What signifies a committed fund balance?

A committed fund balance is specifically designated for particular activities or purposes through formal action by the government’s highest level of decision-making authority, such as the governing body or council. This means that once the funds are committed, they cannot be used for any other purpose unless an additional formal action is taken to remove or change that commitment.

The term "committed" indicates a high level of intent and restricts the use of those funds beyond just managerial discretion. An essential aspect of committed fund balances is that the decision to commit funds is typically documented in a resolution or ordinance, which provides clear evidence of the intended use of the funds. This is different from funds that are merely designated by management, which may not necessarily require the same level of formal approval.

In summary, a committed fund balance highlights the specific intentions of a governing body to utilize funds for defined purposes, and this level of commitment helps ensure accountability and transparency in governmental financial reporting and budgeting.