DIA – Fund Balance


The purpose of this policy is to establish guidelines for the District’s fund balances in order to maintain and improve financial stability and to protect the District from unforeseen budgetary situations such as emergencies, natural disasters, major infrastructure failures, or unexpected litigation.


Within governmental funds, net equity is reported as fund balance, which is the difference between fund assets and liabilities. It is computed by taking the prior year’s ending fund balance and adding to that the current year’s financial position (revenues less expenditures).

In accordance with GASB Statement No. 54, the school board recognizes the following categories of fund balance:

  • Restricted Fund Balance – Amounts for which constraints have been placed on the use of the resources externally imposed by creditor, grantors, contributors, or laws/regulations of other governments. Any year-end balances in grant or food service funds are restricted fund balances.
  • Committed Fund Balance – Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the legislative body (School District Meeting).

The School Board, as the governing body, may commit fund balance by a formal vote prior to the government’s fiscal year-end for that fiscal year.  Future modification or rescission of committed funds must likewise be accomplished by a formal vote of the school board prior to fiscal year-end.  These amounts cannot be used for any other purpose unless the legislative body or governing body removes or changes the specified use by taking the same type of action that was employed when the funds were initially committed.  The district has committed fund balances which represent voted and accumulating capital reserves and trust funds.

  • Assigned Fund Balance – Amounts that are constrained by the School District’s intent to be used for a specific purpose but are neither restricted nor committed. This intent can be expressed by the School Board or through the Board delegating this responsibility to the Superintendent or their designee. Prior year encumbrances are considered assigned fund balances which reflect goods and services ordered or contracted for which will be received or rendered in the subsequent year. Assigned Fund Balance also includes various rebates received and designated for specific use.
  • Unassigned Fund Balance – the portion of fund balance that has not been restricted, committed, or assigned for a specific purpose. Unassigned fund balance may be designated for a specific purpose via a warrant article that was voted upon, such as funding capital reserves or trust funds using year-end unassigned fund balance during the next fiscal year.

It is healthy for an entity to end the year with fund balance and is not indicative of “over budgeting”. Auditors recommend that school districts aim to end a fiscal year with unreserved fund balance equal to 2-5% of actual expenditures. What is more important than one year’s stand-alone unreserved fund balance is the cyclical nature of the amount in order to avoid rises and falls in tax rates so that taxpayers have rates that are smooth.

Unreserved Fund Balance Retention

RSA 198:4-b, ll allows a school district to retain up to 5% of the current fiscal year’s net assessment. The “Net Assessment” represents the amount to apportion to the communities of the ConVal District minus the Education Grant.

The Contoocook Valley School District voted to accept RSA 198:4-b, II at the March 9, 2021 meeting, as follows:

Warrant Article 12 – Beginning in fiscal year 2022/2023, shall the School District by this vote authorize, indefinitely until rescinded, to retain year-end unassigned general funds in an amount, in any fiscal year, not to exceed 5 percent of the current fiscal year’s net assessment, in accordance with RSA 198:4 b, II.  Such fund balance retained may only be expended after conducting a public hearing by the governing body in accordance with RSA 198:4-b.  The initial funding of this warrant article will begin with the June 30, 2023 fund balance.

As a result, beginning in Fiscal Year 24, the school board will have the ability to retain unassigned fund balance up to 5% of the June 30, 2023 district net assessment. This is facilitated by then reducing the unassigned fund balance on the report of Estimated Revenue AFTER the school board votes to retain an amount up to 5% of the district net assessment.

Board Policy Statement

These policy guidelines will provide direction during the budget process and demonstrate a commitment to maintain adequate reserves for financial stability and for long term financial planning:

The District will maintain an unreserved fund balance, in the general fund, of no more than 2.5% of the net district assessment.

The Board may adjust retained levels of fund balance within the parameters of RSA 198:4-b, only by amending this written policy with a vote of the Board at a properly noticed meeting.

It is the intent of the Board to retain the minimum levels of reserves to meet the fiscal needs of the district.

It is the intent of the School Board to use retained fund balance for emergencies as determined by the School Board.  It will always reflect a careful balance of the body’s desire to maintain adequate reserves with its desire to maintain essential services.

Prior to expending retained general funds, the school board shall hold a properly noticed public hearing on the action to be taken with such funds.

If the District is required to use these funds, an annual accounting and report of the activities of the retained general funds shall be presented to the school board of the district and published in the annual report.


Category: R

Legal References:

RRSA 32, Municipal budget Law Governmental

RSA 198:4-b Contingency Fund

Accounting Standards Board (GASB) Statement No. 54,

Fund Balance Report and Governmental Fund Type Definitions


1st Read:  May 18, 2021

2nd Read: June 1, 2021

Adoption: June 1, 2021