Fund Balance - General Fund - 2010 Budget Message

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The fund balance in the General Fund is the cumulative amount of money and other resources retained after all expenditures and other liabilities have been paid and all revenue has been recorded.

Maintenance of an adequate fund balance is important because it provides a financial “safety net” in the event of emergencies, economic downturns or other unforeseen circumstances. Fund balance maintenance is also a major factor considered by bond rating agencies when evaluating the Township’s credit worthiness. The Township maintains a strong financial performance, with emphasis on long-range planning, ensuring Township citizens are provided the services expected of a “First Class” Township.

In 2007, the Township updated and strengthened its GF fund balance policy, requiring a minimum year-end GF undesignated fund balance of no less than 12% of the year’s total GF operating expenditures. This minimum reserve allows the Township to realize a certain level of investment earnings and provide a funding source for emergencies and contingencies. Further, the policy established a goal for the Township to maintain a year-end GF undesignated fund balance within a minimum of 15% and a maximum of 18% of the year’s total GF expenditures. Undesignated GF fund balance is defined as those financial resources available for spending and therefore not reserved for specific purposes such as encumbrances. The Township reviews its fund balance periodically and reports this information to the Board of Commissioners. More detailed information regarding the Fund Balance Policy is outlined in the Reader’s Guide “Fiscal Policies.”

Over the past ten completed fiscal years, the Township took a planned drawdown (deficit spent) on its fund balance for five consecutive years (1999-2003). Due to excellent budgetary performance during those years, the actual deficits were less than budgeted. As a result of excellent financial performance in 2004 (+$1.4 million surplus), 2005 (+$2.6 million surplus), 2006 ($0.3 million surplus), 2007 ($0.5 million surplus) and 2008 ($0.6 million surplus), the GF fund balance has unexpectedly grown, resulting in the GF undesignated ending fund balance reaching $11.8 million at the end of 2008.

The structural budgetary imbalance in the 2009 Budget was -$2.1 million; however the Township now expects to finish 2009 with an estimated actual deficit of only $1.3 million, outperforming the 2009 Budget by $0.8 million. This was possible due to strong fiscal constraint, cost containment, and unexpected recent business tax revenue performance.

The Proposed 2010 Budget projects the Township’s 2009 undesignated year-end GF fund balance at approximately $10.5 million, or 20.1% of the 2009 estimated actual GF expenditures. This fund balance level exceeds the fund balance policy maximum goal of 18%.

The 2010 Proposed GF Budget projects a structural budgetary imbalance of approximately $1.6 million, which is $0.3 million more than the 2009 Budget gap. The chart below shows the 2010 Budget with an ending GF fund balance (undesignated) of $8.9 million or 17.1% of the 2010 budgeted expenditures. However, the GF Fund budget summary shows an ending GF fund balance of $9.1 million or 17.4% of the 2010 budgeted expenditures. This includes approximately $0.2 million of fund balance reserved (designated) for encumbrances, which is not included in the fund balance policy calculation.

Fund Balance Policy Summary
General Fund (Fund Policy Calculation)
Actual
2008
Budget
2009
Estimated
2009
Budget
2010
Expenditures
$50.0
$52.7
$52.3
$52.2
Ending Fund Balance (undesignated)
11.8
9.0
10.5
8.9
Ending FB as a % of Annual Operating Expenditures
23.6%
17.1%
20.1%
17.1%
Goal Range - Low End
15.0%
15.0%
15.0%
15.0%
Goal Range - High End
18.0%
18.0%
18.0%
18.0%

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