Definition
GASB Statement 54 classifies governmental fund balance by the extent to which the government is bound to observe constraints on the resources. Nonspendable amounts are not in spendable form, such as inventory and prepaid items, or must be kept intact. Restricted amounts are limited by external providers, constitutions, or enabling legislation. Committed amounts are limited by formal action of the government's highest decision-making authority. Assigned amounts are intended for a purpose by the governing body or a delegated official. Unassigned is the residual, and only the general fund reports a positive unassigned balance.
Why it matters in an audit or review
Auditors inspect the ordinance or resolution that created a commitment, confirm it was approved before year end, and test that assigned amounts reflect documented intent. They also check that negative balances in other funds are reported as unassigned and that stabilization arrangements are classified in line with their terms.
Example
Illustrative: a general fund has $9,000,000 of fund balance, including $300,000 of prepaid items, $1,200,000 committed by council resolution for a capital reserve, and $500,000 assigned by the finance director for next year's budget. Unassigned is $7,000,000 ($9,000,000 less the other three).
Common mistakes
- Treating a manager's informal plan as committed.
- Passing a commitment resolution after year end.
Sources
- GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions: https://storage.gasb.org/GASBS%2054.pdf
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error