Daniel Lunghofer, OSPI Neil Sullivan, Spokane Public Schools. Portions of this presentation adapted from GASB

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1 Daniel Lunghofer, OSPI Neil Sullivan, Spokane Public Schools Portions of this presentation adapted from GASB

2 What is GASB? GASB stands for the Governmental Accounting Standards Board. GASB s role is to establish and improve standards of reporting for U.S. state and local governments. It is recognized as the official source of Generally Accepted Accounting Principles for state and local governments. 2

Mismatch between what governments are reporting about fund balance and what

3 GASB found significant variations in how standards are applied, leading to significant divergence in practice. Widespread confusion about terminology. Mismatch between what governments are reporting about fund balance and what users of financial statements actually need. GASB issued Statement 54 in March

4 Consider a government that has: $100 earmarked for capital projects by the government itself. $100 in property tax revenue restricted to paying debt service. $100 of cash available for any purpose. 4

5 If the amounts constrained to specific purposes are reported in the General Fund, they are shown as reserved. Reserved for: GF ASB DSF CPF TVF Total Capital Projects $100 $100 Debt Service $100 $100 Unreserved $100 $100 But 5

6 If the amounts constrained to specific purposes are reported outside the General Fund, they are shown as unreserved. GF ASB DSF CPF TVF Total Reserved for: Capital Projects $100 $100 Debt Service $100 $100 Unreserved $100 $100 $100 $100 6

7 If the amounts constrained to specific purposes are reported outside the General Fund, they are shown as unreserved. GF ASB DSF CPF TVF Total Reserved for: Capital Projects Debt Service Unreserved $100 $100 $100 $300 This has changed 7

8 Classification Under Old System (pre GASB 54) Reserved Fund Balance Unreserved, Designated Fund Balance Unreserved, Undesignated Fund Balance Change under GASB 54 Split into three separate categories Name change Name change Classification Under New System (post GASB 54) Nonspendable Fund Balance Restricted Fund Balance Committed Fund Balance Assigned Fund Balance Unassigned Fund Balance 8

9 Not in spendable form, such as: Inventory. Prepaid items. Legally or contractually required to be maintained intact (i.e. corpus of a permanent fund). 9

10 Amounts constrained to being used for a specific purpose by: External sources such as creditors, grantors, laws or regulations of other governments. Imposed by law through constitutional provisions or enabling legislation. 10

11 Constraint on use imposed by the school district itself, using its highest level of decision making authority. Constraint can be removed or changed only by the same authority. For Washington school districts, this means a formal resolution of the board of directors of the district. 11

12 Amounts intended to be used for specific purposes. Intent is expressed by: The board of directors. High level individual authorized by the governing body. 12

13 Available for any purpose. Special rules exist for using this classification in funds other than the General Fund. 13

14 The fund balance amounts are reported in the same categories, just in different funds. Under the old system: Reserved for: GF ASB DSF CPF TVF Total Capital Projects $100 $100 Debt Service $100 $100 Unreserved $100 $100 14

15 Under the new system: GF ASB DSF CPF TVF Total Restricted for: Capital Projects $100 $100 Debt Service $100 $100 Unassigned $100 $100 15

16 Starting with the total Fund Balance (Assets minus Liabilities), take away: Any amounts that are not in spendable format (i.e. Nonspendable). Any amounts that are Restricted as to their use. Any amounts that have been Committed to a specific use by the board of directors. Any amounts that are Assigned to a specific use (and recorded in the appropriate GL code). 16

17 In the General Fund: Record the residual amount, either positive or negative, as Unassigned Fund Balance. According to the verbiage in Statement 54, governments should not report an assignment for an amount to a specific purpose if the assignment would result in a deficit in unassigned fund balance. 17

18 Let s assume a district has $10,000 in total Fund Balance, of which: $1,000 is Nonspendable. $6,000 is Restricted. Case A: they have $1,000 in Commitments, and $1,000 in Assignments. Case B: they have $1,000 in Commitments, and $3,000 in Assignments. Case C: they have $5,000 in Commitments. How are these reported on the financial statements? 18

19 Fund Balance Case A Case B Case C Nonspendable $1,000 $1,000 $1,000 Restricted $6,000 $6,000 $6,000 Committed $1,000 $1,000 $5,000 Assigned $1,000 $2,000 $0 Unassigned $1,000 $0 ($2,000) Total Fund Balance $10,000 $10,000 $10,000 19

20 In funds other than the General Fund, the balance is recorded in one of two places: If the balance is positive, record it as Assigned to Fund Purposes (GL 889). If the balance is negative, record it as Unassigned Fund Balance (GL 890). 20

21 Let s assume a district has $10,000 in total Fund Balance, of which: $0 is Nonspendable. $8,000 is Restricted. Case A: they have $1,000 in Commitments. Case B: they have $3,000 in Commitments. How are these reported on the financial statements? 21

22 Fund Balance Case A Case B Nonspendable $0 $0 Restricted $8,000 $8,000 Committed $1,000 $3,000 Assigned to Fund Purposes (GL 889) $1,000 $0 Unassigned (GL 890) $0 ($1,000) Total Fund Balance $10,000 $10,000 22

23 Entire GL section of Accounting Manual was re written in accordance with these standards. In most cases, it is a title change (e.g. Reserved to Restricted ). There are some new GL Codes added for a variety of purposes. 23

24 GL 821 Restricted for Carryover of Restricted Revenues (previously rolled into GL 810). GL 872 Committed to Minimum Fund Balance policy (if your district has such a policy). GL 889 Assigned to Fund Purposes (for closing out funds other than GF if a positive amount). 24

25 For WSIPC districts, the software will be updated for these new GL codes. Non WSIPC districts will have to add the codes on their own or work with their vendor to make the changes. The F 196 is being re programmed to incorporate these changes for financial statement purposes. Changes present more Fund Balance definition that may not be used by every district. 25

26 OSPI is adopting GASB 54 to provide better transparency on the fiscal health of school districts. The benefits of adopting this statement include: Increased transparency. Easier to respond to data requests about what is in Fund Balance. 26

27 GASB 54 The Future! There is still more work to be done to fully implement GASB 54 for Washington school districts. Governmental Fund definitions: Focus will be on identifying allowable expenses within the funds. RCWs will also govern the flexibility on allowable expenditures within funds. Encumbrance accounting. 27

28 Questions? Contact Daniel Lunghofer (360)

VGFOA October 23, Statement No. 54: Fund Balance Reporting and Governmental Fund Type Definitions

VGFOA October 23, Statement No. 54: Fund Balance Reporting and Governmental Fund Type Definitions VGFOA October 23, 2009 Statement No. 54: Fund Balance Reporting and Governmental Fund Type Definitions Presenters Bruce W. Chase Professor of Accounting Radford University John B. Montoro Director of Government