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<br />aR~a~ <br />~~n ~_" ~ <br />~t~~ <br />~•4 w.A <br />RJCHARD H. MOORS <br />TREASURER <br />April 5, 2004 <br />TO: <br />FROM: <br />SUB.TECT: <br />State of North Carolina <br />®epartn~ent of State Yrea~urer <br />State and Local Government Finance Division <br />and the Local Govermnent Commission <br />Officials of Cities and Counties and Certified Public Accountants <br />T. Vance Holloman, Director <br />Fiscal Management Section <br />Fund Balance Available for Appropriation <br />JAMCE T BURKE <br />DEPUTY TREASURER <br />Memorandum #1014 <br />Each yeaz the staff of the Local Government Commission analyses the financial statements of <br />cities and counties to determine the amount of fund balance available for appropriation in the <br />General Fund, and the amount of fund balance available for appropriation as a percentage of <br />prior yeaz expenditures.. These numbers aze significant because the property tax is a major <br />source of revenue in the General Fund. The majority of property tax revenues are received in the <br />latter months of the calendaz yeaz. Therefore, there should be reserves on hand in the form of <br />fund balance available for appropriation at Tune .30th to prevent the unit from experiencing cash <br />flow difficulties dwing the first two quarters of the next fiscal year. The minimum level of fund <br />balance available far appropriation that should be on hand to enable the unit to meet current <br />obligations and to prevent the unit from experiencing cash flow difficulties is 8% of the prior <br />yeaz's expenditures. <br />In addition to the 8% needed to prevent cash flow difficulties, units also maintain fund balance <br />available for appropriation in the General Fund in case unforeseen needs or opportunities should <br />arise. Fund balance available for appropriation at.Iune 30th is a source that may be budgeted in <br />the following year to address these situations. There is not an established minimum amount that <br />should be in reserve for these purposes. The officials of the individual units should make that <br />determination.. The amount of fund balance available for appropriation maintained by a <br />particulaz unit would be influenced by such factors as the size of the unit, economic conditions <br />within the unit, future capital outlay needs, stability of revenue sources and susceptibility of the <br />unit to natural disasters. <br />The staff sends letters to units if' the amount of fund balance available for appropriation as a <br />percentage of prior year expenditures in the General Fund falls below 8%, The staff' also <br />compazes the percentage of fund balance available for appropriation to the prior year percentages <br />for similar units. If that percentage is materially below the average of similaz units, the staff will <br />send a letter to alert the unit of this fact. Units will be encouraged to evaluate the amounts in <br />reserves and determine if the level is adequate. <br />3'3 North Salisbury Street, Raleigh, North Carolina 27603.1385 <br />Telephnnc (~/9J 807-2350 Fox. (919)807-2352 fdrebsite-www treasurerstatenc us <br />An Eguat Opportunity/A~rmative Action Employer <br />