Classifications of Fund Balance

A fund balance for governmental funds is analogous to equity for a business and possesses the following characteristics:

• activity accounts are closed to this account at the end of each accounting period,
• the balance represents the net resources that are available for future spending, and
• the categories within the fund balance represent the different constraints to which government managers must adhere.

There are five categories of fund balance: 

• Non-spendable resources are resources that cannot be spent, including 
  • inventories,
  • prepaid expenses, and
  • the principal of a permanent fund.
• Restricted funds are funds that have constraints placed upon them by external parties regarding the use of resources. These constraints can be
  • externally imposed (through a debt covenant, a grantor, contributors, or other governments), or
  • imposed by law (constitutionally or through enabling legislation).
• Committed funds are those with constraints placed on the use of resources by
  • formal action of the government’s highest level of decision-making authority or
  • contractual obligations.
• Assigned funds are those for which the government has an expressed intent to use resources for specific purpose.
  • No formal action has been taken by the government's highest level of decision-making authority. For example, if a controller decides staff members need Excel training and expresses an intent to spend $30,000 next year on the training, but the legislature has not taken action on this intent, the $30,000 would be part of assigned funds.
  • For government funds other than the general fund, this is the last category for all remaining positive amounts.
• Unassigned funds are those that have no constraints placed on them and that are a residual classification of the general fund.
  • Only the general fund can report a positive unassigned fund balance.
  • For government funds other than the general fund, this is used only to report a negative balance.