Page 120 - Pantego FY22 Operating Budget

IX. FINANCIAL CONDITIONS AND RESERVES

A. OPERATIONAL COVERAGE -NO OPERATING DEFICITS. The Town will maintain an
operational coverage factor of 1.00, such that current operating revenues (plus approved
fund balance appropriations) will equal or exceed current operating expenditures.

Deferrals, short-term loans, or one-time sources will be avoided as budget balancing
techniques. Reserves will be used only for emergencies or non-recurring expenditures,
except when balances can be reduced because their levels exceed guideline minimums
as stated in Paragraph B, following.

B. GENERAL GOVERNMENT RESERVES. A key element of the financial stability of the
Town is to establish guidelines for fund balance. Unassigned fund balance is an
important measure of economic stability. It is essential that the Town maintain adequate
levels of unassigned fund balance to mitigate financial risk that can occur from
unforeseen revenue fluctuations, unanticipated expenditures, and similar circumstances.

It is the goal of the Town that the unassigned fund balance of the General Fund should
be a minimum of 90 days (24.66%) of the General Fund annual expenditures. The Town
will take action to reduce the fund balance if the unassigned fund balance grows beyond
120 days expenditures.

A reserve will be maintained for general governmental capital projects. The reserve will
be funded with operating surpluses. The reserve will be used for major capital outlays
related to unplanned/emergency projects. As soon as practicable after each fiscal year
end when annual operating results are known, any General Fund operating surplus in
excess of budget, not required to meet ending resource requirements, may be
transferred to the reserve with the approval of Town Council.

Use of unassigned fund balance/net position (unrestricted retained earnings) may be
used in a combination of the following:
- One-time expenditures that do not increase recurring operating costs;
- Major capital purchases; and
- Start-up expenditures for new programs undertaken at mid-year provided such
action is considered in the context of multiyear projections of program
revenues and expenditures.
Should such use reduce the unrestricted balance below the appropriate level set as the
objective for that fund, the Town will take action necessary to restore the unrestricted
fund balance/net position to acceptable levels.

The Proprietary Fund working capital should be maintained at least at the 24.66% of
total operating expenditures or the equivalent of 90 days. The Town will take action to
reduce the net position balance if the working capital grows beyond 120 days.

Cash and investment balances in the Town’s Economic Development Corporation funds
should be maintained at a minimum of 25% of the current year budgeted expenditures
and transfers.

114