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Policy DICA

DICA GASB54 - Fund Balance Policy
NEPN/NSBA Code: DICA 

GASB54 – FUND BALANCE POLICY 

Purpose. The following policy has been adopted by the Board of Education in order to address the implications of Governmental Accounting Standards Boards (“GASB”) Statement No. 54, Fund Balance Reporting and Governmental Fund Definitions. The policy is created in consideration of unanticipated events that could adversely affect the financial condition of the District and jeopardize the continuation of necessary public services. This policy will ensure that the District maintains adequate fund balances and reserves in order to:

A. Provide sufficient cash flow for daily financial needs,
B. Secure and maintain investment grade bond ratings,
C. Offset significant economic downturns or revenue shortfalls, and
D. Provide funds for unforeseen expenditures related to emergencies.

Fund type definitions. The following definitions will be used in reporting activity in governmental funds across the District. The District may or may not report all fund types in any given reporting period, based on actual circumstances and activity.

The general fund is used to account for all financial resources not accounted for and reported in another fund.

Special revenue funds are used to account and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specific purposes other than debt service or capital projects. 

Debt service funds are used to account for all financial resources restricted, committed or assigned to expenditure for principal and interest. 

Capital projects funds are used to account for all financial resources restricted, committed, or assigned to expenditure for the acquisition or construction of capital assets. 

Permanent Funds are used to account for resources restricted to the extent that only earnings, and not principal, may be used for purposes that support the District’s purposes. 

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:

Nonspendable fund balance

Definition – 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.

Classification – 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 District).

The District will maintain a fund balance equal to the value of inventory balances and prepaid items (to the extent that such balances are not offset with liabilities and actually result in fund balance). 

The District will maintain a fund balance equal to the corpus (principal) of any permanent funds that are legally or contractually required to be maintained intact. 

The District will maintain a fund balance equal to the balance of any land or other nonfictional assets held for sale. 

Restricted fund balance

Definition – 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

Definition – includes amounts that can be used only for the specific purposes determined by a formal action of the District’s highest level of decision-making authority (i.e., the voters of the District). 

Authority to Commit – Commitments will only be used for specific purposes pursuant to a formal action of the Board of Education. A majority vote is required to approve a commitment and a two-thirds majority vote is required to remove a commitment. 

Assigned fund balance

Definition – includes amounts intended to be used by the District for specific purposes but 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.

Authority to Assign – The SAD #4 Board of Directors delegates to the Superintendent or 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 

Definition – includes the residual classification for the District’s general fund and includes all spendable amounts not contained in the other classifications. In other funds, the unassigned classification should be used only to report a deficit balance from overspending for specific purposes for which amounts had been restricted, committed, or assigned. 

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 non-spendable 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. 

Implementation and review. Upon adoption of this policy the Board of Education authorizes the Superintendent to establish any standards and procedures which may be necessary for its implementation. The Superintendent shall review this policy periodically and make any recommendations for changes to the Board of Directors.

Adopted:    January 10, 2012


M.S.A.D. #4
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