801.4 - General Fund Reserves and Fund Balance Reporting

 

 

 

Line Item Budget: A contingency reserve will be established at 0.2% of budgeted general fund expenses at the beginning of each fiscal year to provide for unanticipated expenditures of a non-recurring nature, to meet unexpected minor increases in service delivery costs, and to pay for needs caused by unforeseen emergencies.

Financial Metrics: The district is committed to the following financial metrics:

  1. Solvency Ratio*: Maintaining a combined unassigned and assigned general fund balance that is at least 7% of annual revenue (actual or anticipated). The current year’s cash reserve levy and before staffing and other spending decisions are finalized.

The district will take reasonable steps to achieve a total general fund balance at least equal to its unspent authority. This enables the district to cash flow its legal spending limit.

  1. Unspent Authority: Maintaining an unspent authority balance of not less than 7% of that year’s annual expenditures. The current year’s projected balance will be discussed with the board before staffing and other spending decisions are finalized for the succeeding year.

The district will measure attainment of these goals as of June 30th, but only after completion of the certified annual report.

Fund Balance Reporting: Financial reporting for the balances in the district’s governmental funds is based on Governmental Accounting Standards Board (GASB) Statement 54, Fund Balance Reporting, and Governmental Fund Type Definitions. Fund balance refers to the difference between assets and liabilities in the governmental funds balance sheets. GASB Statement 54 establishes a hierarchy that is based on, “the extent to which the government is bound to honor constraints on the specific purpose for which the amounts in those funds can be spent.”

The governmental funds can have up to five fund balance classifications. The classifications are defined below from most to least restrictive.

  1. Non-spendable Fund Balance: Includes amounts that cannot be spent because they are either: (a) Not in spendable form or (b) legally or contractually required to be maintained intact. This includes items not expected to be converted to cash, including inventories and prepaid expenses. It may also include other property acquired for resale and the principal of a permanent fund.
  2. Restricted Fund Balance: Should be reported when constraints placed on the use of resources are either: (a) Externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation. This includes categorical balances.
  3. Committed Fund Balance: Reflects specific purpose pursuant to constraints imposed by formal action of the board. Such constraints can only be removed or changed by board action.
  4. Assigned Fund Balance: Reflects amounts that are constrained by the government’s intent to be used for specific purposes but meet neither the restricted nor committed forms of constraint. Unless the amount is negative, the assigned fund balance is the residual classification for the governmental funds other than the general fund. If the amount is negative then the residual amount is shown as unassigned.
  5. Unassigned Fund Balance: The residual classification for the general fund only. As noted above, if a negative residual amount exists in other governmental funds then the amount is reported as unassigned.

The board authorizes the chief financial officer to assign general fund balance amounts for specific purposed in compliance with GASB 54.

*Solvency Ratio Calculation:  Unassigned + Assigned Fund Balances
                                               General Fund Revenues – AEA Flow Through


Adopted: 12/13
Reviewed: 12/18
Revised: 5/15