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Policy 4070 - Fund Balance

The purpose of this policy is to ensure the financial stability of the Board by establishing clearly defined accounting procedures for reporting and using fund balance in alignment with GASB-54. The policy defines and states the authority and guidelines for the use of fund balance.

Policy Document

I. Policy Statement

The Board of Education of Howard County recognizes that maintaining an adequate Board established fund balance is sound fiscal practice and that responsible financial management is aligned with the Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions (GASB). One objective of this standard is to improve the understandability and usefulness of fund balance information by providing clear fund balance classifications. GASB-54 abandons the reserved, unreserved, and designated classifications of fund balance and replaces them with five classifications: nonspendable, restricted, committed, assigned, and unassigned.

II. Purpose

The purpose of this policy is to ensure the financial stability of the Board by establishing clearly defined accounting procedures for reporting and using fund balance in alignment with GASB-54. The policy defines and states the authority and guidelines for the use of fund balance.

III. Definitions

Within the context of this policy, the following definitions apply:

  1. Assigned Fund Balance – Amounts that are subject to a purpose constraint that represents an intended use established by the Board or by its designated body or official. The purpose of the assignment must be narrower than the purpose of the General Fund. Formal action is not necessary to impose, remove, or modify a constraint in Assigned Fund Balance.

  2. Capital Project Fund – Fund (restricted, committed or assigned) for capital outlays.

  3. Committed Fund Balance – Fund limited by Board action set in place prior to the end of the fiscal period. These amounts can be used only for the specific purposes determined by a formal action of the Board and require the same formal action to remove the constraint.

  4. Fund – A sum of money set aside for a purpose.

  5. Fund Balance – The excess of assets over liabilities.

  6. General Fund – The category (the general operating fund of the Howard County Public School System (HCPSS) used to account for all financial resources except those required to be accounted for in another fund.

  7. Nonspendable Fund Balance – Fund balance not in a spendable form, such as prepaid items, inventory items, or funds that legally or contractually must be maintained intact.

  8. Proprietary Funds – Amounts that fund activities the HCPSS operates, similar to those of a business, to cover costs through charges to users. Proprietary funds include an enterprise fund and internal service funds. The HCPSS has one enterprise fund and four internal service funds. The enterprise fund captures the activity of the James Rouse Theatre. The internal service funds are: Printing & Duplicating, Information Management and Computer Services, Health and Dental Self-Insurance, and Workers’ Compensation Self-Insurance.

  9. Restricted Fund Balance – Amounts that can be spent only on the specific purposes stipulated by law or by the external providers of those resources.

  10. Restricted Programs Fund – Fund used to account for restricted grants issued primarily by county, state, and federal governmental agencies.

  11. Special Revenue Fund – Fund used to account for and report activities that are substantially funded by a specific external revenue source that is restricted or committed to a specific purpose. The Board has two special revenue funds: the Food Service Fund and the Glenelg Wastewater Treatment Plant Fund.

  12. Unassigned Fund Balance – Fund balances that have not been classified in the four categories, namely Nonspendable, Restricted, Committed, and Assigned Fund Balance. All funds in this category are considered spendable resources. This category also provides the resources necessary to meet unexpected expenditures and revenue shortfalls.

  13. Unrestricted Fund Balance – Funds that are considered part of the Committed Fund Balance, Assigned Fund Balance, or Unassigned Fund Balance.

IV. Standards

  1. The provisions of this policy apply to the fund balances in all Board funds (general fund, restricted fund, special revenue fund, capital project fund, and proprietary funds).

  2. All fund balances will be used in accordance with GASB-54 defined purposes and provisions of this policy.

  3. Fund balance amounts will be reported as Committed Fund Balance only after formal approval by the Board. The action to commit amounts in such a manner must occur prior to fiscal year end; however, the actual dollar amount may be determined in the subsequent period.

    The following chronology exemplifies approval of the Committed Fund Balance:

    1. The Board may approve a motion prior to year end for the year-end financial statements, if available, up to a specified dollar amount as Committed Fund Balance for a specific purpose.

    2. The exact dollar amount to be reported as Committed Fund Balance for this purpose may not be known at the time of approval due to the annual financial audit not yet being completed.

    3. This amount can be determined at a later date and appropriately reported within the year-end financial statements.

  4. The Board may commit fund balance for any reason that is consistent with the definition of Committed Fund Balance contained within GASB-54. After approval by the Board, the amount reported as Committed Fund Balance cannot be reversed without utilizing the same process required to commit the funds. Therefore, in accordance with GASB-54, funds can only be removed from the Committed Fund Balance category after motion and approval by the Board.

  5. The Superintendent will have the authority to assign fund balance based on the Board’s intentions for the use of fund balance.

  6. Unassigned fund balance will be available to be designated for one-time expenditures in subsequent years (e.g., equipment purchases, new program start-up costs).

  7. Unassigned fund balance will require the approval of the Board and may be applied to ongoing expenditures only when a viable plan designated to sustain the expenditures is simultaneously adopted.

  8. Any unrestricted fund balance in a proprietary fund is assigned to that fund.

  9. Fund balance will be reported in the Board’s HCPSS Annual Audited Financial Statements and in the HCPSS Operating Budget each year.

V. Responsibilities

The Superintendent/Designee will ensure compliance with the standards of this policy.

VI. Delegation of Authority

The Superintendent is authorized to implement and monitor compliance with this policy.

VII. References

  • Annotated Code of Maryland, Education Article, Section 5-101

B. Other Board Policies

  • None

C. Relevant Data Sources

D. Other

  • Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance

  • Reporting and Government Fund Type Definitions

VIII. History

ADOPTED: March 9, 2006

REVIEWED:

MODIFIED:

REVISED: February 20, 2014

EFFECTIVE: February 20, 2014