By: Janis Slater, CPA, Manager | email
The Governmental Accounting Standards Board recently issued Statement No.54, which will significantly change reporting requirements for governmental fund balances. The new statement clarifies the definitions of individual funds and may change the activities reported in a government’s special revenue funds.
Beginning in fiscal year ending June 30, 2011, governments will separately identify amounts that are nonspendable. The new classifications are: Nonspendable Funds– amounts that are not in spendable form, or legally or contractually must be kept intact; Restricted Funds– amounts used for specific purposes due to constitutional provisions, enabling legislation or externally imposed constraints; Committed Funds– amounts used for specific purposes because of a formal action by the government’s authority, which may include contractual obligations if existing resources have been committed; Assigned Funds– amounts intended for specific purposes but not restricted or committed; Unassigned Funds– the residual classification for the General Fund, the only fund that can report a positive unassigned fund balance. Other funds might have a negative unassigned fund balance due to overspending restricted, com
mitted or assigned amounts.
GASB No.54 establishes new presentation and disclosure requirements. The fund balances on the balance sheet may be separately displayed or aggregated. If aggregated, the notes need to disclose details for the aggregated amounts. New disclosure requirements include classification policies and procedures, minimum fund balance policy, encumbrances and major special revenue funds.
GASB No.54 has changed the definitions of the individual governmental funds to provide clarity about which resources can or should be reported in different funds and improve the comparability of financial statements. The funds affected by the change are the General Fund, Special Revenue Funds, Capital Projects Funds, Debt Service Fund and Permanent Funds.
This brief overview of GASB No.54 is well in advance of the implementation date, but we feel it is important to make you aware of the requirements. Governments will have to restate existing fund balances to conform to the new requirements. Officials need to be educated about the new classifications and disclosures, and it may be necessary for government officials to alert third parties about changes that could affect debt covenants or other requirements. If you would like further information regarding GASB No.54, please contact us. We’d be happy to help.