CHAPTER 50

DESIGNATED AND UNDESIGNATED FUND BALANCE

Purpose:

The purpose of this policy is to establish procedures for preserving an adequate fund balance in order to sustain financial stability for the City of Ellsworth and to provide prudent management of the City’s reserves.

Undesignated Fund Balance:

The City’s undesignated fund balance is a surplus of funds which have accrued from unexpended operating budgets and unanticipated excess revenues. This surplus proves financial stability to bond holders and rating agencies. This surplus also provides the City with a "rainy day" fund for use in unforeseen, unbudgeted emergency situations.

In order to maintain financial stability, the City has established policy to maintain an undesignated fund balance no less than 7% and no more than 12% of the previous fiscal year’s operating expenditures less debt service. This will be calculated as follows:

Gross City expenditures plus Gross School Dept. expenditures less debt service equals net expenditures. Actual undesignated fund balance / net expenditures equals percent of fund balance.

Any fund balance in excess of 12% shall be used to increase designated reserves, the City’s appropriated contingency account, or the appropriated capital improvement fund.

In the case of a serious, unexpected municipal event, the City Council may reduce the undesignated fund balance below the 7% minimum to compensate for these losses. A written plan to replenish the fund in a maximum of three fiscal years must be approved by the City Council at the time of the emergency fund balance appropriation.

Transfer or Appropriation of Fund Balance Surplus:

Upon receipt of the audit for the previous fiscal year, the Treasurer shall calculate the percentage of undesignated fund balance. The City Council may then, by order, transfer amounts from the City’s undesignated fund balance to a designated reserve or contingency account.

Designated Fund Balance

The City’s Designated Fund Balance is a group of Reserve Funds provided by the City Council. They are as follows:

1) Wastewater
2) School Unemployment
3) School District
4) Industrial Park Reserve
5) Capital Reserve
6) Adult Education
7) Hancock County Technical Center
8) Highway Equipment
9) Harbor
10) City Hall
11) School Dept. – Tennis Courts
12) James McCarty Fund
13) Cable Television
14) Cable Television
15) Jump Playground
16) City Unemployment
17) Fire Dept. Rescue Fund
18) Federally Forfeited Property
19) City Bond Funds
20) Water Dept Bond Funds
21) Fund Balance

The purpose of the designated reserve funds is to create savings for future capital projects or unforseen, unbudgeted emergency situations.

Requirements:

Transfers from designated reserve funds are made only by vote or budget resolve. Exceptions are the School Unemployment Reserve and the City Unemployment Reserve;¹transfers from these reserves are generated monthly to reimburse the State Labor Department for unemployment compensation.Funding for the designated reserves may be by transfers from undesignated fund balance, budget appropriation, transfers from other designated reserves, or unanticipated revenue.

City Bond Funds: These funds are to be used only to offset the annual debt service requirement for the 2001 GOB (City Portion). The funds will be withdrawn at 10% per year for 10 years.

Water Dept. Bond Funds: These funds are to be used only to offset the annual debt service requirement for the 2001 GOB (Water Dept. Portion). The funds will be withdrawn at 10% per year for 10 years. No Reserve may be unfunded.

Adopted 9/20/99

Amendments through 1/14/02

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