How is a committed fund balance defined?

A committed fund balance is defined as resources that have been formally committed to specific activities by the governing body of the government entity. This means that the governing body has made a formal decision to allocate these funds for particular purposes, resulting in a higher level of constraint than a mere designation or informal commitment.

This formal action typically involves passing a resolution or ordinance, thereby distinguishing committed funds from other types of fund balances, such as those that are unassigned or assigned. The commitment is binding and requires a decision by the governing body to uncommit or reallocate these resources, reflecting a strategic approach to financial management.

In contrast, funds set aside by external contributors pertain to restricted fund balances, where limitations are imposed by external sources rather than the governing body. Temporary restrictions for special projects suggest a different classification that may include funds not committed but earmarked for specific time-bound initiatives. Lastly, resources available for any purpose indicate unassigned funds, which are not yet designated for any specific action or use, demonstrating a lack of commitment to particular activities.