Fund Balance Policy

Goal/Mission: To have a sufficient fund balance so Tax and Revenue Anticipation Notes (TRANS) are no longer needed.

Objectives:
1. Provide an educational briefing: defining the fund balance, the purpose of the fund balance and recommended fund balances needed in various county operational, debt service, and special revenue funds.
2. Allow decisions to be transparent.
3. Provide a medium in which fund balance management decisions can be made.
4. Outline steps to be taken to reach an optimal fund balance, if an optimal fund balance does not exist.
5. Summarize the Fund Balance Policy.

Educational Briefing:
a. Fund Balance defined: Fund Balance shall be defined as all equity balances of restricted, committed, assigned and unassigned within a fund. The county shall not spend restricted fund balance for other than its intended uses.

b. Purpose of Fund Balance:
• To have sufficient funds for cash flow operations during the year.
• To have emergency funds available due to revenue short falls or unanticipated expenditures/expenses.
• To reflect financial stability and strength; thereby, portraying to the investment community the county’s financial management strength and public investment security and low risk. Low financial risk and strong financial strength and stability should reflect a lower risk and thus lower interest rate for future debt issuance.

1. Fund balance needs for various funds shall be categorized as follows:

IO I General Fund:
The General Fund is heavily supported by property tax and, since property tax is not due until eight months into the fiscal year, must have a relatively high fund balance related to the appropriations in order to support cash flow nee ds. The fund balance should be sufficient to meet cash flow needs and available funds should also assist in investment planning, and is calculated at 25% of the current year appropriation. We would like to achieve this goa l in five years from the 2016/20I7 budget year.

116 Solid Waste:
The Solid Waste Fund is heavily supported by property tax and, since property tax is not due until eight months into the fiscal year, must haven relatively high fund balance related to the appropriations in order to support cash flow needs. The fund balance should be sufficient to meet cash flow needs and is calculated at 25% of the current year appropriation. We would like to achieve this goal in five years from the 2016/20 I 7 budget year.

118 Ambulance Service:
The Ambulance Service Fund is partially supported by property tax and patient charges and, since property tax is not due until eight months into the fiscal year, must have a relatively high fund balance related to the appropriations in order to support cash flow needs. The fund balance should be sufficient to meet cash flow needs and is calculated at 25% of the current year appropriation. We would like to achieve this goal in five years from the 20I6/2017 budget year.

151 General Debt Service:
The General Debt Service Fund is the primary f’u11d used for the depository of monies to pay for county debt. The fund balance should be sufficient to meet cash flow needs and available funds should also assist in investment planning, and is G1kulntcd at 50% of the current year appropriation.

156 Education Debt Service:
The Education Debt Service Fund shall be used to pay debt issued by the county for repayment of the construction/additions of the Cannon County Schools. The fund balance should be sufficient to meet cash flow needs and available funds should also assist in investment planning, and is calculated at 50% of the current year appropriation.

2. Decisions shall be transparent:
The County Budget Committee shall recommend an annual budget to the County Commission. The annual budget shall reflect the operational activity of the county and have a ”Summary Statement of Proposed Operations.” The County Commission’s deliberation on the annual budget shall consider the “Summary Statement of Proposed Operations” in the adoption of the annual budget. The Summary Statement is part of the annual budget. The process for adoption of the annual budget shall be a public record and all meetings shall be public meetings.

3. Medium in which the Fund Balance Decisions shall be made:
The management of the fund balances shall be transparent to the Commission and the public by the annual publication of a “Summary Statement or Proposed Operations” for each of the county funds. The Summary Statement shall reflect: Estimated Beginning Fund Balance plus Estimated Revenue less Appropriation equals Estimated Ending Fund Balance.

The estimated beginning fund balance shall be estimated during the annual budget process and shall be continuously reviewed for each fund until the budget is adopted and/or the fiscal year end is closed. After the fiscal year end is closed, the operational statement shall be recalculated reflecting the ending fund balance closing (prior year), which is the beginning fund balance for the new budget. After the annual audit is complete, the operational statement is again updated with the audited fund balance (prior year).

During the adoption of the annual budget, the calculation shall be made comparing the percentage of Estimated Ending Fund Balance (for the proposed new year) with the proposed appropriation.
This calculation shall be compared to the policy for compliance. Any variance outside of this policy shall be noted and explained and outlined the reasoning for the variance and any proposal to comply with the policy.

Attachment A: Sample of the ”Summary Statement of Proposed Operations.”

4. Steps to be taken if Fund Balance is not optimal:
The Budget Committee and County Commission’s action on the fund balance, which may be higher or lower than the policy, shall he set out as follows:

• If the fund balance is lower than the stated policy the County Commission should consider increasing revenue or reducing appropriations to adjust the fund balance into an acceptable range.

5. Summary of Fund Balance:
• IO1 General Fund – 25% of proposed appropriation.
• 151 General Debt Service Fund – 50% of proposed appropriation.
• 156 Education Debt Fund Balance – 50% of proposed appropriation.

Approved: February 2, 2017

APPROVE:

Mike Gannon County Executive