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~~`"" "''~~~ STATE OF MINNESOTA <br />~~~~':~ i OFFICE OF THE STATE AUDITOR <br />~ >~ , <br />: <br />~~ <br />` <br />ws;. <br />' ~~ ` SUITE 500 <br />. <br />~'~"``•~'~- 525 PARK STREET (651) 296-2551 (Voice) <br />(651) 296-4755 (Fax) <br />REBECCA OTTO SAINT PAUL, MN 55103-2139 state.auditor(astate.mn.us (F..-mail) <br />STATE AUDITOR 1-800-627-3529 (Relay Service) <br />Statement of Position <br />Fund Balances for Local Governments <br />In governmental fundsl, 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 />Back;;round <br />Reserved Fund Balance <br />The function of reserved fund balance is to separate the portion of fund balance that is <br />not 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 />Resources not available for spending. Some of the assets reported in <br />governmental funds are not available for 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 />