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HomeMy WebLinkAboutAgenda - 10-21-2008 - 4iORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: October 21, 2008 Action Agenda j Item No. 4 -1 SUBJECT: Approval of School Districts Local Current Expense Fund Balance Policy DEPARTMENT: PUBLIC HEARING: (Y/N) No ATTACHMENT(S): INFORMATION CONTACT: School Districts Local Current Expense Donna Coffey, (919) 245-2151 Fund Balance Policy PURPOSE: To approve .a joint School Districts Local Current Expense Fund Balance Policy between Orange County Board of County Commissioners and Chapel Hill Carrboro City and Orange County Schools. BACKGROUND: At a joint meeting on September 25, 2008, the Orange County Board of County Commissioners and the Boards of Education for Chapel Hill Carrboro City Schools and Orange County Schools agreed to the attached School Districts Local Current Expense Fund Balance Policy. As a final step, elected officials agreed at the September 25, 2008 meeting that each elected board would officially approve the policy at a regularly scheduled open meeting. Both Boards of Education are scheduled to approve the attached policy at upcoming meetings. FINANCIAL IMPACT: Per the attached policy, 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 targeted level of undesignated .fund balance for cash flow purposes will be at a minimum of 5.5 percent of budgeted expenditures for Chapel Hill Carrboro City Schools. For 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. While the Boards of Education have authority to appropriate fund balance, it is highly desired by County Commissioners that fund balance appropriations be limited for non-recurring expenses. Should either Board of Education appropriate fund balance, the District should note and explain the allocation in their normal annual budgetary appropriation as a part of the budget narrative accompanying the recommended and adopted budgets. RECOMMENDATION (S): The Manager recommends that the Board approve the attached School Districts Local Current Expense Fund Balance Policy. BOCC 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 undesianated 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.