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GASB 54 – Understanding the Fund Balance Pieces. November 11, 2010. Objectives Today. Background - GASB 54 Governmental Fund Types Fund Balance (Current) & GASB 54 Fund Balances GASB 54 Fund Balance Policies & Note Disclosures

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objectives today
Objectives Today

Background - GASB 54

Governmental Fund Types

Fund Balance (Current) & GASB 54 Fund Balances

GASB 54 Fund Balance Policies &

Note Disclosures

(All information presented is subject to change and is developed in conjunction with District’s auditors, financial advisor, and references)

gasb 54 implementation date fasrg
GASB 54 - Implementation Date & FASRG

Fiscal Period ending June 30, 2011 or August 31, 2011

No early implementation per TEA & FASRG

FASRG - Update 14 includes GASB 54 information

background gasb 54
Background - GASB 54

Focuses on Fund Balance

  • Impacts Governmental Funds
  • Enhance usefulness of fund balance information
  • Classification based upon

hierarchy and use of

resources

  • Consistency
what is fund balance
What is Fund Balance?

The difference between assets and liabilities in governmental funds

gasb 54 applicable funds
GASB 54 – Applicable Funds

Governmental Funds

General Fund

Special Revenue Funds - Revenues for a specific purpose

Debt Service Fund - Repayment of Debt

Capital Project Fund - Capital Outlay

Permanent Fund - Endowment

gasb 54 fund balance classification
GASB 54 - Fund Balance Classification

Non-spendable

Restricted Essentially what is now reserved

Committed Fund Balance

Assigned Essentially what is now designated

Unassigned Essentially what is unreserved

gasb 54 non spendable fund balance
GASB 54 – Non-spendable Fund Balance

Not in a Spendable Form

  • Inventories
  • Prepaid Items
  • Deferred Expenditures
  • Long-term Receivables

Legally or contractually required

to be maintained intact

(principal of endowment fund)

gasb 54 restricted fund balance
GASB 54 – Restricted Fund Balance

Constrained for a specific purpose by external parties or enabling legislation

  • Child Nutrition Program
  • Technology Program (allotment)
  • Construction Programs
  • Other granting agencies (State and Federal)
gasb 54 committed fund balance
GASB 54 - Committed Fund Balance

Constrained to a specific purposed by the Board of Trustees (action taken by highest level of governing body)

  • Potential litigation, claims, or judgments, self-insurance funds
  • Campus Activity Funds

(allows district to maintain financial data, including fund balance, in special revenue fund)

gasb 54 committed fund balance cont d
GASB 54 – Committed Fund Balance (cont’d)
  • Constraint can only be changed or removed by Board taking action
    • Resolution – action to constrain resources should occur prior to end of fiscal year (exact amount maybe determined subsequently)
gasb 54 assigned fund balance
GASB 54 – Assigned Fund Balance

Earmarked for a specific purpose

Intent is specified by the governing body or authorized officials

Residual amounts in governmental funds other than general fund are assigned

gasb 54 assigned fund balance cont d
GASB 54 – Assigned Fund Balance (Cont’d)

Examples

  • Insurance Deductibles
  • Program start-up cost
  • Self-insurance
  • Other legal issues
gasb 54 unassigned fund balance
GASB 54 – Unassigned Fund Balance
  • Available for any purpose
  • Operating fund – any remaining fund balance not classified as non-spendable, restricted, committed, or assigned
  • Operating fund should always have a positive unassigned balance
gasb 54 special revenue fund defined
GASB 54 – Special Revenue Fund Defined
  • Created to report a revenue source that is restricted or committed to a specific purpose
    • Funds not classified in the above categories will transfer operations into the Operating Fund for financial reporting
  • Revenue source should constitute

a significant portion of the

resources in the fund

gasb 54 debt service
GASB 54 – Debt Service
  • To account for all resources that are restricted, committed, or assigned to repay debt
  • Debt Service Fund – must report if
    • Legally required to do so
    • Amounts are accumulated to pay

futureprincipal and interest

payments

gasb 54 construction fund
GASB 54 – Construction Fund

To account for all financial resources that are restricted, committed, or assigned for capital outlays

  • Definition now includes non-major capital outlay

Prior definition defined all resources to acquire or construct major capital facilities

gasb 54 best practices implementation
GASB 54 – Best Practices - Implementation

Analyze all governmental funds for appropriate reporting of fund balances

  • Special attention to Special Revenue funds and sources of revenue

Determine order of spending fund balance

gasb 54 best practices cont d
GASB 54 – Best Practices Cont’d

A fund balance spending order policy should be adopted by the Board before current fiscal year-end

If your board elects not to adopt a policy then the following spending order will be the default:

  • Committed
  • Assigned
  • Unassigned
gasb 54 best practices cont d20
GASB 54 – Best Practices Cont’d

Fund Balance Policy should identify the highest level of decision-making authority needed to commit a balance (Board)

Identify decision making level of individuals authorized to assign a balance

  • Board of Trustees
  • Superintendent, CFO, or Asst. Sup. of Finance
gasb 54 best practices cont d21
GASB 54 – Best Practices Cont’d

Minimum fund balance policy (Operating Fund-Unassigned)

  • Cash flow needs -timing of State aid payments and tax collections
    • Credit ratings
    • Unfunded mandates
    • Projected level of expenditures
    • TEA recommends 2 months operating cost
gasb 54 note disclosures
GASB 54 – Note Disclosures

Decision making authority and actions taken for committed and assigned fund balances

Spending order of fund balances

Minimum fund balance information, if district has policy

Purpose of major special revenue fund, identifying revenues and other sources

Significant encumbrances

gasb 54 quick quiz
GASB 54 – Quick Quiz

Which GASB 54 fund balances most closely match the current Reserved Fund Balance category?

A. Unassigned

B. Restricted

C. Committed

D. B & C above

E. None of the above

gasb 54 quick quiz cont d
GASB 54 – Quick Quiz (cont’d)

2. How does the GASB 54 committed fund balance differ from assigned?

A. Action must be taken to modify or change

B. Level of authority to commit fund balance

C. Balance is subject to approval by external party

D. A & B above

E. None of the above

gasb 54 quick quiz cont d25
GASB 54 – Quick Quiz (cont’d)

3. If the Board does not adopt a spending order for fund balance the default order of spending is?

A.) Committed B.) Non-spendable

Assigned Restricted

Unassigned Unassigned

C.) Unassigned

Assigned

Committed

gasb 54 quick quiz cont d26
GASB 54 – Quick Quiz (cont’d)

4. Board action must be taken before the end of the fiscal year for which fund balance category/s?

A. Assigned

B. Restricted

C. Committed

D. None of the above

gasb 54 references
GASB 54 - References

Texas Education Agency ( FASRG Update 14)

http://www.tea.state.tx.us/index2.aspx?id=1222&menu_id=645

Local Government Services Bureau -http://doa.mt.gov/lgsb/default.mcpx

GASB http://www.gasb.org/st/summary/gstsm54.html

Gauthier, Stephen J., Fund balance: new and improved , http://www.allbusiness.com/ government/government-bodies-offices- regional/12306287-1.html

gasb 54 references28
GASB 54 - References

Chase, Bruce W., & Montoro, John B., Journal of Accountancy, Balancing Governmental Budgets Under GASB 54 http://www.journalofaccountancy.com/Issues/2009/Nov/20091713.htm

GASB, Fact Sheet about Fund Balance Reporting and Governmental Fund Type Definitions

http://72.3.167.244/project_pages/FBR_Fact_Sheet.pdf

Berman, Eric S., Government Accountability Brief

http://www.aicpa.org/InterestAreas/BusinessIndustry AndGovernment/Resources/GovernmentResourceCenter /Guidance/DownloadableDocuments/ Gov%27t%20Brief_Jun%2710.pdf

Contact information -

[email protected]

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