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Home My WebLink AboutAgenda - 01-22-2015 - 7b 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date:January 22, 2015 Action Agenda Item No.7-b SUBJECT: Recommended Uses of General Fund Unassigned Fund Balance as of June 30, 2014 DEPARTMENT:Finance and Administrative PUBLIC HEARING: (Y/N)No Services ATTACHMENT(S):INFORMATION CONTACT: 1.BOCC Fund Balance Policy 2.Schedule of General Fund Balance Bonnie Hammersley, 919-245-2300 Available for AppropriationClarence G. Grier, 919-245-2453 3.Chart and Schedule of Changes in Fund Balance Since FY2008 PURPOSE: To receive a recommendation for the use of the General Fund unassigned Fund Balance in excess of the BOCC’s fund balance policy. BACKGROUND: On April 5, 2011the BOCC adopted a fund balance policy that states : The County will strive to maintain an unassigned fundbalance 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. As of June 30, 2014 the General Fund Unassigned Fund Balance totaled $44.9 million (Attachment 2). Of this amount, $10million was appropriated prior tothe end of the fiscal year to balance the FY 2014 – 2015 General Fund Operating Budget. After theappropriationof the General Fund’s fund balance available for appropriation, the General Fund unassigned fund balance as of June 30, 2014 is$34.9 million, whichrepresents 18.65% ofthe General Fund expenditures as of June 30, 2014. This represents approximately a 57.83% increase in the General Fund unassigned fund balance since June 30, 2008. Additionally this represents unassigned fund balance in excess of the fund balance policy of $3.0million. For the current fiscal year, staffrecommendsthe appropriation $1.5 million of the excess fund balanceto continue the funding of the Other Post Employment Benefits(OPEB) Fundpreviously establishedto partially fund the total required contribution for the current fiscal year. It has been 2 recommended by the Local Government Commission and the Bond Rating Agencies that the County addressthe funding of its OPEB liability. The current OPEB unfunded liability totals approximately $59.1million. The total remaining General Fund unassigned fund balance after the current year appropriations and the appropriation for the OPEB contributioninexcess of the fund balance policy percentage of 17% totals $1.5 million (Attachment 2). Additionally staff recommendsthat the BOCC consider using $450,000 to replenish the Social Justice Fundor for FY2014-15 appropriations as needed, and that the remaining balance of $1.1 million available unassigned balance be used to balance the FY2015-16 budget (Attachment 2). FINANCIAL IMPACT: The financial impact is the use of $3.0million of General Fund Balance in excess of the established fund balance policy of 17%. RECOMMENDATION(S): The Manager recommends that the Board approve the recommended uses of General Fund available fund balance: $1.5 million of the excess fund balance to continue the funding of the Other Post Employment Benefits(OPEB) Fund; $450,000 to replenish the Social Justice Fund or for FY2014-15 appropriations as needed; and the remaining balance of $1.1million available unassigned balance be used to balance the FY2015-16 budget; and provide direction and feedback to staff on the other potential uses of unassigned (available) fund balance. 3 Attachment1 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 Countyand therebyjeopardize the continuation of necessary public services. This policy will ensure the Countymaintains adequate fund Governmental Funds balance and reserves in the County’s to provide the capacity to: 1.Providesufficient 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. Governmental Funds Fund Balance for the County’s 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’shighest 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 reportedin any other classification. The General Fund will be the only fund that will have anunassigned 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 Countyhas 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’sfiscal health is maintaining a fund balance position that rating agencies feel is adequate to meet the County’s needs and challenges. 4 Orange Countyhas 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 unassignedfund 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. unassigned 2.To the extent thatthe General Fund 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 providesfor programs with multiple revenue sources. The FinancialServices Directorwill use resources in the following hierarchy: bond proceeds, Federal funds, State funds, local non-county funds, countyfunds. 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 Directorhas the authority to deviate from this policy if it is in the best interest of the Countywith Boardof County Commissioner’sapproval. 4.Management is expected to manage the budget so that revenue shortfalls and expenditure increases do not impact the County’stotal unassignedfund 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 actionto 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% oftotal operating revenues at fiscal year-end, net of any donated assetsrecognized, to provide reserves for operations and future capitalimprovements. Restrictions, reservations, and designations of Net Assetsfor Enterprise Funds For external reporting purposes, net assets will be reported asrestricted or unrestricted in accordance with GAAP. For internalpurposes, net assets will be reserved or designated as follows: 1. Encumbered balances tocontinue existing projects are designated. 2.Designations for funding of planned projects in a future period toreduce the financial demands placed upon a subsequent budget. Internal Service Funds – Dental Insurance Fund - totalnet assets shall maintain a positive balance to illustrate the internal nature of recovery fees forservicesperformed in self-insuring employees of the County. Additionally, the net assets of the fund will demonstrate adequate funding for incurred, but not reported claims. 5 Rescission This policy supersedes any policy in place prior to this date. April5, 2011 6 General Fund Balance Available for Attachment 2 Appropriation As of January 22, 2015 Totals Fund Balance Available for Appropriation (A), June 30, 2014$ 44,940,204 Fund Balance, Assigned FY2014-2015 Budget $ 10,068,343 Total Assigned Fund Balance (B) 10,068,343 Fund Balance Unassigned (A less B), June 30, 2014$ 34,871,861 General Fund Expenditures for the year ended June 30, 2014$ 186,998,772 General Fund Unassigned Fund Balance as of June 30, 2014 As a Percentage of General Fund Expenditures18.65% BOCC Fund Balance Policy - 17 %17.00% General Fund Unassigned Fund Balance as of June 30, 2014 In excess of the Board's policy$ 3,082,070 Less: OPEB Funding(1,541,035) Less: CY Appropriation of Fund Balance - Additional Unassigned Fund Balance Available for Appropriation As of November 30, 2014$ 1,541,035 Suggested Current Year uses of the Additional Fund Balance Avail Replenish the Social Justice Fund or General Fund appropriations (450,000) Additional Amounts Available for Appropriation$ 1,091,035 $ 31,789,791 1 7 Attachment 3 Change in General Fund Available Fund Balance Since FY2008 1232÷3 Unassigned Unassigned General Fund Fund Balance Fund Balance Expenditures% Fiscal Year 2008$ 22,094,158$ 171,030,90312.92% 2009$ 16,989,028$ 184,068,1729.23% 2010$ 21,097,621$ 178,967,62911.79% 2011$ 27,782,007$ 176,421,14715.75% 2012$ 36,351,777$ 175,010,44620.77% 2013$ 36,608,054$ 181,528,38620.17% 2014$ 34,871,861$ 186,998,77218.65% Change Since FY200857.83% Note: Available Fund Balance for FY2008 and FY was reduced by th budget carryforwards: FY2008$ 1,709,166 FY2009$ 1,988,442 40 Å Å Å 35 Å 30 Å 25 Å 20 Å 15 10 5 0 2008200920102011201220132014 Cz- ;©