3060 Ending Fund Balance
The Ending Fund Balance Policy for Union Public Schools is intended to provide guidelines during the preparation and execution of the annual budget and financial audit to ensure that sufficient reserves are maintained for unanticipated expenditures or revenue shortfall and to fund the cash flow needs the first six months of each fiscal year until both property tax and state aid payment are received. It also is intended to preserve flexibility throughout the district’s fiscal year to make adjustments in funding for programs approved in connection with the annual budget. The main objective of establishing and maintaining the policy is for the district to be in a strong fiscal position that will allow for better position to weather negative economic trends and to meet first semester cash flow needs for payroll and other operating expenses. The policy shall only apply to the district’s appropriated funds which include, but are not limited to, the following:
• General Fund
• Capital Projects Fund
• Debt Service Fund
• Building Fund
• Child Nutrition Fund
The GAAP basis fund balance refers to the difference between assets and liabilities in the governmental funds balance sheet. Fund balance consists of five categories, defined in Governmental Accounting Standards Board Statement No. 54, as follows:
• Nonspendable Fund Balance: The nonspendable fund balance classification 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 would include items not expected to be converted to cash including inventories and prepaid amounts. It may also include the long-term amount of loans and receivables, as well as property acquired for resale and the corpus (principal) of a permanent fund.
It will be the responsibility of the Director of Financial Reporting and/or Chief Financial Officer to identify and report all nonspendable funds appropriately in the district’s Government financial statements prepared on a GAAP basis.
• Restricted Fund Balance: The restricted fund balance classification 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.
It will be the responsibility of the Director of Financial Reporting and/or Chief Financial Officer to identify and report all restricted and otherwise designated funds appropriately in the district’s Government financial statement prepared on a GAAP basis.
• Committed Fund Balance: The committed fund balance classification under a GAAP basis reporting reflects specific purposes pursuant to constraints imposed by formal action of the district’s highest level of decision- making authority, the Board of Education. Also, such constraints can only be removed or changed by the same form of formal action.
• Assigned Fund Balance: The assigned fund balance classification under a GAAP basis of reporting reflects amounts that are constrained by the district’s intent to be used for specific purposes, but meet neither the restricted nor committed forms of constraint. Assigned funds cannot cause a deficit in unassigned fund balance.
For purposes of Assigned Fund Balance, the Government has given authority to the Superintendent or Chief Financial Officer to assign funds for specific purposes.
• Unassigned Fund Balance: The unassigned fund balance classification is the residual classification for the General Fund only. Unassigned fund balance essentially consists of excess funds that have not been classified in the four above fund balance categories.
When expenditures are incurred for purposes for which both restricted and unrestricted fund balance is available, restricted fund balance is considered to have been spent first. For purposes of sinking fund interest earnings transferred to general fund, and for purposes of bond fund interest earnings transferred to the building fund, all interest dollars transferred are deemed to be spent first.
When expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications can be used, amounts classified as committed should be reduced first, followed by amounts classified as assigned and then amounts classified as unassigned. For purposes of bond fund interest earnings transferred to the building fund, all interest dollars transferred are deemed to be spent first.
Ending Fund Balance under State Reporting Laws
The cash basis ending fund balance of the General Fund (non-GAAP basis) is limited by state laws and should avoid exceeding those pre-determined, legally set amounts more than two consecutive years to avoid exposing the district to state financial penalties which would reduce state funding.
Adopted 12/12/11
Revised 12/10/12
Revised 12/14/15