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• <br /> } <br /> IS a <br /> Fund Balance Policies•77 <br /> 9 <br /> tt <br /> • Designations (i.e., governments may wish to maintain higher <br /> levels of unreserved,undesignated fund balance to compensate <br /> for any portion of unreserved fund balance already designated j! <br /> for a specific purpose). <br /> jI <br /> How Much Unreserved Fund Balance for the Fund <br /> Balance Policy? !!i <br /> A number of standards for size of unreserved fund balance in the gen- tl.' <br /> eral fund that have been cited over the years. GFOA recommends that <br /> =i <br /> general purpose governments,regardless of size,maintain unreserved <br /> fund balance in their general fund of no less than 5 to 15 percent of regu- <br /> lar general fund operating revenues, or of no less than one to two <br /> months of regular general fund operating expenditures.8 <br /> Bond raters and others often use the rule of thumb standard that <br /> calls for an unreserved fund balance in the general fund of 5 percent. <br /> Others argue that unreserved fund balance should be equal to no less <br /> than one month's operating expenditures(e.g.,8.3 percent).Still others ' ,I <br /> argue for a broader range of one to three months of operating <br /> expenditures. <br /> A government's particular situation may require levels of unre- <br /> served fund balance in the general fund significantly in excess of these <br /> recommended minimum levels. The most commonly cited factor in <br /> greater unreserved fund balance size (general fund) is budget size. A <br /> government's unreserved fund balance should be inversely propor- <br /> tional to its total budget size.Smaller governments are more susceptible <br /> to economic changes and, therefore, require a larger unreserved fund <br /> balance. Benchmarking against other similar local governments may <br /> also help determine unreserved fund balance size (see the related <br /> sidebar on page 76). <br /> HOW FINANCIAL RESOURCES ARE SET ASIDE FOR <br /> UNRESERVED FUND BALANCE <br /> Methods must be established for setting aside unreserved fund balance <br /> resources. Otherwise, politicians may advocate depletion of fund bal- <br /> ance to satisfy constituents or achieve political goals. Service-oriented <br /> elected officials may want more resources for government programs, <br /> while tax-averse elected officials may want to show their citizens that <br /> a <br />