Thurston County
Financial Policies and Procedures
Policy
POL-2200 ENDING FUND BALANCES
PURPOSE:
The purpose of this policy is to develop guidelines and standards for establishing fund balances in each of Thurston County’s Governmental and Enterprise Funds that will:
1. Provide a source of funding for budgeted activities should revenue collections fall short of projections in any given budget cycle.
2. Provide a financial “safety net” in the event of emergencies or unforeseen circumstances.
3. Ensure sufficient resources to meet cash flow requirements for monthly or seasonal fluctuations in revenue and expenditures.
4. Be used to evaluate the County’s financial stability by bond rating agencies.
The purpose of this policy is also to outline the guidelines for reporting proper fund balance components, and to ensure adherence to, Governmental Accounting and Financial Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions for Thurston County’s Governmental Funds only.
Note that for purposes of this policy only; the term “fund balance” is substituted for “net assets” in the County’s Enterprise Funds.
REFERENCES:
RCW 36.33 – Creation and Uses of County Funds
Budgeting, Accounting, and Reporting System (BARS) Manual
Thurston County Budget and Fiscal Principles (Resolution #14179)
Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions
DEFINITIONS:
Fund Balance: The difference between assets and liabilities in a governmental fund.
Governmental Accounting Standards Board (GASB) Statement No. 54: A financial reporting standard, effective for reporting periods beginning after June 15, 2010, that establishes three detailed fund balance classifications for governmental funds as follows: 1) non-spendable; 2) restricted; and 3) unrestricted.
Governmental Funds: Funds of the County used to account for activities supported by taxes, grants, and other similar resources. This is the largest category of funds and is where most county operations are financed. There are five types of Governmental Funds as follows: General, Special Revenue, Debt Service, Capital Projects, and Permanent. These funds have a current financial resources measurement focus.
Enterprise Funds: Funds of the County used to report any activity for which a fee is charged to external users for goods or services. These funds have an economic resources measurement focus and are not subject to GASB 54.
Non-Spendable Fund Balance: The portion of fund balance that cannot be spent for ongoing expenditures because it: 1) will never convert to cash (e.g., prepaid items and inventories) or will not convert to cash soon enough to affect the current period (e.g., long term receivables), or; 2) are legally or contractually required to be maintained (e.g., principal of an endowment).
Restricted Fund Balance: Resources that are subject to externally enforceable legal restrictions imposed by creditors, grantors, contributors, or laws and regulations.
Unrestricted Fund Balance: Resources that can be used for any purpose within the fund reported. This component is further broken down into the following categories:
· Committed Fund Balance – Resources whose use is constrained by limitations that the County imposes upon itself through formal action of the Board of County Commissioners (BoCC), and that remain binding unless removed in the same manner.
· Assigned Fund Balance – Reflects an intended use of resources established by the BoCC, or delegate (Financial Management Committee) designated for that purpose. Amounts in excess of Non-Spendable, Restricted, and Committed Fund Balance in funds other than the General Fund automatically would be reported here. This category is less formal than Committed.
· Unassigned Fund Balance – The net or residual resources remaining in excess of what was properly classified in the Non-spendable, Restricted, Committed, and Assigned categories of fund balance. Generally only applicable to the General Fund.
POLICY STATEMENTS:
1. A designated minimum unrestricted fund balance for the General Fund is set by the Board of County Commissioners (BoCC).
2. For all other county funds, a designated minimum fund balance and reserve shall be established for each County office/department that is responsible for funds under their control.
3. The minimum fund balance standard and projected beginning fiscal year fund balance level shall be included by each County office/department in the development and adoption of the annual operating and capital budget.
4. Fund balances will be monitored by the County Auditor and Budget and Fiscal Manager, as applicable, to ensure that resources are sufficient to meet ongoing obligations without incurring inappropriate surpluses or deficits.
5. Fund balance is reported as Committed when the BoCC passes an ordinance or resolution that places specific constraints on how resources may be used in the County’s Governmental funds.
6. Fund balance is reported as Assigned when the intent to use resources for a specific purpose in the County’s Governmental funds is formally expressed by the Financial Management Committee (FMC).
7. When both Restricted and Unrestricted resources are available for use, Restricted resources are assumed to be used first. Also, when Unrestricted funds are available for expenditure, a specific order of spending shall be 1) Committed, 2) Assigned, and 3) Unassigned. These will be applicable to all Governmental Funds.
Issue Date: Oct 10 Pol-2200
Rev: Sep 12 Page 1 of 3