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Committee reviews fund balance policy

During next week’s meeting, Washington County commissioners will consider drafts of two new policies designed to further implement best management practices.
Commissioners have had prior discussions on the need to set a minimum fund balance to ensure the county has adequate cash on-hand for operations, and Budget Committee members reviewed a draft of a Fund Balance Policy during their Nov. 13 meeting.
Mayor Dan Eldridge said the fund balance policies of comparable counties in the state, and information from County Technical Assistance Service and the Governmental Accounting and Financial Standards Board were considered in drafting Washington County’s policy.
“Ours is more detailed than most, and everyone is liking what we’ve done,” he said, referring to input from the county auditors, the interim county attorney, and a bond-rating agency.
The policy will apply to the county’s General Fund and General Debt Service Fund.
“What is the tangible result of having a policy in place?” Commissioner Mitch Meredith asked.
Eldridge said the bond-rating agencies endorse policies as examples of best management practices, and having additional ones in place could put the county in line for a classification upgrade.
“We want to ensure we have enough cash on-hand,” he said. “We not only have (enough), we’re putting a policy in place.”
According to the draft, it shall be the policy of the county to begin each fiscal year with a minimum unassigned fund balance in the General Fund of four months average expenses for that year.
Implementing this practice would serve liquidity needs, protect against unforeseen emergencies, enhance the credit worthiness of the county and ensure stable tax rates.
A cash flow forecast prepared during the budgetary process would ensure the unassigned fund balance would not be less than 15 percent of projected annual expenditures at any point during the fiscal year.
“One of the things that creates cash flow bumps are capital expenditures, which is one reason why I wanted to move capital expenditures out of the General Fund,” Eldridge said.
Commissioner Joe Grandy suggested changing the wording to state four months of budgeted, rather than average, expenses.
The draft policy also states the county will begin each fiscal year with a balance of cash or investments in the Debt Service Fund of 40 percent of the current year’s debt service obligations or an amount equal to the Debt Service Fund expenditure requirements during the first six months of the fiscal year, whichever is greater.
“Operating with a 40 percent contingency would provide an additional measure of caution because the first six months (have) the lowest revenue,” Eldridge said. “This (practice) will ensure the debt service payments will be made.”
Interim County Attorney Keith Bowers suggested adding a section to the policy to allow for emergency expenditures that would take the balance below the minimums if approved by a majority of the county commission.
Grandy made a motion to recommend the Fund Balance Policy to the full commission with the requested changes in wording. The motion was seconded by commissioner Ethan Flynn and passed unanimously.
Also going forward will be a draft of an Asset Accounting Policy, which provides guidelines related to the inventory of capital assets with a useful life of more than one year and a historical cost of $10,000 or more; controllable assets with a historical cost between $1,000-$9,999; and assets with a historical cost of less than $1,000 and a useful life of less than one year.