Policies
Middletown Public Schools No. 3040
Spending Policy and Minimum Fund Balance Policy
SPENDING POLICY and MINIMUM FUND BALANCE POLICY
PURPOSE:
The purpose of this policy is to establish School Committee guidelines and expectations for the spending of District money in accordance with the Governmental Accounting Standards Board (GASB) 54.
PHILOSOPHY:
The School Committee recognizes that in order to provide a stable financial environment for the operations of the Middletown Public School District and to provide a high-quality education to the students in a fiscally responsible manner, this spending policy has been designed to appropriately identify and classify the use of the District’s fund balances, as well as appropriately identify and record all revenue streams. This policy is meant to serve as the framework upon which consistent and transparent operations may be built and sustained.
POLICY DEFINITIONS:
Fund Balance: Fund balance is the difference between assets and liabilities in governmental funds (i.e. general fund, special revenue funds, capital project funds, debt service funds and permanent funds).
Non-Spendable Fund Balance: The amount of a fund balance that cannot be spent because it is either not in spendable form or there is a legal or contractual requirement for the funds to remain intact (i.e. prepaid expenses, inventory, fixed assets, endowment principal, etc.).
Restricted Fund Balance: The amount of a fund balance that can only be spent on specific expenses due to constraints on the spending because of legal restrictions, outside party creditors, and grantor/donor requirements (i.e. debt service fund balances, bond fund balances, grants and donations with specific spending constraints).
Committed Fund Balance: The amount of a fund balance that the Middletown School Committee has committed by a formal action. This action item must be passed by the Committee prior to a fiscal year end, but the specific amount may be determined at a later date. (i.e. Cell Tower Matching Funds, Debt Service Set Aside Funds, Medicaid, etc.)
Assigned Fund Balance: The amount of a fund balance that includes the portion of the spendable fund balance that reflects funds intended to be used by the government for specific purposes assigned by information operational planning (as an example capital goods replacement, annual technology budget replacement, etc.). The assigned fund balance represents a “plan” for spending the amount, but it is not restricted or committed. The authority to “assign” fund balance is designated to the Business Manager.
Unassigned Fund Balance: The amount of a fund balance that is in the General Fund and includes all spendable amounts that are not otherwise contained in the classifications listed above, and therefore, not subject to any constraints or intended use. Unassigned amounts are available for any purpose. These are the current resources available for which there are no external or self-imposed limitations or set spending plan. Although there is generally no set spending plan for the unassigned portion, there is a need to maintain a certain funding level. Unassigned fund balance is commonly used for emergency expenditures not previously considered. In addition, the resources classified as unassigned can be used to cover expenditures for revenues not yet received.
POLICY STATEMENT:
I. All Non-Spendable and Spendable Fund Balance Shall Be Reported as follows:
1. At the end of each fiscal year, the Superintendent/or designee will report the portion of the fund balance that is not in spendable form as Non-Spendable Fund Balance on the annual financial statements.
2. At the end of each fiscal year, the Superintendent/or designee will report restricted fund balance amounts that have applicable legal restrictions per GASB #54.
3. At the end of each fiscal year, the Superintendent/or designee will report committed fund balances that have been committed by self-imposed actions by the Middletown School Committee.
4. At the end of each fiscal year, the Superintendent/or designee will report the portion of fund balance, if any, that is assigned for a specific purpose and a description of the specified purpose.
5. At the end of each fiscal year, the Superintendent/or designee will report the portion of the unassigned fund balance. In addition, the Middletown Public Schools shall maintain an unassigned fund balance of no less than 3.5-5.5% of total General Fund Budgeted Operating Expenditures in order to accommodate immediate cash flow needs for unanticipated expenditures and/or emergencies.
a. In the event that the amounts assigned for cash flow fall above or below the desired range of unassigned fund balance, the administration shall report such amounts to the School Committee as soon as practical after the end of the fiscal year. Should the actual amount assigned for cash flow fall below the desired range, the School Committee shall create a plan to restore the fund to the appropriate levels.
1st Reading – June 16, 2011
2nd Reading and Approval – July 21, 2011
Review - September 18, 2025
3 Year Review Due - September 2028