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ARLAN E. BOYLES <br />T��cr-arst <br />��ras�rrterrt Cif � �re�u�r <br />State and Local Government Finance Diz ision <br />and the Local Government Commission <br />June 5, 1997 <br />Mr. Kenneth Touw, Chairman <br />Chapel HiLVCarrboro Board of Education <br />750 S. Merritt Mill Rd. <br />Chapel Hill, N.C. 27516 -2878 <br />Dear Mr. Kenneth Touw: - <br />ROBERT 3rL HIGH <br />OEPLiY TREASL,'AER <br />Received <br />JUAN - 9 1997 <br />Managers Office <br />It has recently been brought to my attention that a letter was written to your Board <br />of Education dated March 20, 1997 from this office, which inappropriately <br />referenced a minimum level of fund balance available for appropriation that boards <br />of education should maintain. <br />The previous letter included wording indicating that fund balance available for <br />appropriation should not be allowed to drop below 8% of total General Fund <br />expenditures, which is a Local Government Commission policy that applies only to <br />tax - levying units of government. The staff of the Local Government Commission <br />has long recognized that boards of education, as non - taxing units, may need to <br />maintain a much lower level of fund balance available since they receive funding <br />from other units of government and therefore have a more constant revenue stream <br />than ta_x levying units. Given that the funding relationships between counties and <br />boards of education's are different in each county, the Local Government <br />Commission recommends a board of education have sufficient fund balance to pay <br />its obligations in a timely manner. We believe that each board of education and <br />county should work together to determine the appropriate level of reserves that <br />should be maintained by the board of education. We have enclosed a copy of an <br />article entitled "Fund Balance in Local Government Bud -eting and Finance" from <br />Popular Government Winter 1989), which discusses certain issues and many of the <br />LGC's policies relating to fund balance. That article clearly indicaces that we do not <br />prescribe a specific level of fund balance available for appropriation to be <br />maintained by a board of education. <br />