Policy - Fund Balance Management Policy

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~y"_// 11 ~~ ORANGE COUNTY BOARD OF COMMISSIONERS FUND BALANCE MANAGEMENT POLICY The Fund Balance Management Policy is intended to address the needs of Orange County (County), in the event of unanticipated and unavoidable occurrences which could adversely affect the financial condition of the.. County and thereby jeopardize the continuation of necessary public services. This policy will ensure the County. maintains adequate fund balance and reserves in the County's Governmental Funds to provide the capacity to: 1. Provide sufficient cash flow for daily financial needs, 2. Secure and maintain investment grade bond ratings, 3. Offset significant economic downturns or revenue shortfalls, and 4. Provide funds for unforeseen expenditures related to emergencies Fund Balance for the County's Governmental Funds will be comprised of the following categories: 1. Nonsgendable -amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. 2. Restricted -amounts externally imposed by creditors (debt covenants), grantors, contributors, laws, or regulations of other governments. 3. Committed -amounts used for a specific purpose pursuant to constraints imposed by formal action of the government's highest level of decision-making authority. a. Amounts set aside based on self-imposed limitations established and set in place prior to year-end, but can be calculated after year end. b. Limitation imposed at highest level and requires same action to remove or modify c. Ordinances that lapse at year-end 4. Assigned -amounts that are constrained by the government's intent to be used for specific purposes, but are neither restricted nor committed. 5. Unassigned -amounts that are not reported in any other classification. The General Fund will be the only fund that will have an unassigned fund balance. The Special Revenue Funds and Capital Project funds will consist of only nonspendable, restricted, committed and assigned categories of fund balance. Unassigned Fund Balance -General Fund Orange County has adopted a fiscal policy that provides for capital projects to be financed with debt and pay-as-you-go funding. In order to obtain the best possible financing, the County has adopted policies designed to maintain bond ratings at or better than AAA (Fitch), Aa2 (Moody's Investor Services) and AA+ (Standard & Poor's). Part of the County's fiscal health is maintaining a fund balance position that rating agencies feel is adequate to meet the County's needs and challenges.