ITEM:		CONSENT CALENDAR
3.	IMPLEMENTATION OF GASB STATEMENT NO. 54 AND RESOLUTION NO. 2015-22 ADOPTING FUND BALANCE POLICY
Meeting Date:			December 14, 2015	Budgeted:	N/A
From:			David J. Stoldt,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Suresh Prasad	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: The Administrative Committee reviewed this item on December 7, 2015 and recommended approval.
CEQA Compliance: N/A

SUMMARY: In March 2009, the Governmental Accounting Standards Board (GASB) issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, to address issues related to how fund balance was being reported in governmental financial statements. The intent of the Statement is to bring greater transparency and consistency to fund balance reporting in the governmental sector. The District complied by implementing GASB Statement No. 54 for the Fiscal Year ending June 30, 2011, however, a formal fund balance policy was not adopted.

This new standard does not change the total amount of a given fund balance, but it substantially alters the categories and terminology used to describe the components of a fund balance. The new categories and terminology reflect an approach that focuses, not on financial resources available for appropriation within a fund, but on the extent to which the District is bound to honor constraints on the use of the funds. In the past, fund balances have been classified into three separate components: Reserved, Designated, and Undesignated. There are almost always important limitations on the purpose for which all or a portion of the resources can be used. The force of these limitations can vary significantly depending on their source. The various components of the new fund balance reporting standard are designed to indicate the extent to which the District is bound by these limitations placed upon the resources.

GASB Statement No. 54 defines five new components of fund balance that will replace the current existing three components. The five new components are:

Nonspendable Fund Balance. The portion of a fund balance that cannot be spent because they are either: (a) not in a spendable form, such as prepaid items, inventories of supplies, or loans receivable; or (b) legally or contractually required to be maintained intact, such as the principal portion of an endowment. This category was traditionally reported as a “reserved” fund balance under the old statement.

Restricted Fund Balance. The portion of a fund balance that has constraints placed on the use of resources that are either: (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. This category was traditionally reported as a “reserved” fund balance under the old standard.

Committed Fund Balance. The portion of a fund balance that includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the District and remain binding unless removed in the same manner. This category was traditionally reported as a “designated” fund balance under the old statement.

Assigned Fund Balance. The portion of a fund balance that includes amounts that are constrained by the government’s intent to be used for specific purposes, but that are neither Restricted nor Committed. Such intent needs to be established either by the District or by an official designated for that purpose. This category was traditionally reported as a “designated” fund balance under the old standard.

Unassigned Fund balance. The portion of a fund balance that includes amounts that do not fall into one of the above four categories. The General Fund is the only fund that should report this category of fund balance. This category was traditionally reported as an “undesignated” fund balance under the old standard.

Part of the District’s implementation of this statement for is the formal adoption of a fund balance policy. The policy explains the five components of fund balance and formally delegates to the Administrative Services Manager/Chief Financial Officer, as required by GASB Statement No. 54, the authority to assign fund balances for specific purposes for inclusion in the annual financial reports. Prior to GASB Statement No. 54, these amounts were reported by the Administrative Services Manager/Chief Financial Officer as Reserved, Designated, and Undesignated and did not require Board delegation.

The District’s independent auditor, Hayashi & Wayland, has reviewed the draft Policy and concurs with its recommendations.

RECOMMENDATION: District staff recommends that the Board adopt Resolution approving the Fund Balance Policy implementing GASB Statement No. 54.

EXHIBITS

3-A Proposed Resolution and Attachment 1, Proposed GASB 54 Fund Balance Policy

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