08-14-07 FPAC Agenda - Laserfiche WebLink

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:tl • i. l 4110 Fund Balance Policies•79 cated from property taxes.For instance,a local government could dedi- cate 1 or 2 percent of its annual property tax revenues for unreserved f' fund balance. I METHODS OF UTILIZING UNRESERVED FUND I� BALANCE RESOURCES Unreserved fund balance policies should include operating and capital needs that cannot be funded through current revenues. Such policies provide taxpayers with an explanation of why financial resources have been set aside and the conditions under which such resources will be expended. Common uses for unreserved fund balance in the general fund include: • Meeting future capital needs; • Offsetting difficult economic times; • Stabilizing fluctuations in cash flow requirements;and • Providing for emergency situations. Instead of appropriating all surplus funds to unreserved fund bal- ance,governments may wish to set aside a portion of surplus funds for lower-order priorities that are less crucial to the proper functioning of the organization after unreserved and reserved fund balance obliga- tions have been met. In this case, excess surpluses may be utilized for • lower-order governmental priorities,potentially outlined in a strategic plan or some other priority-setting document. Common local govern- ment uses for surpluses may include:neighborhood revitalization,ad- ditional capital spending,retirement of existing debt,and gainsharing. SUMMARY The broad categories listed in Exhibit 5-2 are highly recommended for constructing a fund balance policy.Details such as how many designa- tions should be created or the appropriate size of unreserved fund bal- ance in the general fund are dependent on the characteristics of the local government in question. As a guideline,GFOA recommends that governments establish an unreserved fund balance (consisting of both undesignated and desig- nated portions) of between 5 and 15 percent of general fund operating revenues.An unreserved fund balance: