08-14-07 FPAC Agenda - Laserfiche WebLink

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• , • i 1 j 80■Financial Policies:Design and Implementation Exhibit 5-2 ■ Fund Balance Policy Components Highly Advisable Advisable Optional I. How financial resources are set aside X for unreserved fund balance II. Determining the appropriate size of un- X reserved fund balance(or budget stabi- lization fund) III. Methods of utilizing unreserved fund X li balance resources • Provides resources to address contingencies; • Maintains good standing with bond rating agencies; • Avoids interest expense; • • Allows additional investment income (when investments are made prudently);and • Ensures a stable cash flow when revenue is unavailable. Other categories of fund balance (categories of reserved fund bal- ance,designations for unreserved fund balance,and surpluses)may be established to indicate both the degree of discretion public managers have over financial resources and the policy priorities of government. Endnotes 1. Local governments,for instance,pay staff salaries during the year at intervals that may not co- incide with revenue collection.Revenues may be collected only once or twice per year. 2. Fund balance as determined according to generally accepted accounting principles(GAAP)is more widely understood and accepted across a majority of local governments. 3. Stephen J.Gauthier,An Elected Official's Guide to Fund Balance and Net Assets:Using the GASB 34 Model.(Chicago,Illinois:Government Finance Officers Association,2002),p.8. 4. Ian J.Allan,"Unreserved Fund Balance and Local Government Finance,"Research Bulletin:Re- search and Analysis on Current Issues(Chicago,Illinois:Government Finance Officers Associa- tion,November 1990),p.1. 5. Gauthier,An Elected Official's Guide to Fund Balance and Net Assets,p.10. 6. Audits of State and Local Governmental Units with Conforming Changes as of May 1, 1998, 12.09 (New York,New York:American Institute of Certified Public Accountants). 7. Rowan A.Miranda and Ronald D.Picur,Benchmarking and Measuring Debt Capacity(Chicago, r Illinois:Government Finance Officers Association,1999),p.49. tt 8. Appropriate Level of Unreserved Fund Balance in the General Fund(2002),GFOA Recommended Practice. O