The following policy has been adopted by the TADL Board of Trustees in order to address the implications of Governmental Accounting Standards Board (“GASB”) Statement No. 54, Fund Balance Reporting and Governmental Fund Definitions. The policy is created in consideration of unanticipated events that could adversely affect the financial condition of the Library and jeopardize the continuation of necessary public services. This policy will ensure that the Library maintains adequate fund balances and reserves in order to:
- Provide sufficient cash flow for daily financial needs;
- Offset significant economic downturns or revenue shortfalls;
- Provide funds for unforeseen expenditures related to emergencies; and
- Secure and maintain investment grade bond ratings
General Fund – used to account for all financial resources not accounted for and reported in another fund.
Special Revenue Fund – used to account and report the proceeds of specific revenue sources that are restricted or committed to expenditures for specific purposes other than debt service or capital projects.
Debt Service Fund – used to account for all financial resources restricted, committed, or assigned to expenditures for principal and interest.
Capital Projects Fund – used to account for all financial resources restricted, committed, or assigned to expenditures for the acquisition or construction of capital assets.
Permanent Funds – used to account for resources restricted to the extent that only earnings, and not principal, may be used for purposes that support the Library’s objectives.
The following categories will be used to report governmental fund balances in accordance with the definitions provided by GASB Statement No. 54:
Non-spendable Fund Balance – amounts that cannot be spent because they are either not in spendable form or are legally or contractually required to be maintained intact. Classification of non-spendable amounts will be determined before all other classifications and consist of the following:
- The Library will maintain a fund balance equal to the balance of any long-term outstanding balances due from others;
- The Library will maintain a fund balance equal to the value of inventory balances and prepaid items unless those items are offset with liabilities and result in fund balance;
- The Library will maintain a fund balance equal to the principal of any permanent funds that are legally or contractually required to be maintained intact; and
- The Library will maintain a fund balance equal to the balance of any land or other nonfinancial assets held for sale.
Restricted Fund Balance – amounts that can be spent only for the specific purposes stipulated by the constitution, external resource providers, or through enabling legislation.
Committed Fund Balance – amounts that can be used only for the specific purposes determined by formal action of the TADL Board of Trustees. (Authority to Commit: a majority vote is required to approve the commitment and a two-thirds majority vote is required to remove a commitment).
Assigned Fund Balance – amounts intended to be used by the Library for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds other than the general fund, assigned fund balance represents the remaining amount that is not restricted or committed. (Authority to Assign: the TADL Board of Trustees delegates to the Director the authority to assign amounts to be used for specific purposes. Such assignments cannot exceed the available [spendable, unrestricted, uncommitted] fund balance in any individual fund).
Unassigned Fund Balance – is the residual classification for the Library’s General Fund and includes all spendable amounts not contained in the other classifications. In other funds, the unassigned classification should be used only to report a deficit balance from overspending amounts that have been designated as restricted, committed, or assigned.
The following guidelines address the classification and use of fund balance in governmental funds:
Classifying Fund Balance Amounts - fund balance classifications depict the nature of the net resources that are reported in a governmental fund. An individual governmental fund may include non-spendable resources and amounts that are restricted, committed, or assigned, or any combination of those classifications. The General Fund may also include an unassigned amount.
Encumbrance Reporting – encumbering amounts for specific purposes for which resources have already been restricted, committed, or assigned should not result in separate display of encumbered amounts. Encumbered amounts not previously restricted, committed or assigned, will be classified as committed or assigned, as appropriate, based on the definitions and criteria set forth in GASB Statement No. 54.
Prioritization of Fund Balance Use – when an expenditure is incurred and when both restricted and unrestricted (committed, assigned, or unassigned) amounts are available, it will be the policy of the Library to consider restricted amounts to have been reduced first. When an expenditure is incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used, it shall be the policy of the Library that committed amounts would be reduced first, followed by assigned amounts and then unassigned amounts.
Minimum Unassigned Fund Balance – the TADL Board has designated a minimum unrestricted fund balance in the General Fund ranging from 12-15 percent of the subsequent year’s budget. This minimum fund balance is to protect against cash flow shortfalls related to timing of projected revenue receipts and to maintain a budget stabilization commitment. Unrestricted fund balances, for the purpose of this fund balance recalculation, will include unassigned and assigned fund balances.
The following expanded definitions will be used in reporting activity in governmental funds and endowments across the Library. The Library may or may not report all types in any given reporting period, based on actual circumstances and activity.
Public Improvement Fund (Restricted) – for use to maintain Library facilities throughout the district as needed, these funds are restricted for the purchase of equipment, technology, and furnishings or for construction or building improvement. Expenses from this fund are restricted by state law to “Public Improvement” and available to administration by board authorization upon the recommendation of the Finance Committee. This fund is built from charitable contributions or grants or other non-tax revenue sources.
Slear Trust (Committed Endowment) –established in 1999 with $80,950.06 by the Slear Trust without restrictions or conditions on its use. In the same year, the TADL Library Board resolved that the principal amount of the fund “shall not be spent and the interest income generated by the Slear Trust principal shall be expended exclusively to support children’s programming throughout the Traverse Area District Library system, until the Board of Trustees resolves otherwise.” The balance identified for this fund at the end of 2009 was $81,000. Expenditures from this fund may be executed by Administration for children’s programming purposes when interest income is generated by the fund.
Katherine D. Lewis Bequest (Non-spendable Endowment) – established in 1977 with $20,000 by Katharine D. Lewis in her last will and testament with the following restriction “The interest on this money is to be used only for the purchase of new books.” Expenditures from interest on this fund may be executed by Administration for the purchase of new books when interest income is generated by the fund.
Revised September 21, 2023