonfarm employment dropped, and unemployment rose in all but a handful of localities. Average employment growth is
expected to resume next fiscal year as the economy continues to improve.
Figure 1
Virginia Economic Indicators
1.2%
Gross Domestic
Product
Gross Domestic Product
(GDP) is the broadest
measure of overall
economic activity. It
represents the value of all
finished goods and
services produced in the
economy. GDP grew in
Virginia by 1.2 percent in
fiscal year 2021 after
slipping by -0.8 percent in
fiscal year 2020 due to the
pandemic.
4.1%
State Personal
Income
State personal income
growth improved to 4.1
percent in fiscal year 2021
from 3.5 percent in fiscal
year 2020. This growth was
partly due to continued
federal pandemic fiscal
stimulus and relief. Wages
and salaries, which make
up the majority of total
personal income, grew 2.5
percent in fiscal year 2021,
an improvement over the
1.7 percent growth rate in
fiscal year 2020.
-2.5%
State Non-farm Payroll Employment
During fiscal year 2021,
Virginia's changes in non-
farm employment generally
mirrored those of the U.S.,
with losses in almost all
sectors. Leisure/hospitality
and state/local government
had the largest losses.
Several sectors added jobs
during the fiscal year,
including transportation and
utilities, federal government,
retail trade and construction.
The new jobs were small in
comparison to jobs lost.
5.8%
Taxable Sales
Rate
Taxable sales data are
used as a proxy for retail
sales, even though they
do not include motor
vehicle or motor fuel
sales, yet do include
sales at restaurants and
lodging places. During
fiscal year 2021, taxable
sales increased by 5.8
percent, the largest
increase in over 14
years.
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Virginia’s Economy, continued
Overall, Virginia’s economy improved in fiscal year 2021, though some residual effects of the COVID-19
recession were still evident in labor market indicators. The broadest measure of economic activity, state
gross domestic product (GDP), increased after falling the year before. Wages and salary growth, in addition
to federal relief programs, contributed to higher personal income. Higher incomes combined with relaxation
of restrictions imposed to slow the COVID-19 virus transmission and vaccine rollouts helped boost consumer
spending, reflected in increased state taxable sales. The Virginia housing market also continued to improve
during the fiscal year. Existing home sales, building permit issuance, and housing prices increased over the
previous year, with housing price appreciation approaching rates of increase last seen during the real estate
bubble that peaked in 2006.
By the end of fiscal year 2021, the nation's economy saw conditions return to a more familiar pattern of
lower unemployment and stable growth. Economic growth is expected to continue into the next fiscal year
as consumer spending ramps up due to pent up demand for services, substantial savings accumulated during the pandemic, and the effects of federal fiscal stimulus. Businesses will need to fill depleted
inventories, and homebuilders will respond to rising housing demand. However, new challenges are on the
horizon, including the spread of the "Delta Variant," which created a new wave of increased COVID-19
caseloads that threatened to slow consumer spending, supply chain bottlenecks in various areas of the
economy, business difficulties finding workers, and an uptick in inflation. In addition, the Federal Reserve is
expected to rein in its accommodative monetary policy, resulting in higher interest rates.
Economic data and review prepared by the
Weldon Cooper Center for Public Service
at the University of Virginia
Colonial Williamsburg
Photo by Sarah Hauser
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Financial Statement Information
Virginia state government reports on its finances on the basis of a fiscal year , which starts on July 1 and ends the following
June 30. All information presented in this report is for fiscal year 2021 (FY 2021), which began on July 1, 2020, and ended on
June 30, 2021.
Virginia's financial information is prepared by the Department of Accounts, an executive branch agency, under the direction
of the Governor and the Secretary of Finance. The information is then audited by the Auditor of Public Accounts, who is an
official of the legislative branch of government. In this way, the audit process is independent. The financial information for FY
2021 was audited and received an unmodified auditor’s opinion.
Virginia accounts for its financial operations through government-wide financial statements and fund financial statements
(governmental, proprietary, and fiduciary).
Government-wide Highlights:
The primary government’s (Commonwealth’s) assets and deferred outflows of resources exceeded its liabilities and
deferred inflows of resources at June 30, 2021, by $33.7 billion. Net position of governmental activities (i.e., general fund,
special revenue funds) increased by $4.4 billion and net position of business-type activities (enterprise funds) increased
by $153.0 million.
Fund Highlights:
At the end of the fiscal year, the Commonwealth’s governmental funds reported a combined ending fund balance of
$14.3 billion, an increase of $4.8 billion in comparison with the prior year. Of this total fund balance, $419.4 million
represents nonspendable fund balance, $4.4 billion represents restricted fund balance, $6.7 billion represents committed
fund balance, and $2.7 billion represents assigned fund balance. These amounts are offset by a negative $49.6 million
unassigned fund balance.
The Enterprise Funds reported net position at June 30, 2021, of $1.9 billion, an increase of $152.2 million during the year
which is primarily attributable to increases for the Virginia College Saving Plan and capital contributions for the Alcoholic
Beverage Control Authority offset by a decrease for the Unemployment Compensation Fund.
The General Fund recognized higher total fund assets, total fund liabilities, revenues, and expenditures when compared
to fiscal year 2020.
Long-term Debt:
The Commonwealth’s total debt rose during the fiscal year to $52.6 billion, an increase of $4.0 billion, or 8.3 percent.
During the fiscal year, the Commonwealth issued new debt in the amount of $1.5 billion and $6.1 billion for the primary
government and component units. These debt issuances increased the total debt balances for the primary government
and component units to $18.1 billion and $34.5 billion, respectively.
Information is presented in this report on the GAAP basis of accounting. This means the data was compiled using the
standardized set of reporting principles that have been established for all state and local governments.
This Popular Report contains information from only selected funds and accounts and does not include information of the state’s
discrete component units. Component units are legally separate entities that are accountable to the state. Some examples of
component units are the public higher education institutions.
The full financial statements of the Commonwealth of Virginia, together with other economic and demographic information, are
published in Virginia’s Annual Comprehensive Financial Report, or ACFR. If you would like to view the ACFR, it is available for
download at https://www.doa.virginia.gov/reports/ACFReport/2021-ACFReport.shtml.
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Commonwealth Statement of Net Position and Statement of Activities
A Statement of Net Position summarizes all of the assets and deferred outflows of resources, and all the liabilities and
deferred inflows of resources, with the difference reported as net position.
At of the end of FY 2021, Virginia had assets and deferred outflows of resources (i.e., cash, investments, property,
receivables, and consumption of assets applicable to future reporting periods) of $73.7 billion. These assets were
partially offset by liabilities and deferred inflows of resources (i.e., amounts owed by the state to others and
acquisition of assets applicable to future reporting periods) of $40.0 billion.
This left state government with a net position (the amount left after liabilities and deferred inflows of resources are
subtracted from assets and deferred outflows of resources) of $33.7 billion, an increase of 15.7 percent over fiscal
year 2020. The increase was primarily due to increases in cash, investments, and capital assets.
Figure 2 is a condensed Statement of Net Position for the Commonwealth as of June 30, 2021.
Figure 2
Statement of Net Position
As of June 30, 2021
Dollars in Millions
Kayaking on Claytor Lake
Photo by Sam Dean
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Commonwealth Statement of Net Position and Statement of Activities -continued
The Statement of Activities (Figure 3) summarizes information showing how the state’s net position changed during the
fiscal year.
Total net position increased by $4.6 billion. The net position of the governmental activities increased $4.4 billion, or 16.2
percent, primarily due to increases in cash and investments in the General Fund and increases in capital assets offset by
increases in total liabilities. Business-type activities had an increase of $153.0 million, or 8.6 percent.
Virginia recognized $37.7 billion in program revenues and $31.8 billion in general revenues, which was used to pay for
$64.9 billion of expenses.
Program revenues are receipts that can be identified with specific expenses and are used to pay those expenses. Most
of these receipts comes from user fees, charges to purchase items, and federal funding. General revenues consist
primarily of tax revenue, as well as any other revenue that does not meet the definition of program revenue.
Figure 3
Statement of Activities
For the Fiscal Year Ended June 30, 2021
Dollars in Millions
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FY 2017– FY 2021
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Commonwealth Statement of Net Position and Statement of Activities -continued
Although the total equity of Virginia is substantial and confirms the overall financial health of the Commonwealth, it is equally
important to look at the financial condition of some of the individual funds. Governmental activities represent activities
associated with the taxes and fees charged by most state agencies. Business-type activities are those like the Virginia Lottery
that operate like a business.
Governmental Activities Revenues Governmental Activities Expenses
The following is a graphical representation of the The following is a graphical representation of the
Statement of Activities (Figure 4) revenues for Statement of Activities (Figure 5) expenses for
governmental activities. governmental activities.
Figure 4 Figure 5
Revenues by Source – Governmental Activities Expenses by Type – Governmental Activities
FY 2021 FY 2021
Figure 6 represents financial trend information for primary government (governmental and business-type activities) to
help the reader understand how the Commonwealth’s financial performance has changed over time.
Figure 6
Primary Government Total Revenues and Expenses
(Dollars in Thousands)
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Commonwealth Statement of Net Position and Statement of Activities -continued
The following table (dollars in millions) summarizes the Commonwealth's revenue and expenses by major source and category for
the current and previous two fiscal years (as restated). For the Governmental AcƟviƟes, the OperaƟng Grants and ContribuƟons
and expense differences between the current and prior fiscal year are primarily due to the receipt and disbursement of federal
monies received for support to individuals and families to help offset the economic difficulƟes caused by the COVID‐19
pandemic. The tax increases in fiscal year 2021 resulted from a strong recovery in Virginia as the COVID‐19 pandemic restricƟons
were liŌed. The largest increases came from income and sales taxes. For the Business‐type AcƟviƟes, the Virginia LoƩery had
significantly higher sales, which were offset by expenses during the current year.
Figure 7 Three Year Comparison of Revenues and Expenses
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Figure 8
General Fund Resources
FY 2021, GAAP Basis
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General Fund
During FY 2021, the General Fund received $27.2 billion in resources. Figure 8 illustrates the various revenue sources.
Individual and fiduciary income taxes accounted for 63.0 percent of the resources, while sales and use taxes made up
17.0 percent. These revenues plus other revenues totaled $26.1 billion, or 95.9 percent.
The remaining monies totaling $1.1 billion came from other sources, such as transfers from other funds, including
alcoholic beverage sales.
Revenues (not including transfers) increased by $2.7 billion from FY 2020. This revenue change results from increases
of $2.9 billion primarily attributable to income taxes, sales and use taxes, tobacco product tax and tobacco master
settlement receipts.
These increases were offset by decreases of $255.9 million primarily attributable to interest and dividends.
Horseback riding,
The Omni Homestead Resort
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General Fund, continued
General Fund disbursements, including transfers, for FY 2021 (Figure 9) totaled $23.4 billion.
Expenditures totaled $23.0 billion and transfers to other funds were $414.8 million. Education, including direct aid for
primary and secondary schools as well as support for public college and universities, accounted for 43.0 percent.
Support for social services, Medicaid, public health, and mental health consumed 30.0 percent of the General Fund.
Disbursements for public safety were 13.0 percent, while only 10.0 percent was used to support the administration of
general governmental operations.
Expenditures (not including transfers) increased by $833.4 million over the prior year. This was primarily attributable
to increases in education and individual and family services expenditures of $534.0 million and $293.8 million,
respectively.
Net other financing sources and uses increased by $224.2 million, which is primarily due to higher transfers in from
nongeneral funds and a decrease in transfers out to nongeneral funds.
Figure 9 General Fund Disbursements
FY 2021, GAAP Basis
CSX A Line Bridge
over the James River
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General Fund, continued
While the Commonwealth operates on the cash basis of accounting, GAAP accounting requires that Virginia recognize
certain assets and liabilities that are not recognized on the cash basis of accounting. Therefore, the Commonwealth’s
GAAP basis financial statements differ from the cash basis of accounting. Overall, the additional liabilities recognized
under GAAP exceeded the additional assets, reducing fund balance to a greater degree than is recognized on a cash
basis of accounting. Several future liabilities are particularly significant.
•One is for tax refunds payable on returns filed in FY 2021 and paid during the months of July and August following
year-end close of $481.5 million.
•Another is estimated Medicaid claims payable of $472.2 million, which represents medical services rendered in prioryears that will not be paid for until FY 2022. These amounts are summarized in Figure 10 that compares the General Fund on a cash and GAAP basis of accounting.
Figure 10 Analysis of General Fund Balance
Cash Basis versus GAAP Basis
For Fiscal Years Ended June 30, 2021 and 2020
Dollars in Millions
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General Fund, continued
Fund balance increased to $7.1 billion, compared to a balance of $3.3 billion in FY 2020. (Figure 11).
The increase in the General Fund balance from FY 2020 to FY 2021 is primarily due to increases in individual
income taxes, sales and use taxes, and deeds, contracts, wills, and suits taxes offset by increases in education and
individual and family services expenditures.
Figure 11General Fund Balance
(Dollars in Millions)
RdV Vineyards
Photo by Jeff Mauritzen
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Commonwealth Transportation Fund
The Commonwealth Transportation Fund pays for the construction and maintenance of state highways. The fund also
provides monies for other modes of transportation including rail, bus, aviation and seaports. The size of this fund
reflects the fact that Virginia is one of only a few states that includes essentially all roads within the state highway
system. Virginia has approximately 72,861 miles of state roads.
The Commonwealth Transportation Fund (Figure 12) is classified as a special revenue fund because revenues of the fund
come from various taxes and fees that are restricted for use in the support of transportation programs.
These revenue sources include the tax on motor fuel, vehicle registration and titling fees, and driver licensing fees.
Also, since 1986, one half cent of the state's sales tax revenue is deposited into this fund. Effective with fiscal year
2014, an additional portion of the state’s sales tax revenue is deposited into this fund.
During FY 2021, the Commonwealth Transportation Fund had revenues and other sources of $7.7 billion and
expenditures and other uses of $7.4 billion. At the end of FY 2021, the fund had a balance of $3.6 billion measured.
Highway construction projects often require several years to complete. State revenues contribute approximately 74.1
percent of the funding for these projects. The federal government provides 10.6 percent, and 15.3 percent comes
from bond proceeds. Local governments also contribute to the cost of highway construction.
Figure 12
Commonwealth Transportation Fund Revenue Resources
FY 2021
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Alcoholic Beverage Control Fund
The ABC fund accounts for the receipts and disbursements
from the sale of alcoholic beverages.
In FY 2021, ABC transferred $246.4 million to the General
Fund to use for current operations and for the care,
treatment, study, and rehabilitation of alcoholics. Total ABC
operating income for FY 2021 was $228.9 million on $1.1
billion in total sales.
Virginia College Savings Plan Fund
Proprietary Fund
The Virginia College Savings Plan (VCSP) Fund administers the
Defined Benefit 529 Program, which consists of two savings
options: Prepaid529 and Tuition Track Portfolio. Prepaid529 is
closed to new contracts. The Tuition Track Portfolio allows for
the purchase of units to be redeemed for future tuition costs.
VCSP had current assets of $207.0 million plus noncurrent
assets such as investments and receivables of $3.2 billion.
These assets were held to satisfy current liabilities of
$331.8 million and noncurrent liabilities of $1.5 billion.
Net investment in capital assets was $675,000, Restricted
for Net Other Postemployment Benefit – Virginia Sickness
and Disability Program was $405,000 and total unrestricted
net position was $1.6 billion as of June 30, 2021.
Private Purpose Fund
The VCSP also administers the Defined Contribution 529
Program that allows participants to save for qualified higher
education expenses by making contributions.
Total investments in the VCSP Defined Contribution 529
Program totaled $7.1 billion, and the net position held in
trust as of June 30, 2021, was $7.3 billion.
For FY 2021, VCSP reported contributions from plan
participants of $935.7 million. Deductions for FY 2021
totaled $479.1 million, including $431.8 million in
educational expense benefits paid and $47.3 million in
redeemed shares.
Virginia Lottery Fund
The Virginia Lottery Fund (Figure 13)
accounts for all receipts and disbursements
from the sale of lottery tickets for various
games.
During FY 2021, the Virginia Lottery had
operating revenues of $3.3 billion and
expenses, including lottery prize payments, of
$2.5 billion. Nonoperating revenue and
expenses for the year, including interest
earnings, netted to $716,023.
During FY 2021, $777.0 million was transferred
out to be spent for public education as
required by law.
Figure 13
Revenues, Expenses and Changes in Fund Net Position Virginia Lottery
For the Fiscal Year Ended June 30, 2021
Dollars in Thousands
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Debt Administration
Virginia has held its AAA bond rating, the best rating possible, since 1938. This is longer than any other
state and is a reflection of the confidence placed in the Commonwealth's fiscal health by bond raters and
finance professionals. Virginia's bond rating allows it to borrow money at the most competitive rates
available. Having a good credit rating means Virginia can save millions of taxpayer dollars in interest
payments when it finances debt, such as borrowing for construction costs. With less interest to pay,
Virginia's resources can be used where needed, and the state can maintain more favorable tax rates for
citizens and industries.
Discrete Component Units are generally excluded from this document. However, the debt of
Component Units is included in the Debt Administration section in order to provide a complete
presentation of the Commonwealth’s total debt.
The total outstanding debt on the books of the Commonwealth as of the end of FY 2021 was $52.6
billion (Figure 14). Debt on the books of the Commonwealth can be classified into three categories:
1. general obligation bonds of Virginia taxpayers;
2. limited obligations, which may use tax revenue to pay principal and interest (Other Tax Supported);
and
3. debt issued by state-created authorities and institutions of higher education, which is not an
obligation of Virginia taxpayers and does not use tax revenues (Non-Tax Supported).
As illustrated in Figure 14, a total of $1.2 billion, or 2.4 percent, of all debt, is a general obligation of
Virginia taxpayers and supported by a pledge of all tax revenues and other monies of the
Commonwealth. This kind of pledge is also referred to as “full faith and credit” debt. General obligation
debt is issued as provided for in the State Constitution.
The next category of debt, limited obligations which may use tax revenue, does not carry the “full faith
and credit” of the Commonwealth, but does use certain tax revenues, in whole or in part, to pay
principal and interest. Examples of other tax supported debt include certain bonds issued by the
Virginia Port Authority to improve Virginia ports, most highway construction bonds, bonds issued to
construct state office buildings, hospitals and prisons, as well as capital leases and installment purchase
contracts entered into by state agencies and institutions of higher education. A total of $24.4 billion of
this type of tax supported debt was outstanding at the end of FY 2021. This is 46.3 percent of all debt
on the books of the Commonwealth.
Hampton History Museum
Photo by Seamus McGrann
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Debt Administration, continued
The total outstanding debt on the books of the Commonwealth as of the end of FY 2021 was $52.6 billion (Figure 14).
Non-tax Supported Debt makes up 53.7 percent of all debt in the Commonwealth. The majority of this debt is issued
by various authorities that are created under state law to issue bonds to finance programs considered to provide a
benefit to the public. Total debt in this category at the end of FY 2021 was $28.3 billion.
The largest of these authorities is the Virginia Housing Development Authority, which has $4.4 billion in debt
outstanding secured by various mortgages. Other issuers include the Virginia Public School Authority and the Virginia
Resources Authority. In each case, the debt of these authorities is secured only by the fees paid for services. Colleges
and teaching hospitals also issue bonds secured only by fees paid for services. No tax revenues are used to support
this debt and it is not considered a legal obligation of the Commonwealth. However, $914.4 million of the total carries
a “moral obligation” promise by the Commonwealth to consider funding any deficiencies in debt service reserves from
tax revenues. To date, no such deficiencies have occurred.
Figure 14
State Debt/ObligationsTax Supported and Non-Tax Supported
As of June 30, 2021
Dollars in Thousands
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Debt Administration, continued
Figure 15 shows the ratio of general obligation debt per person.
Figure 15
Ratio of General Obligation DebtPer Capita
(Amounts in Thousands, Except for Per Capita)
Figure 16
Percentage of Annual Debt Service Expenditures for
Governmental Debt to Total Noncapital Expenditures –
All Governmental Fund Types
(Dollars in Thousands)
Figure 16 summarizes the outstanding debt owed by the Commonwealth in all categories over three fiscal years.
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Award for
Outstanding
Achievement in
Popular Annual
Financial Reporting
The Government Finance Officers
Association of the United States
and Canada (GFOA)
recognized the Commonwealth through its
Award for Outstanding Achievement in
Popular Annual Financial Reporting for the
fiscal year ended June 30, 2020.
This is a prestigious national award,
recognizing conformance with the highest
standards for preparation of state and local
government popular reports.
In order to receive an Award for Outstanding
Achievement in Popular Annual Financial
Reporting, a government unit must publish a
Popular Annual Financial Report whose
contents conform to program standards of
creativity, presentation, reader appeal, and
understandability. The award is valid for a
period of one year only. The Commonwealth
has received this award for the last 26
consecutive years (fiscal years 1995-2020).
It is expected that the current report
continues to conform to the Popular Annual
Financial Reporting requirements.
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Organization of Government
Selected Government Officials - Executive Branch
For more information on Virginia’s government, please visit www.virginia.gov
To view an electronic copy of Virginia’s Annual Comprehensive Financial Report
Please visit https://www.doa.virginia.gov/reports/ACFReport/2021-ACFReport.shtml.
This report was prepared by staff of the Virginia Department of Accounts.
Photographs courtesy of Virginia Tourism Corp. www.virginia.org
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