Supervisors set fund policy

By Susan Gibbs

County supervisors voted to establish a fund balance policy at their regularly scheduled meeting June 12.

A proposed policy was provided to supervisors prior to the meeting. It read:

“The types of fund balance components are non-spendable, restricted, committed, assigned and unassigned, as defined below. This policy will focus on the amount remaining after accounting for non-spendable and restricted fund balance.

The policy statement reads:

“The county of Greene recognizes that sound financial principles require sufficient funds to be retained to provide a stable financial base at all times. An adequate fund balance is essential to maintain a good credit rating, to provide for operating and future capital budgets, to protect against temporary revenue shortfalls, and to cover emergency or unforeseen expenditures.

“The Board of Supervisors is ensuring the economic stability of the county by establishing a target level for reserve balances. Fund balance is the cumulative balance, over time, of all assets and liabilities reported in governmental fund. It is a measure of resources available for current operations. The fund balance policy is based on recommendations of the Governmental Accounting Standards Board.

Components of Fund Balance are: non-spendable, restricted, committed, assigned and unassigned, as defined below. This policy will focus on the amount remaining after accounting for non-spendable and restricted fund balance.

  • Non-spendable Fund Balance: Amounts that cannot be spent because of their form (inventory or pre-payments) or for legal or contractual reason must be kept intact.
  • Restricted Fund Balance: Amounts constrained for a specific purpose by creditors, grantors, contributors, or laws and regulations of other governments.
  • Committed Fund Balance: Amounts that can only be used for a specific purpose by formal action by the Board of Supervisors.
  • Assigned Fund Balance: Amounts set aside for a specific purpose by the county administrator or his/her designee.
  • Unassigned Fund Balance: Amounts in excess of non-spendable, restricted, committed, and assigned fund balance. The General Fund is the only fund that would report a positive amount in this category.

The policy further states that: “A minimum unassigned fund balance shall be established at 15 percent of general fund expenditures net of inter-fund transfers plus an additional amount to cover one month’s average monthly cash flow requirements of the county.

“The Board of Supervisors may appropriate money that will reduce available funds below the declared 15 percent for purposes of a declared emergency. In such circumstances, the Board will adopt a plan to restore the available fund balances to the policy level within 36 months. If the restoration cannot be accomplished within such time period without severe hardship, then the Board will establish a different but appropriate time period.”

The policy also calls for fund balance to be evaluated during the annual budget process. It reads: “It shall be the goal of the Board of Supervisors to adopt a budget that maintains the minimum fund balance requirements.

“The total county budget (for Fiscal Year 20102-2013) is $51.3 million,” Chairman Buggs Peyton reminded supervisors. “When you subtract the inter-fund transfer for the school of $11.5 million you have a remainder $39.8 million.  If you take 15 percent of that you’re talking about $6 million unassigned reserve.”

In addition, Peyton said, the latest numbers from the treasurer indicate $4.58 million in cash flowing through that office on a monthly basis. “If you take that amount plus the $6 million you get $10.5 million so that’s what would be in the reserve plus the non-spendable fund balance.”

Of the $6 million slated for reserve, Peyton continued, $1.5 million is being drawn down this year to fill the public school district’s request for additional funding. “So … you have a remainder of about $4 million for (capital) outlay.”

He suggested earmarking $2 million of that for water/sewer debt service and another $2 million to the water impoundment project currently on the county’s drawing board.

The county currently owes $36,971,622, including principal and interest, in water debt, and the construction of the much-needed reservoir could cost about $40 million.

While it is the water/sewer hook-up fees that have been used to pay down the current debt, housing starts are down, and unless they rise dramatically, it is expected that the county will have to dip into its general fund to make those semi-annual payments within the near future.

When that happens, Peyton said at the June 12 meeting, taxes will have to be raised.

“I think it would be a wise decision to take that $4 million in capital outlay (funds) and move it over into certificates of deposit so it can be somewhat untouchable,” Peyton said.

Supervisor Jim Frydl objected to funding the reserves with any more that 15 percent of the county’s budget.

“What is the reason for the additional cash flow?” Frydl asked.

Peyton explained that if a financial crisis came the additional monies would be looked at first so that the original funds could be less easily raided. He also pointed out that some counties are carrying two months’ cash flow in their reserves.

The Board voted unanimously to put 15 percent of the county’s budget into the reserve fund. All supervisors but Frydl voted to the call for a month’s cash flow to be placed in the fund as well. A consensus of the Board also agreed to recommend that the treasurer place funds earmarked for water service into certificates of deposit.

In addition, at the Board’s last regularly scheduled meeting, on May 22, supervisors agreed to ask for regular reports from county departments and agencies.

The reason, explained Frydl, is that supervisors are “elected to do due diligence and the most effective way I think that we can do that is to receive reports; to look for things that are trending downward or upward so that we can plan ahead if we need to.”

He suggested: that the county administrator update supervisors on any outstanding projects during public session; that the monthly account payable reports from the county finance director continue, and a quarterly report showing percentage of budget spent be delievered; a quarterly report by type of building inspections; a monthly planning and zoning report that includes a list of zonng applications and a quarterly project report; a financial operations report and a capital equipment annual report from solid waste; a report on animal control costs from the sheriff’s office; a current comprehensive list of existing businesses licenses, followed by a montly update showing new busness licenses, as well as a quarterly report on the different tax categories from the commissioner of revenue; a semi-annual report on participation trends from the parks and recreation department; and, in addition to closed session reports from the economic development authority, a bi-annual report to the public.

Frydl also requested: montly balance updates and a quarterly collection update from the county treasurer;  a quarterly report on fees from the county clerk;  a quarterly general update on caseloads from the Commonwealth’s attorney;  and “maybe just a quarterly update from the schools, whether it be budget-related or administrative-related.”

He continued: “I think all of this is just an idea, and I would welcome suggestions (from fellow Board members and the county administrator). This should be a living thing. If we ask for reports from planning and (Zoning Administrator Bart) Svoboda  says this takes a lot of time, what are you guys getting out of it, if we say its wonderful we keep going, if it’s not, then we stop.

“Each department can have things they recommend and any department that has good ideas we should amend this so we get the best information possible. The goal being that we can plan ahead and we are not surprised.”

According to Section 15.2-2508 of the Code of Virginia, the governing body may require such information as they deem advisable from departments, offices, divisions, boards, commissions and agencies. Constitutional officers (as well as department heads) shall be required to furnish the required information.

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