Looking Forward to Cash BARS
Welcome to SAO’s Looking Forward to Cash BARS! This page is intended to provide information to local governments on the upcoming changes for the Cash BARS Manual. This page will be updated as information on various Cash BARS topics becomes available. If you have any questions please use the SAO HelpDesk and we will be happy to assist you.
For extensive information regarding accounting and reporting requirements for Leases, please visit the Leases Project page.
Cash and Investment Balance Classifications and New BARS Codes:
For the past several years, we’ve taken note of local governments’ concerns over the limitations of the two currently prescribed cash and investments balance classifications: reserved and unreserved. With limited classifications it is challenging to convey an accurate financial position. The reported amounts can be misleading, if the government cannot fully describe constraints on how the resources can be spent.
Increasing the number of beginning and ending cash and investment categories will allow governments to more easily understand the process under which constraints were imposed and how they can be modified or removed. This will not only increase transparency in reporting, but also provide valuable information for your legislators, citizens, unions and other users of financial statements about existing limitations on spending these resources.
The hierarchy and character of constraints imposed on the existing resources is an important factor in making decisions affecting governments’ financial health. Any information about the availability and liquidity of financial resources will improve the fiscal decision process. Furthermore, new classifications will allow for state-wide comparability in financial data. So, the governments’ long suggested enhancement is outlined below.
When are the new classifications applicable?
The new cash and investments classifications will be applicable for 2020 annual reports, filed in 2021.
30831/50831 Beginning/Ending Restricted Cash and Investments
Indicates the portion of cash and investments balance that is subject to externally enforceable legal restrictions (imposed by creditors, grantors, donors, other governments, etc.). The restrictions may also be imposed by law through constitutional provisions or enabling legislation. The purpose of externally restricted revenue does not need to be narrower than the purpose of the fund; however, it has to be imposed by an external party. For example:
Unspent resources contributed by other governments in accordance with an interlocal agreement (contract) for future replacement of a building would be classified as restricted because they are subject to a specific external (i.e., other government) restriction.
Unspent operating assessments received by a government would be classified as unrestricted (i.e., committed, assigned or unassigned) because such resources are not subject to specific restrictions and may be used for any allowable purpose of the government.
Any unspent taxes restricted by RCW for a specific purpose.
30841/50841 Beginning/Ending Committed Cash and Investments
Indicates the portion of cash and investments’ balance that represents resources whose use is constrained by specific limitations that the government imposes upon itself at the highest level of decision making (normally the governing body: e.g., board of commissioners, board of directors, board of supervisors, council, etc.) through a most binding formal action (e.g., resolution, ordinance, etc.) and that remains binding unless removed in the same manner. A motion, plan or stated management intent regarding how resources will be used does not meet the criteria for classifying balances as committed because the commitment has to occur at the highest level of authority through the most binding formal action. While commitments may be removed, it would take that same level of authority and level of formal action to do so. Balances should be classified as committed when the government dedicates resources for a specific purpose, but not when only generic or functional limitations are imposed. For example:
A cash balance in a capital project fund saved for future replacement of a building after verbal direction by city council members at a council meeting would not be classified as committed because the commitment was not established by the most binding formal action (resolution or ordinance).
A cash balance in a special revenue fund committed by commissioners for transportation purposes would not be classified as committed balance because the commitment “for transportation” is not specific enough to create any limitations. The limitation should be narrower than governmental function or even activity. While resources designated for “public safety”, “park and recreation” or “public health” would not be considered committed; the designations for “new dispatch equipment”, “purchase of additional land to expand existing park”, or “cleaning the hazardous area XYZ” would be.
30851/50851 Beginning/Ending Assigned Cash and Investments
Indicates the portion of fund balance that reflects a government’s intended use of resources. These are amounts intended to be used by the government for specific purposes that are neither restricted nor committed. Intent can be expressed in one of two ways:
- The governing body can state its intent to use resources for a specific purpose. The intent would be expressed in rather informal way like a motion or other form of a directive.
- The governing body can delegate authority to others (e.g., finance or executive director, chief, head of a department, manager, etc.) to express intent to use amounts for specific purposes.
Any transfer of resources to funds other than general fund represents an assignment. So, only in rare situation when a fund has a negative cash and investments balance (which would be reported as negative unassigned amount), all other funds (i.e., special revenue, capital projects, debt service, permanent, and proprietary) should have a combination of restricted, committed and assigned cash and investments. As discussed below, the permanent fund can also have nonspendable category. For example:
A cash balance in a capital project fund saved for future replacement of some medical equipment intended by the fire chief would be classified as assigned because the intent was established by the manager and it doesn’t require any formal action to change it.
Unspent cash from the property tax transfer to the park special revenue would be classified as assigned because, even if it’s not restricted or committed, the fact that it was moved to the park fund designates its purpose for parks related activities.
30891/50891 Beginning/Ending Unassigned Cash and Investments
This is the amount remaining in the fund after classifying amounts as nonspendable, restricted, committed, or assigned. Unassigned amounts are technically available for any purpose. The general fund is the only fund that can have a positive unassigned cash and investments.
30821/50821 Beginning/Ending Nonspendable Cash and Investments
These are amounts that according to laws or contracts cannot be spent. This category applies to items like permanent endowments when the donor stipulates that the principal amount of the contribution must be preserved and invested and only the earning can be used for governmental purposes. This category will be used only in permanent (700) and trust (600) funds.
Reporting Balances in 2020 Annual Reports
The ending cash and investments for 2019 should follow the current classification (i.e., reserved and unreserved); however the beginning balances for 2020 annual reports should be reclassified following the new categories. The reclassification will not result in red flags when submitting your reports since the Online Reporting system compares only the total beginning balances with the previous year ending balances.
What will be changed?
- New BARS codes will be added in summer 2020, so there is no confusion when reporting 2019 data.
- Draft Section 3.1.8 – Cash and Investment Balances
- C-4/C-5 for 2020 will incorporate new BARS codes.
If you have any questions regarding the new classifications, please use the SAO HelpDesk.