June 14. ,. 2011. Agenda. Review, Methodology & Examples of Fund Balance Classifications. Fund Balance Policies vs. Stabilization Policies. Restricted – Stabilization by State Statute. Review & Examples of Fund Type Classifications. ID: 669017
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Presentations text content in GASB 54 Implementation Fund Balance Reporting and Governmental Fund Type Definitions
Slide1
GASB 54 Implementation
Fund Balance Reporting and Governmental Fund Type Definitions
June 14
,
2011
Slide2
Agenda
Review, Methodology & Examples of Fund Balance Classifications
Fund Balance Policies vs. Stabilization Policies
Restricted – Stabilization by State Statute
Review & Examples of Fund Type Classifications
Examples of Illustrative Statements
Questions
Slide3
Questions & Guidance Units will Need
Classification of FundsHow do I budget my Funds?
Do I have to change how the funds are in my financial system?
Fund type classifications can depend on a unit’s policies, so you could have clients with different results for similar funds.
Classification of Fund Balance
Spending policy will determine how fund balance will be classified.
Different spending policies could result in different fund balance classifications
Does my fund balance policy qualify under GASB 54 as committed?
GASB 54 has potential to affect: MD&A, government-wide, fund statements, notes, supplemental statements and statistical schedules.
Slide4
Impact of GASB 54
GASB 54 is Reporting
Guidance
General Statutes have not changed – Capital Reserve Funds can still be budgeted.
You may or may not want to change how you budget.
Under earlier GASB a unit could not accumulate funds in a CIP
Under earlier GASB Capital Reserve was a Special Revenue Fund
The Statement redefines some Fund Types
Changes the focus of Fund Balance
Changes how we classify fund balance on Balance Sheet.
Does not change total fund balance amount.
Slide5
Fund Balance - Classifications
1 GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions
Classification
Definition
Examples
Nonspendable
“amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.”
1
Inventories,
long-term receivables, Cemetery Permanent Funds,
long-term interfund balances (due to/from)
Restricted
“Fund balance should be reported as restricted when constraints placed on the use of resources
are either:
Externally imposed by creditors-debt covenants, grantors, contributors, laws or regulations of other governments; or
Imposed by law through constitutional provisions or enabling legislation”
1
Restricted - Streets
Restricted –
School Capital
Stabilization
by
State Statute
Slide6
Restricted – Stabilization by State Statute
GASB has redefined Governmental Balance Sheet ReportingUnder GASB 54 “reserve by state statute” now qualifies as restrictedThis impacts Government-wide Net Asset Statement – as “restricted-stabilization by state statute” will be reflected on this statement.
Note: Restricted by stabilization is not calculated on government-wide statement, but calculated from numbers on the balance sheet
Slide7
Fund Balance - Classifications
1 GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions
Classification
Definition
Examples
Committed
“Used for specific purpose pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority”
1
Self-imposed limitations set in place prior to year-end, but can be calculated after year end.
Limitation imposed at highest level and requires same action to remove or modify
Ordinances that lapse at year-end do not meet the committed test
Board passed a
resolution
to use $1,000,000 of fund balance towards
the
building
of a cultural arts center.
Slide8
Fund Balance - Classifications
1 GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions
Classification
Definition
Examples
Assigned
“Amounts that are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed”
1
Assignments can occur anytime before issuance of financial statements.
Assignment ability can be delegated by the board.
For governmental funds (exclusive of the general fund) this is the lowest level of positive fund balance.
Governing body has appropriated fund balance.
Governing body has budgeted $1M
for a mental health hospital. County Mgr. may amend this up to $100,000.
Slide9
Fund Balance - Classifications
1 GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions
Classification
Definition
Examples
Unassigned
Unassigned fund balance
is the lowest classification for the general fund. This is fund balance that has not been reported in any other classification.
The general fund is the only fund that can report a positive unassigned fund balance.
A
capital project fund with a fund deficit.
Slide10
Negative or Residual Fund Balance Amounts
Restricted, committed or assigned should never be negative.
Nonspendable, restricted or committed fund balance categories can reduce assigned/unassigned or create a negative unassigned fund balance classification.
If nonspendable, restricted and committed amounts are more than total fund balance, then assigned is zero and unassigned shows the necessary negative amount.
Slide11
Fund Balance Classifications – General Fund - Examples
Nonspendable
Example #1
Restricted
Committed
Assigned
Unassigned
($20,000)
Total Fund Balance
($20,000)
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet.
What would the new FB section look like?
Slide12
Fund Balance Classifications – General Fund - Answers
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet. What would the new FB section look like?
Nonspendable
Example #1
Restricted
$11,000
Committed
Assigned
Unassigned
($31,000)
Total Fund Balance
($20,000)
Slide13
Nonspendable
Example #2Restricted $20,000Committed
Assigned
5,000
Unassigned
10,000
Total Fund Balance
$35,000
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet.
What would the new FB section look like?
Fund Balance Classifications – General Fund - Examples
Slide14
Fund Balance Classifications – General Fund - Answers
Nonspendable
Example #2
Restricted
$31,000
Committed
Assigned
$4,000
Unassigned
$0
Total Fund Balance
$35,000
14
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet.
What would the new FB section look like?
Slide15
Fund Balance Classifications – General Fund - Examples
Nonspendable
Example #3
Restricted
Committed
$5,000
Assigned
Unassigned
$15,000
Total Fund Balance
$20,000
15
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet.
What would the new FB section look like?
Slide16
Fund Balance Classifications – General Fund - Answers
Nonspendable
Example #3
Restricted
$11,000
Committed
$5,000
Assigned
Unassigned
$4,000
Total Fund Balance
$20,000
16
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet.
What would the new FB section look like?
Slide17
Fund Balance Classifications – General Fund - Questions
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #5
Restricted
Committed
Assigned
Unassigned
($20,000)
Total Fund Balance
($20,000)
Slide18
Fund Balance Classifications – General Fund - Answers
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #5
Restricted
Committed
Assigned
Unassigned
($20,000)
Total Fund Balance
($20,000)
Slide19
Fund Balance Classifications – General Fund - Questions
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #6
Restricted
$20,000
Committed
Assigned
$5,000
Unassigned
$10,000
Total Fund Balance
$35,000
Slide20
Fund Balance Classifications – General Fund - Answers
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #6
Restricted
$20,000
Committed
Assigned
$15,000
Unassigned
$0
Total Fund Balance
$35,000
Slide21
Fund Balance Classifications – General Fund - Questions
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #7
Restricted
Committed
$5,000
Assigned
Unassigned
$15,000
Total Fund Balance
$20,000
Slide22
Fund Balance Classifications – General Fund - Answers
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #7
Restricted
Committed
$5,000
Assigned
$11,000
Unassigned
$4,000
Total Fund Balance
$20,000
Slide23
Fund Balance Classifications
Bond Proceeds are normally restricted based on bond documentsInvestment earnings and premiums are also restricted to same bond purposes.
If you have bond proceeds on hand, remember to reduce Fund Balance restriction by any liabilities to be paid using bond proceeds.
Grants normally restricted by grant regulations
Investment earnings on grant funds are also restricted.
Matching funds are also restricted.
Slide24
GASB 54 – Fund Balance Classification
Change in FocusNo longer communicates what fund balance will be used for or appropriated.
Now focuses on what constraints are placed on how resources within fund balance can be used.
What statement will you use to communicate to management/governing body how much of the General Fund balance:
is obligated,
appropriated in next year’s budget,
is designated by board for working capital or compliance with the Board’s fund policy,
is available for the Board to appropriate?
Slide25
Special Revenue Funds – New Definition
Special Revenue Funds
are proceeds of
specific revenue sources
that are
restricted or committed
Revenue source can’t restrict use to debt service or capital projects.
The specific revenue “foundation” source that meets the test of restricted or committed cannot be a transfer from another fund.
Slide26
Definitions
Restricted
“Externally imposed by creditors (such as debt covenants), grantors, contributors, laws or regulations of other governments; or
Committed
Highest level of authority – “cannot be used for any other purpose unless the government removes or changes the specified use by taking the same type of action”
Slide27
What Fund Types Will Not Change
Emergency Telephone System Fund will still be a special revenue fundThe Restricting Revenue source (legislation) allows for uses other than capital projects or debt service.
Most Likely Prepared Food and Occupancy Funds will remain special revenue funds
The Restricting Revenue source (legislation) allows for uses other than capital projects or debt service.
Boards of Education / Charter Schools
Scholarship Funds will continue as private purpose trust funds
Individual schools fund (club and activity funds) will still qualify as special revenue funds.
Slide28
Capital Reserve Fund
Capital Reserve funds restricted for capital or debt. (G.S. 159-18)
Conclusion – Capital Reserve funds normally can’t be a special revenue fund.
Capital Reserve will most likely be either in the general fund or capital project funds.
Slide29
Capital Reserve Fund – General Fund
If capital reserve funds are to be used for debt it should consolidated in the general fund for statement presentation.
There is only one General Fund so any funds that are moved for reporting purposes into the general fund
are consolidated not combined
.
Your report should not refer to subfunds of the general fund
Capital Reserve Funds must still be budgeted and operated on your accounting system as separate funds.
Cash in the Capital Reserve Funds presented in either the General Fund or possibly a Capital Project Fund in accordance with GASB 34
¶
99 should be reported as restricted cash.
“Restricted assets should be reported when restrictions (as defined in paragraph 34) on asset use change the nature or normal understanding of the availability of the asset.”
Slide30
Proper Presentation – Impacts Perception of Fiscal Health
Pre - Consolidation
A
B
General
General
General
Cash and investments
$ 158,000
$ 458,000
$ 158,000
Taxes Receivable
7,700
7,700
7,700
Accounts Receivable
1,950
1,950
1,950
Inventories
14,200
14,200
14,200
Restricted Cash
300,000
Total assets
$ 181,850
$ 481,850
$ 481,850
Liabilities:
Accounts Payable
$ 43,600
$ 43,600
$ 43,600
Fund balances:
Nonspendable:
Inventories
14,200
14,200
14,200
Restricted:
Stabilization by State Statute
35,430
35,430
35,430
Committed - Tax revaluation
300,000
Assigned:
Subsequent years expenditures
5,000
5,000
5,000
Unassigned:
40,020
340,020
40,020
Total fund balances
138,250
438,250
438,250
Total liabilities and fund balances
$ 181,850
$ 481,850
$ 481,850
Consolidate - Tax Revaluation Fund with $300,000 of cash and Fund Balance.
Is Presentation A or B correct?
B is correct Answer
Proper implementation of GASB 54 can have a significant effect on interpretation of a unit’s fiscal health and future management actions.
Slide31
Capital Reserve Fund – Debt Service
Funds accumulated in a debt service fund could have tax consequences as it relates to arbitrage/yield restriction calculations.
Units with existing debt service funds might consider consolidation of a capital reserve fund; however, they need to make sure they have researched any possible tax consequences.
GASB 54 should not cause a unit to set up a Debt Service Fund.
Slide32
Capital Reserve Fund – Capital Project Fund
If unit is to use capital reserve fund for a capital project they might want to reclassify their capital reserve fund to a capital project fund.
Do you consolidate the capital reserve fund to an already existing capital project fund or do you reclassify capital reserve as a new capital project fund and combine it with any other existing capital project funds?
Slide33
Capital Reserve Fund (CRF) – Capital Project Fund
If unit has no other capital projects funds that relate to the purpose the CRF is to be used for, the unit might reclassify a CRF as a capital project fund for reporting purposes.
A CRF can be consolidated into an existing capital projects fund if they have similar purposes. Example: A unit might have one capital projects fund for all its school projects & the CRF is restricted to school capital projects.
Slide34
How Are Budget/Actual Statements Presented for Consolidated Funds?
Example Capital Reserve Fund consolidated into a General FundBudget/Actual for the General Fund
The general fund in our example would present the budget and actual for the legally adopted general fund in the budget/actual exhibit.
The current year actual amounts of the consolidated fund would show reconciling items back to the Revenue Expenditure and Changes in Fund Balance Statement.
Budget/Actual for the Capital Reserve Fund
The budget for the capital reserve fund must be presented in the financial statements.
The budget/actual would be presented after the notes & RSI following the detail general fund budget/actual statement or following the combining statements (supplemental section).
Slide35
Tax Revaluation Funds
G.S. 153A-150 requires Counties to set aside funds for tax revaluations.Currently classified as special revenue funds
Can be annually budgeted or multi-year budget
G.S. 153A-150 does not discuss the revenue source; therefore, the fund does not meet the criteria of restricted for classifying the fund as a special revenue fund.
If unit had governing board identify a specific revenue source for tax revaluation fund it can remain a special revenue fund – otherwise it should be consolidated into the general fund.
If tax revaluation is classified as a special revenue fund then the fund note will disclose the qualifying revenue source.
Slide36
Grants, Economic Development and Other Current Special Revenue Funds
All Special Revenue Funds will need to be examined to determine if they will continue as Special Revenue under GASB 54 guidance.
Meet the criteria of having a restricted or committed revenue source?
The restriction must come from the source of funds; or
The source of funds must be committed by the highest level of authority.
Slide37
Grants, Economic Development and Other Current Special Revenue Funds
Does the source of funds allow funds to be used for purposes other than capital projects and debt service?
If revenue source requires use of funds for either capital or debt then most likely not a special revenue fund
If unit has an economic development fund and cash is being transferred to another unit who must use the funds for capital or debt, then the unit providing the funds will still be able to classify the funds as special revenue.
Slide38
Grants, Economic Development and Other Current Special Revenue Funds
Note: Those specific restricted or committed revenues that qualified the fund as special revenue can’t be shown as a transfer-in.Fund may still have additional revenues such as investment earnings and transfers.
The foundation revenue must meet the committed restricted criteria.
Example: The unit met the revenue source criteria by committing a portion of its property tax revenue to tax revaluation.
The property tax revenue in the tax revaluation fund can’t be reported as a transfer-in.
It must be recorded as a property tax revenue in the special revenue fund.
Slide39
Implementation Issues
What if your grants fund revenue sources change from year to year?
You take the long-term view
Slide40
Implementation Issues
Changes in fund balance in order to comply with this statement should be applied retroactively by restating fund balance for all prior periods presented.
Fund Balance information in the statistical schedules can be shown prospectively or retroactively.
Slide41
Changes to Your Statements
Management Discussion and AnalysisStatutory calculation of Fund Balance Available should appear in the Financial Analysis section – LGC
New fund balance classifications – MD&A, Exhibits, Combining Statements, Statistical Tables
Possibly new fund structure for reporting purposes
Example: Tax revaluation fund might be consolidated in the general fund
Beginning fund balance restatements
Reporting Stabilization by State Statute as Restricted Net Asset on GW statements
Slide42
Changes to Your Statements
Note DisclosuresSummary of Significant Accounting Policies – fund balance note – Normally Note 1
Fund Descriptions – add descriptions for any consolidations, fund splits, changes in fund types, etc.
New fund balance components
Committed disclose government’s highest level of decision-making authority – majority approval of governing body
Assigned fund balance disclose what body or official is authorized to assign amounts and disclose policy that authorizes such action
Policies on order of spending fund balance amounts
Slide43
Changes to Your Statements
Note Disclosures – Note 1Minimum Fund Balance Polices formally adopted by the governing body
If unit has policy that meets the stabilization arrangements of GASB 54 as committed (very few)
Authority for establishing stabilization arrangement
Requirements for additions to the stabilization amount
Conditions under which amounts may be spent
Stabilization balance if not apparent on the face of the financial statements
Slide44
Changes to Your Statements
Note Disclosures – Detail fund balance note-placed before joint venture noteIf fund balance categories are displayed on the aggregate then detail disclosure is required in the notes
Encumbrances for the each major fund and nonmajor in aggregate – they can not be on the face of the statement
Chart with detail fund balance information for the General Fund:
Minimum - Inventories, Prepaids, New RSS, Powell Bill, Appropriated Fund Balance
Additional - no problem
Numbers used in this disclosure are taken from the Basic Financial Statements – Governmental Balance Sheet – General Fund
Slide45
Changes to Your Statements
Possible Changes to the Combining StatementsPossible changes to individual budget/actual schedules
Statistical Tables – Retroactively or prospectively
We anticipate that most will show retroactively
Prospectively – unit must show two schedules for governmental fund balance statistical tables – one pre-54 and post-54
Slide46
Stabilization vs. Fund Balance Policies
Amounts that meet the stabilization requirements of GASB 54 can be classified as committed, otherwise they will be classified as unassigned. (paragraph 21)Unit Fund Balance Policies do not meet the definition of restricted since NC does not have a state statute that address unit fund balance policies – restricted must be external to the unit
Can a unit create a policy that meets stabilization and commitment requirements of GASB 54?
Yes - however it would probably be very hard to have a board formally adopt such as policy:
Formal Action
Identify specific circumstances that must exist before funds can be used – circumstances that would not be expected to occur routinely
“in an emergency” or “anticipated revenue shortfall” do not meet the test
Normally there would be requirements for source of stabilization funding and when and how additions to stabilization amount s need to be made or replenished
Revenue Stabilization - Working Capital – Contingencies – Emergency Fund – Etc.
Slide47
Illustrative Statements
Determine if previous classified special revenue funds will remain special revenue under GASB 54 or whether they will be reclassified or consolidated into another fund.
Prepare budget actual statements for all funds with legally adopted budgets
Determine the source of funds in fund balance from the operating statement and spending policy – this will include the current change in fund balance as well as the beginning fund balance.
Classify the fund balance based on step # 3 above – including calculation of Stabilization by State Statute
Slide48
Grants Fund
REVENUES
Restricted intergovernmental
1,000,000
Investment earnings
7,000
Total revenues
1,007,000
EXPENDITURES
Current:
Human services
1,500,000
Capital outlay
25,000
Total expenditures
1,525,000
Excess (deficiency) of revenues over expenditures
(518,000)
OTHER FINANCING SOURCES (USES)
Transfers from other funds-Match
1,000,000
Transfers from other funds - unassigned revenues
250,000
Net change in fund balance
732,000
Fund balances, beginning
-
Fund balances, ending
$ 732,000
Spending Policy – county funds spent
last
How would the $732,000 of fund balance be classified under 54?
Spending Policy – county funds spent
first
How would the $732,000 of fund balance be classified under 54?
Examples of Spending Policy Affect on Fund Balance
Slide49
Grants Fund
REVENUES
Restricted intergovernmental
1,000,000
Investment earnings
7,000
Total revenues
1,007,000
EXPENDITURES
Current:
Human services
1,500,000
Capital outlay
25,000
Total expenditures
1,525,000
Excess (deficiency) of revenues over expenditures
(518,000)
OTHER FINANCING SOURCES (USES)
Transfers from other funds-Match
1,000,000
Transfers from other funds - unassigned revenues
250,000
Net change in fund balance
732,000
Fund balances, beginning
-
Fund balances, ending
$ 732,000
Spending Policy – county funds spent
last
Q.
How would the $732,000 of fund balance be classified under 54?
A.
$250,000 – assigned and $482,000
as restricted
Spending Policy – county funds spent
first
Q.
How would the $732,000 of fund balance be classified under 54?
A.
$732,000 would be classified as restricted.
Examples of Spending Policy Affect on Fund Balance
Slide50
Questions and Answers
All Illustrative statements will be updated for GASB 54
Download this presentation
DownloadNote - The PPT/PDF document "GASB 54 Implementation Fund Balance Repo..." is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Presentations text content in GASB 54 Implementation Fund Balance Reporting and Governmental Fund Type Definitions
GASB 54 Implementation
Fund Balance Reporting and Governmental Fund Type Definitions
June 14
,
2011
Slide2Agenda
Review, Methodology & Examples of Fund Balance Classifications
Fund Balance Policies vs. Stabilization Policies
Restricted – Stabilization by State Statute
Review & Examples of Fund Type Classifications
Examples of Illustrative Statements
Questions
Slide3Questions & Guidance Units will Need
Classification of FundsHow do I budget my Funds?
Do I have to change how the funds are in my financial system?
Fund type classifications can depend on a unit’s policies, so you could have clients with different results for similar funds.
Classification of Fund Balance
Spending policy will determine how fund balance will be classified.
Different spending policies could result in different fund balance classifications
Does my fund balance policy qualify under GASB 54 as committed?
GASB 54 has potential to affect: MD&A, government-wide, fund statements, notes, supplemental statements and statistical schedules.
Slide4Impact of GASB 54
GASB 54 is Reporting
Guidance
General Statutes have not changed – Capital Reserve Funds can still be budgeted.
You may or may not want to change how you budget.
Under earlier GASB a unit could not accumulate funds in a CIP
Under earlier GASB Capital Reserve was a Special Revenue Fund
The Statement redefines some Fund Types
Changes the focus of Fund Balance
Changes how we classify fund balance on Balance Sheet.
Does not change total fund balance amount.
Slide5Fund Balance - Classifications
1 GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions
Classification
Definition
Examples
Nonspendable
“amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.”
1
Inventories,
long-term receivables, Cemetery Permanent Funds,
long-term interfund balances (due to/from)
Restricted
“Fund balance should be reported as restricted when constraints placed on the use of resources
are either:
Externally imposed by creditors-debt covenants, grantors, contributors, laws or regulations of other governments; or
Imposed by law through constitutional provisions or enabling legislation”
1
Restricted - Streets
Restricted –
School Capital
Stabilization
by
State Statute
Slide6Restricted – Stabilization by State Statute
GASB has redefined Governmental Balance Sheet ReportingUnder GASB 54 “reserve by state statute” now qualifies as restrictedThis impacts Government-wide Net Asset Statement – as “restricted-stabilization by state statute” will be reflected on this statement.
Note: Restricted by stabilization is not calculated on government-wide statement, but calculated from numbers on the balance sheet
Slide7Fund Balance - Classifications
1 GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions
Classification
Definition
Examples
Committed
“Used for specific purpose pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority”
1
Self-imposed limitations set in place prior to year-end, but can be calculated after year end.
Limitation imposed at highest level and requires same action to remove or modify
Ordinances that lapse at year-end do not meet the committed test
Board passed a
resolution
to use $1,000,000 of fund balance towards
the
building
of a cultural arts center.
Slide8Fund Balance - Classifications
1 GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions
Classification
Definition
Examples
Assigned
“Amounts that are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed”
1
Assignments can occur anytime before issuance of financial statements.
Assignment ability can be delegated by the board.
For governmental funds (exclusive of the general fund) this is the lowest level of positive fund balance.
Governing body has appropriated fund balance.
Governing body has budgeted $1M
for a mental health hospital. County Mgr. may amend this up to $100,000.
Slide9Fund Balance - Classifications
1 GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions
Classification
Definition
Examples
Unassigned
Unassigned fund balance
is the lowest classification for the general fund. This is fund balance that has not been reported in any other classification.
The general fund is the only fund that can report a positive unassigned fund balance.
A
capital project fund with a fund deficit.
Slide10Negative or Residual Fund Balance Amounts
Restricted, committed or assigned should never be negative.
Nonspendable, restricted or committed fund balance categories can reduce assigned/unassigned or create a negative unassigned fund balance classification.
If nonspendable, restricted and committed amounts are more than total fund balance, then assigned is zero and unassigned shows the necessary negative amount.
Slide11Fund Balance Classifications – General Fund - Examples
Nonspendable
Example #1
Restricted
Committed
Assigned
Unassigned
($20,000)
Total Fund Balance
($20,000)
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet.
What would the new FB section look like?
Slide12Fund Balance Classifications – General Fund - Answers
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet. What would the new FB section look like?
Nonspendable
Example #1
Restricted
$11,000
Committed
Assigned
Unassigned
($31,000)
Total Fund Balance
($20,000)
Slide13Nonspendable
Example #2Restricted $20,000Committed
Assigned
5,000
Unassigned
10,000
Total Fund Balance
$35,000
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet.
What would the new FB section look like?
Fund Balance Classifications – General Fund - Examples
Slide14Fund Balance Classifications – General Fund - Answers
Nonspendable
Example #2
Restricted
$31,000
Committed
Assigned
$4,000
Unassigned
$0
Total Fund Balance
$35,000
14
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet.
What would the new FB section look like?
Slide15Fund Balance Classifications – General Fund - Examples
Nonspendable
Example #3
Restricted
Committed
$5,000
Assigned
Unassigned
$15,000
Total Fund Balance
$20,000
15
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet.
What would the new FB section look like?
Slide16Fund Balance Classifications – General Fund - Answers
Nonspendable
Example #3
Restricted
$11,000
Committed
$5,000
Assigned
Unassigned
$4,000
Total Fund Balance
$20,000
16
You have just realized that Powell Bill – Restricted for Streets in an amount of $11,000 has not been recorded yet.
What would the new FB section look like?
Slide17Fund Balance Classifications – General Fund - Questions
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #5
Restricted
Committed
Assigned
Unassigned
($20,000)
Total Fund Balance
($20,000)
Slide18Fund Balance Classifications – General Fund - Answers
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #5
Restricted
Committed
Assigned
Unassigned
($20,000)
Total Fund Balance
($20,000)
Slide19Fund Balance Classifications – General Fund - Questions
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #6
Restricted
$20,000
Committed
Assigned
$5,000
Unassigned
$10,000
Total Fund Balance
$35,000
Slide20Fund Balance Classifications – General Fund - Answers
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #6
Restricted
$20,000
Committed
Assigned
$15,000
Unassigned
$0
Total Fund Balance
$35,000
Slide21Fund Balance Classifications – General Fund - Questions
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #7
Restricted
Committed
$5,000
Assigned
Unassigned
$15,000
Total Fund Balance
$20,000
Slide22Fund Balance Classifications – General Fund - Answers
You have just realized that the Mgr. has authority to assign funds for a mental health center and after looking at the draft financial statements has decided to assign $11,000 for MH Center. What would the new FB section look like?
Nonspendable
Example #7
Restricted
Committed
$5,000
Assigned
$11,000
Unassigned
$4,000
Total Fund Balance
$20,000
Slide23Fund Balance Classifications
Bond Proceeds are normally restricted based on bond documentsInvestment earnings and premiums are also restricted to same bond purposes.
If you have bond proceeds on hand, remember to reduce Fund Balance restriction by any liabilities to be paid using bond proceeds.
Grants normally restricted by grant regulations
Investment earnings on grant funds are also restricted.
Matching funds are also restricted.
Slide24GASB 54 – Fund Balance Classification
Change in FocusNo longer communicates what fund balance will be used for or appropriated.
Now focuses on what constraints are placed on how resources within fund balance can be used.
What statement will you use to communicate to management/governing body how much of the General Fund balance:
is obligated,
appropriated in next year’s budget,
is designated by board for working capital or compliance with the Board’s fund policy,
is available for the Board to appropriate?
Slide25Special Revenue Funds – New Definition
Special Revenue Funds
are proceeds of
specific revenue sources
that are
restricted or committed
Revenue source can’t restrict use to debt service or capital projects.
The specific revenue “foundation” source that meets the test of restricted or committed cannot be a transfer from another fund.
Slide26Definitions
Restricted
“Externally imposed by creditors (such as debt covenants), grantors, contributors, laws or regulations of other governments; or
Committed
Highest level of authority – “cannot be used for any other purpose unless the government removes or changes the specified use by taking the same type of action”
Slide27What Fund Types Will Not Change
Emergency Telephone System Fund will still be a special revenue fundThe Restricting Revenue source (legislation) allows for uses other than capital projects or debt service.
Most Likely Prepared Food and Occupancy Funds will remain special revenue funds
The Restricting Revenue source (legislation) allows for uses other than capital projects or debt service.
Boards of Education / Charter Schools
Scholarship Funds will continue as private purpose trust funds
Individual schools fund (club and activity funds) will still qualify as special revenue funds.
Slide28Capital Reserve Fund
Capital Reserve funds restricted for capital or debt. (G.S. 159-18)
Conclusion – Capital Reserve funds normally can’t be a special revenue fund.
Capital Reserve will most likely be either in the general fund or capital project funds.
Slide29Capital Reserve Fund – General Fund
If capital reserve funds are to be used for debt it should consolidated in the general fund for statement presentation.
There is only one General Fund so any funds that are moved for reporting purposes into the general fund
are consolidated not combined
.
Your report should not refer to subfunds of the general fund
Capital Reserve Funds must still be budgeted and operated on your accounting system as separate funds.
Cash in the Capital Reserve Funds presented in either the General Fund or possibly a Capital Project Fund in accordance with GASB 34
¶
99 should be reported as restricted cash.
“Restricted assets should be reported when restrictions (as defined in paragraph 34) on asset use change the nature or normal understanding of the availability of the asset.”
Slide30Proper Presentation – Impacts Perception of Fiscal Health
Pre - Consolidation
A
B
General
General
General
Cash and investments
$ 158,000
$ 458,000
$ 158,000
Taxes Receivable
7,700
7,700
7,700
Accounts Receivable
1,950
1,950
1,950
Inventories
14,200
14,200
14,200
Restricted Cash
300,000
Total assets
$ 181,850
$ 481,850
$ 481,850
Liabilities:
Accounts Payable
$ 43,600
$ 43,600
$ 43,600
Fund balances:
Nonspendable:
Inventories
14,200
14,200
14,200
Restricted:
Stabilization by State Statute
35,430
35,430
35,430
Committed - Tax revaluation
300,000
Assigned:
Subsequent years expenditures
5,000
5,000
5,000
Unassigned:
40,020
340,020
40,020
Total fund balances
138,250
438,250
438,250
Total liabilities and fund balances
$ 181,850
$ 481,850
$ 481,850
Consolidate - Tax Revaluation Fund with $300,000 of cash and Fund Balance.
Is Presentation A or B correct?
B is correct Answer
Proper implementation of GASB 54 can have a significant effect on interpretation of a unit’s fiscal health and future management actions.
Slide31Capital Reserve Fund – Debt Service
Funds accumulated in a debt service fund could have tax consequences as it relates to arbitrage/yield restriction calculations.
Units with existing debt service funds might consider consolidation of a capital reserve fund; however, they need to make sure they have researched any possible tax consequences.
GASB 54 should not cause a unit to set up a Debt Service Fund.
Slide32Capital Reserve Fund – Capital Project Fund
If unit is to use capital reserve fund for a capital project they might want to reclassify their capital reserve fund to a capital project fund.
Do you consolidate the capital reserve fund to an already existing capital project fund or do you reclassify capital reserve as a new capital project fund and combine it with any other existing capital project funds?
Slide33Capital Reserve Fund (CRF) – Capital Project Fund
If unit has no other capital projects funds that relate to the purpose the CRF is to be used for, the unit might reclassify a CRF as a capital project fund for reporting purposes.
A CRF can be consolidated into an existing capital projects fund if they have similar purposes. Example: A unit might have one capital projects fund for all its school projects & the CRF is restricted to school capital projects.
Slide34How Are Budget/Actual Statements Presented for Consolidated Funds?
Example Capital Reserve Fund consolidated into a General FundBudget/Actual for the General Fund
The general fund in our example would present the budget and actual for the legally adopted general fund in the budget/actual exhibit.
The current year actual amounts of the consolidated fund would show reconciling items back to the Revenue Expenditure and Changes in Fund Balance Statement.
Budget/Actual for the Capital Reserve Fund
The budget for the capital reserve fund must be presented in the financial statements.
The budget/actual would be presented after the notes & RSI following the detail general fund budget/actual statement or following the combining statements (supplemental section).
Slide35Tax Revaluation Funds
G.S. 153A-150 requires Counties to set aside funds for tax revaluations.Currently classified as special revenue funds
Can be annually budgeted or multi-year budget
G.S. 153A-150 does not discuss the revenue source; therefore, the fund does not meet the criteria of restricted for classifying the fund as a special revenue fund.
If unit had governing board identify a specific revenue source for tax revaluation fund it can remain a special revenue fund – otherwise it should be consolidated into the general fund.
If tax revaluation is classified as a special revenue fund then the fund note will disclose the qualifying revenue source.
Slide36Grants, Economic Development and Other Current Special Revenue Funds
All Special Revenue Funds will need to be examined to determine if they will continue as Special Revenue under GASB 54 guidance.
Meet the criteria of having a restricted or committed revenue source?
The restriction must come from the source of funds; or
The source of funds must be committed by the highest level of authority.
Slide37Grants, Economic Development and Other Current Special Revenue Funds
Does the source of funds allow funds to be used for purposes other than capital projects and debt service?
If revenue source requires use of funds for either capital or debt then most likely not a special revenue fund
If unit has an economic development fund and cash is being transferred to another unit who must use the funds for capital or debt, then the unit providing the funds will still be able to classify the funds as special revenue.
Slide38Grants, Economic Development and Other Current Special Revenue Funds
Note: Those specific restricted or committed revenues that qualified the fund as special revenue can’t be shown as a transfer-in.Fund may still have additional revenues such as investment earnings and transfers.
The foundation revenue must meet the committed restricted criteria.
Example: The unit met the revenue source criteria by committing a portion of its property tax revenue to tax revaluation.
The property tax revenue in the tax revaluation fund can’t be reported as a transfer-in.
It must be recorded as a property tax revenue in the special revenue fund.
Slide39Implementation Issues
What if your grants fund revenue sources change from year to year?
You take the long-term view
Slide40Implementation Issues
Changes in fund balance in order to comply with this statement should be applied retroactively by restating fund balance for all prior periods presented.
Fund Balance information in the statistical schedules can be shown prospectively or retroactively.
Slide41Changes to Your Statements
Management Discussion and AnalysisStatutory calculation of Fund Balance Available should appear in the Financial Analysis section – LGC
New fund balance classifications – MD&A, Exhibits, Combining Statements, Statistical Tables
Possibly new fund structure for reporting purposes
Example: Tax revaluation fund might be consolidated in the general fund
Beginning fund balance restatements
Reporting Stabilization by State Statute as Restricted Net Asset on GW statements
Slide42Changes to Your Statements
Note DisclosuresSummary of Significant Accounting Policies – fund balance note – Normally Note 1
Fund Descriptions – add descriptions for any consolidations, fund splits, changes in fund types, etc.
New fund balance components
Committed disclose government’s highest level of decision-making authority – majority approval of governing body
Assigned fund balance disclose what body or official is authorized to assign amounts and disclose policy that authorizes such action
Policies on order of spending fund balance amounts
Slide43Changes to Your Statements
Note Disclosures – Note 1Minimum Fund Balance Polices formally adopted by the governing body
If unit has policy that meets the stabilization arrangements of GASB 54 as committed (very few)
Authority for establishing stabilization arrangement
Requirements for additions to the stabilization amount
Conditions under which amounts may be spent
Stabilization balance if not apparent on the face of the financial statements
Slide44Changes to Your Statements
Note Disclosures – Detail fund balance note-placed before joint venture noteIf fund balance categories are displayed on the aggregate then detail disclosure is required in the notes
Encumbrances for the each major fund and nonmajor in aggregate – they can not be on the face of the statement
Chart with detail fund balance information for the General Fund:
Minimum - Inventories, Prepaids, New RSS, Powell Bill, Appropriated Fund Balance
Additional - no problem
Numbers used in this disclosure are taken from the Basic Financial Statements – Governmental Balance Sheet – General Fund
Slide45Changes to Your Statements
Possible Changes to the Combining StatementsPossible changes to individual budget/actual schedules
Statistical Tables – Retroactively or prospectively
We anticipate that most will show retroactively
Prospectively – unit must show two schedules for governmental fund balance statistical tables – one pre-54 and post-54
Slide46Stabilization vs. Fund Balance Policies
Amounts that meet the stabilization requirements of GASB 54 can be classified as committed, otherwise they will be classified as unassigned. (paragraph 21)Unit Fund Balance Policies do not meet the definition of restricted since NC does not have a state statute that address unit fund balance policies – restricted must be external to the unit
Can a unit create a policy that meets stabilization and commitment requirements of GASB 54?
Yes - however it would probably be very hard to have a board formally adopt such as policy:
Formal Action
Identify specific circumstances that must exist before funds can be used – circumstances that would not be expected to occur routinely
“in an emergency” or “anticipated revenue shortfall” do not meet the test
Normally there would be requirements for source of stabilization funding and when and how additions to stabilization amount s need to be made or replenished
Revenue Stabilization - Working Capital – Contingencies – Emergency Fund – Etc.
Slide47Illustrative Statements
Determine if previous classified special revenue funds will remain special revenue under GASB 54 or whether they will be reclassified or consolidated into another fund.
Prepare budget actual statements for all funds with legally adopted budgets
Determine the source of funds in fund balance from the operating statement and spending policy – this will include the current change in fund balance as well as the beginning fund balance.
Classify the fund balance based on step # 3 above – including calculation of Stabilization by State Statute
Slide48Grants Fund
REVENUES
Restricted intergovernmental
1,000,000
Investment earnings
7,000
Total revenues
1,007,000
EXPENDITURES
Current:
Human services
1,500,000
Capital outlay
25,000
Total expenditures
1,525,000
Excess (deficiency) of revenues over expenditures
(518,000)
OTHER FINANCING SOURCES (USES)
Transfers from other funds-Match
1,000,000
Transfers from other funds - unassigned revenues
250,000
Net change in fund balance
732,000
Fund balances, beginning
-
Fund balances, ending
$ 732,000
Spending Policy – county funds spent
last
How would the $732,000 of fund balance be classified under 54?
Spending Policy – county funds spent
first
How would the $732,000 of fund balance be classified under 54?
Examples of Spending Policy Affect on Fund Balance
Slide49Grants Fund
REVENUES
Restricted intergovernmental
1,000,000
Investment earnings
7,000
Total revenues
1,007,000
EXPENDITURES
Current:
Human services
1,500,000
Capital outlay
25,000
Total expenditures
1,525,000
Excess (deficiency) of revenues over expenditures
(518,000)
OTHER FINANCING SOURCES (USES)
Transfers from other funds-Match
1,000,000
Transfers from other funds - unassigned revenues
250,000
Net change in fund balance
732,000
Fund balances, beginning
-
Fund balances, ending
$ 732,000
Spending Policy – county funds spent
last
Q.
How would the $732,000 of fund balance be classified under 54?
A.
$250,000 – assigned and $482,000
as restricted
Spending Policy – county funds spent
first
Q.
How would the $732,000 of fund balance be classified under 54?
A.
$732,000 would be classified as restricted.
Examples of Spending Policy Affect on Fund Balance
Slide50Questions and Answers
All Illustrative statements will be updated for GASB 54
Questions?
Slide5151