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City of Keller
Fund Balance Policy (per GASB 54)

Purpose

The purpose of this policy is to establish a key element of the financial stability of the City of Keller (the
City) setting guidelines for fund balance. Unassigned fund balance is an important measure of economic
stability. It is essential that the City maintain adequate levels of unassigned fund balance to mitigate
financial risk that can occur from unforeseen revenue fluctuations, unanticipated expenditures, and
similar circumstances. The intent of this policy is to ensure the City maintains adequate fund balances
in the City’s various operating funds with respect to the following:

1. Providing sufficient cash flow liquidity for the City’s general governmental operations,
2. Securing and maintaining investment grade bond ratings,
3. Offsetting significant economic downturns or revenue shortfalls, and
4. Providing funds for unforeseen expenditures related to emergencies.

Definitions

Fund Equity – A fund’s equity is generally the difference between its assets and liabilities.

Fund Balance – An accounting distinction is made between the portions of fund equity that spendable and
non-spendable. These included the following categories:

1. Non-spendable fund balance – includes amounts that are not in a spendable form or are required
to be maintained intact. Examples include inventory and prepaid expenses.

2. Spendable Fund Balance:
A. Restricted – includes amounts that are constrained for specific purposes which are externally
imposed by providers, such as creditors, grantors, or contributors; or amounts constrained due
to regulations of other governments. Examples include grant awards and bond proceeds.
B. Committed – Includes amounts that are limited to specific purposes that are internally imposed
by the City through formal action of the City Council. Commitments may be changed or
removed only by formal action of the City Council. This includes balances formally approved
by the City Council during the budget adoption and amendment process. The formal action
must be approved by the City Council prior to the end of the fiscal year in which the
commitment will be reflected on the financial statements.
C. Assigned – includes amounts that are intended for specific purposes that are considered
neither restricted nor committed. Intent can be expressed by the City Council, or by an official
to which the City Council delegates the authority. Assignment of fund balance are less formal
than commitments and do not require formal action for their imposition or removal. In
governmental funds other than the General Fund, assigned fund balance represents the
amount that is not restricted or committed. This indicates that resources in other
governmental funds are, at a minimum, intended to be used for the purpose of that fund.
D. Unassigned – the residual classification of amounts in the General Fund which includes all
amounts not classified in other fund balance categories. Unassigned amounts are technically
available for any purpose. Negative residual amounts for all other governmental funds are
reported in this classification.

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