26BUDGET(FULL-LINKED) - Flipbook - Page 281
City of Plymouth
Fund Balance Policy
Developed for GASB 54
Purpose
The City Commission recognizes that the maintenance of a fund balance is essential to the
preservation of the financial integrity of the City and is fiscally advantageous for both the
City and the taxpayers. This policy will ensure that the City maintains adequate fund
balances and reserves in order to:
•
Provide sufficient cash flow for daily financial needs
•
Secure and maintain investment grade bond ratings (if necessary)
•
Offset significant economic downturns or revenue shortfalls
•
Provide funds for unforeseen expenditures related to emergencies
Definitions
Fund Balance – A governmental fund’s fund balance is the difference between its assets and
deferred outflows and its liabilities and deferred inflows.
Fund Balance Components – An accounting distinction is made between the portions of fund
equity that are spendable and nonspendable. Under GASB 54, these are broken up into five
categories:
1) Nonspendable fund balance – Amounts that are not in a spendable form (such as
inventory) or are required to be maintained intact (such as the corpus of an
endowment fund).
2) Restricted fund balance – Amounts that can be spent only for the specific purposes
stipulated by external resource providers either constitutionally or through enabling
legislation. Examples include grants and dedicated millages.
3) Committed fund balance – Amounts constrained to specific purposes by a
government itself using its highest level of decision-making authority; to be reported
as committed, amounts cannot be used for any other purpose unless the government
takes the same highest-level action to remove or change the constraint.
4) Assigned fund balance – Amounts intended to be used by the government for
specific purposes. Intent can be expressed by the governing body or by an official
or body to which the governing body delegates the authority. In governmental funds
other than the general fund, assigned fund balance represents the amount that is not
restricted or committed. This indicates that resources in other governmental funds
are, at a minimum, intended to be used for the purpose of that fund.
5) Unassigned fund balance – The residual classification of the general fund which
includes all amounts not contained in other classifications. Unassigned amounts are
technically available for any purpose.
