HomeMy WebLinkAboutAgenda - Item 1F - School Districts Local Current Expense Fund Balance PolicyBOCC Approved
10/21/2008
School Districts Local Current Expense Fund Balance Policy
Joint Policy Between
Orange County Board of County Commissioners
Chapel Hill Carrboro City Schools Board of Education
Orange County Schools Board of Education
1. Guidelines
The School Budget and Fiscal Control Act (SBFCA) establishes accounting,
budgetary and fiscal control guidelines for School Systems. The SBFCA is
codified in G.S. Chapter 115C, Article 31, beginning at G.S. 115C-422. This
act parallels the statutes established for Local Government with a few
exceptions.
2. Definitions
2.1. Total Fund Balance – The difference between a school system’s total
assets and its total liabilities at the end of the fiscal year.
2.2. Fund Balance Available for Appropriation – The sum of a school system’s
assets held in cash and investments minus the sum of the school system’s
liabilities and encumbrances at the end of the fiscal year as outlined in G.S.
115C-425 of the SBFCA.
2.3. Designated Fund Balance – The amount of the available fund balance that
has been appropriated for the budget year through budgetary action of the
School Board.
2.4. Undesignated Fund Balance - The difference between Fund Balance
Available for Appropriation and Designated Fund Balance.
3. Policy
3.1. Fund Balance for Cash Flow Purposes – Each school district will make a
good faith effort to maintain a level of undesignated fund balance that will
ensure sufficient funds are available to address its cash flow needs. The
following levels are to be maintained for cash flow purposes only:
3.1.1. Chapel Hill Carrboro City Schools - The targeted level of
undesignated fund balance for cash flow purposes will be at a
minimum of 5.5 percent of budgeted expenditures.
3.1.2. Orange County Schools – The targeted level of undesignated fund
balance for cash flow purposes will be at a minimum of 3 percent of
budgeted expenditures.
BOCC Approved
10/21/2008
3.2. Accumulated Fund Balance Above Cash Flow Purposes - In the event
that either school district accumulates more than the percentage amounts
allowed for cash flow purposes, the respective Boards of Education will
develop a plan in place for spending the accumulated fund balance surplus
for non-recurring purposes. The Board of Education will share that plan with
the Board of County Commissioners
3.3. Fund Balance Appropriation Occurring Outside the Normal Annual
Budgeting Process – Appropriation of fund balance is a budgetary action
that rests with elected bodies of each school system. It is highly desired that
fund balance appropriations be limited to non-recurring expenses. Both
school districts have historically appropriated fund balance as a part of their
normal budgeting process, and this practice will remain until additional
revenue is available to eliminate the use of fund balance. The Board of
Education should note and explain significant deviations in the normal
budgetary appropriation as a part of the budget narrative accompanying the
recommended and adopted budgets.
If the Board of Education finds it necessary to appropriate fund balance,
outside the normal annual budgeting process, the Board of Education shall
highlight the appropriation in their next fiscal year’s budget request. The
County Commissioners are not obligated to increase local current expense in
order to fund recurring items for which the Board of Education appropriates
fund balance outside of the normal budgeting process.
4. Undesignated Fund Balance – Undesignated fund balance may be allowed to
accumulate above the cash flow percentages under certain circumstances.
School Boards will develop a detailed plan for future use of accumulated fund
balance. Boards of Education are to use undesignated fund balance to address
unforeseen events or opportunities. In these instances, it is the responsibility of
the Board of Commissioners to work with the School Boards to address the
extraordinary issues.
5. Extraordinary Emergency Needs – There may arise a time in the future when
one or both school district(s) experience(s) an unforeseen extraordinary
uninsured event that greatly compromises how the district(s) serve(s) children.
In such instances, there may be a need for the school district(s) to use some or
all of its fund balance. In such instances, the Board(s) of Education is(are) to
take appropriate action to correct the problem, and following necessary
budgetary action by the Board of County Commissioners, the County will
reimburse the School Board(s) for the necessary expenditures.
6. Policy Review - The School/County Collaboration Work Group shall review this
policy every 18 months to determine if changes to the policy are necessary.