Accounting Procedures Handbook

13 FUND BALANCE I. OVERVIEW Fund Balance is the difference between a governmental agency’s assets and liabilities. Each unique fund will have a Fund Balance. When revenues exceed expenditures, the fund balance for the fund is increased. Likewise, when expenditures exceed revenues, fund balance for the fund is decreased. The Board’s fund balance represents the resources available to fund future endeavors. The various components of fund balance are designed to indicate the extent to which the Board is bound to honor constraints on the specific purposes for which amounts in the fund balance can be spent. Financial statements for governmental funds report up to five components of fund balance: • Nonspendable • Restricted • Committed • Assigned • Unassigned II. CONTROL OBJECTIVES • To ensure that the Board’s funds are properly designated. • To ensure that any funds constrained by action of the Board are properly recorded. III. PROCEDURES A. Nonspendable Fund Balance Nonspendable funds are those that are inherently nonspendable from the vantage point of the current period. They are those with the following characteristics: • Net resources that cannot be spent because of their form, such as prepaid items and inventories of supplies • Net resources that cannot be spent because they must be maintained intact, such as funds pursuant to a legal or contractual requirement such as an endowment B. Restricted Fund Balance Restricted funds are those that reflect resources that are subjected to externally enforceable legal restrictions. Such restrictions typically are imposed by parties altogether outside the Board such as: • Creditors • Grantors • Contributors • Other governments, through laws and regulations Restricted funds are also created by actions of the governing body of the organization, in our case the Board of Education. Restricted fund balance exist for the Board’s Special Revenue Fund and the Board’s Capital Project Fund. C. Committed Fund Balance The portion of fund balance that represents resources whose use is constrained by limitations that the Board of Education imposes upon itself at its highest level of decision making and that remain binding unless removed in the same manner. The action to remove