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'rv°'rO'~ o" STATE OF MINNESOTA <br /> <br />a~~ 1' OFFICE OF THE STATE AUDITOR <br />f_ <br />~ <br />~s. ay~ SUITE 500 <br />'' <br />~T~'~4'~ <br />`~Om <br />~``r 525 PARK STREET (65 q 296-2551 (Voice) <br />r <br />. <br />,~, ' (651) 296-4755 (Fax) <br />REBECCA O'f"f0 SAINT PAUL, MN <br />55103-2139 slate.auditor(a)state.mn.us (E-mail) <br />STATE AUDITOR 1-R00-627-3529 (Relay Service) <br />Statement of Position <br />Fund Balances for Local Governments <br />Back rg ound <br />In governmental fundst, a local government should identify fund balance separately <br />between reserved and unreserved fund balance. The local government may assign and <br />report some or all of the unreserved fund balance as designated and undesignated. This <br />statement of position is based on generally accepted accounting principles (GAAP) for <br />government as established by the Governmental Accounting Standards Board. Future <br />changes in GAAP may result in a change in the position of the Office of the State <br />Auditor. <br />Reserved Fund Balance <br />The function of reserved fund balance is to separate the portion of fund balance that is <br />nat appropriable for expenditure or is legally segregated for specific future uses, so that <br />the unreserved, fund balance can serve as a measure of current available financial <br />resources. <br />Under GAAP, the portion of fund balance that meets the following criteria should be <br />classified as reserved: <br />• Kesources not available Jor spending. Some of the assets reported in <br />governmental funds are not available far spending in the subsequent year's <br />budget. For example, along-term loan receivable, such as an advance to another <br />fund, is not available for current spending. Likewise, local governments that <br />report supplies, inventories, and prepaid items in governmental funds typically <br />would report a corresponding amount of reserved fund balance to indicate that <br />these amounts are not actually available for spending. <br />• Legal restrictions on spending. Fund balance also is reserved to indicate situations <br />where a portion of fund balance is not available for new spending because of legal <br />Governmental fund reporting focuses primarily on the sources, uses, and balances of current financial <br />resources and often has a budgetary orientation. The governmental fund category includes the general fund, <br />special revenue funds, capital projects funds, debt service funds, and permanent funds. (Codification of <br />Governmental Accounting and Financial Reporting Standards §1300.102). <br />Reviewed: January 2008 <br />Revised: NA 2007-1022 <br />