What makes up a fund balance?
Fund balance is what is left in a fund when every bill for the year is paid: the year's revenue less its spending, added to what was there at the start. Accounting standards (GASB Statement 54) sort it into five categories, from the most tightly bound to the most freely available. Each fund's own Fund balance page shows its amounts in these categories.
The five categories
- Nonspendable
- Not available to spend because it is not cash: money already paid out ahead of time, such as prepaid expenses, or supplies on hand, or money that must be kept intact.
- Restricted
- Can be spent only on what an outside party has set: a grant's terms, a law, or a bond agreement.
- Committed
- Set aside for a purpose by a formal vote of the board; only another vote can release it.
- Assigned
- Earmarked for a purpose by the board or an official it has authorized, without a formal commitment.
- Unassigned
- Everything else in a General Fund, available for any purpose: the reserve that carries a district through an emergency or a gap in cash flow. Funds other than a General Fund do not carry an unassigned balance.
What the nonspendable balance is made of
In every fund in this book, the nonspendable balance is prepaid amounts: prepaid items, which are bills paid before June 30 for goods or services received after it, and prepaid claims for the health reimbursement arrangement (HRA) and the health care and dependent care reimbursement accounts (HCRA and DCRA). The money has already left the bank, so it counts toward the fund balance but cannot be spent again.
Why unassigned can be below zero
The five categories always add up to the fund balance. When the nonspendable amount, money already paid out ahead of time, is larger than the whole fund balance, accounting rules show the difference as a negative unassigned amount. The fund balance itself is not negative: it is the total at the bottom of each fund's table, the same figure as on the fund's own page.
Weeks of operations
To put a fund balance in everyday terms, each fund's page divides it by one week of that year's spending (the year's spending divided by 52). A balance under one week is given in days instead (the year's spending divided by 365), and under one day as "less than one day".
Fund balance policies
A board can adopt a policy setting how much fund balance to keep, often as a share of the year's spending. Each fund's page says whether its board has adopted one.