GASB 54 Fund Balance Reporting and Governmental Fund Type Definitions

1. GASB 54 � Fund Balance Reporting and Governmental Fund Type Definitions Lee Carter NCCMT

2. Objectives The participant will be able to identify the key components of GASB 54 The participant will be able to categorize the main effects of the statement on North Carolina local government financial reports The participant will be able to evaluate reporting options for governmental funds

3. Background Part of larger fund equity project (included all types of funds) Governmental fund requirements were more controversial Proprietary and Fiduciary funds separated � became GASB Statement No. 46 Years of work to develop GASB 54

4. Fund Balance for Governmental Funds Two main categories Nonspendable Spendable Nonspendable Not in spendable form Legally/contractually required to remain intact Examples Inventories/Prepaids Principal of a Permanent Fund Long-term receivables

5. Spendable Fund Balance Fund balance that is in a spendable form and also available for spending Four classifications Restricted Committed Assigned Unassigned

6. Spendable � Restricted Fund Balance Externally-imposed restrictions Grantors Debt covenants Restricted by State Statute Restricted by law through constitutional provisions or enabling legislation External resources Legally enforceable that resources may only be used for specified purposes

7. Spendable � Committed Fund Balance Fund balance that is committed by formal actions of the governing board Formal actions are required to �undo� any limitations placed by formal action (can�t just be appropriations lapsing) Set in place prior to year end, but amount can be calculated after year end Similar to a current �high level� designation by a board

8. Spendable � Assigned Fund Balance Fund balance amounts that are intended to be used for a particular purpose but are NEITHER restricted NOR committed Assigned Fund Balance includes the following: All remaining spendable amounts (positive) in governmental funds except the General Fund General Fund amounts that have designations (e.g., subsequent year�s budget appropriation) Assignments may occur any time before the issuance of the financial statements Assignment ability may be delegated by the board

9. Spendable � Unassigned Fund Balance Residual classification for the General Fund Use for other governmental funds ONLY for negative residuals Fund balance that has not been assigned to other funds Fund balance that has not been restricted, committed, or assigned for particular purposes in the General Fund

10. Encumbrances Should be disclosed by major funds and nonmajor funds in aggregate as part of commitments No separate fund balance classification Reported in Restricted by State Statute

11. Specific Guidance for Stabilization Amounts Similar to �rainy day� amounts where funds have been formally set aside Circumstances for use must be specific Stabilization is generally considered to be a specific purpose Typically reported as restricted or committed (most likely committed in NC), depending on the details of its availability / flexibility Unassigned if not restricted or committed

12. Display Guidelines Nonspendable can be displayed in the aggregate or by the two categories Nonspendable in form Required to remain intact Restricted can be broken down by �major� restrictions or in the aggregate Committed and assigned may be reported by �major� limitations or in the aggregate

13. Sample Balance Sheet Classifications Nonspendable (any governmental funds) Spendable Restricted for (any governmental funds) Committed to (any governmental funds) Assigned to (any governmental funds) Unassigned (General Fund only, used for negative residuals of other governmental funds)

14. Fund Balance Note Disclosures Committed Fund Balance Government�s highest level of decision-making authority Formal actions necessary to enact/modify/rescind Reappraisal reserves Assigned Fund Balance Body or official responsible for assigning amounts Policy that authorizes such assignments

15. Disclosures (continued) Spendable Fund Balance Order in which government considers restricted versus unrestricted amounts to be spent when both are available Order in which committed, assigned, or unassigned amounts are considered to be spent Any aggregate displays on the balance sheet should be disaggregated in sufficient detail in the note disclosures

16. Disclosures (continued) Stabilization arrangements/requirements Authority Additions process Use process Balance if not apparent on face of financial statements Minimum Fund Balance Policies Describe the policy Brief description of action necessary

17. Governmental Fund Type Definitions General Fund The General Fund should be used to account for and report all financial resources not accounted for and reported in another fund Language for the General Fund being used when another fund is not required dropped Minimum number of funds principle dropped in GASB 34

18. Governmental Fund Type Definitions (cont.) Special Revenue Fund Used to account for and report proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects Must have 1 or more restricted or committed revenue sources - should be majority of resources � if specific resources no longer a majority � use General Fund Resources should be recorded as revenues in special revenue funds Should not include moneys held in trust Reappraisal reserve funds Capital reserve funds Disclose purposes of major special revenue funds and revenues and resources used in those funds

19. Governmental Fund Type Definitions (cont.) Special Revenue Fund (cont.) Reappraisal reserve Board must have specific revenue source � specified in budget ordinance Shown as revenue in the fund � not as a transfer Presented as committed fund balance Otherwise reported in the General Fund

20. Governmental Fund Type Definitions (cont.) Capital Projects Fund Used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays New home for capital reserve funds for capital purposes Does not need to be major facilities (equipment replacement is acceptable) Excludes proprietary fund capital outlays and capital assets held in trust for others

21. Governmental Fund Type Definitions (cont.) Debt Service Fund Used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest Used when legally required Used to accumulate resources for debt service payments in future years Capital reserve funds for debt service

22. Governmental Fund Type Definitions (cont.) Permanent Fund Used to account for and report resources that are restricted to the extent that only earnings, not principal, may be used for purposes that support the reporting government�s programs Do not include private purpose trust funds Endowments and cemetery perpetual care funds

23. Implementation Issues Implementation should be done retroactively Reclassifications made by restating fund balance for all prior periods presented Fund balance information in the statistical section may reflect changes prospectively, though retroactive implementation is encouraged See LGC Memos 2010-23 and 2010-35 During audit of 2009 � 10 fiscal year work with auditor on restatement of fund balance for opening balances Required implementation would be for FY beginning after June 15, 2010 � NO EARLY IMPLEMENTATION