Explaining Fund Balances
A fund balance is a savings account that falls into one of three categories and each category serves a specific purpose with the district. Expenditures paid for through any fund balance should be dedicated to one-time expenditures, as opposed to ongoing costs. Because there is not a dedicated funding stream (a steady source of incoming money), using money from a fund balance for ongoing expenditures creates a gap between the revenue and expenditures that must be filled in the next fiscal year as the original deficit will remain and grow over time.
The Three Types of Fund Balances:
- Unassigned Fund Balance – Funds available to meet current and future years expenditures. These are resources in Fund 1 that are not restricted and have not been committed or assigned to any specific purpose. Current policy requires the unassigned fund balance to be between 8-12% of general fund expenditures.
- Reserve Fund Balance – Minnesota State Statute dictates the amount of money kept in the reserve fund balance and the use of that money.
- Assigned Fund Balance - The assigned fund balance is money which has been set aside for a specific purpose. This money is assigned by the school board, or a body or an official to which the school board has delegated the authority to assign amounts to be used for a specific purpose. The assigned fund balance also includes donations which have been given for a specific purpose. If the Board sets aside money for a specific purpose they can reassign the money by Board action as needed; however, money given as a donation for a specific purpose cannot be reassigned or used for anything else.
Can the board use fund balance dollars for anything they choose?
- Unassigned Fund Balance can be used for any purpose.
- Reserved Fund Balance can only be used as prescribed by Minnesota State Statute. Examples of this would include staff development, operating capital, third party billing, and student activities to name a few.
- Assigned Fund Balance can only be used for the designated purpose as determined by the Board. Money can be reassigned by Board action as needed; however, money given as a donation for a specific purpose cannot be reassigned or used for anything other than that specific purpose.
How much is currently in each Fund Balance?
As of 11/20/23 the balances of each fund balance are:
- Unassigned Fund Balance - $9.5 million
- This represents 10.5% of general fund expenditures
- Reserve Fund Balance - $5.2 million
- Assigned Fund Balance - $8 million
Additional Information, Resources, and Supporting Documents: