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November 11, 2010

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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November 11, 2010

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  1. GASB 54 – Understanding the Fund Balance Pieces November 11, 2010

  2. 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)

  3. 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

  4. 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

  5. What is Fund Balance? The difference between assets and liabilities in governmental funds

  6. 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

  7. 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

  8. 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)

  9. 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)

  10. 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)

  11. 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)

  12. 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

  13. GASB 54 – Assigned Fund Balance (Cont’d) Examples • Insurance Deductibles • Program start-up cost • Self-insurance • Other legal issues

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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

  23. 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

  24. 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

  25. 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

  26. 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

  27. 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

  28. 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 - Kpenny@coppellisd.com

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