Recopilación de información de detalle sobre los objetivos de conservación de la ZEPA ES0000304

GASB standards provide the same accounting option for recording prepayments (such as prepaid insurance and prepaid rent) as they do for materials and supplies. Thus, if expenditures for insurance and similar services cover more than one accounting period, they may be allocated among the affected accounting periods (the consumption method), or they may be accounted for as expenditures in the year of acquisition (the purchases method). Unlike the approach to year- end inventories, the standards are silent regarding the need for reporting significant amounts of unexpired insurance and other prepayments as assets; nevertheless, the preparer may choose to do so if prepayments are considered material.

Although the consumption method may be used, General Fund and Special Revenue Fund expenditures for insurance and rent that cover more than one accounting period typically are charged to the accounting period in which the services are acquired (the purchases method), and prepaid amounts are not considered significant. Thus, if resources of $60,000 are used to acquire a 3-year insurance policy in 2013 for General Fund activities, the following journal entry is made in the General Fund in 2013, and no year-end adjustment is made:

Expenditures—insurance 60,000

Vouchers payable 60,000

To record acquisition of 3-year insurance policy.

Warrants

Some governments require that, before a check can be written and payment made, a warrant be prepared. A warrant is an order, drawn by the appropriate authority, requesting the treasurer (or someone designated by that person) to pay a specified sum of money to a particular person or organization. Its purpose is to assist in preventing unauthorized payments. No journal entries are needed when warrants are prepared.

FUND BALANCE PRESENTATION

As noted previously, the net assets of a governmental-type fund—the difference between the total assets and the total liabilities—is called “fund balance.” Several references to fund balance in this chapter were preceded by terms like Restricted, Nonspendable, and Unassigned. For example, 27 _{As a practical matter, many governments use the purchases method and do not consider the year-end inventory to be}

significant. Note that we record significant inventory amounts with a direct credit to fund balance. Some writers prefer recording the inventory with a credit to Other financing sources. We suggest the latter method is inconsistent with the purchases method because it changes the year’s operating results and effectively converts the purchases method to the consumption method.

when discussing intergovernmental grants, we said that unspent resources on grants with pur- pose restrictions should be classified as “restricted” fund balance. We now discuss all the classifi- cations of fund balance used in financial reporting and the implications the reader of financial statements may draw from them.

As shown in Table 2-4 of Chapter 2 , all governmental-type funds other than the General Fund are used to account for resources that are restricted or otherwise limited to spending for specific purposes or functions . But even within the purpose or function limitations, there are vary- ing degrees of constraint; for example, a constitutional or contractual requirement regarding the use of resources is far more constraining on a government than an expression of intent by the government’s legislature. Further, use of some of the General Fund resources also may be con- strained in varying degrees by the requirements of a higher-level government or by actions of local governmental officials. Users of General Fund financial statements, in particular, need to know the extent and the nature of these constraints so they can determine how much of the fund balance is available for future general-purpose spending.

To provide information on the availability of fund balances, GASB Statement No. 54 requires the fund balance sections of governmental-type fund balance sheets to be reported in five potential classifications, based on the extent to which the entity is bound to honor constraints on the purposes for which fund balances may be spent. The classifications, in descending order of constraint, are Nonspendable, Restricted, Committed, Assigned, and Unassigned.

Not all governments are likely to have all five fund balance classifications in a given year. Only the General Fund can have a positive Unassigned fund balance. Also, by definition, the fund balances of Special Revenue Funds, Capital Projects Funds, Debt Service Funds, and Permanent Funds have been assigned for some specific purpose or function; hence, the fund balances for those funds are classified at least as Assigned. Descriptions and illustrations of the five fund bal- ance classifications follow.

Fund Balance Classifications

NONSPENDABLE FUND BALANCE Fund balances classified as nonspendable are amounts that are not available for appropriation because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. For example,

• Resources are reported in governmental-type fund balance sheets when the government accounts for supplies on the purchases method and has significant amounts of inventory at year-end. A government may also report prepaid items in this manner. As shown on page 151, recording the inventory asset or the prepayment results in a corresponding credit to Nonspendable fund balance.

• Longer-term interfund loans result in receivables that are not currently available for spend- ing. Therefore, when such loans are recorded, there also needs to be a reclassification of the amount loaned from Unassigned to Nonspendable fund balance. Notice the interfund loan ($760,000) made by the Mt. Lebanon General Fund (page 30) and the related Nonspend- able fund balance.

• The corpus of a Permanent Fund is legally or contractually required to be maintained intact and is reported as Nonspendable fund balance, as shown in Table 6-11 on page 212.

RESTRICTED FUND BALANCE Fund balances classified as restricted have the most binding degree of constraint because the related resources can be used for no purpose other than that

specified in the constitutional provision, enabling legislation, or contractual provision creating the restriction. Specifically, such constraints may be either

a. Externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or

b. Imposed by law through constitutional provisions or enabling legislation. 28

GASB Statement No. 54 defines “enabling legislation” as legislation that authorizes the gov- ernment to mandate payment of resources (from external resource providers) and includes a legally enforceable requirement that the resources be used only for the purposes stipulated in the legislation. A “legally enforceable requirement” is one whereby the government can be compelled by external parties (such as citizens and the judiciary) to use the resources only as stipulated in the legislation.

Examples of transactions and events creating Restricted fund balance follows:

• The government receives an intergovernmental grant that contains a purpose restriction, as discussed in the earlier section on “Intergovernmental Grants.”

• A local government statute authorizes a specific tax or fee for a specified purpose (such as a hotel occupancy tax, levied specifically for beautifying the downtown business district), and legal enforceability regarding use of the tax is established by case law or discussion with governmental counsel.

• Based on a voter-approved proposition, a bond agreement states the specific purpose for which the proceeds of debt will be used.

• A bond agreement requires that 1 year’s debt service be maintained with a trustee until the debt from a particular bond issue is fully redeemed.

COMMITTED FUND BALANCE Fund balances classified as committed are amounts that are constrained as to use as a result of formal action (legislation, resolution, or ordinance) of the gov- ernment’s highest level of decision-making authority . These actions require consent of both the legislative and executive branches of government, where applicable.

Amounts classified as committed are distinguished from amounts classified as “restricted by enabling legislation” in that (a) amounts committed may be deployed to other uses through the same types of due process action (legislation, resolution, or ordinance) that created the com- mitment and (b) constraints on the use of committed amounts are imposed by the government separately from the authorization to raise the underlying revenue. Therefore, compliance with the commitment of resources to specific purposes is not considered “legally enforceable,” as previ- ously defined.

To illustrate, refer to the previous illustration of restricted resources regarding the hotel occupancy tax. If legal enforceability regarding the decision to use the resources to beautify the downtown area has not been established, then the fund balance should be classified as commit- ted, rather than restricted.

ASSIGNED FUND BALANCE Amounts constrained by a government’s intent to spend resources for specific purposes are classified as assigned. The intent to spend may be expressed either by the government’s governing body or a body (such as a budget committee) or official to which the governing body has delegated that authority. Constraints imposed on assigned amounts can be 28 _{GASB Cod. Sec. 1800.134.}

more easily removed than those imposed on restricted or committed amounts because (a) assigned constraints are not imposed externally and (b) internal authority to impose the con- straint need not be at the highest level of decision making. In no event can the amounts assigned be so great as to create a deficit in Unassigned fund balance.

Any fund balance in a governmental-type fund other than the General Fund that is not class- ified as nonspendable, restricted, or committed should be classified as assigned. Classifying these amounts as assigned reinforces the point that net assets reported in Special Revenue Funds, Capi- tal Projects Funds, and Debt Service Funds cannot be used for the government’s general purposes.

Here are some illustrations of Assigned fund balances:

• The city council’s Finance Committee expresses written intent to use part of the General Fund balance for future spending on street lighting, but no appropriation has been made as yet for that purpose. Notice that the General Fund column of Mt. Lebanon’s balance sheet on page 30 contains such assignments; they are intended for future pension obligations and winter storm costs.

• The governing body appropriates a portion of the government’s year-end fund balance to eliminate an anticipated budgetary deficit in the subsequent year’s budget equal to the pro- jected excess of expected expenditures over expected revenues. Notice that the General Fund column of Mt. Lebanon’s balance sheet on page 30 contains such an assignment.

UNASSIGNED FUND BALANCE Unassigned fund balance is the residual classification for the General Fund only. The amount reported as unassigned is available for spending for any legal purpose. From the perspective of both internal financial statement users and external analysts, the Unassigned fund balance is available as a cushion against revenue shortfalls caused by eco- nomic contraction and as a means of financing any future needs. It should also be noted that, because of the ease in removing the constraints, much of the Assigned fund balance probably can be accessed readily for general purposes, if needed.

Accounting for and Reporting on Fund Balance Classifications

The composition of governmental fund balance is essentially a year-end financial reporting pro- cess; that is, data accumulated within the accounting system should enable the financial state- ment preparer to make the appropriate classifications for financial reporting purposes. In fact, the original journal entries made to record some transactions, such as Advances to other funds, result in recording Nonspendable fund balances.

If a government has restricted resources from grants, internal records are generally needed for billing and for determining how much has been spent on the grant. If a government uses both restricted and unrestricted resources to finance a particular program, it should compute the com- position of year-end fund balances by applying its accounting policies regarding the order in which expenditures were incurred during the year.

Judgment may be needed in making some classifications. For example, suppose a govern- ment receives a grant with a requirement that it match the grant with its own resources. It accounts for the grant in a Special Revenue Fund and classifies the resources as Restricted fund balance. If it transfers General Fund resources to that fund to make the match, year-end balances of the transferred resources also would be classified as Restricted fund balance. 29

Effect of Year-End Encumbrances on Fund Balance Classification

In Chapters 3 and 4 , we assumed all materials and services ordered (and encumbered) during the fiscal year are received on or before the year’s end. In reality, however, not all items ordered dur- ing the year are received in the same year, particularly when the orders are placed toward the end of the year. As discussed in Chapter 3 , encumbrances are a constraint on the amount available for spending. What happens to encumbrances that are still open at year-end, and how does that affect the classification of fund balance?

Laws differ among jurisdictions regarding unexpended appropriations at year-end. Some gov- ernments allow the encumbered portions of their unexpended appropriations at year-end to remain open. When the supplies or services are received, they are charged against the open appropriation of the year for which they were budgeted. More often, the appropriations lapse at the end of the year and become void as spending authority. In that case, expenditures relating to the open encumbrances will be charged to the following year’s appropriations. Regardless of how they are handled for budget purposes, however, year-end open encumbrances are not expenditures, and liabilities for financial accounting purposes are not recorded until the year the supplies or services are received.

To the extent that the entity’s fund balances have been classified as restricted, committed, or assigned, amounts encumbered within those classifications should not be displayed separately in the fund balance section of the balance sheet because the classification itself adequately describes the constraint. However, amounts encumbered from unassigned resources should be reported as Assigned fund balance because the authority given to the person that places the order results in that amount meeting the criteria for classification as assigned. Because the revenue, expenditure, and transfer accounts are closed to Unassigned fund balance when the books are closed, as described in Chapter 4 , the following journal entry is needed to reclassify open encum- brances at year-end (if not previously classified as restricted, committed, or assigned) from Unas- signed fund balance to Assigned fund balance (amounts assumed):

Unassigned fund balance 100,000

Assigned fund balance 100,000

To classify year-end open encumbrances as assigned. This journal entry will be reversed at the start of the next year.

In addition, because all budgetary account balances need to be closed at year-end, the fol- lowing entry is needed:

Budgetary fund balance reserved for encumbrances 100,000

Encumbrances 100,000

To close year-end outstanding encumbrances.

At the start of the next year, the encumbrances are reestablished by means of a debit to Encum- brances and a credit to Budgetary fund balance reserved for encumbrances.