6200 - FUND BALANCE POLICY
The District's fund balance policy has been adopted in order to address the implications of Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Definitions. This policy is created in consideration of unanticipated events that could adversely affect the financial condition of the District. This policy will ensure that the District maintains adequate fund balances and reserves in order to:
provide sufficient cash flow for daily financial needs;
secure and maintain investment grade bond ratings;
offset significant economic downturns or revenue shortfalls;
provide funds for unforeseen expenditures related to emergencies.
This policy and the procedures promulgated under it supersede all previous regulations regarding the District's fund balance and reserve policies.
Fund Balance Reporting in Governmental Funds
Fund balance will be reported in governmental funds under the following categories using the definitions provided by GASB Statement No. 54:
Non-spendable fund balance includes amounts that cannot be spent because they are either 1) not in spendable form or 2) legally or contractually required to be maintained intact.
Non-spendable amounts will be determined before all other classifications and consist of the following items (as applicable in any given fiscal year):
The District will maintain a fund balance equal to the balance of any long-term outstanding balances due from others, including other funds of the government.
The District will maintain a fund balance equal to the value of inventory balances and prepaid items.
The District will maintain a fund balance equal to the principal of any permanent funds that are legally or contractually required to be maintained intact.
Restricted fund balance includes amounts that can be spent only for the specific purposes stipulated by the constitution, external resource providers, or through enabling legislation.
Committed fund balance includes amounts that can be used only for specific purposes determined by a formal action of the Board of Education.
Assigned fund balance includes amounts intended to be used by the government for specific purposes but that do not meet the criteria to be classified as restricted or committed. In governmental funds other than the general fund, assigned fund balance represents the remaining amount that is not restricted or committed.
The Board delegates to the Superintendent or his/her designee the authority to assign amounts to be used for specific purposes. Such assignments cannot exceed the available (spendable, unrestricted, uncommitted) fund balance in any particular fund.
Unassigned fund balance includes the residual classification for the government's general fund and includes all spendable amounts not contained in the other classifications.
Operational Guidelines
The following guidelines address the classification and use of fund balance in governmental funds:
Classifying fund balance amounts - Fund balance classifications depict the nature of the net resources that are reported in a governmental fund. An individual governmental fund may include nonspendable resources and amounts that are restricted, committed, or assigned, or any combination of those classifications. The general fund may also include an unassigned amount.
Encumbrance reporting - Encumbering amounts for specific purposes for which resources have already been restricted, committed, or assigned should not result in separate display of encumbered amounts. Encumbered amounts for specific purposes for which amounts have not been previously restricted, committed, or assigned, will be classified as committed or assigned, as appropriate, based on the definitions and criteria set forth in GASB Statement No. 54.
Prioritization of fund balance use - When an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned, and unassigned) amounts are available, it shall be the policy of the District to consider restricted amount to have been reduced first. When an expenditure is incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used, it shall be the policy of the District that committed amounts would be reduced first, followed by assigned amounts and then unassigned amounts.
Minimum unassigned fund balance - The District's fund balance shall not fall below fifteen percent (15%) of the preceding year's expenditures. This minimum fund balance is to protect against cash flow shortfalls related to the timing of the projected revenue receipts and to maintain a budget stabilization commitment.
Implementation and Review
Upon adoption of the policy, the Board authorizes the Director of Finance & Business Services to establish any standards and procedures which may be necessary for its implementation. The policy will be reviewed at least annually and any recommendations for changes will be submitted to the Board.