St. Louis County Schools, ISD 2142	MSBA/MASA Model Policy 714
Adopted:  June 25, 2012		Orig. 2011
Reviewed:  June 23, 2016				

714 	FUND BALANCES

[Note:  The provisions of this policy include the provisions of Statement No. 54 of the Governmental Accounting Standards Board (GASB).]

I.	PURPOSE

The purpose of this policy is to create new fund balance classifications to allow for more useful fund balance reporting and for compliance with the reporting guidelines specified in Statement No. 54 of the Governmental Accounting Standards Board (GASB).

The school board recognizes the need to establish a general operating unreserved/undesignated fund balance amount in order to allow the district to meet unforeseen contingencies such as, but not limited to, the following conditions:  enrollment shifts, unfunded state and federal mandates, economic downturns, increased utility costs, inflation, and salary settlements.

The unreserved general operating fund balance is defined as the sum of the balances in the UFARS general fund, Fund 01-General, Fund 03-Transportation, and Fund 05-Capital Fund, excluding the reserved capital funds within Fund 05.

II.	GENERAL STATEMENT OF POLICY

The policy of this school district is to comply with GASB Statement No. 54. To the extent a specific conflict occurs between this policy and the provisions of GASB Statement No. 54, the GASB Statement shall prevail.

III.	DEFINITIONS

A.	“Assigned” fund balance amounts are comprised of unrestricted funds constrained by the school district’s intent that they be used for specific purposes, but that do not meet the criteria to be classified as restricted or committed. In funds other than the general fund, the assigned fund balance represents the remaining amount that is not restricted or committed. The assigned fund balance category will cover the portion of a fund balance that reflects the school district’s intended use of those resources. The action to assign a fund balance may be taken after the end of the fiscal year. An assigned fund balance cannot be a negative number.

B.	“Committed” fund balance amounts are comprised of unrestricted funds used for specific purposes pursuant to constraints imposed by formal action of the school board and that remain binding unless removed by the school board by subsequent formal action. The formal action to commit a fund balance must occur prior to fiscal year end; however, the specific amounts actually committed can be determined in the subsequent fiscal year. A committed fund balance cannot be a negative number.

C.	“Enabling legislation” means legislation that authorizes a school district to assess, levy, charge, or otherwise mandate payment of resources from external providers and includes a legally enforceable requirement that those resources be used only for the specific purposes listed in the legislation.

D.	“Fund balance” means the arithmetic difference between the assets and liabilities reported in a school district fund.

E.	“Non-spendable” fund balance amounts are comprised of funds that cannot be spent because they are either not in spendable form or are legally or contractually required to be maintained intact. They include items that are inherently un-spendable, such as, but not limited to, inventories, prepaid items, long-term receivables, non-financial assets held for resale, or the permanent principal of endowment funds.

F.	“Restricted” fund balance amounts are comprised of funds that have legally enforceable constraints placed on their use that either are externally imposed by resource providers or creditors (such as through debt covenants), grantors, contributors, voters, or laws or regulations of other governments, or are imposed by law through constitutional provisions or enabling legislation.

G.	“Unassigned” fund balance amounts are the residual amounts in the general fund not reported in any other classification. Unassigned amounts in the general fund are technically available for expenditure for any purpose. The general fund is the only fund that can report a positive unassigned fund balance. Other funds would report a negative unassigned fund balance should the total of non-spendable, restricted, and committed fund balances exceed the total net resources of that fund.

H.	“Unrestricted” fund balance is the amount of fund balance left after determining both non-spendable and restricted net resources. This amount can be determined by adding the committed, assigned, and unassigned fund balances.

IV.	CLASSIFICATION OF FUND BALANCES

The school district shall classify its fund balances in its various funds in one or more of the following five classifications: non-spendable, restricted, committed, assigned, and unassigned.

V.	MINIMUM FUND BALANCE

Recognizing the importance of an adequate fund balance to the sound financial management of the district, the school board assigns administration to incorporate into the budget planning process, a minimum unreserved general fund balance of one to two months of operating expenditures. 

At time, the board may want to exceed one month of general operating expenditures if the intent is to temporarily build the fund to lessen the impact of a fund balance reduction.

VI.	ORDER OF RESOURCE USE

If resources from more than one fund balance classification could be spent, the school district will strive to spend resources from fund balance classifications in the following order (first to last): restricted, committed, assigned, and unassigned. 

VII.	COMMITTING FUND BALANCE

A majority vote of the school board is required to commit a fund balance to a specific purpose and subsequently to remove or change any constraint so adopted by the board.

VIII.	ASSIGNING FUND BALANCE

The school board, by majority vote, may assign fund balances to be used for specific purposes when appropriate. The board also delegates the power to assign fund balances to the following:  Business Manager.  Assignments so made shall be reported to the school board on a monthly basis. 

An appropriation of an existing fund balance to eliminate a projected budgetary deficit in the subsequent year’s budget in an amount no greater than the projected excess of expected expenditures over expected revenues satisfies the criteria to be classified as an assignment of fund balance.

IX.	STABILIZATION ARRANGEMENTS

When the fund balance is expected to go outside the parameters of the policy, the superintendent shall inform the board as soon as possible.

When the unreserved general operating fund balance (UGOFB) is projected to decrease below the total of one month of the annual operating expenditures, the board may initiate one of the following measures for the budget year in questions:

1.	Reduce expenditures through a budget cut.
2.	Generate additional revenue through an increase in the referendum.
3.	Implement a combination of budget cuts and an increase in the referendum.

X.	REVIEW

The school board will conduct an annual review of the sufficiency of the minimum unassigned general fund balance level.

Legal References:	Statement No. 54 of the Governmental Accounting Standards Board

Cross References:	MSBA Service Manual, Chapter 7, Education Funding