To establish a fund balance policy tailored to the needs of
the Township of Pine to insure against unanticipated events that would
adversely affect the financial condition of the Township and jeopardize
the continuation of necessary public services. This policy is intended
to assure that the Township maintains adequate fund balance in the
various operating funds to: 1) provide sufficient cash flow for daily
financial needs; 2) secure and maintain investment grade bond ratings;
3) offset significant economic downturns or unanticipated revenue
shortfalls; and 4) provide funds for unforeseen expenditures related
to emergencies. This policy shall apply only to the Township's
governmental funds.
Fund balance will be reported in the governmental funds under
the following categories using the definitions provided by GASB Statement
No. 54:
A. Nonspendable fund balance. Amounts that cannot be spent because they
are either a) not in spendable form (e.g., inventories, prepaid expenses,
long-term receivables) or b) legally or contractually required to
be maintained intact (e.g., developer escrow).
B. Restricted fund balance. Amounts for which constraints on the use
of resources are placed by external parties, constitutional provisions
or enabling legislation.
C. Committed fund balance. Amounts set aside for a specific purpose
by the Township's highest level of decision making authority.
Formal action to commit funds must be taken prior to the end of the
calendar year. The same formal action must be taken to remove or change
the limitations placed on the funds.
D. Assigned fund balance. Amounts intended to be used for specific purposes
that do not meet the criteria to be classified as restricted or committed.
In governmental funds other than the General Fund, assigned fund balance
represents the remaining amount that is not restricted or committed.
E. Unassigned fund balance. The residual classification of the Township's
General Fund consists of all spendable amounts not contained in other
classifications. In other funds, the unassigned classification is
used only to report a deficit balance from overspending for specific
purposes for which amounts had been restricted, committed, or assigned.
The following definitions will be used in reporting activity
in the Township's governmental funds. All fund types may or may
not be reported in any given reporting period, based on actual circumstances
and activity.
CAPITAL PROJECTS FUNDS
Used to account for and report all financial resources restricted,
committed or assigned for the acquisition or construction of capital
assets.
DEBT SERVICE FUNDS
Used to account for and report all financial resources restricted,
committed or assigned to expenditure for principal and interest payments
on debt.
GENERAL FUND
Used to account for all financial resources not accounted
for and reported in another fund.
SPECIAL REVENUE FUNDS
Used to account for and report the proceeds of specific revenue
sources that are restricted or committed for specific purposes other
than debt services or capital projects.
When an expenditure is incurred for purposes for which both
restricted and unrestricted (committed, assigned, or unassigned) amounts
are available, it shall be the policy of the Board of Supervisors
to consider restricted amounts to be expended first. When an expenditure
is incurred for purposes for which amounts in any of the unrestricted
fund balance classifications may be used, it shall be the policy of
the Board of Supervisors that committed amounts shall be reduced first,
followed by assigned amounts and then unassigned amounts.
Only the Township's highest level of decisionmaking authority,
the Board of Supervisors, may commit fund balance for specific purposes.
A resolution is required to approve a commitment of fund balance,
as well as to remove a commitment. The passage of a resolution must
take place prior to December 31 of the applicable calendar year. If
the actual amount of the commitment is not available by December 31,
the resolution must state the process or formula necessary to calculate
the actual amount as soon as information is available.
The Township of Pine Board of Supervisors hereby delegates the
Township Manager the authority to assign fund amounts that will be
used for specific purposes and do not meet the criteria of being classified
as restricted or committed. Assignment of fund balance may be made
for a specific purpose and/or 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 excess of expected expenditures over expected revenues.
Unassigned fund balance is the residual amount of fund balance
in the General Fund. It represents the resources available for future
spending. An appropriate level of unassigned fund balance should be
maintained in the General Fund in order to cover unexpected expenditures
and revenue shortfalls. This policy establishes a minimum unassigned
fund balance in the General Fund as recommended by the Government
Finance Officers Association. The minimum unassigned fund balance
in the General Fund as of December 31 is hereby set at 15% of annual
General Fund expenditures (including operating transfers to other
funds) as set by the officially adopted budget for the subsequent
calendar year. In the event that the balance drops below 15%, the
Board of Supervisors will develop a plan to replenish the fund balance
to the established minimum level within two years.
Compliance with the provisions of this policy shall be reviewed
as part of the annual budget adoption process and the year-end financial
reporting process.