Orange County NC Website
Aside from the significant dollar increase In County current expense funding allocated to the <br />school systems, the major difference between1986 and the current fiscal environment is funding <br />for capital projects. From the late 1970s up to the 1988 bond referendum there were no concerns <br />related to funding start up costs for new facilities. Capital Westment Programming was a new <br />concept for Orange County government. This issue is significant because fund balance has been <br />the major source of start up costs for new facilities for OCS. The CHCCS has used the district tax <br />as a source for start up costs related to new facilities. This practice could also become an issue if <br />the move toward funding equity gains momentum. The Finance Directors have identified three <br />major issues related to fund balance policy that must be given consideration prior, to setting and <br />maintaining concrete fund balance targets. <br />® Funding for Start up costs — As mentioned above, OCS has historically used fund balance <br />as a source to pay the onetime costs associated with opening new schools and the <br />CHCCS has mainly used district taxes. If concrete fund balance targets are established <br />and adhered to, an altemative source for start up costs would have to be identified for <br />OCS. Ukewise, if the district tax is frozen or reduced and/or eventually eliminated in the <br />pursuit of equity funding, other funding sources would need to be identified. <br />Emergencies and Unforeseen Events — In addition to cash flow considerations, units of <br />govemment also use fund balance to handle emergency situations and/or unforeseen <br />events. If fund balance targets are established and followed, a clear statement should be <br />made regarding response to emergencies or unforeseen events. <br />Use of Fund Balance for operating Expenditures - This is another policy issue related to <br />use of fund balance. Both school systems have used fund balance to pay for recurring <br />operational Initiatives in the past. The most recent example of this is the OCS use of $12 <br />million in fund balance in their 20042005 budget to fund several operational initiatives. In <br />addition, CHCCS appropriated $1.6 million. Use of fund balance to pay for ongoing <br />operating costs could present funding challenges for these types of expenditures in future <br />years as reserves become scarce (note the last full paragraph in Superintendent <br />Carraway's September 22, 2004 memo on school fund balance). A sound fund balance <br />policy should also address when and under what circumstances fund balance should be <br />considered for funding ongoing operational expenditures <br />As mentioned above, the 1986 memo from Gordon Baker that resulted in the current policy only <br />addressed fund balance as a cash flow tool. The Finance Directors agreed that a sound fund <br />balance policy should be more comprehensive and Include not only percentage targets related to <br />the levels required to meet cash flow needs, but also address issues involving the how and when it <br />can be accumulated and used. <br />. :r <br />