HomeMy WebLinkAboutAgenda - 11-20-2012 - 7d ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: November 20, 2012
Action Agenda
Item No. 7-d
SUBJECT: Recommended Uses of General Fund Unassigned Fund Balance, as of June
30, 2012
DEPARTMENT: Finance and Administrative PUBLIC HEARING: (Y/N) No
Services
ATTACHMENT(S): INFORMATION CONTACT:
Attachment 1. BOCC Fund Balance Frank Clifton, 919-245-2300
Management Policy Clarence G. Grier, 919-245-2453
Attachment 2. Schedule of General Fund
Balance Available for
Appropriation
Attachment 3. Chart and Schedule of
Changes in Fund Balance
since FY2008
PURPOSE: To provide the Board of County Commissioners (BOCC) with recommendations for
the use of the General Fund unassigned Fund Balance in excess of the BOCC's fund balance
policy.
BACKGROUND: On April 5, 2011, the BOCC adopted a fund balance policy that states:
The County will strive to maintain an unassigned fund balance in the General Fund of
17% percent of budgeted general fund operating expenditures each fiscal year. The
amount of unassigned fund balance maintained during each fiscal year should not fall
below 8%percent of budgeted general fund operating expenditures, as recommended by
the North Carolina Local Government Commission (Attachment 1).
Over time, the County's financial reserves grew. On June 30, 2012, the general fund's
unassigned fund balance totaled $39.6 million (Attachment 2). Of this amount, $3.2 million was
appropriated, prior to the end of the fiscal year. After these appropriations, the general fund's
unassigned fund balance was $36.4 million, which illustrated a 125% increase in the unassigned
fund balance since June 30, 2009 (Attachment 3). Additionally, this represented 20.77% of
budgeted general fund operating expenditures or$6.6 million, as of June 30, 2012.
2
For the current fiscal year, the County has appropriated $4.8 million of the excess fund balance.
The $3 million appropriated to establish and fund the Other Post Employment Benefit (OPEB)
Trust was a Manager recommendation as part of the fiscal year June 30, 2013 Operating
Budget to fully fund the total required OPEB contribution for the current fiscal year. It has been
recommended by the Local Government Commission (LGC) and the Bond Rating Agencies that
the County addresses the funding of its OPEB liability. Without addressing this growing liability,
which currently totals $64 million, the LGC and the Bond Rating agencies have informed staff
that the County's ability issue debt in the future could be limited. Additionally staff recommends
that the BOCC consider the suggested uses of the $1.86 million available unassigned balance
outlined in Attachment 2.
FINANCIAL IMPACT: The financial impact is the use of $6.6 million of General Fund Balance
that is in excess of the established fund balance policy of 17%.
RECOMMENDATION(S): The Manager recommends that the Board approve the suggested
uses of General Fund available fund balance and provide direction and feedback to staff on
other uses of available fund balance.
Attachment 1 April 5,20113
ORANGE COUNTY BOARD OF COMMISSIONERS
FUND BALANCE MANAGEMENT POLICY
The Fund Balance Management Policy is intended to address the needs of Orange County
(County), in the event of unanticipated and unavoidable occurrences which could adversely
affect the financial condition of the County and thereby jeopardize the continuation of
necessary public services. This policy will ensure the County maintains adequate fund
balance and reserves in the County's Governmental Funds to provide the capacity to:
1. Provide sufficient cash flow for daily financial needs,
2. Secure and maintain investment grade bond ratings,
3. Offset significant economic downturns or revenue shortfalls, and
4. Provide funds for unforeseen expenditures related to emergencies.
Fund Balance for the County's Governmental Funds will be comprised of the following
categories:
1. Nonspendable - amounts that cannot be spent because they are either (a) not in
spendable form or (b) legally or contractually required to be maintained intact.
2. Restricted— amounts externally imposed by creditors (debt covenants), grantors,
contributors, laws, or regulations of other governments.
3. Committed — amounts used for a specific purpose pursuant to constraints imposed by
formal action of the government's highest level of decision-making authority.
a. Amounts set aside based on self-imposed limitations established and set in place
prior to year-end, but can be calculated after year end.
b. Limitation imposed at highest level and requires same action to remove or modify
c. Ordinances that lapse at year-end
4. Assigned - amounts that are constrained by the government's intent to be used for
specific purposes, but are neither restricted nor committed.
5. Unassigned — amounts that are not reported in any other classification.
The General Fund will be the only fund that will have an unassigned fund balance. The
Special Revenue Funds and Capital Project funds will consist of only nonspendable,
restricted, committed and assigned categories of fund balance.
Unassigned Fund Balance—General Fund
Orange County has adopted a fiscal policy that provides for capital projects to be financed with
debt and pay-as-you-go funding. In order to obtain the best possible financing, the County has
adopted policies designed to maintain bond ratings at or better than AAA (Fitch), Aa2 (Moody's
Investor Services) and AA+ (Standard & Poor's). Part of the County's fiscal health is
maintaining a fund balance position that rating agencies feel is adequate to meet the County's
needs and challenges.
Attachment 1 April 5,20114
Orange County has therefore adopted a policy that requires management to maintain an
unassigned balance as follows:
1. The County will strive to maintain an unassigned fund balance in the General Fund of 17%
percent of budgeted general fund operating expenditures each fiscal year. The amount of
unassigned fund balance maintained during each fiscal year should not fall below 8%
percent of budgeted general fund operating expenditures, as recommended by the North
Carolina Local Government Commission.
2. To the extent that the General Fund unassigned fund balance exceeds 17% percent, the
balances may be utilized to fund capital expenditures or pay down outstanding County
debt.
3. The County's budget and revenue spending policy provides for programs with .
multiple revenue sources. The Financial Services Director will use resources in the
following hierarchy: bond proceeds, Federal funds, State funds, local non-county
funds, county funds. For purposes of fund balance classification, expenditures are
to be spent from restricted fund balance first, followed in-order by committed fund
balance, assigned fund balance, and lastly, unassigned fund balance. The Financial
Services Director has the authority to deviate from this policy if it is in the best
interest of the County with Board of County Commissioner's approval.
4. Management is expected to manage the budget so that revenue shortfalls and
expenditure increases do not impact the County's total unassigned fund balance. If a
catastrophic economic event occurs that requires a 10% or more deviation from total
budgeted revenues or expenditures, then unassigned fund balance can be reduced
by action from the Board of County Commissioners; the Board also will adopt a plan
of action to return spendable fund balance to the required level.
Enterprise Funds - (Solid Waste, Efland Sewer, and the Orange County Sportsplex) — The
County will strive to maintain unrestricted net assets greater than 8% of total operating
revenues at fiscal year-end, net of any donated assets recognized, to provide reserves for
operations and future capital improvements.
Restrictions, reservations, and designations of Net Assets for Enterprise Funds
For external reporting purposes, net assets will be reported as restricted or unrestricted in
accordance with GAAP. For internal purposes, net assets will be reserved or designated as
follows:
1. Encumbered balances to continue existing projects are designated.
2. Designations for funding of planned projects in a future period to reduce the financial
demands placed upon a subsequent budget.
Internal Service Funds— Dental Insurance Fund -total net assets shall maintain a positive
balance to illustrate the internal nature of recovery fees for services performed in self-insuring
employees of the County. Additionally, the net assets of the fund will demonstrate adequate
funding for incurred, but not reported claims.
Y
Attachment 1 April 5,20115
Rescission
This policy supersedes any policy in place prior to this date.
April 5, 2011
General Fund Balance Available for Attachment 2
Appropriation 6
As of October 31, 2012
Totals
Fund Balance Available for Appropriation (A),June 30, 2012 $ 39,564,649
Fund Balance,Assigned
FY2012-2013 Budget $ 2,187,872
Parking Deck Purchase 1,025,000
Total Assigned Fund Balance(B) 3,212,872
Fund Balance Unassigned (A less B), June 30, 2012 $ 36,351,777
General Fund Expenditures for the year ended June 30,2012 $ 175,010,446
General Fund Unassigned Fund Balance as of June 30, 2012
As a Percentage of General Fund Expenditures 20.77%
BOCC Fund Balance Policy- 17% 17.00%
General Fund Unassigned Fund Balance as of June 30, 2012
In excess of the Board's policy $ 6,600,001
Less: Emergency Telephone Fund (904,367)
Less:OPEB Funding (3,000,000)
Less: Rogers Road Community Center (650,000)
Less: CY Appropriation of Fund Balance (247,131)
Less: November 20th budget Amendment Appropriations (709,111)
Additional Unassigned Fund Balance Available for Appropriation
As of October 31, 2012 $ 1,089,392
Suggested Current Year uses of the Additional Fund Balance
Fund Vehicle Replacement Fund Purchases to avoid financing cost $640,503
Balance Pay as Go Capital Projects-General Fund Projects $419,300
Employee Bonus $500,000
Fund the Design and Planning of the Whitted Building Meeting Room $295,000
* 17% Fund Balance totals....................................................................................... $ 29,751,776
1
Change in General Fund Available Fund Balance Attachment 3
Since FY2008 7
1 2 3 2 . 3
Unassigned
Unassigned General Fund Fund Balance
Fiscal Year Fund Balance Expenditures %
2008 $ 22,094,158 $ 171 ,030,903 12.92%
2009 $ 16,989,028 $ 184,068,172 9.23%
2010 $ 21,097,621 $ 178,967,629 11.79%
2011 $ 27,782,007 $ 176,421 ,147 15.75%
2012 $ 36,351 ,777 $ 175,010,446 20.77%
Change Since FY2008 125.05%
Note: Available Fund Balance for FY2008 and FY was reduced by the following
budget carryforwards:
FY2008 $ 1 ,709,166
FY2009 $ 1 ,988,442'