This leads to the second common misconception, that fund balance is surplus. Just as the fund balance is not strictly cash, it is not a savings account, and it is not surplus. The fund balance is an important working part of fund accounting and must be treated as such. For this reason we will restrict our attention in this paper to the General Fund Balance. The portion of the fund balance has been committed for identified purposes.
Cash flow is an example.
That portion of fund balance which has not been appropriated for a specific purpose as a reserve of designated fund balance. The most commonly asked question regarding fund balance is how large should a district's fund balance be. Perhaps the best answer would be an amount sufficient that short term borrowing for cash flow could be avoided and would also allow the district to set aside sufficient assets to realize its longer range goals. This may not always be practical, however. One factor that carries a great deal of weight in determining what a sufficient fund balance should be is the level to which a district is aided by the state.