Fund Balance Reporting and Governmental Fund Type Definitions

1. Fund Balance Reporting and Governmental Fund Type Definitions Robert M. Apple, CPA, MSA

2. Fund Balance Reporting and Governmental Fund Type Definitions Understanding GASB statement number 54

3. Certified continuing professional education class 1-hour credit Must remain for the entirety of the class to receive CPE credit Must sign in and sign out to receive CPE credit Certificates of attendance will be emailed for CPE credit

4. Fund Balance Reporting and Governmental Fund Type Definitions Who/what are Governmental Accounting Standards Board (GASB) and Generally Accepted Accounting Principles (GAAP)? Clearer definitions of governmental fund types Establish clear fund balance classifications Observing governmental reported resources Effective June, 2010

5. What is GAAP? Proper accounting Decades of accounting practice No authoritative book

6. What is GAAP? Does not account for every situation Make the best choice Rule makers leave room for options

7. What is GAAP? The grey area of materiality Qualitative aspects Quantitative aspects

8. Who Sets Up GAAP? • GASB sets the GAAP rules • GASB provides: • Accounting principles • Interpretations • Guidance for implementation

9. GASB Statement No. 76 • Category A • GASB Statements • Category B • GASB Technical Bulletins • GASB Implementation Guides • American Institute of Certified Public Accountants (AICPA) literature cleared by GASB

10. GASB Statement No. 76 • If not Specified in Category A or B • AICPA literature not cleared by the GASB • Practices widely practiced by state and local government agencies • Literature from professional organizations, regulatory agencies, and authoritative accounting texts

11. Statement Objective GASB Statement No. 54

12. Statement Objective • GASB Statement No.34 clarity – Basic Financial Statements and MD&A • Clearer fund balance classifications. • Fund balance information consistently applied • Clarifying existing governmental fund type definitions

13. Part 1Fund Balance Reporting GASB Statement No. 54

14. Nonspendable Fund BalanceFund Balance Reporting GASB Statement No. 54

15. Nonspendable Fund Balance • Identify amounts that cannot be spent • Assets not expected to be converted to cash • Inventories • Prepaid amounts • Long-term loan receivable • Property acquired for resale

16. Nonspendable Fund Balance • Cannot be spent because • Legally required to be maintained intact • Permanent fund as example • An endowment • Principal has to remain intact but interest can be spent

17. Restricted Fund BalanceFund Balance Reporting GASB Statement No. 54

18. Restricted Fund Balance • GASB 34: Specific purposes stipulated by • Constitutional law provisions • External resource providers (e.g., creditors or grantors) • Enabling legislation mandating resources used for a specific purpose

19. Committed Fund BalanceFund Balance Reporting GASB Statement No. 54

20. Committed Fund Balance Used only for specific purposes Determined by government’s decision making authority Can be changed and redeployed through legislation

21. Assigned Fund BalanceFund Balance Reporting GASB Statement No. 54

22. Assigned Fund Balance Used for specific purposes Didn’t meet criteria for restricted or committed Does not require the highest level of decision-making authority

23. Assigned Fund Balance • Includes all remaining amounts except for negative balances • Negative balances - discussed later in classifying fund balance amounts • Specific purpose amounts in the general fund

24. Unassigned Fund BalanceFund Balance Reporting GASB Statement No. 54

25. Unassigned Fund Balance Residual classification for the government’s general fund Spendable amounts not contained in other classifications Deficit balance for all other funds from overspending

26. Disclosures • Processes through which constraints are imposed on amounts • Committed classifications • Assigned classifications

27. Classifying Fund Balance AmountsFund Balance Reporting GASB Statement No. 54

28. Classifying Fund Balance Amounts • Required and appropriate classification and amounts of residual balances • Disclose accounting policies of spending for • Restricted • Assigned • Or Unassigned

29. Classifying Fund Balance Amounts • Can result in a negative balance • Amounts assigned to other purposes in that fund reduced to eliminate deficit • Negative residual amount classified as unassigned fund balance

30. Stabilization ArrangementsFund Balance Reporting GASB Statement No. 54

31. Stabilization Arrangements • Setting aside resources to withstand unexpected revenue shortfalls or expenditure needs • Classifying on the balance sheet as committed or restricted • Disclosures on stabilization arrangements • Describe and identify specific circumstances

32. Displaying Fund Balance Classifications on the Face of the Balance SheetsFund Balance Reporting GASB Statement No. 54

33. Nonspendable Fund Balance • Two components of nonspendable fund balance • Not in spendable form • Legally or contractually required intact or • Presented in aggregate

34. Restricted Fund Balance Distinguishing major purposes or Displayed in aggregate

35. Committed and Assigned Fund Balances Displayed in sufficient detail or Each classification displayed in aggregate

36. Part 2Fund Balance Disclosures GASB Statement No. 54

37. Fund Balance Classification Policies and ProceduresFund Balance Disclosures GASB Statement No. 54

38. Fund Balance Classifications Policies and Procedures • Committed fund balance • Who is the government’s highest level of decision-making authority • What is the required action to modify

39. Fund Balance Classifications Policies and Procedures • Assigned fund balance • Who is the official or body authorized to assign amounts • Policy established by governing body authorization given to

40. Fund Balance Classifications Policies and Procedures • Classification of fund balances • When the government considers amounts to have been spent for expenditures for the purpose of: • Restricted or unrestricted amounts • Committed, assigned, or unassigned amounts

41. Reporting EncumbrancesFund Balance Disclosures GASB Statement No. 54

42. Reporting Encumbrances Significant encumbrances by major fund and nonmajor fund in the aggregate Disclosed in conjunction with other significant commitments

43. Details of Fund Balance Classifications Displayed in the AggregateFund Balance Disclosures GASB Statement No. 54

44. Details of Fund Balance Classifications Displayed in the Aggregate Amounts for both nonspendable components separately disclosed Restricted, committed, or assigned fund balances specific purposes disclosed

45. Stabilization ArrangementsFund Balance Disclosures GASB Statement No. 54

46. Stabilization Arrangements Disclose the authority establishing Requirements for additions to the amount Conditions when may be spent The balance unless apparent on the financial statements

47. Minimum Fund Balance PoliciesFund Balance Disclosures GASB Statement No. 54

48. Minimum Fund Balance Policies If adopted in lieu of stabilization amounts Describe the policy established by the government

49. Part 3Governmental Fund Type Definitions GASB Statement No. 54

50. General FundGovernmental Fund Type Definitions GASB Statement No. 54