Title
GASB 54 Policy - Approval
History
In February 2009, the GASB (Governmental Accounting Standards Board) issued GASB Statement 54 Fund Balance Reporting and Governmental Fund Type Definition which provides guidance for fund balance categories and classifications. Five categories of fund balances were created and defined by GASB 54 which is applicable for financial statements beginning after June 15, 2010.
To comply with GASB 54, the Finance Department recommends the following policies for approval:
• The Village will report governmental fund balances per GASB 54 definitions in the balance sheet as follows:
o Nonspendable (Funds not in a spendable form such as inventory, prepaid items, and assets held for resale)
o Restricted (Funds governed by externally enforceable restrictions and enabling legislation)
o Committed (Funds governed by Village Board action)
o Assigned (Funds intended for a specific purpose established by Village policy)
o Unassigned (Funds not allotted to other categories and, therefore, not subject to any constraints)
• The Village Board will approve all commitments by formal action. A commitment can only be modified or removed by the same formal action.
• The Finance Director may assign resources and amounts of fund balance to a specific purpose. These assignments will follow Village policy.
• The Village considers restricted amounts to have been spent first when the expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, followed by committed amounts then assigned amounts. Unassigned amounts are used only after the other categories of fund balance have been fully utilized.
GASB 54 also includes changes to governmental fund type definitions. Governmental fund types include the General Fund, Special Revenue Funds, Debt Service Funds, Capital Project Funds, and Permanent Funds. The change in definition for Special Revenue Funds is the only change that will affect the Village’s financial statements. GASB 54 requires Special Revenue Funds to only be used to account for proceeds of specific revenue sources that are restricted or committed to expenditures for specific purposes other than debt service or major capital projects. If the Village does not have a substantial portion of the revenue restricted or committed within the Special Revenue Fund then the Fund’s activity is to be reported in the General Fund.
Currently, the Recreation & Parks Fund, the Home Rule Sales Tax Fund, and the Main Street Triangle Fund do not have a substantial portion of revenue sources that are restricted or committed. A Special Revenue Fund with no restricted or committed revenue sources will only be able to continue as a Special Revenue Fund under GASB 54 if there were restricted resources remaining in the fund balance. Since the Main Street Triangle Fund has a deficit fund balance and currently no restricted or committed revenue sources the fund is required to be included under the General Fund for the FY2011 financial statements. Once property tax increment is received, the Main Street Triangle Fund can be reclassified as a Special Revenue Fund on the financial statements. The Finance Department recommends committing funds for the Recreation & Parks Fund and Home Rule Sales Tax Fund so these funds can continue to be reported as Special Revenue Funds on future financial statements. The funds will be committed for the following purposes:
• Recreation program fees will be committed towards culture and recreation expenditures recorded in the Recreation and Parks Fund
• Home Rule Sales Tax will be committed towards capital project funding and rebates recorded in the Home Rule Sales Tax Fund.
The Recreation and Parks Fund will continue to be reported as a Special Revenue Fund for the FY2011 financial statements since the Fund also receives property tax revenue which is a restricted revenue souce. The Home Rule Sales Tax Fund will be included under the General Fund for the FY2011 financial statements since the funds were not committed until after year end. The Fund will be reclassified back to a Special Revenue Fund on the FY2012 financial statements.
On April 2, 2012, this item was reviewed and approved by the Finance Committee and referred to the Board for approval.
Recommended Action/Motion
I move to approve the GASB 54 fund balance policy for incorporation into the existing fund balance policies.
And
Approve the commitment of recreation program fees towards culture and recreation expenditures.
And
Approve the commitment of home rule sales tax towards capital project funding and rebates.