A city received resources that the state indicates can only be used for public works projects, such as road construction. Assuming the resources have not been expended by year end, how would the resources the city received be shown in the city's fund balances?

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

Answer: (D)

Under GASB, fund balance classifications reflect the constraints on how resources can be used. When the use of resources is restricted by external law or regulation, they are reported as restricted fund balance. In this scenario, the state directs that the resources can only be used for public works projects like road construction, which is an external constraint. Since the funds have not been expended, they remain in the restricted category, available only for those specified purposes. If the constraint were internal—imposed by the city’s own council action—that would be a committed or assigned fund balance, not restricted. If there were no restrictions, the funds would be unrestricted.