[HISTORY: Adopted by the Board of Commissioners
of the Township of Radnor as indicated in article histories. Amendments
noted where applicable.]
[1]
Editor's Note: This ordinance repealed former
Ch. 44, Financial Policies, Art. I, Deposits, adopted 2-22-1988 by
Res. No. 88-07.
For purposes of this article, the following terms shall have
the noted meanings:
Financial proceeds derived from the sale of general obligation
bonds or notes or other types of tax-exempt securities.
Certificates of deposit, bank checking and savings accounts,
money market/mutual funds, and other short-term instruments, generally
maturing in 90 days or less.
Process by which a bank or other financial institution pledges
securities, property, or other deposits to secure funds invested by
the Township. For example, Pennsylvania banks that accept funds from
Radnor Township in excess of amounts covered by federal deposit insurance
(generally, $250,000) are required to pledge 120% of the excess amount
in United States Treasury bills as collateral in the event of that
bank's default.
An unsecured short-term promissory note issued by corporations,
with maturities ranging from two to 270 days.
The risk of financial loss due to the failure of the security
issuer or backer.
A type of financial investment, whose value is derived from,
or depends on, the value of one or more other types of investment
(examples include interest rate swaps, reverse repurchase agreements,
etc.).
The process of investing financial assets among a range of
securities by type of investment, sector, maturity, and quality rating.
Common or preferred stock, which shall be restricted to high-quality,
readily marketable securities of corporations that are actively traded
on all major exchanges.
The obligation of an official to provide fiscal stewardship
towards financial assets under his/her control.
High-quality, marketable securities with assets invested
in obligations guaranteed by the United States Treasury or other federal
agencies or investment grade corporate bonds and notes, including
convertibles with a rating of A or higher.
Generally, governmental-type, internal service, and proprietary
funds whose assets finance the day-to-day operations of the Township,
such as the general fund, General Debt Service Fund, Sewer Fund, Stormwater
Management Fund, Liquid Fuels Fund, Capital Improvement Fund, Police
Investigation Fund, Police Equitable Sharing Fund, Commemorative Shade
Tree Fund, Parks Improvement and Open Space Fund, Educational Service
Agency Fund, and Willows Fund.
The risk associated with declines or rises in interest rates,
which cause an investment in a fixed-income security to increase or
decrease in value.
The risk that the value of a security will rise or decline
as a result of changes in market conditions.
Current market price of a security.
The process whereby the book value or collateral value of
a security is adjusted to reflect its current market value as of any
given date.
The date on which payment of a financial obligation is due.
Financial assets of the Township deposited into the Post-Employment
Benefits Obligation Trust Fund to be held for the payment of accrued
but unused leave time, post-retirement healthcare, and any other post-retirement
benefit that falls within the OPEB category.
Financial assets of the Township's Police Pension Trust
Fund and the Civilian Employee Pension Trust Fund, which are held
for the payment of benefits to retired employees.
The face, or par, value of an investment instrument.
A standard that generally limits investment activities to
those that a prudent, or reasonable, investor would engage in.
An agreement of one party to sell securities at a specified
price to a second party and a simultaneous agreement of the first
party to repurchase the securities at a specified price or at a specified
later date.
An investment instrument whereby one asset is traded for
another.
Short-term United States government debt securities with
maturities of no longer than one year and issued in minimum denominations
of $ 10,000.
Long-term United States government debt securities with maturities
of 10 to 30 years and issued in minimum denominations of $1,000.
Intermediate United States government debt securities with
maturities of one to 10 years and issued in denominations ranging
from $1,000 to $1,000,000 or more.
A.
The purpose of this article shall be to provide guidance to Radnor
Township ("Township") officials in discharging their fiduciary responsibility
to prudently invest Township funds by identifying objectives, assigning
responsibilities, and addressing certain risk factors to enhance investment
performance.
B.
Scope. This article shall apply to all financial assets of the Township,
including general operating funds, bond proceeds, and pension fund
assets, and any of its component units, except as otherwise noted.
C.
Objectives. The primary objectives of this article shall be as follows:
(1)
Safety. Investments generally shall be made foremost with the preservation
of principal in mind and by minimizing the effects of the following
types of risk:
(a)
Credit risk. The Township shall minimize credit risk by:
[1]
Limiting the investment of funds to the safest types of securities.
[2]
Prequalifying the financial institutions, broker/dealers, intermediaries,
and advisors with which the Township will conduct business.
[3]
Diversifying investments so that potential losses on individual
securities will be minimized.
(b)
Interest rate risk. The Township shall minimize the risk that
the market value of securities in the portfolio will fall due to changes
in general interest rates by:
[1]
Structuring investments so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to
sell securities on the open market prior to maturity;
[2]
Investing funds primarily in shorter-term securities, money
market mutual funds, or similar investment pools where appropriate.
(c)
Market risk. Investment decisions generally shall not be made
to anticipate possible changes in equity, fixed income, or other market
conditions.
(2)
Liquidity. Investments shall be structured to ensure that adequate
funds are on hand to pay reasonably anticipated Township obligations
(such as payroll, scheduled debt payments, other operating expenses,
and pension benefits) in a timely manner. Because all possible cash
demands cannot be anticipated, the portfolio should consist of investments
with active or resale markets.
(3)
Return.
(a)
Investment earnings are of secondary importance compared to
safety and liquidity objectives. Except as otherwise indicated, investments
generally shall be structured to attain a market average rate of return
based on performance benchmarks established herein. These benchmarks
shall be periodically reviewed by the Finance Director and may be
adjusted with the approval of the Township Manager to reflect changes
in the economic performance of the selected investment instruments.
(b)
Investments as a rule shall be structured to exceed those benchmarks
only when consistent with prudent investment principles and only if
safety and liquidity objectives can be met.
(4)
Securities generally shall not be sold before they mature except
as follows:
D.
Public trust
and ethics.
(1)
Township officials in the investment process shall act as responsible
custodians of the public interest and shall avoid any transaction
that may impair public confidence in the governance of the Township.
(2)
Officials involved in the investment process shall refrain from personal
business activity that could conflict with the proper execution and
management of Township investments or that could impair their ability
to make impartial decisions.
(3)
Officials involved in the investment process shall be governed by the Code of Ethics of the Township, and they also shall abide by the Code of Ethics of the Government Finance Officers Association (see Appendix A), incorporated as a part hereof.[1]
[1]
Editor's Note: Appendix A, Code of Ethics of the Government Finance Officers Association, is included at the end of this chapter.
A.
Township general operating funds and bond proceeds may be invested
in cash, fixed income, and equity instruments and shall be in accordance
with federal, state, and other applicable laws and regulations, as
follows:
(1)
General operating funds. These shall be invested pursuant to Pennsylvania
Act 72 of 1971, as amended (53 P.S. § 56705.1). Types of
investment instruments permissible include, United States Treasury
bills, obligations backed by the full faith and credit of the United
States government or its agencies, shares of money market or mutual
funds of companies that invest solely in authorized investments, funds
pooled by other municipalities and governmental entities, including
the Pennsylvania Local Government Investment Trust, certificates of
deposit, guaranteed investment contracts, repurchase agreements, and
commercial paper to the extent they are collateralized according to
law.
(a)
Investment credit quality restrictions.
[1]
An "approved institution" is any financial institution with
total assets in excess of $2,000,000,000 and which carries a short-term
debt rating of A1 or better by Standard & Poor's or Moody's
Rating Services. All United States banks must be members of the Federal
Deposit Insurance Corporation.
[2]
Commercial paper must be rated A1 or better by Standard &
Poor's or Moody's Rating Services. A split rating is acceptable
so long as one of the ratings is A1 or better.
[3]
Money market funds must have over $1,000,000,000 in assets,
must be managed by major bank trust department portfolio managers,
and must be regulated by United States Government under Investment
Company Act rule 2a-7 and/or 3c7. The funds will seek to maintain
a one-dollar-per-share net asset value.
[4]
All investments in municipal bonds or agencies must be rated
AA or better by Standard & Poor's or Moody's Rating
Services.
(2)
Bond proceeds. These shall be invested in any instruments authorized
for general operating funds and in other types of investments permitted
by the Pennsylvania Local Unit Debt Act (53 Pa.C.S.A., Chapters 80
through 82); these latter generally include any type of securities
in which the Commonwealth of Pennsylvania is authorized to invest.
(3)
Prohibited investments. Only those investments identified in Subsection A of this section are permissible. Neither the Township Administration nor outside investment managers are permitted to invest in any investment outside of what is permissible in Subsection A of this section. Such prohibited investments include, but are not limited to, hedge, derivative or asset-backed investments or other nonpermissible investments that jeopardize the objectives of this investment policy as set forth in § 44-2 of this article.
B.
Safekeeping and custody. As a rule, all Township investments shall
be stored in safekeeping by an unrelated third party not underwriting
a particular investment.
(1)
Authorized financial dealers and institutions. The Finance Director
shall maintain a list of financial institutions authorized to provide
investment services and of approved security brokers/dealers.
(2)
Financial dealers/brokers who desire to offer investment transactions
to the Township shall supply the following, as requested by the Finance
Director:
(a)
Proof of Financial Industry Regulatory Authority (FINRA) certification.
(b)
Proof of state registration.
(c)
Certification of having read and understood and agreeing to
comply with this article.
(d)
Certification that the financial institution in which the investment
is being purchased from has a rating of Al or better from either Standard
& Poor's or Moody's Rating Services;
(3)
The Finance Director shall conduct, at least annually, a review of
the performance and qualifications of the financial condition and
registration status of qualified financial brokers/dealers, as well
as financial institutions holding Township investments.
C.
Performance measures. The performance of Township investments shall
be measured annually by the following criteria:
(1)
Safety. The extent to which any investments lost principal during
a calendar year.
(2)
Liquidity. The extent to which any investment had to be liquidated
before its maturity to meet an expense.
(3)
Return. The extent to which the average return of all investments met their objectives. To measure whether investments of general operating funds and bond proceeds meet their return objectives, the Finance Director shall use the following or other appropriate indexes as benchmarks: ninety-one-day Treasury bill yield; six-month certificate of deposit rate (CD); and twelve-month CD rate. The performance of pension plan assets shall be measured in accordance with § 44-4B.
D.
Reporting. An annual report shall be provided to the Board of Commissioners
that includes, at a minimum, the following information for invested
general operating funds, bond proceeds, and pension plan assets:
(1)
Listing of individual investments held at the end of the year.
(2)
Realized and unrealized gains or losses resulting from appreciation
or depreciation by listing the cost and market value of securities
over one-year duration that are not intended to be held until maturity.
(3)
Dollar-weighted yield to maturity of portfolio on investments as compared to applicable benchmarks, as described in § 44-3C.
(4)
Listing of investments by maturity dates.
(5)
Percentage of the total portfolio that each type of investment represents.
(6)
Analysis of credit risk and other appropriate factors.
E.
Investment procedures. The Finance Director may establish appropriate
staff procedures that govern the investment of Township funds pursuant
to this article under the direction of the Township Manager.
A.
Objectives. The objectives of the police and civilian employee pension
plans ("plans") and Other Post-Employment Benefit Fund shall be to:
(1)
Pension plans: provide full funding for retirement benefits for each
plan's respective participants and beneficiaries.
(2)
Other Post-Employment Benefit Obligation Plan: provide full funding
for retirement-related obligations, including accrued but unused leave
time, retiree healthcare and any other benefit the Township is obligated
to provide to both uniformed and civilian retirees
(3)
Maximize return within reasonable and prudent levels of risk.
(4)
Ensure that the plans' assets will be invested in accordance
with all relevant legislation and regulations in a manner consistent
with fiduciary standards.
B.
Investment guidelines.
(1)
Time horizon. The plans' objectives are based on a five-year
investment horizon so that interim fluctuations should be viewed with
appropriate perspective; that is, with the view that the chances and
duration of investment losses are carefully weighed against the long-term
potential for appreciation of assets.
(2)
Diversification. Investments shall be diversified with the intent
to minimize the risk of investment loss. Consequently, the total portfolio
of each plan will be constructed and maintained to provide prudent
diversification of the concentration of holdings in individual issues,
issuers, countries, governments or industries.
(a)
Not more than 5% of the total stock portfolio valued at market
may be invested in common stock of any one corporation.
(b)
Not more than 25% of stock valued at market may be held in any
one industry category.
(c)
Fixed income securities of any one issuer shall not exceed 5%
of the total fixed income portfolio at the time of purchase (this
shall not apply to issues of the United States Treasury or other federal
agencies).
(d)
Derivatives shall not be purchased for the purpose of portfolio
leveraging.
(3)
Asset allocation.
(a)
To achieve the greatest likelihood of meeting the plans'
objectives and the best balance between risk and return for optimal
diversification, the plans' assets shall be allocated in accordance
with the ranges for each asset class as follows:
[1]
Police pension plan.
|
Asset Class
|
Allocation
(percentage)
| |
|---|---|---|
|
Equities, domestic
|
27.5% to 37.5%
| |
|
Equities, international
|
13.0% to 23.0%
| |
|
Fixed income
|
36.5% to 46.5%
| |
|
Real estate
|
0.0% to 8.0%
| |
|
Cash equivalents
|
0.0 to 10.0%
|
[2]
Civilian pension plan.
|
Asset Class
|
Allocation
(percentage)
| |
|---|---|---|
|
Equities, domestic
|
27.5% to 37.5%
| |
|
Equities, international
|
13.0% to 23.0%
| |
|
Fixed income
|
36.5% to 46.5%
| |
|
Real estate amity
|
0.0% to 8.0%
| |
|
Cash equivalents
|
0.0% to 10.0%
|
(b)
The pension boards, with approval of the Township Manager, are
authorized to adjust the allocation targets from time to time as circumstances
warrant.
(4)
Rebalancing procedures. The asset allocation ranges established under § 44-4B(3) represent a long-term perspective. As such, rapid, unanticipated market shifts or changes in economic conditions may cause the asset mix to fall outside the policy range. These divergences should be of a short-term nature, and the respective plans' pension boards, under the direction of the Township Manager, shall be responsible for rebalancing the assets and ensuring that money managers selected by the pension boards keep divergences as brief as possible. Money managers shall have discretion to temporarily invest a portion of the assets in cash reserves when they deem it appropriate. However, the managers shall be evaluated against their peers on the performance of the total funds under their direct management.
(5)
Risk tolerances. The objectives of these plans cannot be achieved
without incurring a certain amount of principal volatility. Therefore,
the plans shall be managed in a style that seeks to minimize principal
fluctuations over the established time horizon and that is consistent
with the plans' stated objectives.
(6)
Performance expectations.
(a)
The investment objectives for these plans shall be to achieve an average total annual rate of return equal to or greater than the plan's stated actuarial return assumptions. Performance will be measured against specific benchmarking of the pension assets against the biggest possible index in each of the asset classes (see § 44-4D(2)(b) for examples of possible benchmarks). The actual returns may vary significantly from these targets on a year-to-year basis.
(b)
The pension boards, with approval of the Township Manager, are
authorized to adjust these performance targets from time to time as
circumstances warrant.
C.
Guidelines for portfolio holdings.
(1)
Equities. Equity holdings shall be restricted to high-quality, readily
marketable securities of corporations that are actively traded on
all major exchanges.
(2)
Fixed income.
(a)
Fixed investments shall be high-quality, marketable securities
with a preponderance of the investments in United States Treasury,
federal agencies, and United States Government-guaranteed obligations,
and investment-grade corporate issues, including convertibles.
(b)
The overall Moody's or Standard & Poors' rating
of the fixed-income assets shall be at least A. In cases where the
yield spread adequately compensates for additional risk, securities
of below-investment-grade ratings can be purchased up to a maximum
of 15% of total market value of fixed-income securities.
(c)
Active bond management is hereby encouraged and may require
transactions that will temporarily lower the investment return or
change the maturity of the plans' portfolios in anticipation
of market changes. Holdings of individual securities shall be large
enough for liquidation.
(3)
Cash. Cash and short-term instruments maturing in 90 days or less
shall be registered to a maximum of 10% of total assets at all times.
Cash equivalent reserves shall consist of cash instruments having
a quality rating of A-2, P-2 or higher.
(4)
Safekeeping. A custodian appointed by the pension boards for safekeeping
shall hold all securities. The custodian shall produce statements
at least monthly listing the name and value of all assets held.
D.
Control procedures.
(1)
Review of investment objectives. An investment advisor, selected
by the pension boards, shall regularly review the appropriateness
of this portion of the Township investment policy for achieving the
plans' stated objectives.
(2)
Review of investment performance.
(a)
The investment advisor shall report quarterly to the pension
boards to review the plans' investment performance. In addition,
the investment consultant will be responsible for keeping the pension
boards advised of any material change in all money managers'
personnel, investment strategy, and other pertinent information potentially
affecting the performance of all investments.
(b)
The investment advisor shall compare the investment results
on a quarterly basis to appropriate benchmarks, as well as market
index returns in both equity and debt markets. Examples of benchmarks
and indexes that will be used are the S&P 500 Index for large
companies; Russell 2000 Index for small companies; MSCI Europe, Australia
and Far East Index (EAFE) for international equities; Barclays Capital
Index for fixed-income securities; and the United States 91-Day Treasury
Bill Index for cash equivalents.
(3)
The Township Manager or the pension boards from time to time may
engage the services of an additional consultant to review the performance
of the investment advisor, money managers, and this policy.
[Adopted 8-18-2008 by Ord. No. 2008-5]
[Amended 6-9-2014 by Ord. No. 2014-05]
A.
Title. This article shall be known as the "Radnor Township Governmental
Accounting Standards Board Statement No. 54 Fund Balance Policy."
B.
ASSIGNED FUND BALANCE
COMMITTED FUND BALANCE
FUND BALANCE
NONSPENDABLE FUND BALANCE
(1)
(2)
RESERVATIONS OF FUND BALANCE
RESTRICTED FUND BALANCE
UNASSIGNED FUND BALANCE
UNRESTRICTED FUND BALANCE
Definitions. The following words and phrases when used in this article
shall have the meanings given to them in this section unless the context
clearly indicates otherwise:
Includes spendable fund balance amounts established by management
of the Township that are intended to be used for specific purposes
that are neither considered restricted nor committed.
Amounts that can be used only for the specific purposes determined
by a formal action (ordinance or resolution) of the Radnor Township
Commissioners (the level of decision-making authority in the Township).
Commitments may be changed or lifted only by the Radnor Township taking
the same formal action (ordinance or resolution) that imposed the
constraint originally. Resources accumulated pursuant to stabilization
arrangements sometimes are reported in this category.
As defined by the Governmental Accounting, Auditing and Financial
Reporting of the Government Finance Officers Association (GFOA), "fund
balance is the difference between assets and liabilities reported
in a governmental fund."
Not in spendable form includes items that are not expected to
be converted to cash (such as inventories and prepaid amounts) and
items such as long-term amount of loans and notes receivable, as well
as property acquired for resale. The corpus (or principal) of a permanent
fund is an example of an amount that is legally or contractually required
to be maintained intact.
Reserves established by the Township Commissioners (committed
fund balance) or Township management (assigned fund balance).
Amounts that can be spent only for specific purposes:
Unassigned fund balance is the residual classification for
the general fund. This classification represents fund balance that
has not been assigned to other funds and that has not been restricted,
committed, or assigned to specific purposes within the general fund.
Unassigned fund balance may also include negative balances for any
governmental fund if expenditures exceed amounts restricted, committed,
or assigned for those specific purposes.
The total of committed fund balance, assigned fund balance
and unassigned fund balance.
C.
Purpose.
(1)
The Township hereby establishes and will maintain fund balance, as
defined herein, in accordance with Governmental Accounting and Financial
Standards Board Statement No. 54, fund balance Reporting and Governmental
Fund Type Definitions. Fund balance shall be composed of nonspendable,
restricted, committed, assigned and unassigned amounts.
(2)
A fund balance policy is adopted in order to secure and maintain
investment-grade credit ratings, meet seasonal shortfalls in cash
flow, and reduce susceptibility to emergency or unanticipated expenditures
and/or revenue shortfalls. Fund balance information is used to identify
the available resources to repay long-term debt, reduce property taxes,
add new governmental programs, expand existing ones, or enhance the
financial position of the Township, in accordance with policies established
by the Township Commissioners.
(3)
This fund balance policy establishes:
(a)
Fund balance policy for the general fund;
(b)
Reservations of fund balance for the general fund;
(c)
The method of budgeting the amount of estimated unrestricted
fund balance available for appropriation during the annual budget
adoption process (prior to the actual, audited fund balance being
known) and what actions may need to be taken if the actual fund balance
is significantly different than the budgetary fund balance; and
(d)
Establish the spending order of operating revenues and fund
balances.
D.
Fund balance policy (general fund).
(1)
Restricted fund balance. There is no restricted fund balance in the
general fund or amounts that can be spent only for specific purposes:
(a)
Stipulated by external resource providers such as creditors
(by debt covenants), grantors, contributors, or laws or regulations
of other governments; or
(b)
Imposed by law through constitutional provisions or enabling
legislation will be budgeted and reported in special revenue funds,
capital project funds or debt service funds.
(2)
Committed fund balance.
(a)
Commitment of fund balance may be made for such purposes, including,
but not limited to:
(b)
Commitment of fund balance may be made from time to time by
ordinance or resolution of the Township Commissioners. Commitments
may be changed or lifted only by the Township Commissioners taking
the same formal action that imposed the constraint originally (ordinance
or resolution). The use (appropriation) of committed fund balances
will be considered in conjunction with the annual budget adoption
process or by budget amendment approved by ordinance or resolution
of the Township Commissioners during the fiscal year.
(3)
Assigned fund balance.
(a)
Assignment of fund balance may be:
[1]
Made for a specific purpose that is narrower than the general
purposes of the government itself; and/or
[2]
Used to reflect the appropriation of a portion of existing unassigned
fund balance to eliminate a projected deficit in the subsequent year's
budget in an amount no greater than the projected excess of expected
expenditures over expected revenues.
(b)
Assigned fund balance shall reflect management's intended
use of resources as set forth in the annual budget (and any amendments
thereto). Assigned fund balance may or may not be appropriated for
expenditure in the subsequent year depending on the timing of the
project/reserve for which it was assigned.
(4)
Nonspendable fund balance. Nonspendable fund balance is established
to report items that are not expected to be converted to cash such
as inventory and prepaid items; items not currently in cash form such
as the long-term amount of loans and notes receivable as well as property
acquired for resale; and items legally or contractually required to
be maintained intact such as the corpus (or principal) of a permanent
fund.
(5)
Minimum level of unassigned fund balance.
(a)
Unassigned fund balance is the residual classification for the
general fund and represents fund balance that has not been restricted,
committed or assigned to specific purposes within the general fund.
(b)
If, after the annual audit, prior committed or assigned fund
balance causes the unassigned fund balance to fall below 12% of general
fund budgeted operating expenditures, the Finance Director will so
advise Township Commissioners in order for the necessary action to
be taken to restore the unassigned fund balance to 15% of general
fund budgeted operating expenditures.
(c)
The Township Manager will prepare and submit a plan for committed
and/or assigned fund balance reduction, expenditure reductions and/or
revenue increases to the Township Commissioners. The Township shall
take action necessary to restore the unassigned fund balance to acceptable
levels within two years.
E.
Reservations of fund balance (general fund).
(1)
Committed fund balance. Radnor Township hereby establishes the following
committed fund balance reserves in the general fund.
(a)
Financial stabilization.
[1]
The financial stabilization fund balance is committed by Radnor
Township at two months of the average regular monthly budgeted operating
expenditures as recommended by the GFOA which sets forth, at a minimum,
that general purpose governments, regardless of size, maintain no
less than one or two months of regular general fund budgeted operating
expenditures. The calculation of the average regular monthly budgeted
operating expenditures will be the full year budgeted operating expenditures
divided by 12, and the financial stabilization fund balance will be
twice the amount calculated.
[2]
To the extent that Act 511 revenues grow to exceed 30% of the total general fund revenues in any given year, the Township will commit up to an additional 10% of general fund expenditures over the target fund balance required in Subsection D(5)(b). The purpose for the additional 10% is to further mitigate against sudden, unexpected and large decreases in the Act 511 revenues, which have shown to be sensitive to economic shifts. Please see § 44-11, Nonrecurring revenues, for additional guidance on the potential source of funds for the additional 10% required by this section of the fund balance policy.
[3]
It will be the responsibility of the Township's Finance
Director to report the current committed fund balances in the Township's
annual audited financial statements.
(2)
Assigned fund balance.
(a)
The Radnor Township Commissioners hereby establish the following
assigned fund balance reserves in the general fund:
[1]
Assignment to subsequent year's budget. The subsequent
year's budgetary fund balance reserve is assigned by Township
management as set forth in the annual budget (and any amendments thereto)
to appropriate a portion of existing unassigned fund balance to eliminate
a projected deficit in the subsequent year's budget in an amount
no greater than the projected excess of expected expenditures over
expected revenues.
[2]
Assignment to encumbrances. The Radnor Township Home Rule Charter
provides for capital expenditure appropriations to continue in force
until the purpose for which it was made has been accomplished or abandoned,
within a two-year period from inception.
(b)
It will be the responsibility of Township Finance Director to
report the current assigned fund balances in the Township's annual
audited financial statements.
F.
Budgeting.
(1)
Appropriation of unrestricted fund balance. The actual amount of
unrestricted fund balance (total of committed fund balance, assigned
fund balance and unassigned fund balance) is not known until the completion
of the annual audit which takes place approximately four months after
the end of the fiscal year being audited. However, an estimate of
unrestricted fund balance must be made during the annual budget adoption
process (generally, September through December) which is prior to
the end of the fiscal year, December 31.
(2)
Estimated beginning fund balance. In order to achieve the most accurate
estimate possible, the Township Manager or designee shall project
both sources of funds (revenues, prior years' unrestricted fund
balances carried forward and other financing sources) and uses of
funds (operating and nonoperating expenditures), including accruals,
for each department in each governmental fund through December 31
of the then-current fiscal year. These projections will be shown in
a separate column for each fund in the proposed and final budget documents.
The difference between the estimated actual sources of funds and estimated
actual uses of funds is the calculated estimated beginning fund balance
for the subsequent fiscal year. If planned for use in the subsequent
fiscal year, committed and assigned fund balance may be included in
the estimated beginning fund balance.
(3)
Estimated ending fund balance.
(a)
For the year being budgeted, a calculation of estimated ending
fund balance shall also be made. This calculation shall be the difference
between the budgeted sources of funds and the budgeted uses of funds
as described above.
(b)
Since the uses of funds are restricted, committed or assigned
in all other governmental fund types, there is no policy to the amount
of ending fund balance unless the project is completed and the fund
should be closed. In this situation, a residual equity transfer will
be made to zero-out any remaining fund balance.
(c)
If, after the annual audit, the actual general fund unassigned
fund balance is greater than 18% of budgeted operating expenditures
in the general fund, the excess may be used in one or a combination
of the following ways:
[1]
Left in the general fund to earn interest and roll forward into
the subsequent year's beginning fund balance;
[2]
Appropriated by ordinance or resolution of the Township Commissioners
for a one-time expenditure or opportunity that does not increase recurring
operating costs;
[3]
Committed to increase a formal stabilization arrangement or
reserve (including but not limited to economic stabilization, contingency
reserves or disaster reserves); or
[4]
Appropriated for start-up expenditures of new programs undertaken
at mid-year, provided that such action is considered in the context
of Commissioners-approved multiyear projections of revenues and expenditures.
G.
Spending order of operating revenues and fund balances. The Township
will first use federal, then state, and lastly Township revenues to
meet its financial obligations. The Township uses restricted amounts
to be spent first when both restricted and unrestricted fund balance
is available unless there are legal documents/contracts that prohibit
doing this, such as in grant agreements requiring dollar-for-dollar
spending. Additionally, the Township would first use committed fund
balance, followed by assigned fund balance and then unassigned fund
balance when expenditures are incurred for purposes for which amounts
in any of the unrestricted fund balance classifications could be used.
H.
Annual review and determination of fund balance policy. Compliance
with the provisions of this policy shall be reviewed as a part of
the annual budget adoption process, and the amounts of restricted,
committed, assigned, nonspendable and the minimum level of unassigned
fund balance shall be determined during this process.
I.
Additional information, requirements and responsibilities. It will
be the responsibility of the Township Finance Director to keep this
policy current.
[Amended 6-9-2014 by Ord. No. 2014-05]
A.
It is the policy of Radnor Township that one-time or limited-term
financial resources shall not be used for current or future ongoing
operating expenses.
B.
Definitions. For purposes of this article, "nonrecurring revenues"
shall consist of, but not be limited to, proceeds from asset sales,
debt refinancing, one-time grants, legal settlements, large unbudgeted/unplanned
revenues, and similar nonrecurring resources.
C.
Appropriate uses of nonrecurring revenues shall include:
(1)
Maintaining the targeted fund balances in the General Fund;
(3)
The early retirement of debt or funding of other long-term liabilities
of the Township (examples include the funding of any underfunded pension
obligations and/or underfunded OPEB obligations);
(4)
Funding capital improvements or building fund balances in the Capital
Improvement Fund; and
(5)
Other nonrecurring expenditures.
D.
Depending on the nature, timing, and source of the nonrecurring revenue, the Board may pass special legislation specifically detailing the use of the nonrecurring revenues. However, absent any special legislation that specifically allocates how nonrecurring revenue is to be allocated, the priority of allocation shall be in the order of § 44-11C, above.
A.
It is the goal of Radnor Township to fund all assets
with expected useful lives of less than 10 years, including vehicles,
equipment, and minor improvements to buildings and grounds (those
less than $25,000 in costs), whenever possible with cash on hand as
opposed to utilizing borrowed funds.
B.
It is the policy of the Township to achieve this goal
through the following means:
(1)
Annual fund transfer from the general fund, which
began in 2008 with a transfer of $150,000 and shall be budgeted to
increase each year by a minimum of $25,000;
(2)
All proceeds from the sale of fixed assets shall be
dedicated to the Capital Improvement Fund for this purpose;
(3)
Five percent of all revenues received through Notices
of Assessment as a result of the audits of delinquent Act 511 accounts
shall be dedicated to the Capital Improvement Fund for this purpose;
(4)
The Board, at its sole discretion, may levy a tax
millage rate on real property that is dedicated to the Capital Improvement
Fund for this purpose.
