ST.
LOUIS BOARD OF EDUCATION POLICY
Business & Non-Instructional
Operations
SLPS FUND BALANCE Policy
Policy #3160
Purpose
The purpose of this policy is to
establish a key element of the financial stability of the St. Louis Public
Schools (SLPS) by setting guidelines for fund balance. Unassigned fund balance
is an important measure of economic stability. It is essential that the school
district maintain adequate levels of unassigned fund balance to mitigate
financial risk that can occur from unforeseen revenue fluctuations,
unanticipated expenditures, and similar circumstances. The fund balance also
provides cash flow liquidity for the school district's general operations.
Background
Fund balance refers to the difference
between assets and liabilities in the governmental funds balance sheet. This information
is one of the most widely used elements of state and local government financial
statements for analysis. One central
importance of the credit reviews performed by municipal bond analysts; fund
balance information also is used by oversight bodies, federal, state, county
and local legislators to assess the financial health of an organization.
Additionally, financial statement users examine fund balance information to
identify the available
liquid resources that can
be used to repay long-term debt, reduce property taxes, add new educational
programs, expand existing ones, or enhance the financial position of the school
district.
GASB has found that its usefulness and
the value of fund balance information provided is significantly reduced by misunderstandings
regarding the message that it conveys, and the inconsistent treatment and
financial reporting practices of governments.
In March 2009, in order to improve how fund balance information is
reported and enhance its decision-usefulness, GASB issued Statement No. 54,
Fund Balance Reporting and Governmental Fund Type Definitions. The SLPS adopted the GASB 54 policy in FY
2011.
Definitions
·
Fund Equity - A fund's equity is generally the difference
between its assets and its liabilities.
·
Fund Balance - An accounting distinction is made between the
portions of fund equity that are spendable and non-spendable.
These are broken up into five
categories:
Non-spendable
fund balance - Includes
amounts either not in spendable form or legally or contractually required to be
maintained intact. This would include inventory, prepaids,
and non-current receivables such as long-term loan and notes receivable and
property held for resale (unless the proceeds are restricted, committed or
assigned). This also includes amounts that are legally or contractually
required to be maintained intact (principal balance of endowments and permanent
funds).
Restricted
fund balance - Reflects
the same definition as restricted net assets on the government wide Statement
of Net Assets: constraints placed on the use of amounts are either externally
imposed by creditors (such as through debt covenants), grantors, contributors,
or laws or regulations of other governments; or imposed by law through
constitutional provisions or enabling legislation.
Committed
fund balance - Includes
amounts that are committed for specific purposes by formal action of the school
board. Amounts classified as “committed” are not subject to legal
enforceability like restricted fund balance; however, those amounts cannot be
used for any other purpose unless the school board removes or changes the
limitation by taking the same form of action it employed to previously impose
the limitation. The action to commit fund balances must occur prior to year
end; however, actual amounts can be determined in the subsequent period.
Assigned
fund balance - Amounts
that are intended by the school district to be used for specific purposes, but
are neither restricted nor limited, should be reported as assigned fund
balance. Intent should be expressed by the school board itself or a subordinate
high-level body or official possessing the authority to assign amounts to be
used for specific purposes in accordance with policy established by the school
board. This would include ANY activity reported in a fund other than the
General Fund that is not otherwise restricted more narrowly by the above
definitions. The school district is not allowed to assign balances that result
in a residual deficit.
Unassigned
fund balance - includes
any remaining amounts after applying the above definitions (amounts not
classified as non-spendable, restricted, committed or assigned). Planned
spending in the subsequent year’s budget would be included here and can no
longer be described as “designated” unless formally committed or assigned.
Special rules exist for using this classification in funds other than the General
Fund. In funds other than the General Fund unassigned only used if the balance
is negative, therefore, the General Fund is the only fund that will report a
positive unassigned balance.
Policy Committed Fund Balance - The school board (SAB) is the highest level of
decision-making authority for the SLPS. The formal action that is required to
be taken to establish, modify, or rescind a fund balance commitment is a resolution
approved by the school board at a school board meeting. The resolution must
either be approved or
rescinded, as applicable, prior to the last day of the fiscal year for which
the commitment is made.
Assigned Fund Balance -The School Board of
the SLPS has authorized itself to be the final authorized approval to assign
fund balance to a specific purpose as approved by this fund balance policy.
Minimum Unassigned Fund Balance
Order of Expenditure of Funds
When multiple categories of fund
balance are available for expenditure (for example, a construction project is being
funded partly by a grant, funds set aside by the school district, and
unassigned fund balance), the SLPS will start with the most restricted category
and spend those funds first before moving down to the next category with
available funds.