posted March 1, 2017

GASB Statement No. 54 - A Refresher

by Joshua Jumper, CPA, CGFM, Audit Manager

The Governmental Accounting Standards Board (“GASB”) approved Statement 54 in February 2009 and made it effective for the fiscal year ending June 30, 2011. Implementation back in FY 10-11 required a deep analysis of an entities’ activity. In some cases, it also required the re-determination of how a certain fund is reported based on the activity of that fund. For example, the fund balance of non-general funds that don’t meet the definition of restricted fund balance are not allowed to be reported special revenue funds or capital project funds without a policy allowing assignments or commitments.

As a refresher, GASB Statement No. 54 created five “buckets” of fund balance:

  1. Nonspendable- Nonspendable fund balance classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. “Not in spendable form” includes items that are not expected to be converted to cash; most common examples are inventories and prepaid amounts.
  2. Restricted- Fund balance should be reported as restricted when constraints placed on the use of resources are either (1) externally imposed by creditors (i.e., debt covenants), grantors, contributors, or laws or regulations of other governments; or (2) imposed by law through constitutional provisions or enabling legislation.
  3. Committed– Committed amounts can only be used for specific purposes; these amounts are imposed by formal action of the government's highest level of decision-making authority. These amounts cannot be used for any other purpose unless the government removes or changes the specified use by taking the same type of action (e.g., legislation) it employed to previously commit these amounts.
  4. Assigned- Assigned amounts are intended to be used for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority.
  5. Unassigned- Unassigned fund balance is the residual classification for the General Fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund. The General Fund should be the only fund that reports a positive unassigned fund balance amount.

Now that we are over five years from of the initial implementation of this statement, it is a good time to review those initial classifications and determine if adjustments need to be made. Many clients of ours made those initial determinations and created a policy in the first year; however, not much has been done since to ensure that initial determinations are still accurate. In addition, we have clients that still don’t have a policy – it is never too late to create one! Moreover, there is a likelihood that the individual(s) that made those determinations or policy decisions are not in those same positions.


Another key item to reassess are stabilization arrangements or more commonly known as “rainy day” funds. GASB Statement 54 treats stabilization arrangements as a specific purpose, allowing governments to report these amounts in the general fund as restricted or committed, if they meet the applicable definitions and criteria. For financial reporting purposes, resources set aside under a stabilization arrangement may be expended only when certain specific circumstances or conditions exist that are not expected to occur routinely. This is commonly confused with minimum fund balance policies, which generally do not stipulate the conditions under which fund balance may fall below the minimum but, rather, establishes a target amount that the government believes should be maintained to provide a reasonable level of assurance that day-to-day operations can continue if revenues are insufficient to cover expenditures. In these cases, the minimum fund balance policy does not satisfy the GASB Statement 54 criteria to be reported as a stabilization arrangement and should be reflected within the category of unassigned.

Now is a good as any to review those policies and procedures and ensure they are meeting the needs of your organization today instead of meeting the needs of your organization five years ago!

The content of these pages is for general information purposes only and does not constitute advice. Heinfeld, Meech & Co., P.C. tries to provide content that is true and accurate as of the date of writing; however, we give no assurance or warranty regarding the accuracy, timeliness, or applicability of any of the contents.