Overview

In order to properly prepare for the implementation of Governmental Accounting Standards Board Statement No. 54, “Fund Balance Reporting and Governmental Fund Type Definitions” (“GASB54”), we are sending along this guidance and are requesting your help in a few key areas.

Implementation is required for fiscal years beginning after June 15, 2010. Therefore, counties, towns, cities and other local governments are required to implement for audits ending December 31, 2011. School districts and other local governments with a June 30th year-end are required to implement for their 2010–2011 fiscal year-end. Early implementation of GASB54 is permitted.

Because this new standard redefines what should be classified as a special revenue fund, we are asking each of our clients to assess all of their funds currently classified as such to ensure that they will still meet the definition. Definitions for debt service funds and capital projects funds largely remain the same, as does the General Fund.

Special Revenue Fund Guidance

Special revenue funds are “used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Specific revenue source should be the foundation for a special revenue fund.”

Therefore, in your assessment of each special revenue fund currently maintained, it may be that a particular fund does not meet this definition. If this should occur, there are currently two alternatives to select from:

• Close the fund up to the General Fund, or
• Consolidate up to the General Fund for financial reporting purposes only.

New Components of Fund Balance

GASB54 introduces five new components of fund balance that replace the current structure:

• Non-spendable: Inventories, prepaid items, long-term loans receivable, etc.
• Restricted: TABOR reserve, Conservation Trust, Debt Service balances, or other legally restricted amounts.
• Committed: Resources constrained by the government’s highest decision-making authority (e.g., via ordinance or resolution).
• Assigned: Intended use of resources (e.g., capital projects or special revenue balances not otherwise classified).
• Unassigned: Typically used for the General Fund or for deficit balances in other funds.

What We’re Asking Clients to Do

We are asking each of our clients to review their current chart of accounts in order to update accounts used to track this information. If certain accounts (e.g., non-spendable) are not currently maintained in the chart of accounts, the data may be captured in the draft financial statements. During fieldwork, we’ll evaluate whether updates are necessary.

Looking Ahead

As additional implementation guidance becomes available, we’ll notify you promptly. Please feel free to contact us with any questions or concerns. During fieldwork, we will take time to discuss specific needs for each of our clients.