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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

General Accounting

Fund Balance/Net Position
Governmental Funds

Introduction

GASB 54 significantly changed the focus of fund balance reporting in two major areas — fund balance classifications and fund type definitions. For more information on the fund type definitions, see Governmental Funds.

Fund balance is reported from the perspective of the underlying resources within fund balance. GASB 54 components of fund balance identify constraints on how resources can be spent and the sources of those constraints. Agencies should note that there is not a one-to-one crosswalk from the old fund balance classifications to the GASB 54 fund balance classifications. GASB 54 does not affect the government-wide or accrual-based statement presentations and it does not change the amount of total fund balance on any fund statements.

Governmental fund balance classification is reported in Note 32 — Fund Balances. For the recommended format, see Note 32 Sample.

Fund Balance Classifications

The fund balance classifications discussed below apply to all governmental funds — general funds, special revenue funds, debt service funds, capital projects funds and permanent funds.

Classification Definition Example
* The long-term portion of loans and receivables can be classified as nonspendable in general revenue fund 0001 only. For all other governmental funds, classify the long-term portion of loans and receivables as restricted, committed or assigned, depending on the loan or receivable constraints.
Nonspendable This classification includes amounts that cannot be spent because they are either:
  • Not in a spendable form.
    –OR–
  • Legally or contractually required to be maintained intact.
Corpus (or principal) of a permanent fund, consumable inventories, merchandise inventories, prepaid items, long-term portion of loans and receivables (general revenue fund 0001 only).*
Restricted This fund balance is reported as restricted when constraints placed on the use of resources are either:
  • Externally imposed by creditors (such as debt covenants), grantors, contributors, or laws and regulations of other governments.
    –OR–
  • Imposed by law through constitutional provisions or enabling legislation.

Restrictions in place by the Texas Constitution, the federal government, debt covenants and/or external parties.

Debt Service funds (FT03) has a restricted fund balance.

Committed

Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the state’s highest level of decision-making authority (the Legislature) are reported as committed fund balance.

Those committed amounts cannot be used for any other purpose unless the Legislature removes or changes the specified use by taking the same type of action it employed to previously commit those amounts.

Restrained for use by state legislative action (such as a law becoming state statute).

Many of the General Revenue-Dedicated funds have a committed fund balance.

Assigned Amounts constrained by the agency’s intent to be used for specific purposes that are neither restricted nor committed are reported as assigned fund balance. Restrained for use by agency governing board and/or agency head.
Unassigned

This is the residual classification for the general fund. The net resources of the general fund in excess of nonspendable, restricted, committed and assigned fund balances (a surplus fund balance) are classified as unassigned fund balance.

In all other governmental funds, the excess of nonspendable, restricted and committed fund balances over total fund balance (a deficit fund balance) is classified as unassigned.

Note: With the exception of the stabilization fund, the general revenue fund (fund 0001) is the only fund that can report a positive unassigned fund balance.

The stabilization fund (“the rainy day fund”) has an unassigned fund balance if it does not meet the criteria of specific conditions.

Classifying Fund Balance Amounts

  • Determine the nonspendable fund balance before classifying other fund balance components.
  • Determine the spendable components (restricted, committed, assigned and unassigned) by using the Comptroller’s Manual of Accounts and relevant statutes to analyze the funds. In the state of Texas, the majority of funds are created by the Legislature for a specific purpose.
  • In the uncommon situation where funds are created for multiple purposes, an agency determines the spendable components based on the categorization of inflows and the agency’s spending policy on whether restricted or unrestricted amounts are spent first when both are available. If no policy exists for the order of the use of unrestricted resources, the default order is:
    1. Committed
    2. Assigned
    3. Unassigned
  • Restrictions can be imposed by enabling legislation, provided the enabling legislation meets the following criteria:
    • The legislation authorizes the agency to levy, assess or charge external resource providers.
      –AND–
    • The legislation includes a legally enforceable requirement that the resources be used for a particular purpose specified in the same legislation (that is, the same legislation that creates the revenue source also creates the use restriction).

The enabling legislation criteria are not met if any one of the following conditions is present. In these instances, classify the fund balance as committed rather than restricted.

  • The use restriction is imposed unilaterally by legislation separately from the legislation that created the revenue source.
  • The allocation or earmarking of existing resource inflows by separate legislation.
  • The use of constraints is not legally enforceable.
  • Amounts may be redeployed for other purposes with appropriate due process.

There are currently no fund balances for agencies that meet the “restricted by enabling legislation” requirements.

  • Do not report negative (deficit) restricted, committed or assigned balances. If the total fund balance is negative, a fund balance allocation transaction must be entered to USAS to reclassify the negative fund balance to the unassigned fund balance GL 2325. To determine if the fund balance is negative, review the DAFR8580 summarized at the D24 GAAP fund (level 3).
  • Categorizing a positive (surplus) fund balance as assigned cannot result in a negative (deficit) unassigned fund balance.
  • Only general revenue fund 0001 can report a positive (surplus) unassigned fund balance. All other governmental funds must be reported at least at the assigned fund balance level.
  • Restricted, committed or assigned fund balances cannot be greater than the total fund balance.
  • A negative unassigned fund balance can only be reported if the total fund balance is negative, and only after all other fund balance classifications are exhausted.

Fund Balance Allocation Examples

The following examples illustrate the classification of fund balance in governmental funds. If you have any questions or need further clarification of fund balance requirements, contact your financial reporting analyst.

Example 1

A GR-Dedicated fund (FT01) has a deficit income summary (current year expenditures exceeded current year revenues), resulting in a negative unassigned fund balance. Since the GR-Dedicated fund is classified as fund type FT01, USAS automatically closes income summary to the unassigned GL 2325. Fiscal year-end fund balances are:


Fund Balances (Deficits): Amount
Restricted $  100.00 
Committed 150.00 
Assigned 175.00 
Unassigned (75.00)
Total Fund Balances $  350.00 

Because a positive assigned fund balance cannot be reported with a negative unassigned fund balance, and a negative unassigned fund balance can only be presented if the total fund balance is negative — record an adjustment in USAS to allocate the unassigned fund balance of $(75.00) to the assigned fund balance. Once the allocation transaction processes, fiscal year-end fund balances are:


Fund Balances (Deficits): Amount
Restricted $  100.00
Committed 150.00
Assigned 100.00
Unassigned 0.00
Total Fund Balances $  350.00

Example 2

Example 2 uses the same scenario as in Example 1, except the assigned fund balance is insufficient to absorb the entire negative unassigned fund balance. Fiscal year-end fund balances are:


Fund Balances (Deficits): Amount
Restricted $  100.00 
Committed 150.00 
Assigned 175.00 
Unassigned (200.00)
Total Fund Balances $  225.00 

To correct these fund balances:

  1. Eliminate the assigned fund balance by allocating it to the unassigned fund balance. This leaves $(25.00) in the unassigned fund balance.
  2. Eliminate the remaining ($25.00) by allocating the amount from the committed fund balance to the unassigned fund balance.

Once all USAS allocation transactions process, fiscal year-end fund balances are:


Fund Balances (Deficits): Amount
Restricted $  100.00
Committed 125.00
Assigned 0.00
Unassigned 0.00
Total Fund Balances $  225.00

Example 3

In the scenario below, rather than a positive (surplus) total fund balance as in Example 1, the income summary for the current fiscal year creates a negative (deficit) total fund balance:


Fund Balances (Deficits): Amount
Restricted $  100.00 
Committed 150.00 
Assigned 175.00 
Unassigned (500.00)
Total Fund Balances $   (75.00)

To correct these fund balances, process a USAS entry to eliminate the negative unassigned fund balance by allocating resources from the other fund balance classifications. Because the total fund balance is negative, there will still be a negative unassigned balance. Once all allocation transactions process, fiscal year-end fund balances are:


Fund Balances (Deficits): Amount
Restricted $     0.00 
Committed 0.00 
Assigned 0.00 
Unassigned (75.00)
Total Fund Balances $  (75.00)

Example 4

If an agency has a fund that does not close to the unassigned fund balance, the fund balance allocation process is different.

For example, the income summary for special revenue funds (FT02) automatically closes to restricted fund balance GL 2310. If the total fund balance is positive, a surplus or deficit balance in the unassigned fund balance is not allowed. The fund balance is reported as a restricted fund balance.

Example 5

However, if the total fund balance is negative, allocation entries are required to reclassify the fund balance from restricted to unassigned — since the restricted fund balance cannot report a negative amount.

Fiscal year-end fund balances are:


Fund Balances (Deficits): Amount
Restricted $ (250.00)
Total Fund Balances $ (250.00)

Process a USAS entry to allocate the negative restricted fund balance to the unassigned fund balance. Once all allocation transactions process, fiscal year-end fund balances are:


Fund Balances (Deficits): Amount
Restricted $      0.00 
Unassigned (250.00)
Total Fund Balances $ (250.00)

USAS General Ledger Accounts

The following GL accounts are used to record fund balances in USAS.

Classification USAS GL Account Number USAS GL Account Name
Nonspendable 2300 Fd Bal – NonSpnd for Permanent Fund Corpus
Nonspendable 2301 Fd Bal – NonSpnd for Inventory
Nonspendable 2302 Fd Bal – NonSpnd for Prepaid Items
Nonspendable 2303 Fd Bal – NonSpnd for LT Loans, Contracts and Receivables
Restricted 2310 Fd Bal – Restricted
Committed 2315 Fd Bal – Committed
Assigned 2320 Fd Bal – Assigned
Unassigned 2325 Fd Bal – Unassigned

Encumbrances

A fund balance constraint specific to encumbrances similar to “reserved for encumbrances” is no longer reported. This does not impact the process of recording encumbrances in USAS for budgetary purposes. For more information, see Encumbrance Report and Lapsing of Appropriations (APS 018) (FPP A.019).

Include encumbered funds in the restricted, committed or assigned category based on the constraints placed on them.

Amounts encumbered for a specific purpose may be reported as assigned fund balance only if the resources:

  • Are not already considered to be reportable as restricted or committed fund balance
  • Will not result in a negative unassigned fund balance

The Comptroller’s office does not require that encumbrances be disclosed in agencies’ notes to the financial statements as this information is not used in the compilation of the state of Texas CAFR. However, agencies may choose to disclose encumbrances in their AFR notes to the financial statements.

Imprest Accounts

Imprest accounts (previously categorized as “Fund Balance Reserved for Imprest Accounts”) are not reported as a separate fund balance category and are not classified in a different category from the remainder of the fund balance (that is, restricted, committed or assigned).

For fund balance allocation templates, see the Working Papers.

Government-wide Statement of Net Position Basis Conversion GL’s

The following basis conversion GLs are used to record the components of net position for governmental funds.

Net Position, Net Investment in Capital Assets (GL 3505) – The difference between assets, deferred outflows, deferred inflows and liabilities that consists of capital assets (including restricted capital assets) less:

  • Accumulated depreciation
  • Accumulated amortization (except for accretion on capital appreciation bonds)
  • The outstanding balance of debt directly attributable to the acquisition, construction or improvement of those assets
  • Deferred outflows and deferred inflows of resources attributable to the acquisition, construction or improvement of those assets or related debt

The portion of debt or deferred inflows of resources attributable to the unspent amount of related debt proceeds or deferred inflows of resources at fiscal year-end is included in the same net position component (restricted or unrestricted) as the unspent amount — not in the calculation of net position, net investment in capital assets.

Restricted Net Position – The difference between assets, deferred outflows, deferred inflows and liabilities that consists of assets with constraints placed on their use that are either:

  • Externally imposed by creditors, grantors, contributors or laws/regulations of other governments.
    –OR–
  • Imposed by law through enabling legislation.

Record restricted net position to the following GLs:

  • GL 3700 basis conversion net position restricted for debt retirement
  • GL 3705 basis conversion net position restricted for capital projects
  • GL 3710 basis conversion net position restricted for education
  • GL 3715 basis conversion net position restricted for transportation
  • GL 3795 basis conversion net position restricted for other

Record nonexpendable restricted net position to the following GLs:

  • GL 3800 basis conversion nonexpendable net position restricted for permanent school fund
  • GL 3840 basis conversion nonexpendable net position restricted for endowment funds
  • GL 3845 basis conversion nonexpendable net position restricted for permanent funds

Record expendable restricted net position to the following GLs:

  • GL 3890 basis conversion expendable net position restricted for endowment funds
  • GL 3895 basis conversion expendable net position restricted for permanent funds

Unrestricted Net Position – The difference between the assets, deferred outflows, deferred inflows and liabilities not reported as net position, net investment in capital assets or restricted net position.

Record unrestricted net position to the following GLs:

  • GL 3900 basis conversion net position unrestricted – permanent health fund
  • GL 3950 basis conversion unrestricted net position
Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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