1. 1 GASB Statement 54 Fund Balance Reporting and Governmental Fund Types deene.dayton@state.sd.us 773-5932

2. 2 Intro Statement No. 54 Released March 11, 2009 Effective for periods beginning after June 15, 2010

3. 3 Intro Why?? Significant variation on how current standards were applied Widespread confusion about terminology Fund balance is an important benchmark for numerous laws and other applications

4. 4 Current F/B  Fund balance is a term used for assets minus liabilities in a “governmental” fund

5. 5 Current F/B  Reserved F/B Resources not available for spending  Reserve for inventory  Long-term loan receivable Legal restrictions on spending  Restriction narrower than the purpose of the fund itself  Bond covenants

6. 6 Current F/B  Designated F/B Management’s intended future use of resources  Designated for future projects  F/B applied to subsequent year’s budget

7. 7 Current F/B  Unreserved, Undesignated F/B What’s left May even represent what’s left in a Special Revenue Fund

8. 8 Current Proprietary  Net Assets – Invested in Capital Restricted Unrestricted

9. 9 New F/B - Listing  Nonspendable  Restricted  Committed  Assigned  Unassigned

10. 10 New F/B - Nonspendable  Not in spendable form, such as: Inventory Long-term loans and notes receivable Prepaids  Amounts legally or contractually required to be maintained intact The principal balance of a permanent fund

11. 11 New F/B - Restricted  Same definition as for net assets in Statement 34 – when constraints are placed on resources in the following manner – External parties  Debt covenants  Contributors The constitution State law (CO, SPED, Pension)

12. 12 New F/B - Committed  Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the highest level of decision making authority (governing board)  Constraint can be removed or changed only by the same body (governing board)  Action to constrain resources should occur prior to the end of fiscal year, though the exact amount may be determined subsequently

13. 13 New F/B - Assigned  Amounts that are constrained by the government’s “intent” to be used for specific purposes  Intent is expressed by – The governing body A body or individual to which the governing body has delegated the authority to assign amounts to be used for specific purposes

14. 14 New F/B - Assigned  Constraints imposed on the use of assigned amounts are more easily removed or modified than those imposed on amounts that are classified as committed.  Some governments may not have both committed and assigned fund balances, as not all governments have multiple levels of decision-making authority.

15. 15 New F/B - Assigned  By reporting particular amounts that are not restricted or committed in a special revenue, capital projects, debt service, or permanent fund, the government has “assigned” those amounts to the purposes of the respective funds.  In other words, the non-general funds will only have an unassigned balance if it is negative.

16. 16 New F/B - Assigned  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. 17 New F/B - Assigned  An appropriation of existing f/b to eliminate a projected budgetary deficit in the subsequent year’s budget (cash applied) satisfies the criteria to be classified as an assignment of fund balance.  An assigned f/b is created if the proposed budget at the May meeting contains “fund balance applied” in the General Fund.

18. 18 New F/B - Assigned  GASB believes that an appropriation of existing fund balance does not meet the criteria for a commitment because the government does not have to take action to remove the constraint---it expires at the end of the budgetary period.

19. 19 New F/B - Assigned  Amounts eartagged for cash flows (Gen): B. M. initiated – not reported separately B. M. generated pursuant policy – assigned B. M. generated and adopted by the governing board – committed (formal action of committing must be prior to June 30 th )

20. 20 New F/B - Unassigned  The residual classification for the General Fund.  In other governmental funds, if expenditures incurred for specific purposes exceeded the amounts restricted, committed, or assigned to those purposes, it may be necessary to report a negative unassigned f/b.

21. 21 New F/B - ALL  A government should determine the composition of its ending fund balance by applying its accounting policies regarding whether it considers restricted or unrestricted amounts to have been spent when an expenditure is incurred for purposes for which both restricted and unrestricted amounts are available. The policy must be included in the notes to f/s.

22. 22 New F/B - ALL  The amount that should be reported as nonspendable f/b should be determined before classifying amounts in the restricted, committed, and assigned f/b classifications.

23. 23 New F/B - ALL  In a governmental fund other than the General Fund, expenditures incurred for a specific purpose might exceed the amount in the fund that are restricted, committed or assigned to that purpose and a negative residual balance for that purpose may result. If that occurs, amounts assigned to other purposes in that fund should be reduced to eliminate the deficit.

24. 24 New F/B - ALL Incorrect Correct  Restricted100,000 100,000  Committed-50,000 -0-  Assigned200,000150,000

25. 25 New F/B - ALL  A negative residual amount should not be reported for restricted, committed or assigned fund balances in any fund.

26. 26 New F/B - Display  The following components of f/b: Two components of nonspendable Major restricted purposes Specific purposes of committed and assigned The preceding may either be reported separately in the f/s’s or aggregated in the f/s’s and disclosed in the notes

27. 27 New F/B - Disclosures  The disclosures for committed f/b should identify the government’s highest level of decision making authority AND the formal action that is required to be taken to establish a f/b commitment

28. 28 New F/B - Disclosures  The disclosures for assigned f/b should identify the body or official authorized to assign amounts to a specific purpose AND the policy established by the governing body pursuant to which that authorization is given.

29. 29 New F/B - Disclosures  If a governing body has established a minimum f/b policy, then the policy should be described in the notes to f/s

30. 30 Fund Balance

31. 31 Fund Types – Special Revenue  Special revenue funds “are used” to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes.  The proceeds of specific revenue sources should be the foundation for a special revenue fund.

32. 32 Fund Types – Special Revenue  Special revenue funds should not be used to account for resources held in trust for individuals, private organizations, or other governments. (private purpose trust)

33. 33 Fund Types – Special Revenue  The restricted or committed proceeds of specific revenue sources should be expected to continue to comprise a substantial portion of the inflows reported in the fund.

34. 34 Fund Types – Special Revenue  Note disclosures should disclose the purpose of each major Special Revenue Fund as well as identifying which revenues are reported in each of these funds.

35. 35 Special Revenue – Impact Aid  Impact Aid is special revenue but it is not spent on a special purpose so it technically is not a special revenue fund.  But state law (SDCL 13-16-31) references a separate Impact Aid fund.

36. 36 Special Revenue – Impact Aid  When a GAAP/Compliance conflict exists, we try to satisfy both  Maintain a separate Impact Aid Fund throughout the year……blend it with the General Fund for year end financial reporting  Note – Transfers from the Impact Aid Fund to non-General Funds would be reported as a transfer out of the General Fund (permissible under SDCL 13-16-26.2)

37. 37 Special Revenue – Impact Aid  All funds are required to be budgeted (SDCL 13-11- 2), such as General, Impact Aid, CO…  GASB requires budgetary RSI for General and major special revenue funds  Impact Aid is not a GASB recognized major special revenue fund so it will not be reported as budgetary RSI  General Fund budgetary RSI will include only the budgeted General fund and not any blended Impact Aid amounts (explain in notes to RSI)

38. 38 Fund Types – Capital Projects  To account for the expenditure on capital outlays, including the acquisition or construction of capital facilities and other capital assets. (broader definition)  Should not be used for capital-related outflows of proprietary funds.

39. 39 Fund Types – Capital Projects  Although the use of a capital projects fund is not required, its application will prevent distortions of trend data in an entity’s operating funds.

40. 40 Fund Types – Debt Service  To account for financial resources that are restricted, committed or assigned to expenditure for principal and interest.  All debt does not trigger/mandate the use of a debt service fund…….however

41. 41 Fund Types – Debt Service  Debt service funds “should be used” to report resources if legally mandated.  Debt service funds “should be used” to account for resources that are being accumulated for principal and interest maturing in future years. (term bond)

42. 42 Fund Types – Permanent  “Should be used” to account for resources that are restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government’s programs.  Not to include private purpose trust money that is for individuals, private organizations, or other governments.

43. 43 Food Service  INVENTORIES 171 Purchased 172 Commodities  REVENUES 4820 Donated Food  EXPENSES 461 Purchased 462 Donated

44. 44 Food Service  Commodities are being received as processed foods or on a system called Net Off Invoice (NOI)  Inventorying of commodities is challenging because they are now marked with commercial labels.

45. 45 Food Service  The food service program now allows for Single Inventory Record Keeping  Both the 171 Purchased Food and the 172 Commodity asset accounts may be aggregated into the 171 account and labeled “Food Inventory”.

46. 46 Food Service  The 4820 Donated Food revenue account would not change. Processed food and NOI purchases will reflect the commodity content.

47. 47 Food Service  Without a separate 172 commodity asset account, a district will no longer be able to do a COGS for commodities. It is now allowable to determine the commodity expense (462 Donated) by assuming that the amount received will equal the amount consumed.

48. 48 Food Service  The commodity expense account is not only needed for reporting on Exhibit VI, but it also is reported on the cash flows statement and on SEFA.

49. 49 Food Service 462 Donated Food (expense) 4820 Donated Food (revenue)  To record the value of commodities received.

50. 50 Food Service 461 Purchased Food (expense) Cash To record the delivery of purchased food.

51. 51 Food Service 461 Purchased food (expense) 171 Food Inventory (to adjust inventory down) 171 Food inventory (to adjust inventory upward) 461 Purchased food (expense) After ending inventory is taken, the above entries will adjust the inventory account up or down accordingly. Food expense is reported on the “consumption basis”.

52. 52 Food Service  Schools may implement the Single Inventory Record Keeping Approach at the start of any school year or inventory records may be maintained as you always have in the past.

53. 53 GASB Update  Codification of Pre-November 30, 1989, FASB pronouncements Exposure Draft Stage

54. 54 GASB UPDATE  Economic Condition Reporting Should additional data be included into a financial report so that a better assessment of financial sustainability may be made

55. 55 GASB Update  Accounting and Financial Reporting for Service Concession Arrangements (SCA’s) (Public/Private partnerships) Exposure Draft Stage

56. 56 GASB Update  Statement 14 Reexamination (the financial reporting entity) Exposure Draft Stage

57. 57 GASB Update  Proposed Suggested Guidelines for Voluntary Reporting, Service Efforts and Accomplishments (SEA) Performance Information Proposal Stage

58. 58 GASB Update  Pension Accounting and Financial Reporting Invitation to Comment Stage