Budget Badge #06 - Budget: Fund Balance-Budget Badge #6

Budget Badge #6 - PowerPoint

Pdf Summary

This document explains school district fund balance (also called equity/fund equity), defined as the net position of governmental funds: total assets minus total liabilities, or the cumulative excess of revenues over expenditures. It shows how fund balance changes during a fiscal year: revenues minus expenditures produce the annual surplus/deficit, which added to beginning fund balance equals ending fund balance. Examples illustrate calculating fund balance from an assets/liabilities snapshot and from year-to-date revenues and expenditures.

The guide emphasizes that a district’s legal authority to spend and raise money is driven by the adopted budget, and that budgeted revenues plus available fund balance should cover planned expenditures.

Fund balance is reported in five categories: <strong>Nonspendable</strong> (not in spendable form, e.g., inventory/prepaids), <strong>Restricted</strong> (externally or legally constrained, such as state program carryovers), <strong>Committed</strong> (formally set by school board action/resolution), <strong>Assigned</strong> (intended for a purpose with less formal authorization, often by the superintendent/business official), and <strong>Unassigned</strong> (remaining unrestricted/undesignated balance).

The document outlines why fund balance matters: it indicates financial health, provides a cushion for revenue shortfalls or spending overruns (including cash-flow timing like fluctuating state apportionment payments), supports operational stability (reducing disruptive staffing and program cuts), and can affect bond ratings. It notes that “adequate” unassigned fund balance levels vary by district policy (e.g., WSSDA Policy 6022), with common targets of 5%–15% of expenditures/revenues and a GFOA recommendation of 10% unrestricted.

Finally, it stresses early fund balance projections using spreadsheets/cash-flow tools, considering enrollment impacts, revenue timing, encumbrances, major one-time purchases, and payroll (often 80%–85% of spending). It also references Washington budget extension deadlines (August 31) and includes knowledge checks and a final assessment requirement (75% to pass).

Keywords

school district fund balance

governmental funds equity

assets minus liabilities

annual surplus deficit calculation

fund balance categories GASB

nonspendable restricted committed assigned unassigned

budget authority and adopted budget

unassigned fund balance adequacy 5 to 15 percent

cash flow timing state apportionment

fund balance projections spreadsheets encumbrances payroll