FUND BALANCE REPORTING For Fiscal Years 2011 2012 and FY 2012 2013 Since the decision was made to implement the principles included in GASB Statement (GASBS) 54 (Fund Balance Reporting), the actual implementation process has been a bit bumpy. This document is intended to give districts more distinct guidance about how to report ending fund balances in funds other than the General Fund for school years 2011 2012 and 2012 2013. Background In February 2009, the Governmental Accounting Standards Board (GASB) released Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions, for fiscal years beginning after June 25, 2010. For school districts, this meant the school year 2010 2011 would be the first year for reporting fund balances. During the summer of 2009, members of the School District Accounting Advisory Committee (SDAAC) met to discuss the implementation of this statement. The changes to fund balance reporting were included in the 2010 2011 edition of the Accounting Manual for Public School Districts in the State of Washington and detailed in Bulletin 017-10. Since that time, continued discussions have taken place, as well as the first round of school district financial audits that deal with GASBS 54. Based on new discussions, the methods for reporting fund balance in funds other than the General Fund are changing. Definitions Before getting into the discussions pertaining to funds other than the General Fund, it is necessary to review the definitions of the various fund balance types, as outlined in GASBS 54. Nonspendable Fund Balance In terms of fund balance, "nonspendable" means those amounts that: a. Are not in spendable form; or b. Legally or contractually required to be maintained intact. (GASBS 54, 6) "Not in spendable form" means those assets of the district that are not in cash or expected to be converted into cash - for example, inventory and supplies. "Legally or contractually required to be maintained intact" means that there is an enforceable requirement that the money be maintained intact and thus cannot be used. For example, a donation to the district that stipulates only the interest earnings on that donation can be spent would be considered as a part of "nonspendable" fund balance. Fund Balance Reporting 1 Effective Date: 9-1-11
Restricted Fund Balance In terms of fund balance, "restricted" means that there are constraints placed on the use of resources that 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. (GASBS 54, 8) "Enabling legislation," as used above, means legislation that "authorizes the government to assess, levy, charge or otherwise mandate payment of resources and includes a legally enforceable requirement that those resources be used only for the specific purposes stipulated in the legislation" (GASBS 54, 9). "Legal enforceability means that a government can be compelled by an external party to use resources created by enabling legislation only for the purposes specified by the legislation" (GASBS 54, 9). Committed Fund Balance In terms of fund balance, "committed" means that the amounts so designated "can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision-making authority" (GASBS 54, 10). For school districts, the highest level of decision-making authority is the school district's board of directors. A "formal action" would be either a published policy of the school board, or a resolution passed by the board. When using the resolution, it is not necessary for the board to pass a separate resolution for the commitment if another resolution clearly outlines the commitment. For instance, committing funds to a specific purpose may be done as a part of the district's budget adoption resolution, if the reason for the commitment is clearly outlined in the budget resolution. Commitments of fund balance cannot be changed except by another formal action of the school board. If the district is using an existing policy as the basis for a commitment (e.g., a minimum fund balance policy), then a formal resolution would be needed to change the commitment (and override the policy). Assigned Fund Balance In terms of fund balance, "assigned" means that the amounts so designated are intended to be used by the government for a specific purpose, but there is neither an external restriction nor a formal commitment placing the restriction. Assignments represent amounts that the government "would like" to spend on a particular purpose, but if something comes up they can easily change it. Assignments can be made by the governing body or their designee (GASBS 54, 13). To change an assignment, it is a simple matter of removing the amount from an assigned fund balance account; no formal action or resolutions are necessary. Fund Balance Reporting 2 Effective Date: 9-1-11
Unassigned Fund Balance The amounts of fund balance that are not listed in one of the above categories. Fund Balance Reporting Other Than the General Fund This next section deals with the reporting for the various governmental funds other than the General Fund, for both the 2011 2012 and 2012 2013 years. Associated Student Body Fund (ASB) An Associated Student Body Fund (ASB Fund) is considered a "special revenue fund" within the definition of GAAP. A special revenue fund is used "to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects" (GASBS 54, 30). For the ASB Fund, the primary source of money is fees collected "as a condition to [ ] attendance at any optional noncredit extracurricular event of the district which is of a cultural, social, recreational, or athletic nature" (RCW 28A.325.010). These fees shall be deposited in the ASB Fund to defray the costs of the events (RCW 28A.325.010). This means that the fees that are collected for attendance at events are considered restricted within the definition of GASBS 54. The legislation that allows for the collection of fees at ASB events limits them to being used for the specific purpose of paying for ASB events and activities. In addition, "all moneys generated through the programs and activities of any associated student body shall be deposited in the associated student body program fund" (RCW 28A.325.030 (1) (b)). This applies the restriction to ASB fundraising activities as well. Fund Balance Reporting: Associated Student Body Fund As the amounts in the ASB Fund are considered Restricted based on the enabling legislation, that is the proper classification for the fund balance. Except for amounts that are Nonspendable (i.e., inventory) or otherwise Restricted (e.g. Restricted for Uninsured Risks), the remaining amount of fund balance needs to be reported as Restricted. For 2011 2012, this is to be done in GL 810 Restricted for Other Items. Starting in 2012 2013, this is to be done in GL 819 Restricted for Fund Purposes. At this time, there are no plans to close GL 889 Assigned to Fund Purposes in the ASB Fund. However, districts should not report anything in GL 889 starting with the 2011 12 school year; any spendable fund balance not otherwise restricted will go into GL 810/819, which will leave nothing to be reported in GL 889. Fund Balance Reporting 3 Effective Date: 9-1-11
Debt Service Fund (DSF) The DSF is "used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest" (GASBS 54, 34). In general, the largest source of money in the DSF comes from voter-approved levies. These levies may be enacted "for the sole purpose of making the required payments of principal and interest on general obligation bonds issued solely for capital purposes" (Washington Constitution, Article VII, 2 (b)). There should little uncertainty that this is a restriction created by enabling legislation. However, other sources of money in the DSF, such as forest revenues are a little less clear about whether there is a restriction placed on the money by enabling legislation. There are contractual obligations for payments on principal and interest, however, which appear to fit the first portion of the definition of "restricted," shown above. Fund Balance Reporting: Debt Service Fund For 2011 2012, districts should report the balance in their DSF in GL 810 Restricted for Other Items. Starting in 2012 2013, districts should report the balance in GL 830 Restricted for Debt Service. This applies to all amounts that are not set aside for Arbitrage Rebate or otherwise Restricted. At this time, there are no plans to close GL 889 Assigned to Fund Purposes in the DSF. However, districts should not report anything in GL 889 starting with the 2011 2012 school year; any fund balance not set aside for Arbitrage Rebate should be in GL 810/830, which will leave nothing to be reported in GL 889. Capital Projects Funds (CPF/TVF) In GAAP terminology, a capital projects fund is "used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets" (GASBS 54, 33). For Washington school districts, two funds have been established by statute that are considered to be "capital projects funds" within the GAAP definition: the Capital Projects Fund (CPF) and the Transportation Vehicle Fund (TVF). Transportation Vehicle Fund The TVF is a limited version of a capital projects fund, in that it can only be used for the purchase and/or major repair of pupil transportation equipment (RCW 28A.160.130). While there are different sources of money that can flow into the TVF, the restrictions on the use of the money are created by enabling legislation. Fund Balance Reporting: Transportation Vehicle Fund Currently, there are no changes for reporting of fund balances within the TVF compared to the published information in the Accounting Manual. Except for Fund Balance Reporting 4 Effective Date: 9-1-11
amounts that are restricted in some manner (for example, to repay non-voted debt or arbitrage), districts have the option for 2011 2012 to report the balance of their TVF in GL 889 Assigned to Fund Purposes. Any fund balance reporting in this account should be done in accordance with the Accounting Manual. However, districts are encouraged to utilize GL 810 Restricted for Other Items for the remainder of fund balance. Capital Projects Fund The Capital Projects Fund (CPF) is for a wide variety of capital purposes under law. CPF funds can be used to purchase land or buildings, to construct new buildings, renovate playfields, engage in energy efficiency improvements, and more (RCW 28A.320.330 (2); RCW 28A.530.010). The issue lies in that there are many different varieties of revenue that can flow into the CPF: bonds, levies, state construction assistance reimbursements, impact fees, etc. The uses and limitations on what each of these different revenue sources may be used for depend on the individual source. Fund Balance Reporting: Capital Projects Fund Fund balance reporting within the CPF will be examined more in depth over the summer. Until the time as improved guidance is available, districts should continue to record their ending fund balance amounts in the CPF in accordance with the published guidance in the Accounting Manual. Fund Balance Reporting 5 Effective Date: 9-1-11