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GASB Statement#54 Fund Balance Classircations 30 Classification Definition Examples Amounts that cannot be spent because they are either; * Inventories Nonspendable *Prepaid items a) Not in a spendable form. * Long-term receivables b) Legally or contractually *Permanent principal of endowment funds required to be maintained intact. Amounts that have constraints placed on them by either; * Restricted by State Statute Restricted *Unspent bond proceeds a) External creditors such as debt * Grants earned,but not spent covenants,grantors, * Debt covenants contributors,or laws or * Taxes dedicated to a specific purpose regulations of another * Revenues restricted by enabling government legislation b) Law through constitutional provisions or enabling legislation Amounts that have constraints placed * The City Council decides to set aside Unrestricted—Committed on them by formal action of the monies for a new facility government's highest level of decision- *Property tax levies set for a specific making authority. purpose by resolution Amounts that are constrained by the * The City Council delegates the authority Unrestricted—Assigned government's intent to be used for to assign fund balances in specific-purpose specific purposes,but are neither funds to the City Manager or Finance restricted nor committed. Director Applies solely to the General Fund,and Unrestricted-Unassigned includes any amounts not reported under *Not applicable other classifications. 31 33 Staff will add that the `Unrestricted-Assigned' classification will allow Staff to use available monies to 34 accommodate both operational and capital needs within each Fund,as prescribed by the Budget and Capital 35 Improvement Plan. In contrast, the `Unrestricted-Committed' classification is perhaps best reserved for 36 specific purchases or initiatives that have a strong commitment from the City Council and may require 37 long-term financial decision-making. 38 39 City Staff has reviewed the classifications defined under GASB Statement#54. The table shown in Exhibit o B of Attachment A depicts the City's General and special purpose funds along with the recommended fund balance category. 3 It is further recommended that any ancillary revenues such as interest earnings should be categorized in the """'YP"""'YP same manner as the foundational revenue used to initially establish the fund. 46 GASB Statement#54 also prescribes the adoption of a Fund Balance Policy and Spending Prioritization 47 Policy. The City already has an existing Fund Balance Policy. Therefore, it is suggested that a spending prioritization statement and corrective action statement simply be included in that Policy to maintain 49 compliance with GASB Statement #54. A revised Fund Balance Policy in markup form is included in 5o Exhibit of Attachment A. 51 Page 2 of 7