Policies and Procedures Handbook
Created by the Resource Center Contact the Webmaster Last Updated: 09/14/2011	Garrett County Board of Education 40 South Second Street Oakland, MD 21550 (301)334-8900

FINANCIAL REPORTING FUND BALANCE CLASSIFICATIONS

Board Policy 

Applicability and Definitions

    The Governmental Accounting Standards Board (GASB) has issued Statement No.54, Fund Balance Reporting and Governmental Type Definitions (GASB 54).  The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2010.  This Statement defines the different types of fund balances that a governmental entity must use for financial reporting purposes.  GASB 54 requires that fund balance amounts be reported within one of the fund balance categories listed and defined below.  The objective of this Statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied.

Nonspendable Fund Balance – Amounts that cannot be spent due to form: including inventories and prepaid amounts.  This category also includes long-term loans and notes receivable as well as any amounts that must be maintained intact legally or contractually (corpus or principal of a permanent fund).

Restricted Fund Balance – Amounts constrained for a specific purpose by external parties, constitutional provision or enabling legislation. 

Committed Fund Balance – Amounts constrained for a specific purpose by a governing body using its highest level or decision making authority.  These constraints can only be removed or changed by the same governing body using its decision making authority to reverse a decision.  Action to constrain resources should occur prior to end of fiscal year, though the exact amount may be determined subsequently.

Assigned Fund Balance – Amounts intended to be used for a specific purpose.  This intent is expressed by a governing body or another body such as a budget/finance committee or other approved individual designee of the governing body. Residual amounts for all governmental funds except the general fund not otherwise classified as nonspendable, restricted, or committed.  Amount reported as assigned should not result in a deficit in unassigned fund balance.

Unassigned Fund Balance – Amounts available for any purpose that are not committed as nonspendable, restricted, committed, or assigned.  This is the only fund which could report a positive amount in the unassigned fund balance.  For all other governmental funds, amounts expended in excess of resources that are nonspendable, restricted, committed or assigned are categorized as unassigned funds with negative balances.

The Board of Education is the governing body with the highest level of decision-making authority relative to Board of Education fund balances.  The Board through formal action is the only body that can commit fund balance.  This action will be in the form of a Board Resolution approved and documented within the minutes of the Board meeting. Once established, only the Board may modify or rescind a fund balance commitment.   Modification or rescission can only occur with an additional approved Board Resolution to act upon the modification or rescission.   

The elected Board delegates to the Superintendent or Interim Superintendent, Assistant Superintendent and Director of Finance, the authority to assign fund balance.   

It is the Board’s policy to first use restricted fund balances for expenses incurred for which both restricted and unrestricted fund balances are available unless a local match is required.  Where a local match is required, the expense is allocated to restricted and unrestricted fund balances based on the required match percentages.  In the event that expenditures are made from multiple unrestricted fund balance classifications, the order of fund spending shall be as follows:  Committed , Assigned, and Unassigned.   

The Board of Education’s fund balance carryover is approved by County Government policy which limits the fund balance that can be carried over from year to year without the express approval of Garrett County’s Board of County Commissioners.  Funds approved by the county for carryover will be classified within the financial statements as restricted.

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