[Adopted 6-12-2012 (P12-02)]
A. 
Purpose. This Fund Balance Policy of the Kent County Levy Court, Kent County, Delaware (the "County") establishes the procedures for reporting fund balances in the Governmental Fund Type financial statements. The main objective of establishing and maintaining a Fund Balance Policy is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that are consistently applied. Certain commitments and assignments of fund balances will help ensure that there will be adequate financial resources to protect the County against unforeseen circumstances and events such as revenue shortfalls and unanticipated expenditures. The Policy also authorizes and directs the Director of Finance or his/her designee to prepare financial reports which accurately categorize fund balances in accordance with Governmental Accounting Standards Board ("GASB") Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, effective for the fiscal year ended June 30, 2011 (fiscal year 2011) and thereafter.
B. 
General policy. Fund balance is essentially the difference between the assets and liabilities reported in a governmental fund.
(1) 
There are five separate components of fund balance, each of which identifies the extent to which the County is bound to honor constraints on the specific purpose for which amounts can be spent.
(a) 
Nonspendable fund balance: amounts that are not in a spendable form (such as inventory and prepaids) or are legally required to be maintained intact. It is the responsibility of the Finance Director to categorize these funds as defined.
(b) 
Restricted fund balance: constraints are placed on the use of this resource as follows: externally imposed by creditors or laws or regulations of other governments; or constrained by grantors, contributors or enabling legislation to assess levy or charge to mandate payment. It is the responsibility of the Finance Director to categorize these funds as defined.
(c) 
Unrestricted fund balance.
[1] 
Committed fund balance: amounts that can be used only for the specific purposes determined by a formal action (resolution or ordinance) of the Levy Court.
[2] 
Assigned fund balance: amounts the County intends to use for a specific purpose but is neither restricted nor committed.
[3] 
Unassigned fund balance: 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. These funds are available for any government-related purpose.
(2) 
The first two components listed above (nonspendable fund balance and restricted fund balance) are not further addressed in this policy due to the nature of their restrictions. This policy is focused on the financial reporting of unrestricted fund balance, or the last three components listed above.
C. 
Components of unrestricted fund balance.
(1) 
Committed fund balance. The Kent County Levy Court, as the County's highest level of decision-making authority, may commit fund balance for specific purposes pursuant to constraints imposed by formal actions taken. These committed amounts cannot be used for any other purpose unless the Kent County Levy Court removes or changes the specific use through the same type of formal action taken to establish the commitment. Kent County Levy Court action to commit fund balance must occur with the fiscal reporting period, no later than June 30; however, the amount can be determined subsequent to the release of the annual financial statements. At the time of adoption of this Policy, the County does not have reserves that meet this component of fund balance.
(2) 
Assigned fund balance.
(a) 
Authority is given to the County Administrator, Finance Director or Levy Court to assign funds for specific purposes. Assigned funds are amounts that are constrained by the County's intent to be used for specific purposes, but are neither restricted nor committed. The assigned funds are for specific programs or projects that were approved in prior budgets and were not spent in the current fiscal year, specific requests made by Levy Court, or for a specific need as identified by the County Administrator.
(b) 
This Policy hereby delegates authority to assign amounts to be used for specific purposes to the Director of Finance or his/her designee and the County Administrator for the purpose of reporting these amounts in the annual financial statements.
(3) 
Unassigned fund balance.
(a) 
These are residual positive net resources of the General Fund in excess of what can properly be classified in one of the other four categories. There are some reserves that do not meet the requirements of the aforementioned components of fund balance. For financial statement reporting purposes, these reserves are included in unassigned fund balance. Positive unassigned fund balance is only reported in the General Fund and not in any of the other governmental fund types. Unassigned fund balance represents the resources available for future spending. An appropriate level of unassigned fund balance should be maintained in the General Fund to cover unexpected expenditures and revenue shortfalls.
(b) 
Kent County Levy Court hereby designates a retention goal of 50% of the most recently adopted General Fund expenditure budget for its unassigned fund balance. In the event that the unassigned fund balance falls below the 50% goal, the Director of Finance, the County Administrator and Kent County Levy Court will consider budgetary methods to increase the reserve to the desired goal. These may include delaying planned purchases, freezing vacant staff positions, and other measures. The Finance Director and the County Administrator will develop a plan to replenish the unassigned fund balance to the established minimum level within three years.
D. 
Other provisions.
(1) 
Fund balance classification. The County considers restricted fund balances to have been spent first when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the County considers committed amounts to be reduced first, followed by assigned amounts, and then unassigned amounts.
(2) 
Stabilization arrangement.
(a) 
If needed or desired, the Levy Court may establish a financial stabilization account, and corresponding policy to follow, that will be a committed fund balance. A financial stabilization account may be established for the purpose of providing funds for an emergency or urgent event such as: severe revenue shortages, severe budgetary imbalances, safety of County employees, or safety of the citizens of Kent County. This could also include any events that the County Administrator or Levy Court declares as an emergency.
(b) 
After the Levy Court adopts the stabilization account, the minimum level for the account may be set at a percentage of the most recent approved budget for General Fund expenditures or a specified amount. In the event that the balance drops below the established minimum level, the Finance Director and the County Administrator will develop a plan to replenish the financial stabilization account balance to the established minimum level within three years. When a stabilization arrangement is approved, it must contain the following:
[1] 
Approval by resolution or ordinance.
[2] 
Requirements for additions to the stabilization amount.
[3] 
Conditions under which stabilization amounts may be spent.
(c) 
Any change or revision to an approved stabilization agreement shall require a super majority vote of Levy Court.
(3) 
Policy statement. This policy is in place to provide a measure of protection for the County of Kent, Delaware against unforeseen circumstances and to comply with GASB Statement No. 54. No other policy or procedure supersedes the authority and provisions of this policy.