801.4 - General Fund Reserves and Fund Balance Reporting

The district shall prepare an annual three-year general fund budget forecast that includes estimates of unspent authorized budget (spending authority) as well as restricted, assigned and unassigned fund balances available at the end of each fiscal year. The estimates shall be prepared utilizing scenarios for likely State Supplementary Assistance (SSA) rates and enrollment projections. The projections shall include estimates of property tax rates and income surtax rates, if applicable.

The treasurer shall report monthly to the school board as to actual revenue and expenditures for the month and year-to-date, as compared to budgeted revenues and expenditures and compared to historical revenues and expenditures (both in dollar amounts and percentages) for each fund maintained by the district. The treasurer shall provide context with respect to current year variances between budgeted and historical revenues and expenditures.

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.

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.
  2. 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 due September 15th of each year.

The district shall solicit from the School Budget Review Committee (SBRC) additional modified supplemental amount (spending authority) where it may be available for items such as special education deficit, increasing enrollment, budget guarantee, open enrollment not on prior year count, Limited English Proficiency (LEP), and any other lawful purposes. The board shall be provided a resolution to approve the maximum request authorized. Any award of modified supplemental amount may be levied as a cash reserve levy, in full, in the next available budget year. For recurring program deficits that are predictable and estimable, the district shall levy in advance for the immediately succeeding year as part of the general cash reserve levy if the deficit causes the estimated assigned and unassigned to fall below the minimum required. Grants of spending authority not funded by the state or other sources may ultimately be levied against property taxes.

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 purposes in compliance with GASB Statement 54.

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

Adopted: 12/13
Reviewed: 12/18
Revised: 5/15; 1/22; 2/24
Legal Reference (Code of Iowa): §§ 257.31(4); 279.8; 291; 297.22-25; 298; 298A
IASB Reference: 701.03-05; 701.05-R(1)