Governmental Resources


The requirements for financial reporting are subject to periodic change depending on new pronouncements and/or rules issued by various governing bodies. The Government Accounting Standards Board (GASB) is responsible for establishing generally accepted accounting principles (GAAP) for state and local governments.

In March 2009, the GASB issued Statement No. 54, “Fund Balance Reporting and Governmental Fund Type Definitions.” The objective of this Statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. This Statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds.

The purpose of this information is to assist you and your organization in preparing for the reporting requirements of GASB 54 and to notify you of the possibility that policy changes may need to be considered as you approach adoption of this statement, which is effective for periods beginning after June 15, 2010.

The following list is intended to provide guidance to assist in a smooth implementation of GASB 54 and should be performed well in advance of the implementation date:

  1. Review the new fund balance categories: nonspendable, restricted, committed, assigned and unassigned. The new categories and terminology reflect an innovative approach that will focus, not on financial resources available for appropriation, but on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in the fund can be spent. Not all governments will have all five components of fund balance. Determining the components of fund balance will be an annual exercise performed as part of the year-end financial reporting. Controls should be developed and implemented over this aspect of financial reporting; of course, these controls will also need to be documented.
  2. Review current policies and procedures to determine if resources would meet the definition of committed or assigned. Additional policies may need to be adopted or revised in order for them to be consistent with the new definitions. For example, a policy should be established to address whether the government considers restricted or unrestricted (committed, assigned, or unassigned) amounts to have been spent when an expenditure is incurred for purposes for which both restricted and unrestricted amounts are available. Likewise, a policy should be established to address the order in which committed, assigned, or unassigned amounts are considered to have been spent when an expenditure is incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used.

    In addition, a fund balance policy should be adopted that establishes a minimum level at which unrestricted fund balance is to be maintained. A comprehensive fund balance policy should address all of the following:
    - The appropriate level of unrestricted fund balance to be maintained in the General Fund;
    - The circumstances in which unrestricted fund balance can be spent down; and
    - The policy for replenishing deficiencies.
  3. Determine if current special revenue funds meet the revised definition for such funds. Special revenue funds that do not meet the revised fund definition will be reported as part of the general fund. Because the budget cycle for the General Fund occurs several months before the beginning of the fiscal year, it is important to know where certain resources will be reported at the start of the budget process.
  4. Gather information required to be disclosed in the notes to the financial statements. Specifically, the following will be required to be disclosed about amounts reported in fund balance:

    • A description of authority and actions that lead to committed and assigned fund balance.
    • The government’s policy regarding order of spending regarding restricted and unrestricted fund balance and the order of spending for
    • For any stabilization arrangements, the authority for establishing, requirements for additions and the conditions under which amounts may be used. If not reported on the face of the financial statements, the stabilization balance.
    • A description of any formally adopted minimum fund balance policies.
    • The purpose of each major special revenue fund and which revenue sources are reported in each of those funds.
    • Encumbrances, if significant, are reported in conjunction with other disclosures of significant commitments.

A summary of Statement No. 54 is available at and the entire GASB Statement No. 54 may be purchased at In addition, a Power Point presentation including examples can be found on our website (please see the link below)

We anticipate that implementing this standard, particularly in the first year will result in an overall increase in effort by both management and your audit team. As always, we encourage you to contact us either by phone or email regarding any questions you may have or if you would like assistance with the implementation of the new standard.

Yours very truly,

Schowalter & Jabouri, P.C. Assurance Services Team

Click here to view the GASB 54 Power Point Presentation.