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16 <br /> 1 ➢ The essential uses of General Fund reserves: <br /> 2 • Mitigate risk attributed to revenue shortfalls or unanticipated non-recurring <br /> 3 expenditures <br /> 4 • Provide a financial bridge during recessions or weak economic conditions <br /> 5 • Use for natural disasters and emergencies <br /> 6 • Cash Balance cushion <br /> 7 <br /> 8 S&P Scorecard (chart) <br /> 9 <br /> 10 Moody's Scorecard (chart) <br /> 11 <br /> 12 The Ten `AAA' Rated Counties of North Carolina (chart) <br /> 13 <br /> 14 General Obligation Bond Rating Scale (chart) <br /> 15 <br /> 16 Audited Unassigned Fund Balance as a Percent of Expenditures—General Fund (graph) <br /> 17 <br /> 18 Best Practice Unassigned Fund Balance <br /> 19 ➢ In Summary <br /> 20 • GFOA Recommends Unassigned Fund Balance at 2 Months of Expenditures or <br /> 21 16.7% <br /> 22 • North Carolina AAA Rated County Peers Maintain at Least 2 Months; one <br /> 23 exception <br /> 24 • Strong Fund Balance provides Financial Bridge in Recession and Emergencies <br /> 25 <br /> 26 General Fund Cash flow <br /> 27 <br /> 28 Gary Donaldson said the long term financial plan is a better narrative, and the fund <br /> 29 balance becomes a part of this. <br /> 30 Commissioner Rich asked Gary Donaldson if he believes the County needs a fund <br /> 31 balance policy. <br /> 32 Gary Donaldson said yes, because the rating agencies weight it highly. <br /> 33 Chair McKee asked if, in his professional opinion, the fund balance should stay at 17%. <br /> 34 Gary Donaldson said when the current audit is concluded, there will be a clearer part of <br /> 35 the picture; and when a 5-year financial plan is developed, the question will be better answered. <br /> 36 He said he thinks 17% is a good level. <br /> 37 Commissioner Dorosin asked if any analysis was done prior to the balance being set at <br /> 38 17%. He clarified that Gary Donaldson is suggesting that the amount should be set by financial <br /> 39 projection and other variables. <br /> 40 Gary Donaldson said a plan is simply a plan, and the rating agencies will not necessarily <br /> 41 view a deviation from said plan as a negative. He said in his view, two months of expenditures <br /> 42 should be the model. <br /> 43 Commissioner Dorosin said the Local Government Commission (LGC) requires 8% and <br /> 44 the Government Finance Officers Association (GFOA) says 16%, the latter of which he thinks to <br /> 45 be overly conservative. He said the Board should consider lowering it. He knows there is a <br /> 46 financial aspect to this, but he likens it to a personal savings account, which one uses when one <br /> 47 needs it. He said he does think a policy is needed, but he finds the current fund balance of <br /> 48 18% to be too high. <br />