HomeMy WebLinkAboutResolutions - 2015.07.16 - 21902MISCELLANEOUS RESOLUTION 1115175
BY: Finance Committee, Thomas Middleton, Chairperson
IN RE: DEPARTMENT OF MANAGEMENT AND BUDGET/FISCAL SERVICES — APPROVAL OF
FUND BALANCE POLICY FOR THE GENERAL FUND
To the Oakland County Board of Commissioners
Chairperson, Ladies and Gentlemen:
WHEREAS the term "fund balance" is an accounting term used to describe the net assets of
governmental funds calculated in accordance with generally accepted accounting principles (GAAP); and
WHEREAS fund balance is intended to serve as a measure of the financial resources available in a
governmental fund; and
3 WHEREAS the General Fund is the principal operating fund used to account for the County's general
purpose programs; and
11 WHEREAS the County's other funds (such as special revenue, proprietary, and fiduciary funds) are more
limited in scope to account for specific programs funded with earmarked revenues; and
WHEREAS best practices published by the Government Finance Officers Association (GFOA)
recommends for general purpose governments that unrestricted fund balance should be no less than two
months of regular general fund operating revenues or regular general fund operating expenditures; and
6 WHEREAS the County's practice for purposes of financial planning has included a long-term
maintenance target for the General Fund balance to be no less than 20% of annual General
Fund/General Purpose expenditures which is in line with GFOA's recommended best practices; and
7 WHEREAS maintaining an adequate level of fund balance in the General Fund is essential to mitigate
risks and provide a reserve for potential revenue shortfalls; and
c' WHEREAS if fund balance falls below recommended levels, it can be challenging for a political body to
restore fund balance by taking corrective actions such as cutting operating expenditures and/or
generating additional revenue by increasing fees and taxes; and
I WHEREAS bond rating agencies consider the government's fund balance policy, history of use of fund
balance, and policy and practice of replenishment of fund balance when assigning ratings; and
o WHEREAS the County's multi-year financial planning and management practices, which focuses on
maintaining the long-term fund balance target, has resulted in retaining the highest bond rating of AAA
since 1998, thereby reducing the cost of borrowing for capital projects, such as for water and sewer
systems maintained on behalf of the County's local units of government; and
/ WHEREAS the County Executive recommends that the Board of Commissioners adopt the attached
Fund Balance Policy for the General Fund to formally codify a highly recognized and proven best practice
which has been instrumental to Oakland County's long-term financial sustainability.
NOW THEREFORE BE IT RESOLVED that the Oakland County Board of Commissioners adopts the
attached Fund Balance Policy for the General Fund.
Chairperson, on behalf of the Finance Committee, I move the adoption of the foregoing resolution.
Oakland County, Michigan
Fund Balance Policy for the General Fund
Policy
An appropriate level of fund balance shall be maintained in the General Fund to ensure
continued delivery of County services. Fund balance is an important measure of financial
stability. It is essential that the County maintain adequate levels of fund balance to mitigate
financial risk that can occur from unforeseen revenue fluctuations, unanticipated expenditures,
and similar circumstances. The fund balance also provides cash flow liquidity for the County's
general operations. Determination of the appropriate targeted level of fund balance shall be
based on the principles, guidelines, and process set forth below.
Principles
Consideration and projection of fund balance is a critical component of financial planning. The
appropriate level of required fund balance should be determined within the context of long-
term forecasting and should avoid the risk of placing too much emphasis upon the level as
measured at any one point in time. A long-term fund balance forecast shall be developed in
conjunction with the County's multi-year budget and long-term financial plan.
In general, use of fund balance should be limited to one-time expenditures, such as for capital
projects or projects of limited duration. It should be recognized that continued use of fund
balance to support ongoing program expenditures is not sustainable in the long-term. Thus,
the County's guiding principle is to restrict and limit the use of fund balance to resolve ongoing
structural operating shortfalls. If special conditions exist that necessitate use of fund balance to
support ongoing programs (caused by events such as a catastrophic emergency or a prolonged
economic downturn), it shall be for a limited duration to provide essential citizen services with
a requirement that the County's long-term financial plan shall include a strategy to restore or
maintain fund balance in accordance with the guidelines of this policy.
Guidelines
The minimum long-term fund balance target should be no less than 20% of annual operating
expenditures.
If fund balance is less, or projected to be less, than the minimum targeted amount, a fiscal plan
shall be developed so that the minimum targeted amount of fund balance will be replenished
within a period that should not exceed five years.
If the long-term fund balance is projected to exceed 40% of annual operating expenditures,
then consideration shall be given to the following initiatives. However, prior to approval of
such initiatives, near-term future years' operating budgets should be forecasted to be
structurally balanced (annual ongoing revenues are sufficient to fund annual ongoing
expenditures).
1. County facility, technology, and other sustainability needs
2. One-time seed funding for County operational improvements
3. Property tax millage reduction
4. Advance funding for future outstanding debt service payments of current obligations
Process
The amount of available fund balance is determined with the official close of the County's
accounting records as of September 30 of each year. In accordance with financial reporting
requirements of the Government Accounting Standards Board (GASB), fund balance is reported
according to the following accounting distinctions.
1) Nonspendable fund balance — includes amounts that are not in a spendable form or are
required to be maintained intact.
2) Restricted fund balance — includes amounts that can be spent only for the specific
purposes stipulated by external resource providers either constitutionally or through
enabling legislation.
3) Committed fund balance — includes amounts that can be used only for the specific
purposes determined by a formal action of the government's highest level of decision-
making authority. Commitments may be changed or lifted only by the government
taking the same formal action that imposed the constraint originally.
4) Assigned fund balance — comprises amounts intended to be used by the government for
specific purposes. Intent can be expressed by the governing body or by an official or
body to which the governing body delegates the authority.
5) Unassigned fund balance — is the residual classification of the general fund and includes
all amounts not contained in other classifications. Unassigned amounts are technically
available for any purpose.
The Board of Commissioners shall adopt a resolution annually to accept the results of the year-
end closing of the accounting records and to approve the assignments of fund balance for the
General Fund. Assignments of available fund balance shall be recommended by the County
Executive in consideration of the following priorities:
1. Budgeted and planned future use of fund balance
2. Public safety preparedness, campus security, and emergency response
3. Capital funding for county facilities and technology systems
4. Operational efficiencies and enhancements
Use of fund balance requires an appropriation by the Board of Commissioners as authorized by
the adoption of an enabling resolution.
Resolution #15175 July 16, 2015
Moved by Middleton supported by Spisz the resolution be adopted.
Discussion followed.
Moved by Woodward supported by Gershenson the resolution be amended as follows:
IN RE: DEPARTMENT OF MANAGEMENT AND BUDGET/FISCAL SERVICES -APPROVAL OF
FUND BALANCE POLICY GUIDELINES FOR THE GENERAL FUND
(at the 9th WHEREAS)
WHEREAS bond rating agencies consider the government's fund balance policy guidelines,
history of use of fund balance, and policy and practice of replenishment of fund balance when
assigning ratings; and
(at the 11 th WHEREAS)
WHEREAS the County Executive recommends that the Board of Commissioners adopt the
attached Fund Balance Policy Guidelines for the General Fund to formally codify a highly
recognized and proven best practice which has been instrumental to Oakland County's long-term
financial sustainability.
NOW THEREFORE BE IT RESOLVED that the Oakland County Board of Commissioners adopts
the attached Fund Balance Policy Guidelines for the General Fund.
(at the top of the attached document)
Oakland County, Michigan
Fund Balance Policy Guidelines for the General Fund
Policy Guidelines
(at the second paragraph under the heading Principles)
In general, use of fund balance should be limited to one-time expenditures, such as for capital
projects or projects of limited duration. It should be recognized that continued use of fund balance
to support ongoing program expenditures is not sustainable in the long-term. Thus, the County's
guiding principle is to restrict and limit the use of fund balance to resolve ongoing structural
operating shortfalls. If special conditions exist that necessitate use of fund balance to support
ongoing programs (caused by events such as a catastrophic emergency or a prolonged economic
downturn), it shall be for a limited duration to provide essential citizen services with a requirement
that the County's long-term financial plan shall include a strategy to restore or maintain fund
balance in accordance with these guidelines-of-this' policy guidelines.
Discussion followed.
Vote on amendment:
AYES: Gershenson, Jackson, McGillivray, Woodward, Bowman. (5)
NAYS: Fleming, Gingell, Gosselin, Hoffman, Kowall, Long, Matis, Middleton, Scott, Spisz, Taub,
Weipert, Crawford, Dwyer, (14)
A sufficient majority having not voted in favor, the amendment failed.
Discussion followed.
Moved by Woodward supported by Gershenson the resolution be amended as follows:
( in the attached document under the heading Guidelines after paragraph 3)
1. County facility, technology, and other sustainability needs
2. One-time seed funding for County operational improvements
3. Property tax millage reduction
4. Advance funding for future outstanding debt service payments of current obligations
5. Investments in roads and other public infrastructure to improve the quality of life of
county residents and promote economic development.
(in the attached document under the heading Process and below paragraph 7)
1. Budgeted and planned future use of fund balance
2. Public safety preparedness, campus security, and emergency response
3. Capital funding for county facilities and technology systems
4. Operational efficiencies and enhancements
5. Investments in roads and other public infrastructure to improve the quality of life of
county residents and promote economic development.
Discussion followed.
Vote on amendment:
AYES: Gershenson, Jackson, McGillivray, Woodward. (4)
NAYS: Gingell, Gosselin, Hoffman, Kowall, Long, Matis, Middleton, Scott, Spisz, Taub, Weipert,
Bowman, Crawford, Dwyer, Fleming. (15)
A sufficient majority having not voted in favor, the amendment failed.
Discussion followed.
Moved by Woodward supported by Gershenson the resolution be amended as follows:
( in the attached document under the heading Guidelines after paragraph 3)
1. County facility, technology, and other sustainability needs
2. One-time seed funding for County operational improvements
3. Property tax millage reduction
4. Advance funding for future outstanding debt service payments of current obligations
5. improvement and/or protection of the health and general welfare of county residents.
(in the attached document under the heading Process and below paragraph 7)
1. Budgeted and planned future use of fund balance
2. Public safety preparedness, campus security, and emergency response
3. Capital funding for county facilities and technology systems
4. Operational efficiencies and enhancements
5. Improvement and/or protection of the health and general welfare of county residents.
Use of fund balance requires an appropriation by the Board of Commissioners as authorized by
the adoption of an enabling resolution.
Discussion followed.
Vote on amendment:
AYES: Jackson, McGillivray, Woodward, Gershenson. (4)
NAYS: Gingell, Gosselin, Hoffman, Kowall, Long, Matis, Middleton, Scott, Spisz, Taub, Weipert,
Bowman, Crawford, Dwyer, Fleming. (15)
A sufficient majority having not voted in favor, the amendment failed.
Discussion followed.
Vote on resolution:
AYES: Gosselin, Hoffman, Kowall, Long, Matis, McGillivray, Middleton, Scott, Spisz, Taub,
Weipert, Bowman, Crawford, Dwyer, Fleming, Gingell. (16)
NAYS: Jackson, Woodward, Gershenson. (3)
A sufficient majority having voted in favor, the resolution was adopted.
Resolution #15175 July 16, 2015
1 WEBY APPROVE THIS RESOLUTION
CHIEF DEPUTY COUNTY E.XECUT1VE
ACTING PURSUANT TO luiCL 45.559A (7)
STATE OF MICHIGAN)
COUNTY OF OAKLAND)
I, Lisa Brown, Clerk of the County of Oakland, do hereby certify that the foregoing resolution is a true and
accurate copy of a resolution adopted by the Oakland County Board of Commissioners on July 16, 2015,
with the original record thereof now remaining in my office.
In Testimony Whereof, I have hereunto set my hand and affixed the seal of the County of Oakland at
Pontiac, Michigan this 16th day of July 2015.
Li6a Brow-n, Oakland County