What is the difference between restricted and assigned fund balances regarding who can modify the constraint?

What is the difference between restricted and assigned fund balances regarding who can modify the constraint?

• A. Assigned balances are constrained by the government’s own authority and can be reallocated by the governing body.
• B. Restricted balances can be reallocated by the governing body.
• C. Unrestricted balances are constrained by external parties.
• D. Restricted balances are constrained by external parties or laws; assigned balances are constrained by the government’s own authority and can be reallocated by the governing body.

Answer: (D)

In this area, fund balance classifications show who controls the spending constraints. Restricted fund balances are constrained by external parties or laws—think grant terms or legal requirements—so the government cannot freely change those constraints on its own. Assigned fund balances are constrained by the government’s own authority; the governing body (or a designated official) can designate or reallocate those resources as priorities shift, within policy. So, the best answer captures both ideas: restricted balances are externally constrained, while assigned balances are internally constrained and can be reallocated by the governing body. For example, grant funds must be used according to grant terms (restricted), whereas amounts the government assigns for a future project can be shifted if priorities change (assigned).

In this area, fund balance classifications show who controls the spending constraints. Restricted fund balances are constrained by external parties or laws—think grant terms or legal requirements—so the government cannot freely change those constraints on its own. Assigned fund balances are constrained by the government’s own authority; the governing body (or a designated official) can designate or reallocate those resources as priorities shift, within policy. So, the best answer captures both ideas: restricted balances are externally constrained, while assigned balances are internally constrained and can be reallocated by the governing body. For example, grant funds must be used according to grant terms (restricted), whereas amounts the government assigns for a future project can be shifted if priorities change (assigned).