Governmental finances are slightly different then business finances. With business the focus is usually dominated by the profit and loss statement. With governmental accounting we deal more with revenues and expenses. We also deal with fund balances. There are a number of different types of funds and with these they need to have special designations.
There is an overseer of accounting standards for governmental accounting. They are known as GASB or the Governmental Accounting Standards Board. This group periodically establishes rules to provide for more definition in how governmental funds are managed from an accounting standpoint.
The most recent rule that was implemented is known as GSAB 54. This rule provides that all city funds be designated as to their assigned use. The use designations of each fund fall into the following categories:
Non-spendable
Restricted
Unrestricted – both committed and assigned
Unassigned
Using these designations on each fund explains, to a point, the funds intended purpose and how it can or should be used. As an example of a restricted fund is debt service. Debt service funds can only be used to retire debt.
The rule also made a recommendation that a policy be adopted called a Comprehensive Fund Balance Policy. The policy addresses these areas:
Minimum Fund Balance
Order of Resource use
Stabilization Arrangements
Committing Funds
Assigning Fund Balances
With this in mind the City Council at the April meeting adopted the Comprehensive Fund Balance Policy with defines funds as described and meets the requirement of GSAB 54 in addressing the recommended policy issues.
If anyone has an interest in this policy it can be found in the meeting packet information from the April 2012 meeting.
