Transcript GASB Statement No. 54 Fund Balance Reporting and

GASB Statement No. 54
Fund Balance Reporting and
Governmental Fund Type Definitions
(Effective for FYE June 30, 2011)
John F. Sutton, CPA
Audit Manager
Pugh & Company, P.C.
Home Federal Plaza – Suite 200
315 N. Cedar Bluff Rd.
Knoxville, TN 37930-1409
Phone: 865-769-0660 Direct: 865-769-1684
[email protected]
Effect of GASB 54
• GASB 54 has significantly changed the
definitions and criteria for establishing
governmental funds, especially special
revenue fund types. Also, fund balance
terminology and definitions have changed
dramatically.
• GASB 54 does not apply to proprietary
fund types (Enterprise and Internal
Service Funds) or fiduciary fund types
(trust and pension funds).
Types of Governmental Funds
• Governmental funds are one of the
following:
– General Fund
– Special Revenue (Restricted or Committed
Revenues)
– Debt Service
– Capital Projects
– Permanent (Endowments, etc.)
Special Revenue Funds
• Special revenue funds can only be
established for “restricted” or “committed”
revenues and not for the assignment or
transfer of resources.
• Governments should discontinue reporting
a special revenue fund and instead report
with the General Fund if the government
no longer expects that a substantial
portion of the fund’s revenues are from
restricted or committed resources.
Restricted vs. Committed
• Restricted – Restraints imposed by creditors,
grantors, contributors, or laws and regulations.
These are also considered a legal restriction or
external legal limitation (legally enforceable
requirements).
• Committed – Self-imposed legal limitation by the
government’s highest level decision making
authority (City Council, County Commission,
etc.). Committed amounts cannot be redeployed
(transferred) for other purposes unless formal
action is approved, or reversed, by the decision
making authority.
Special Revenues
• No special revenues can be used unless
they meet the restricted or committed
requirements. Management cannot use or
create additional special revenue funds to
“earmark” funds, or to segregate for
internal financial management.
• Once a special revenue fund is
established, the governmental body is free
to assign, or transfer additional resources
to that fund, provided the fund’s basic
revenue sources remain a substantial
portion of total inflows.
Fund Balance Definitions
• Non-Spendable – Cannot be used in cash, or is
legally or contractually required.
• Restricted - Restraints imposed by creditors,
grantors, contributors, or laws and regulations.
These are also considered a legal restriction or
external legal limitation.
• Unrestricted
 Committed – (previously defined)
 Assigned – Constrained by the governments intent, can
be redeployed by governing board or management.
 Unassigned
Fund Balance Definitions:
Old vs. New
New
Old
Non-Spendable for: Prepaid
A. Reserved for
Expenditures, Inventories,
Prepaid
Encumbrances, Long-term
Expenditures,
Notes Receivable, etc.
Inventories, or
Encumbrances, etc.
B. Reserved for
external, or internal
reasons: for grants
or certain projects
Restricted by law, creditors,
grantors, or by enabling
legislation (State Street Aid
Fund, Drug Control Fund,
etc.)
Fund Balance Definitions:
Old vs. New
(continued)
•
•
Old
Unreserved –
Designations,
internally designated
for projects, could be
redeployed by board
or management.
New
Committed, internally
imposed by Board,
and cannot be
redeployed by
management.
Unreserved Undesignated
Assigned fund balance,
constrained by intent
and can be deployed
by Board or
management. (cont.)
Fund Balance Definitions:
Old vs. New
(continued)
Old
D. Unreserved Undesignated
New
Fund balances of
special revenue, debt
service, and capital
projects funds that are
not non-spendable,
restricted, or
committed are
assigned.
Unassigned is the
residual fund balance
of the general fund
only.
Exception to Unreserved – Unassigned Funds
• If there is a deficit in a Special Revenue,
Debt Service, or Capital Projects Fund
due to expenditures exceeding the
restricted, committed, or assigned fund
balances, then it is possible to report a
negative unassigned fund balance.
Stabilization or Minimum Fund Balance
Policies
• Disclosure in the notes:
– Stabilization arrangements should disclose the
authority, required amounts, conditions that
allow when amounts can be spent, and the
year-end amount (if not apparent on the face
of the statements).
– Minimum fund balance policies should be
disclosed if the government has a formally
adopted policy and disclose the minimum
amount required.
These disclosures are required even if the
arrangements do not meet the “restricted”
or “committed” criteria.
Required Note Disclosures
• The entity will need to add a paragraph to
the fund balance descriptions in the
Summary of Significant Accounting
Policies (SAAP) for the new fund balance
terminology.
• Adopting GASB 54 is a change in
accounting principle (ASC 250-10), then if
the entity closes, or combines some
special revenue funds into the general
fund, then a note disclosure will be
needed to describe the prior period
adjustments (July 1, 2010) (continued)
Required Note Disclosures (Cont.)
• (cont.) to the general fund balance and
special revenue fund balances for funds
that were closed, or combined.
• If audited comparative financial
statements are presented, then the entity
will need to retroactively (retrospectively)
apply GASB 54 to the earliest period
presented and have a note disclosure that
describes the $ change in assets,
liabilities and equity as of the beginning of
the first period presented (July 1, 2009).
Quick Quiz
Question 1:
• The City Manager of Gotham wants to
establish a special revenue fund to
account for the revenues generated by
traffic tickets issued by the police
department.
Can the city establish or report this type of
special revenue fund under GASB 54?
Answer #1
No, the revenues generated by the
traffic tickets are not restricted for certain
purposes under state law and the
revenues are used to support public
safety expenditures.
In order to qualify as a special revenue
fund, the City Council would need to pass
a budget ordinance/resolution that would
dedicate the use of these revenues for
some specific purpose.
Quick Quiz
Question 2:
• The Beaufort County Commission during
its current year budget process has
decided to transfer $100,000 from the
County’s State Street Aid Fund to the
General Fund to help reduce the current
year’s budget deficit.
Under GASB 54, can the County record
this fund transfer as budgeted?
Answer #2
No, the County’s State Street Aid Fund
is restricted externally by state statutes to
only be used for road repairs and
maintenance.
Quick Quiz
Question # 3:
• The B.O.E. finance director decides to
make a transfer of $100,000 from the
General Fund’s assigned fund balance for
technology to unassigned fund balance to
help pay for unexpected increased costs
in utilities and fuel.
Under GASB 54, is the finance director
permitted to do this without action from the
B.O.E.?
Answer #3
Yes, management is allowed to make
transfers from an assigned fund balance
which is used for intent and can be
redeployed by the Board or management.
Quick Quiz
Question # 4:
• The City of Gotham has established a property
tax rate of $1.00, of which $.50 will go to the
parks fund and $.50 will go to the school fund.
However, in order to help pay for a new high
school football stadium, the City Council wants to
budget a transfer of $.25 from the parks fund to
the school fund.
Under the new standard, can the city still continue
to record $.50 property tax revenue in the park
fund and $.50 in the school fund?
Answer # 4
No, the property tax revenue should be
recorded as $.25 for the parks and $.75
for the school fund.
Revenues should be recorded in the
special revenue fund for which they will be
expended for their specified purposes.
Any questions?
John F. Sutton, CPA
Audit Manager
Pugh & Company, P.C.
Home Federal Plaza – Suite 200
315 N. Cedar Bluff Rd.
Knoxville, TN 37930-1409
Phone: 865-769-0660 Direct: 865-769-1684
[email protected]