HomeMy WebLinkAboutAgenda - 04-19-2016 - 7-c - Recommended Uses of General Fund Unassigned Fund Balance as of June 30, 2015 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: April 19, 2016
Action Agenda
Item No. 7-c
SUBJECT: Recommended Uses of General Fund Unassigned Fund Balance as of June
30, 2015
DEPARTMENT: Finance and Administrative
Services
ATTACHMENT(S): INFORMATION CONTACT:
1. BOCC Fund Balance Policy
2. Fund Balance Position - General Bonnie Hammersley, 919-245-2300
Fund Travis Myren, 919-245-2308
Gary Donaldson, 919-245-2453
Paul Laughton, 919-245-2152
PURPOSE: To appropriate 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.
As of June 30, 2015 the General Fund Available Fund Balance totaled $53.7 million (Attachment
2). Of this amount, $10.6 million was appropriated prior to the end of the fiscal year to balance
the FY 2015-16 General Fund Operating Budget.
After the appropriation of the General Fund's fund balance available for appropriation, the
General Fund unassigned fund balance as of June 30, 2015 is $35.5 million, which represents
18.5% of the General Fund expenditures as of June 30, 2015. This amounts to unassigned fund
balance of 1.5% in excess of the established fund balance policy of 17%. The excess 1.5%
equates to $2.8 million of Unassigned General Fund Balance available for appropriation.
Based on a review of Board goals and priorities and County needs, the Manager suggests the
Board direct:
• $1 million of the excess fund balance to fund Affordable Housing Projects; and
• $1.8 million of the excess fund balance to fund priorities identified in the FY2016-17
budget.
2
The affordable housing appropriation could be used for several purposes. First, the County
could acquire or begin the acquisition of affordable units that are financially distressed and in
jeopardy of being removed from the existing stock of affordable units. The purchase of any
property would be subject to final approval of the Board of Orange County Commissioners.
The Affordable Housing Strategic Plan also recommends additional investments in the urgent
repair and housing rehabilitation programs. The Plan recommends an investment of $200,000
to eliminate the waiting list for the urgent repair program and an additional $200,000 to
rehabilitate an additional seven homes. If the Plan is approved by the Board, the affordable
housing appropriation would allow the County to immediately begin addressing these needs.
FINANCIAL IMPACT: The financial impact is the use of $2.8 million of Unassigned General
Fund Balance in excess of the established fund balance policy of 17%.
SOCIAL JUSTICE IMPACT: The following Orange County Social Justice Goals are applicable
to this agenda item:
• GOAL: ENSURE ECONOMIC SELF-SUFFICIENCY
The creation and preservation of infrastructure, policies, programs and funding necessary
for residents to provide shelter, food, clothing and medical care for themselves and their
dependents.
RECOMMENDATION(S): The Manager recommends that the Board approve the
recommended uses of the $2.8 million in excess of 17% General Fund unassigned fund balance
policy for:
• $1 million of the excess fund balance to fund Affordable Housing Projects; and
• $1.8 million of the excess fund balance to be used to fund priorities identified in the
FY2016-17 budget.
3
Attachment 1 April 5, 2011
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.
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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.
5
Rescission
This policy supersedes any policy in place prior to this date.
April 5, 2011
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Attachment 2
Fund Balance Position-General Fund
2015 2014
Total Fund Balance $ 65 ,019 ,581 $ 62, 114,947
Non spendable (20,306) (29,242)
Stabilization by State
Statute ( 11 ,255 ,821 ) ( 12, 102,492)
Available Fund Balance 53 ,743 ,454 49,983 ,213
Committed (7 ,543 ,841 ) (6,001 ,641 )
Assigned ( 10,650,770) ( 10,068 ,343)
Unassigned $ 35 ,548 ,843 $ 33 ,913 ,229
7
Unassigned Fund Balance as a Percent of
Expenditures—General Fund
25% -
18.5% 18.9%
2 0%
1 5%
1 0%
%
• 2 0 1 5
°%o - ■ ZOia
s°%o -
0%
2015 2014
2