safeguarding your fund balance for future liability march 7, 2012
DESCRIPTION
Safeguarding Your Fund Balance for Future Liability March 7, 2012. Presentation Overview. O verview of GASB 54- new fund balance definitions and classifications. Fund balance policy S uggested commitments and assignments. Financial Statement Review. GASB #54. Background and Summary - PowerPoint PPT PresentationTRANSCRIPT
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Safeguarding Your Fund Balance for Future Liability
March 7, 20121
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Presentation Overview
• Overview of GASB 54- new fund balance
definitions and classifications.
• Fund balance policy
• Suggested commitments and assignments.
• Financial Statement Review
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GASB #54
Background and Summary
• Enhance the usefulness of fund balance information.• Clearer fund balance
classifications that can be more consistently applied.
• Clarifying existing governmental fund type definitions.
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GASB #54
Only applies to the five governmental funds.
1) General Fund2) Special Revenue Funds3) Capital Project Funds4) Debt Service Funds and5) Permanent Funds.
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GASB #54
Hierarchy of Fund Balance
Nonspendable Restricted Committed Assigned Unassigned
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GASB #54
Nonspendable Fund Balance
Not in spendable formInventoriesPrepaid Long-term notes receivable
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GASB #54
Committed Fund Balance
Constraints on use are imposed by formal action of the School Board.
Constraints can only be removed or changed by taking the same type of action.
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GASB #54
Committed Fund Balance
o The formal action to commit fund balance should occur prior to the end of the reporting year.
o Amount, subject to constraint, may be determined in the subsequent period
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GASB #54
Assigned Fund Balance
• Not required to be the School Board.
• May be someone or group per persons designated by the School Board.
• Nature of the action to remove or modify assignments are not as strict. 9
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GASB #54
Unassigned• General fund, amounts not
classified as nonspendable, restricted, committed or assigned
• Other governmental funds amount expended in excess of resources that are nonspendable, restricted, committed or assigned.
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Fund Balance Policy
Suggested content:
• Purpose• Definitions• Guidelines• Delegation of Responsibility
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Fund Balance Policy
Purpose
The maintenance of a fund balance is essential to thepreservation of the financial
integrity of the school district fiscally advantageous for both the
district and the taxpayer.
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Fund Balance Policy
Definitions
• Fund balance is the difference between total assets and total liabilities in each fund.
• Restricted - amounts limited by external parties, or legislation.
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Fund Balance Policy
Definitions
• Committed - amounts limited by Board policy or Board action.
• Assigned - amounts that are intended for a particular purpose.
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Fund Balance Policy
Definitions
• Unassigned - amounts available for consumption or not restricted in any manner.
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Fund Balance Policy
Guidelines• Board of Education acts as the
district’s highest level of decision making.
• Official Board resolution must be passed in order to• establish,• modify• or rescind a commitment of fund
balance. 16
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Fund Balance Policy
Guidelines
• This policy may be amended from time to time according to the wishes of the Board of Education.
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Fund Balance Policy
Guidelines
The school district will strive to maintain an unassigned general fund balance of• not less than five percent (5%)
and• not more than eight percent (8%) of the budgeted expenditures for that fiscal year.
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Fund Balance Policy
Guidelines
• The total fund balance, consisting of several portions including restricted, committed, assigned and unassigned, may exceed eight percent (8%).
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Fund Balance Policy
GuidelinesIf the unassigned portion of the fund balance falls below the threshold of five percent (5%) of budgeted expenditures, the Board will pursue options
• for increasing revenues and decreasing expenditures, or a combination of both until five percent(5%) is attained.
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Fund Balance Policy
If the unassigned portion of the fund balance exceeds eight percent (8%) of budgeted expenditures for that fiscal year
• the Board may utilize a portion of the fund balance by appropriating excess funds for expenditures.
• The goal is to use any excess fund balance for nonrecurring expenditures and not for normal operating costs. 21
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Fund Balance Policy
Use Of Fund Balance
• Restricted fund balance will be reduced to the extent that the underlying reason for the restriction has been eliminated.
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Fund Balance Policy
Use of Fund BalanceShould the district experience an excess of expenditures over revenues for a given fiscal year, fund balance will be consumed in the following order:
1. Restricted fund balance to the extent that expenditures related to the restriction contributed to the excess of expenditures over revenues. 23
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Fund Balance Policy
2. Committed fund balance to the extent that expenditures related to the commitment contributed to the excess of expenditures over revenues. If a plan for periodic use of committed fund balance is reviewed and approved by the School Board, committed fund balance will not be reduced by more than the amount designated in the plan.
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Fund Balance Policy
3 .Assigned fund balance to the extent that expenditures related to the assignment contributed to the excess of expenditures over revenues.
4.Unassigned fund balance for any remaining excess of expenditures over revenues.
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Fund Balance Policy
Delegation of Responsibility• The Business Administrator or
designee may assign fund balance for items deemed appropriate at any time prior to the issuance of the audited financial statements for a given year.
• The Business Administrator or designee shall be responsibility for the enforcement of this policy.
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Examples
Committed or Assigned:
• Budgeted use of fund balance• Future PSERS increases• Increase in Healthcare costs• Future Assessment Appeals• Other Post Employment Benefits• Future Charter School Liability
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Examples
Committed or Assigned:
• Early Retirement Incentives• Future Debt Service Expenditures• Variable rate Stabilization• Future High School Expansion• Payment of Overpaid EIT Funds• Phasing in of Millage increases
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Financial Statement Review
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1705 Oregon Pike, Lancaster, PA 17601Phone 717-569-2900 | Toll Free 800-448-1384 | Fax 717-569-0141
www.troutcpa.com
CONTACT INFORMAT ION:
Jill Gilbert, CPA/PartnerDirect line: 717-358-9152
Email: [email protected]
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