Statement No. 54 of the Governmental Accounting Standards Board (GASB 54) establishes
accounting and financial reporting standards for all governments that report governmental funds.
GASB 54 establishes criteria for classifying fund balances and clarifies definitions for governmental
Actions Leading to Restricted, Committed, and Assigned Fund Balances
For committed fund balances (as defined in GASB 54), the Farmington R-7 School District’s
(District) highest level of decision- making authority is the Board of Education. Restrictions are
authorized by the Board based on recommended fund placement in the original adopted and later
revised budget, as well as by Board resolution. Further, the Board delegates the authority to assign
amounts for specific purpose(s) to the superintendent or designee.
1. Nonspendable Fund Balance – Consists of funds that cannot be spent due to their form (such
as inventory) or funds that legally or contractually must be maintained intact.
2. Restricted Fund Balance – Consists of funds that are mandated for a specific purpose by
external parties, constitutional provisions or enabling legislation.
3. Committed Fund Balance – Consists of funds that are set aside for a specific purpose by the
District’s highest level of decision-making authority. Formal action must be taken prior to
the end of the fiscal year. The same formal action must be taken to remove or change the
limitations placed on the funds.
4. Assigned Fund Balance – Consists of funds that are set aside with the intent to be used for
a specific purpose by the District’s highest level of decision-making authority or a designee
who has been given the authority to assign funds. Assigned funds cannot cause a deficit in
unassigned fund balance.
5. Unassigned Fund Balance – Consists of excess funds that have not been classified in the
previous four (4) categories. All funds in this category are considered spendable resources.
This category also provides the resources necessary to meet unexpected expenditures and
Order of Spending
For all funds except the Debt Service Fund, the Board may consider the order of spending as
restricted, committed, assigned, and then unassigned amounts as available. For the Debt Service
Fund, the Board may approve unrestricted or assigned balances to be spent prior to restricted
balances, allowing the spending of interest prior to principal. The year end audit process will
establish the fund balance restriction recommendations for classifying remaining fund balances as
required by GASB 54.
Governmental Fund Types
State rules for public school finance require the Teachers Fund (Special Revenue Fund) be used to
account for revenue sources legally restricted to expenditures for the purpose of teachers’ salaries
and benefits and tuition payments to other school districts as outlined by the Annual Secretary of the
Board Report (ASBR). Substantial sources of revenue for the Teachers Fund will be through
transfers from general fund balances and the required state basic formula and Proposition C sales tax
allocations. The Board establishes the Teachers Fund as a special revenue fund, and a major fund,
in the financial statements.
Minimum Unrestricted Fund Balance
The District shall maintain sufficient financial reserves to provide for prudent financial management
and for adequacy of cash flow to support operations. The operating fund balance is the combined
fund balances for the Teachers', Incidental, and Capital Projects Funds. These reserves include
elements for an operating reserve and a financial stabilization reserve. The appropriate amount for
the operating reserve fund should be reviewed periodically. The District will strive to maintain
minimum undesignated operating fund balances of 15 percent of its prior year operating
As fund balances approach the 15 percent Board-established minimum reserve balance, the Board
may determine necessary action to include, but not be limited to, a levy election or significant budget
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Note: The reader is encouraged to check the index located at the beginning of this section
for other pertinent policies and to review administrative procedures and/or forms for
Farmington R-7 School District, Farmington, Missouri
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