GASB Statement No. 54 and Iowa School Districts

1. GASB Statement No. 54 and Iowa School Districts

2. Agenda • Provide a brief overview of GASB Statement No. 54 “Fund Balance Reporting and Governmental Fund Type Definitions” • Governmental Fund Types • Fund Balance Categories • Discuss Implementation in Iowa School Districts

3. GASB Statement No. 54 • Why? • Two overall changes to financial reporting: • Revised/Clarified definitions of governmental funds • Changed fund balance reporting • Effective for June 30, 2011 • No effect to the proprietary funds (enterprise funds or internal service funds) or fiduciary funds • No effect to government-wide statements

4. GASB Statement No. 54 • General Fund: to account for and report all financial resources not accounted for and reported in another fund • Special revenue funds: specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects • Student Activity Fund • Management Levy Fund • Capital projects funds: financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets • Physical Plant and Equipment Levy Fund-previously reported as a special revenue fund is now a Capital Projects Fund, Fund 36. • Capital Projects Fund

5. GASB Statement No. 54 • Debt service funds: financial resources that are restricted, committed, or assigned to expenditure for principal and interest • Permanent funds: financial resources that are restricted to the extent that only earnings, and not principal, may be used for the District’s programs

6. GASB Statement No. 54 • Nonspendable • Restricted • Committed • Assigned • Unassigned

7. GASB Statement No. 54 • Nonspendable: Not in a spendable form • Cannot ever be spent: inventories or prepaid items • Cannot currently be spent: Long-term portion of loans receivable or assets held for sale • If the proceeds must be used for a specific purpose, classify based on the constraint • Other long-term receivables are usually offset by the deferred revenue liability and there is no fund balance as a result • Legally or contractually required to be maintained intact-permanent fund principal

8. GASB Statement No. 54 • Restricted-externally imposed • External: Creditors, grantors, contributors or laws or regulations of other governments, such as the State • Difference between restricted fund balance and restricted net assets on the government-wide • Committed • Highest level of decision-making authority (Board) • MUST be committed by the Board prior to year-end, must be documented • Assigned • May be established by the governing body itself or the governing body may delegate this to an official (Superintendent or Business Manager) or another body within the organization (Finance Committee) • Cannot be negative

9. GASB Statement No. 54 • Unassigned • Only allowed a positive unassigned fund balance in the General Fund • Other governmental funds may report deficit balances as unassigned • Remember, cannot report an assignment for an amount to a specific purpose if the assignment results in a deficit unassigned fund balance • Classification • Determine nonspendable amounts first. • Apply the District’s policy for whether restricted or unrestricted amounts have been spent when an expenditure is incurred and both types of resources are available. • Next, apply the District’s policy for use of committed, assigned or unassigned. • Deficit position: Eliminate any amounts assigned and if residual is still negative, then report a deficit unassigned amount

10. Stabilization Arrangements • Formally setting aside amounts for use only in certain specific circumstances • Reported as restricted or committed • The formal action taken for setting aside the amounts specifies the circumstances for use and organization must prove non-routine nature • If the formal action is not sufficient, the fund balance is reported as unassigned

11. Implementation • Establish District policies • Committed fund balances-need Board approval prior to June • Assigned fund balances-need to determine the body or official authorized to make assignments and the policy that delegated entity is to follow • Flows: In what order will the resources be used? • Start now with the prior year audit reportand determine the fund balance reporting • Draft the footnote disclosures based on the policies that have been adopted

12. Implementation • Student Activity Special Revenue Fund • Reported as restricted net assets on government wide statements • Fund balance is restricted • Management Levy Special Revenue Fund • Reported as restricted net assets on government wide statements • Source of revenue is the levy annually certified by the District • Fund balance is restricted • PPEL Capital Projects Fund • Reported as restricted net assets on government wide statements • Source of revenue is the levy annually certified by the District • Fund balance is restricted • Capital Projects Fund • Reported as restricted net assets on government wide statements • Statewide sales and service tax • Fund balance is restricted

13. Implementation • Debt Service Fund • Reported as restricted net assets on government wide statements • Source of revenue is the levy specifically approved by voters • Fund balance is restricted • General Fund • Categorical funding-restricted • May have Committed and/or Assigned

16. General Fund example FY 2010 Fund Balance=$7,935,158 • Any Nonspendable? Prepaid items • Any Restricted? Federal and state programs • Any Committed? None • Any Assigned? Federal and state programs What is the Unassigned Balance?

17. Sarah Bohnsack, Partner 563.343.9595 Sarah@governmentalservice.com Mia Frommelt, Partner 913.660.3931 Mia@governmentalservice.com