Which fund balance classification requires formal action by the government's highest level to constrain spending?

Which fund balance classification requires formal action by the government's highest level to constrain spending?

• A. Committed
• B. Restricted
• C. Assigned
• D. Unrestricted

Answer: (A)

Committed fund balance is the portion that the government has constrained through a formal action by its highest level of decision-making, such as a council resolution or ordinance. This means spending from this amount cannot occur unless that formal action is taken to release or modify the commitment. Restricted balance is limited by external sources like grants or laws; assigned balance is set aside by management for a specific purpose but not through the highest-level formal action; unrestricted balance has no constraints. So the requirement for formal action by the highest level to constrain spending points to committed.

Committed fund balance is the portion that the government has constrained through a formal action by its highest level of decision-making, such as a council resolution or ordinance. This means spending from this amount cannot occur unless that formal action is taken to release or modify the commitment. Restricted balance is limited by external sources like grants or laws; assigned balance is set aside by management for a specific purpose but not through the highest-level formal action; unrestricted balance has no constraints. So the requirement for formal action by the highest level to constrain spending points to committed.