Page 111 - Ord 866 Adopting a revised Fiscal Year 17-18 and new proposed Fiscal Year 18-19 budget

Section 2 Financial Analysis
Forecast Overview

Expenditures, while not necessarily being forecast as declining, are generally forecast with a 2-3%
escalation rate, depending on inflation. Forecasts generally have at least one scenario where all
that is assumed on expenditures is the current level of service and perhaps some growth in
salary/ wage expenditures.

The Council can, if they wish, ask that certain service level adjustments, whether it is service
expansion or reduction, be included as alternate scenarios, particularly if it appears that revenues
will not cover expenditures in the out years of the forecast.

It is important to remember that economic conditions play in forecasting, particularly as it relates to
sales tax, which can be a volatile revenue source. If economic conditions improve, sales tax
receipts are affected ( usually positively) as well as building permit revenue.

Fund balance - is a term used to describe the net position of governmental funds calculated in
accordance with generally accepted accounting principles ( GAAP). Budget professionals
commonly use this same term to describe the net position of governmental funds calculated on a
government’ s budgetary basis.

GAAP financial statements report up to five separate categories of fund balance based on the
type and source of constraints placed on how resources can be spent ( presented in descending
order from most constraining to least constraining):
a. non-spendable fund balance,
b. restricted fund balance,
c. committed fund balance,
d. assigned fund balance,
e. unassigned fund balance.

The total of the amounts in these last three categories ( where the only constraint on spending, if
any, is imposed by the government itself) is termed unrestricted fund balance.

General Fund Undesignated Fund Balance - The Town shall strive to maintain the General Fund
undesignated fund balance at, or in excess of, 90 days of operation.

Use of Fund Balance – The Council delegates the responsibility to assign funds to the Town Manager or
his/ her designee. The Council shall have the authority to assign any amount of funds. Assignments may
occur subsequent to fiscal year-end. The Council will utilize funds in the following spending order:
Restricted, Committed, Assigned, Unassigned

Fund Balance will be targeted to only be used with Council approval and can be only be used for the
following:
Emergencies,
Non-recurring expenditures such as technology/ FF& E ( furniture, fixtures and equipment), or
major capital purchases that cannot be accommodated through current year savings.
Should such use reduce the balance below the appropriate level set as the objective for
that fund, recommendations will be made on how to restore it.
The Council shall approve all commitments by formal action. The action to commit funds
must occur prior to fiscal year-end, to report such commitments in the balance sheet of the
respective period, even though the amount may be determined subsequent to fiscal year-
end.
A commitment can only be modified or removed by the same formal action.

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