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1. Call to Order.
2. Joint Meeting with School Board
a. Discussion: Finandal Planning.
b. Executive Session: Legal Matters.
c. Certify Executive Session.
3. Adioum.
COUNTY OF ALBEMARLE
EXECUTIVE SUMMARY
OCT 1 0
AGENDA TITLE:
Financial Planning Session
SUBJECT/PROPO SALfREOUEST:
SupplernantaI In~on~afion for the Financial Pianning Session
with the School Board
STAFF CONTACT(S):
Messrs. Tucker, White
AGENDA DATE:
October 14, 1996
ACTION: X
CONSENT AGENDA:
ACTION:
fA'EM NUMBER:
INFORMATION:
INFORMATION:
ATTACHMENTS: Y~s/~ ~_.__/
REVEEWED BY: .//~ [
BACKGROUND:
At the September 16 Financial planning worksession with the School Board, the Board requested that a second meeting be held to
continue discussions on the projected revanue shortfall over the next five years. The attached material includes brief information on
the short term and long term solutions presonted at the last session.
School Division information is presented as a separate packet.
RECOMMENDATION:
The material is presented for the Board's information prior to the Monday's worksesaion and requires no action. Staff will present a
v~y brief overview of the major funding issues, but the prima~y fuens of the worksession will be on concerns and questions raised by
Board of Supervisor and School Board members, and staff requests any direction that can be provided for future budget preparafion~
FISPLN2.F~
96.188
FIVE-YEAR BUDGET PROJECTIONS
How to Address the Shortfalls in FY97/98 - FY01/02?
Revised 5-year Projections
Scenario I (Page 6 ) shows revised expenditure projections based on the following adjustments:
County population growth rates have been adjusted from an average armual increase of 1.02%
used in the prior projections to 1.5% based on discussions with VEC and the Center for Public
Service. The revised annual growth rate, which should more accurately reflect the County's
population over the next five years, is used in the revisesd scenario m project general govemmeur
baseline increases along with CPI.
VRS Cola payments were increased in the out years to reflect the cumulative costs for both general
govarmnent and the school division, plus the annual rate increases in the school division, which
were not included in the initial analysis.
Revenue sharing projections have been revised by the Department of Finance based on a
reevaluation of their initial assumptions. Their original projection was based on weighted averages
since the beginning of the revenue sharing agreement. Their revised estimates are based on a more
realistic 3% increase on the 1997 reassessment and carried forward for the next several years.
Projected debt service costs for expanded and new school projects in the FY98-FY02 CIP have
been added to school division costs, since additional VPSA bonds will increase the debt service
payments each year.
These revised expenditures can be compared with the prior projections on page 20 of the Five-Year
Forecast. Although the FY97/98 shortfall has been reduced by $432,000, the 2nd, 3rd and 4th years show
an even greater shortfall due m the cumulative effect o£the VRS costs and rate increases, the additional
debt service costs for expanded/new school CIP projects and the upward change in the population growth
rate.
FY98 FY99 FY00 FY01 FY02
Prior Projec~on Shortfall/Surplus ($2.160) ($2.127) (S0.876) (S0.393) $2.394
R evis ed P rojec~on s horffa II/S urplL~ ($1.728) ($2.574) (S1.904) ($2.282) $0.998
$4
($4)
Difference Between Revenues and Expenditures
=v 90101 - FY 01/0,q
FY91 FY92 FY93 :Y94 FY95 FY96 =Y97 FY98 FY99 FY00 FY0' FY02
Fiscal Y ear
Scenario 1I (only recommended capital projects)
Expenditure Scenario II (page 7 ) shows the impact on the operating budgets when capital projects and
their associated operat'mg costs are either deferred or eliminated. The expenditure reductions are based on
preliminary recomm.endatiuns by the CIP Technical Committee, which revised the technology operating
costs associated with new computers and reduced the requested CIP by $17.6 million in order to balance
within available revenues. The resulting shortfalls/surplus when associated operating costs are removed
are seen below:
84
$2
($2)
Difference Between Revenues and Expenditures
--Y 90/91 - FY 01/02
(with expanded costs/
(only recornmenoeo capital projects)
881
1.609 1'8592'101
0
1.385
FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY08 FY99 FY00 FY01 FY02
Fiscal Year
Tiffs preliminary information on the Capital Improvement Program is provided to show the relationship
between the capital and the operating budgets and the impact of either deferring or eliminating capital
projects on the associated operating costs. More specific information on CIP project requests vs.
recommendations will be provided to the Board early in December after Planning Commission review.
Fund Balance Revenues
In response to questions about the use of fund balance revenues to offset the FY98-FY02 operating budget
shortfalls, particularly in response to the FY95/96 savings identified in the End of the Year Financial
Report, the enclosed publication "An Elected Official's Guide to Fund Balance" provides information on
the requirements and management of fund balances.
Based on the FY95/96 End of the Year Financial Report, the County's Undesignated Fund Balance is:
Fund Balance 6-30-95
Less FY95/96 appropriations
Plus FY95/96 Revenues/Savings
Fund Balance 6-30 96
Less Split Billing to Capital
Less Committed to FY96/97 School Budget
Less Reappropriations
Fund Balance Remaining 7-1-96
Split Billing revenues to CIP
Remaining-Fund Balance for One-Time Projects
$14,172,441
1,256,974
19,374,407
$32,289.874
$16,500,007
501,495
240,363
$15,048,016
768,000
$1,232,000
2
The Director of Finance has indicated that approximately $2 million of the remaining $15 million fund
balance could be used to fund one,time needs without jeopardizing the County's cash flow needs. Page 8
shows the undesignated $13 million fund balance relative to the County's cash flow needs over a 12
month period.
1'o adhere to the County's policy of using split-billing revenues for school projects, the CIP Technical
Committee has recommended that $768,000 of the ~;2 million available fund balance revenues, which
came from additional split billing revenues, be put into the school division CII~ as originally intended. If
that recommendation is supported by the Board, the remaining $1.2 million could be used to fund one-
time expenditures in either the C~ or the operating budget. However, these revenues will not repeat and,
therefore, could not be used to fund the ongoing operating shortfall.
Short-Term Solutions
1. Defer/Eliminate Capital Projects
Deferring or eliminating projects in the Capital Improvement Progrmn could have the following three
impacts on the operating budget shortfalls:
a. Debt service costs would be reduced freeing up revenues for other operating costs. Deferring all
the major school projects such as Murray, Henley, Red Hill, Walton, Northern Elementary, Greer,
Jouett, and Stone Robinson could reduce the 5-year debt service costs by approximately $1.74
million.
b. The capital transfer would be reduced, which would free up revenues for other operating expenses.
Since this is the only source of funding for general government projects, this would have the
greatest impact on non-school capital projects. Since many FY98-02 CIP projects have already
been committed, the impact would be on the following types of projects: fire/rescue contributions.
police computers and radio system, highway and sidewalk projects, and pm'ks, athletic fields anda
the Greenway.
c. The operating costs associated with the deferred projects would also be reduced, thereby freeing up
other revenues. Examples of these types of operating expenses are support and training costs for
new computers, maintenance on entrance corridors and parks, fire service personnel and custodial
and maintenance costs on new and expanded facilities.
2.Use More Borrowed Funds for Capital Maintenance and Repair Projects
Based on the County's Financial Policies adopted in October 1994, the annual CIP transfer has increased
each year, with a corresponding increase in current revenues used to fund maintenance and repair projects
in the school division. Tiffs amount increases fi:om $500,000 in FY98 to $1 million in FY02, yet still does
not cover the total maintenance/repair costs requested by the School Board over the frve year period.
School Division Maintenance/Repair Funds
FY98
CII~ I i"ansl~r bUU,UUU
Requested P rojecG 748,000
FY99 FY00 FY01 FY02
bbU,UUt) /bU,ULM ~L~J,UUU q,UUU,(JUU
1,833,200 433,000 1,729,835 1,824,935
S hor~ll S248,000 $1,183,200 (5317,D00) 582§,835 $824,935
The impact of using borrowed funds for maintenance and repair projects would be increased debt service
over the five year period of $746,500, as well as being contrary to the adopted County policy. If VPSA
funds were used for maintenance projects as a temporary measure, new revenues would be needed at some
point to begin rebuilding the maintenance and repair revenues back to the current level.
3. Use one-time fund balance monies to fund CIP projects.
Discussed under fund balance, approximately $1.2 million in fund balance monies could be allocated to
one-time capital projects, thereby freeing up a like mount in the CIP transfer to be used for other needs.
However, since these are one-time revenues, they could be used only for one time costs, not ongoing
operational expenses. The major expenditures, i.e. VRS, bus replacement, textbook, capital associated
operations, including the High School, are ungoin~ expendit~res, nor one-time costs.
Long-Term Solutions
1. Raise Revenues ( Summary of Revenue Sources on page 9)
a. Meals Tax- A referendum approved Meals Tax would provide approximately $2,3 million in
ongoing revenues. The allocation of those revenues would be at the discretion of the Board of
Supervisors.
bo
General Property Taxes - A $0.01 cent increase in the real estate property tax rate will generate
an additional $544,000 in revenues in FY97/98. A $0.01 cent increase in the personal property tax
rate will generate an additional $49,000 in revenues in FY97/98
Ce
Increase Fees/Charges for Services Revenue data since 1991 shows that user fees have declined
slightly for both the development departments and the Department of Parks and Recreation.
Development related fees, which are under the Permits and Fees category, went from 42.5% of all
development related expenditures to 35.5% in FY97. The decline in the development user charges
can be partially explained by decreased building activity, but also that fees in general have not
been adjusted to inflation or any other cost increases since 1993. Total Permit and Fee revenues
are projected to be ~723,000 in FY98.
Parks and Recreation user fees, categorized as "charges for services", offset 24% of all park Costs
in FY91 compared to 20% in FY97, although several rainy summer seasons have kept swimming
revenues short of expectations. Total Charges for Services revenues are projected to be $810,000
in FY98. Expanding and updating user fees can be pursued further by staff should the Board wish
m pursue this option.
Transient Taxes- The 1996 Legislature granted Counties the ability to leverage an additional 3%
transient tax over the current 2% now collected, although the additional 3% must be used strictly
for tourism and travel related expenses. Each 1% equals approximately $190,000 in revenues or
a total addition of $570,000.
Implementing a transient tax, which is totally paid by non-Albemarle residents, would yield the
following advantages:
· The gl 10,000 currently allocated to the Visitor's Bureau could be paid from the 3% tax,
thereby freeing up that amount in general fund revenues to use for other purposes.
· The increased transient tax could be used to fund CEP projects that relate to tourism and travel.
Although the definitions of tourism/travel related expenditures are somewhat unclear at this
time, possible projects in the FY98-02 CIP that might qualify for transient taxes are:
Bike Lanes $297,000
Entrance Corridor improvements 203,000
Rivanna Greemvay 350,000
Associated operating costs of these projects 178,760
$1,028,760
4
Land-Use Tax Changes - In FY96-97, the County deferred approximately $5.5 million dollars in
tax revenues in the land-use taxation program. Assuming collected revenues at $544,000 per
peuny, the additional cost to ineligible properties is approximately $10 cents. Although revenue
impacts have not been updated since the 7/94 Land Use Report to the Board, eliminating all
categories of land use taxation except those properties in Agricultural/Forestal Districts would
have netted approximately $4.1 million. Although the specific revenue impact is not known at this
time, several counties have eliminated use value on forest land only, which for Albemarle County
represents more than 65% of the land currently enrolled in the land use program.
Reduce Operating Expenditures - O~ptions for reducing the cost of general government functions
are.'
Hiring Freezes - Impact would depend on number of positions vacated during the year.
Across the Board cuts ~ Impacts service levels across County departments with greatest impact
often on small departments.
Reduced service levels in selected departments and programs and/or operating hours at parks,
recreational programs, library, etc.
Eliminate funding of any discretionary agency requests. Annual savings $1.5 million
Reduce Operating Expenditures - School Division - Options for reducing the cost of school
division programs relate to the following categories and are addressed in a separate attachment.
· StudenffStaff Ratio
· Special Education Staffing
· Number of Pupils Per Classroom
· Transportation Options
Lease Purclmse Buses
5
SCENARIO !
al~ requested capital projects funded - additional debt service costs shown ~n school budget Average
Annual
FY96/97 FY97/98 FY98199 FY99/00 FY00/10 FY01102 Growth
General Government I
Prior Year Baseline Funding 29.427.520~ 29.427.520 31.133.938 32,494,491 33.904.752 35,362,657
VRS Prefunded Cola 394.260
× cost of government 104.40o/= 104.37% 104.34% 104.30% 104.05%
Baseline Funding 29,427,520, 31,133,938 32.494,491 33.904.752 35.362.657 36,794,84~
plus Capital proiect oDeratin9 costs 444.310 534.335 729.465 1.642.862 1.739.828
Jail debt service 100.000 300.000 300.000 300.000 300.090
Subtotal Projected Gert. Gov't. Expendltt 29,427,52{~ 31,678,248 33,328,826 34,934,217 37,305,519 38,834,672
4.29%
$260.000
7.65% 5.21% 4.82% 6.79% 4.10% 5.71%
School Division Operations
Pdor Year Baseline Funding 66.670.687 66.670.687 70.625.512 74.313.766 76.164.551 81,697.04C
Textbook Fund 200,000
Bus Replacement Fund 432.000
VRS Cola payments 320.000 442.695 378.030 381.340 361.C:~0
x cost of education 104.88°~ 104.52% 104.60% 103.98% 103.05%
Baseline Funding 66.670.687 70.625.512 74.313.786 78.164.551 61.697.040 84.589.836
D~us One-Time revenues 501.495:
Capital project operating costa67,t72,182 488,436 1,873,404 2.079.353 2.963.235 3.102.261
Additional debt service costs 0 44.760 487.385 727.363 472.633
Subtotal Projected School Expend;tures 71,113,948 76,231,950 80,731,289 86,387,628 88,164,730
4.21%
$2.101,338
School Division Doliar Increase
School Division Percent Increase
3.941.766 5,118,002 4,499,339 4,656,339 2,777,102 4,198.5'10
5.87% 7;20% 5.90% 5.77% 3.25°/= 5.60%
Non-Departmental Expenditures
Debt Service 6.959.380 6.845,880 6.845.880 6.845.880 6.845.880 6.845.88C
Capital Transfer 2,686.50£1 2,500,000 2.900.000 3.200.000 3,500,000 4.000.000
Debt Service/Capital Reserve 650,000 400,000 400,000 450,000 450,000 450.000
Revenue Sharing 5.170.853 5.486.188 5.557.771 5.724.505 5.824.505 5.999.240
Subtotal Non-Departmental Exl3 15,466,733' 15,232,068 15,703,65'1 16,220~385 16,620,385 '17,295.120
Non-departmental Dollar Increase
Non-departmental Percent increase
(234,665) 471,883 516.734 400:000 674.735 365,677
-1.52% 3.10% 3.29% 2.47% 4.66% 2.28%
Projected County Expenditures
Plus Self-Sustaining Funds ~*
Total Projected County Expenditures
$112,066,4351 $'118,024,264 5'125.264,427 $t3'1,885,89'1 $139,313,532 $144,294,522
6.337.67ql 6.489.493 6.498.602 6 508 258 6.518.493 6~69,408
118,404,105 124,5~3,757 131~63,029 138,384,149 145,832,025 150~63,930
4.93%
Projected County Dollar Increase
Projected County Percent increase
$6,109,652 $7,249,272 $6,631,120 $7,437,875 $4,731,906'
5.16~/~ 5.82% 5.03% 5.37% 3.24%
Does not include $50' .495 in one - time local transfer funds
includes expenditure increases in cafeteria fund only
10/10~96 6 5YRPLN2,WK4
SCENARIO II
Operating costs for recommended capital projects only
FY9W97 FYgw98
FY98/99 FY99/00 FY00/10 FY01/02
Average
Annual
Growth
General Government
Prior Year Baseline Funding 29.427.520
VRS Prefunded Cola
x cost of government
Baseline Funding 29,427,520
plus Capital project operating costs
Jail debt service
Subtotal Projected Gen. Gov't. Exp 29,427,520
29,427.520 31.133.938 32.494.491 33~904.752 35,362.657
394.260
104.40% 104~7~_ !04.34% 10_4.30% 104.05% 4.29%
31,133,938 32,494,491 33.904.752 35,362,657 36.794.844
205,260 313.630 583,989 1,521,176 1.642.554 $853,322
100.000 300100_0 3~00,000 300000 3~)0~00 $260,000
3f,439,198 33,108,121 34,788,741 37,183,833 38,737,398
General Government Dollar'l~crease
General Government Percent Increase
S2,011,578 $1,568,923 $1,680,620 $2,395,09t $1,553.886 $t,56t,876
6.54% 5.3t % 5.08% 6.88% 4.18% 5.66%
School Division Operations
Pdor Year Baseline Funding 66,679,687 66,670,687 70,625,512 74,313,786 78.164.551 81`597.040
Textbook Fund 200,000
Bus Replacement Fund 432.000
VRS Cola payments 320,000 442.695 378.030 381.340 381,640
x cos[ of education 104.88% 104.52% 104.60% 103.98% 103.05%
Baseline Funding 66,670.687 70.625.512 74.313.756 78.164.551 81.697,040 84.589.836
3les One-Time revenues 501,495
Capital project operating casts 276.086 !.649.355
Additional debt service costs 0 441760
Subtotal Projected School Expendi 67,172,182 70.901,598 76,007,901
1.845.802 2.674.434 2.8021861
487.385 727.353 472.633
80,497,738 85,098,827 87,865,330
4.21%
$11849,708
School DivisiOn Dollar Increase
School Division Percent Increase
3,729,416 5,106,303 4,489.837 4,601,089 2,766,503 4,138,630
5.55% 7.20~/~ 5.91 o~ 5.72% 3;26% 5.53%
Non-Departmentel Expenditures
Debt Service 6.959,380 6.845.880 6.845.880 6,845,880 6,845.880 6,845,880
Capital Transfer 2.686.500 2,500,000 2,900,000 3,200,000 3,500.000 4,000,000
Debt Service/Capita~ Reserve 650.000 400.000 400,000 450,000 450,000 450,000
qevenue Shadng .~,170,853 5.486.188 5.557.771 5.724 5~_05 5 8~824`505 ~999.240
Subtotal Non-DepartmentalExp 15,466,733 15,232,068 t5,703,65f t6,220,385 16,620,385 17,295,120
Non-departmental Dollar Increase
Non-departmental Percent Insrcase
(234,6651 471,683 5'~6,734 .400,000 674,735 365,677
-1.52% 3.19% 3.29% 2.47 °/= 4.06°,~ 2.28%
Projected County Expenditures 8112,066,435 $117,572,864 $t24,819,673 $13'1,506,864 $138,903,045 $'143,897,848
Plus Self-Sustaining Funds ** 6 337,6701 6,489,4g_3 6.498.602 $.508 2_~5~58 6,518,493 6~_269.40~8
Total Projected County Expenditur, 118,404,f05 124,062,357 131,3t8,275 t38,015.122 145,421,538 '150,t67,256
4.87%
Projected County Dollar Increase
Projected County Percent Increase
S5.658.252 $7,255,918 $6,696.847 $7.406,415 $4,745,7t9
4.78% 5.85% 5/I 0% 5.37% 3.26%
Does not include $501.495 in one - time local transfer funds
includes expenditure increases in cafetada fund only
4.87%
10/10/96 7 5YRPLN2.WK4
40
Fund Balance Projection Based on $13,000,000
Based on FY 95/96 Cash Flows
o
June 30
July Aug,
Sept. Oct. Nov. Dec. Jan. Feb.
Month
Mar.
Apdl May
Month Ca--ow Fund Balan~
June 30 13,000 O00
July (2.441.775) 10.558.225
Aug. (9,420,734) 3,579,266
Sept. (13.857.544) (857,544)
Oct. (16,605,472) (3,605,472)
Nov. (5,394,083) 7,605,917
Dec. 11,766,937 24,766,937
Jan. 5.892.337 18,892,337
Feb. 3.174557 16,174,557
rVlar. (529,332) 12,470,668
April (2,868,021) 10,131,979
May 1,752,4'i6 14,752,416
June 3.038.115 16,038,115
10/09/9603:18 PM
FUNDBAL.WK4
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9
Options to
Address the Revenue Shortfall
Financial Planning
Worksession
Major Budget Impacts
· VRS School = $3.3 million
· VRS General =$2.1
· High School = $6.2
· No. Elementary = $1.7
· Capital Operating=S5.6
· New Debt Service =$1.7
. Jail Debt Service = $1.3
. Textbook Fund = $1.1
. Bus Fund = $2.3
FY90/91- FY01/02
~on~y recommended capital projects)
,$4.000
$3,000 ~
$2,000
$1,000
-$1,000
-$2,000
-$3.000
FY91 FY93FY95FY97 FY99 FY01
FY92 FY94FY96 FY98 FYOOFY02
Fiscal Year
1-2
Option:
Defer/Eliminate Capital Projects
· Reduce debt service costs - $1.74 million if
defer school expansion/renovation projects.
· Reduce capital transfer - $12.3 million if
defer general govt projects.
· Reduce operating costs for capital projects -
'$7.3 million, not including High School
Option: Borrow for School
Maintenance/Repair Projects
· Available revenues = $3.8 million
· Borrow VPSA funds -~a~dditional $746,500
debt service
· Net available revenues = $3 million
· Contrary to County policy
3-4
Option: Fund Balance Revenues
· Current million fund balance at $15 million.
· Requires $13 million for cash flow needs.
· Recommend $0.748 split billing revenues in
the fund balance to school capital projects.
· Remaining $1.2 for one-time needs.
Long-Term Solutions - Revenues
· Meals tax = $2.3 million
· Real Property = $544,000/cent
· Personal Property -- $49,000/cent
· Charges for Service - $705,000~100%
requires further review
· Transient Tax = $570,000 targeted to
tourism and travel
· Land-Use Taxation = $5.5 million - requires
major change in land-use policy
5~6
Long-Term Solutions -
Expenditures
· Hiring Freeze
· Across the board cuts in departments and
agencies.
· Reduc.~service levels
· Eliminate discretionary funding'-~utside
agencies. ~/~ ~'~~ ~
7-8
TO:
THROUGH:
FROM:
DATE:
COUNTY PLrBLIC SCHOC
Memorandum
Board of~
Division 8~rintendent
Diane Ippolito ~'
Assistant Superintendent for Instruction
October 14 Joint Meeting of the Board of Supervisors and the School Board
October 7, 1996
In preparation for your meeting with the School Board on October 14, I have prepared the
following Albemarle County Public Schools documents for your review:
A Vision for the Future 1996 to 2002
· Mission Statement and Goals of the School Division
· Strateg/c Plan, an excerpt from the Strategic Plan for a Total School System
Commitment to the School Improvement Process
· 1996-1997 School Board-Superintandent Priorities
· School System Brochure
Previously, the 1996 Progress Report was transmitted to you through Mr. Robert Tucker, County
Executive. Attached is the press release regarding the Progress Report.
If you would like additional information/materials or if you have any questions, please
call me at 296-5820.
/blt
Enclosures (4)
cc: School Board Mcunbers
ALBEMARI E COUNTY PUBLIC SCHOOLS
MISSION
The primary mission of Albemarle County Schools is to provide and promote a dynamic environment
for learning through which all students acquire the knowledge, skills and values necessary to live as
informed and productive members of society.
GOALS
Albemarle County Public Schools will nurture a climate that promotes trust, idea sharing and sensitivity to student needs
and ensure a healthy environment for intellectual development for all children. To provide such an environment, we will
ensure that:
The primary objective of all disciplines will be for students to foster the capacity to apply kmowledge,
facts, concepts and skills in new situations where they are appropriate.
All schools will promote a healthy and inviting school climate in which all students will be prepared
to participate in a democratic society as responsible citizens, workers, and family members.
demonstrating the adopted values of the School Board.
Individual schools will work in feeder pattems to provide the oppommity for students to acquire the
knowledge and understand the concepts of physical, mental and emotional health and demonstrate
sound habits of personal health and fitness. Early intervention strategies and comprehensive and
consistent services will be a primary focus of our efforts.
Curriculum development and implementation will be a dynamic process that necessitates ongoing
revision to meet the individual needs and diverse talents of all students. A primary focus will be for
all students to demonstrate skills and acquire knowledge to meet the established curricular
expectations in the core academic areas of reading, math, written and oral communication, science
and social studies.
Schools will establish comprehensive opportunities to ensure parental and community involvement
toward making each student's education a substantive and valuable experience. They will develop
parmerships with parents, community members, and businesses that directly support and guide our
educational goals. Working together, we will ensure that all students develop the skills and abilities
necessary to be self-sufficient and contributing members of the community.
EVIDENCE
Indicators to provide evidence of progress toward each goal's attainmem are found in the system's Strategic Plan for a
. Total School System Commitment to the School Improvement Process. A Progress Report outlining the division's
performance on these indicators will be issued annually by the Superintendent. In addition, the School Board will receive
a yearly report on the status of the division's curriculum. At this time, the School Board will approve any substantive
changes to curriculum documents.
ALBEMARLE COUNTY SCHOOLS
STRATEGIC PLAN: 1994-2000
The procegs 0fpl~g for the fi/ture of Albemarle County Schools is a critical one..In order to
be prepared for the needs of students'in the years ahead, a focused approach of establishing
priorities and planning for how they will be accomplished is the' only means m ensure success.
With the unprecedented change facing public schools today and the demands on our resources,
we must as a community establish a plan to reach our goals.
The initial development of our school division's vision began with the Blue Ribbon Commission
in 1990. This group, which represented broad-based communky involvement, looked to the
future and established a picture of where the system ought to be by the year 2000. Various
groups were involved in analyzing the recommendations of the Blue Ribbon commission and
establish~n~ 18 goal statements based on the Commission report and other identified needs.
tn 1994, the School Board adopted the Albemarle Cour, _ty Public Schools Strategic Plan 1994-
2000, a six year improvement plan,, as required by the Standards of Quality for Public Schools in
Vireirda~ Since this Strategic Plan was first adopted, the original 18 goals have been revised and
refined into a primary set of five goals. These new goals reflect the changes required to meet the
new challenges for students and schools, while building on the foundation provided by the
origin~ 18 goals and mainta~J_ng their original intent. The implicit nature of the goal statements
is intended to provide increased flexibility and conlzot at the individual school level, so that the
stafl'in each school can make the decisions on how best to meet these targets and ~ndards for
their respective student populations.
The Albemarle County Public Schools Strategic Plan has now been revised as required by the
Virginia Standards of Quality. This revised Strategic Plan has been extended significantly to
support the newly adopted School Board Goals and to support the Division's commitment to the
School Improvement Process. If education is a high priority in th/s community, planning for it
should be an equally high priority. The S~ategic Plan is important in shaping the future for
Albemarle County Schools and ensuring that our system will continue to slrive for a high level of
excellence. It is a dynamic document which continues to change m meet the changing needs of
our students. The Strategic Plan is the school division's blueprint. The staff, students and
community working zogether, will make tt~s blueprint a reality.
The Standards of Quail _ty require that this six year plan be revised, extended, and adopted by the
School Board biannually. The revised 1996 Albemarle County Public Schools Strateeie Plan
provides a strong element of continuity and direction for Division and School Improvement
Tearn~ It is this process that takes us from "what is" to "what could be," and it is organi?ed
arohnd the three questions presented on page 1. The first two questions guide us in our attempt
to establish a school system that creates a standard of quality and equity for all students. The
third question addresses the School Division's potential to effect school improvement.
1-2
WHAT IS THE PRIMARY MISSION OF THE SCHOOL SYSTEM?
(WHAT BUSINESS ARE WE IN?)
The mission of Albemaxle County Schools is to provide and promote a dynamic environment for
learning through which all students acquire the knowledge, skills and values, necessary to live as
informed and productive members of society. The s~stem can only be judged on its s. uCeess with
all students, regardiess of gender, race, or socioeconomic stams~
WHAT WILL WE ACCEPT AS PRIMARY EVIDENCE
FOR JUDGING SCHOOL IMPROVEMENT?
(HOW WELL IS BUSINESS GOING?)
There must be evidence of improvement that goes beyond minimum eompetencies of student
achievement The high-quality results we axe seeking include a sequence &enabling skills that
focuses on high-level thinking and the application of knowledge. Student achievement will be
analyzed in a variety of ways to determine if ail groups within the School Division's population
axe achieving success.
HOW WII,I, SCHOOLS USE THE EVIDENCE TO PROVIDE STRATEGIES FOR
SCHOOL IMPROVEMENT?
(WHAT CAN BE DONE TO EVIl?ROVE BUSINESS?)
All students can learn, but we recognize that the mount of teaching time and the teaching
strategy used must vary depending on the individual student and a number of circum.qtxuces. The
support of effective teaching sh-ategies and those school structttres which impact student learning
is the school administration's top priority.
The purpose of the School Improvement Process, developed f~om the tl~ree questions above, is
· creme a culture of continuous school improvement,
· improve student achievement in each school, and
· continue to reduce differences in student achievement and participation as a function
of race, gender, and socioeconomic status.
IMPLICATIONS
Schools must know what the local and state dam-based areas are and schools must know
these areas will remain constant unless changed by the School Board or the State Board
of Education. These data-based areas will continue to be monitored.
Schools must focus efforts on improving student performance on the local and state data-
based axes.
The Albemarle County Schools Progress Report, detailing both system and individual
school data for the local and state data-based areas, is presented to the School Board each
September and is available for public review.
The Strategic Plan emphasizes two important components~ Shared decision making and
defined standards that measure progress toward the Division goals.
I-3
DEFINITIONS
A. SHARED DECISION MAKING
Shareddecision making means allowing all concerned parties to participate in the school
improvement process. Better decisions are made when all stakeholders are given the ppportt~ty
to be a part of the process and are held accountable for the decisions. With this in mind, each
school selects a School Improvement Team that creates a School Improvement Plan that is
morn'toted by the Superintendent.
The participants in the process include s~hool staff, students, the School Board, parents, County
residents, and the business community. Their involvement in a joint planning, problem solving,
and decision making process should lead to two positive results: increased student aclfievemem
and increased stakeholder satisfaction.
B. DEFINED STANDARDS
System improvement goals, regardless of the format, were never intended to a_and alone, in the
same way that curricular goals cannot be evaluated without the instructional objectives. Students
need to understand the specific expectations and standards in their classes in order to evaluate
the'n: own progress and to understand the assessment of that progress by their teachers. In the
same way, the goals of Albemarle County Schools cannot be understood or evaluated without a
clear definition of the evidence that will be used to evaluate progress or achievement of each
goal. The Annual Progress Report provides continuous evaluations of school and system
performance. The Progress Report serves as the primary vehicle for communicating the state of
student achievement and participation.
Despite the explicit nature of the original 18 improvement goals, specific evidence was
established to clearly define what would be measured and reported for each school. These
spec'fflc results provide educators and the public with the means to evaluate progress in each
school. The flexibility provided by the more implicit nature of the new goals in no way reduces
the need to clearly define the evidence that will be used m measure our progress.
Of the five goals, the first goal provides the umbrella &student achievement - the primary
reason for schools to exist. The standards attached to this first goal include many of the same
measures used for the first set of goals, enabling the public m assess system and school
performance over time.
Reflecting the increased standards for students and schools, those measures of higher
achievement are now included in the primary goal of the system. Also incorporated into the
standards for the first goal are all of the assessed student knowledge standards established by the
State Board of Education in its Outcome Accountability Performance Program.
Goals 2 through 5 support the achievement-centered first goal. All applicable student
participation standards of the Outcome Accountability Program are included with these goals,
since schools unable to demonstrate progress in those areas will also be accountable for
14
demonstrating progress in those areas as well. The focus on equity for all is reflected in Goal 4.
Lu addition to reducing the variance in student-achievement, increased focus has been placed on
student participation and the degree to which staff development and curriculum development
address the diverse needs of our students.
The need for collaboration among schools has been specifically addressed'in the.standards for
' these goals, as has the effect 0fthe school climate on student participation and achievement.
Recogni~ng the critical impact parents, employers, and the overall comrmlllity have on our
students, the outcomes for Goal 5 address the degree to which tree partnerships with the
Albemarle County community are established and maintained.
In total, the performance-based standards for the five goals provide the evidence needed to build
on tha success oftha past, provide high standards to ensure our students and schools will meet
the challenges of the year 2000 andbeyond. (See Chapter V for standards and data which
support Goals 1 - 5)
AN EFFECTIVE SCHOOL SYSTEM FOR THE ALBEMARLE COUNTY
SCHOOL B~WiSION
An effective school system is one in which resources are orgarfized and delivered in such a way
as to ~sure that all students within tha~ system (regardless of mcca. gender, or socioeconomic
status) learn the essential curriculum as defined by that system. An effective school system,
through its statement of mission and goals, its instructional program and sup,m~rt services, and its
allocation or resources, assures that its priorities are teaching for learning, and that its focus is on
both quality and equity. (See Chapter III)
AN EFFECTIVE SCHOOL FOR THE ALBEMARLE COUNTY PUBLIC
SCHOOL DMSION
An effective school in Albemarle County is one ~vhich achieves its teaching for learning mission
by demonstrations of quality and equity in its program result (See Chapter VI)
I-5
1996-1997 SCHOOL BOARD-SUPERInTENDENT PRIORITIES
W/t. AT
In August' 1996, the School Bo~d adopted the f°llowLng priorities for the 1996-97 ~chool year.
I. Enrollment and Facilities
A redistricting plan will be adopted.
Long-range facility/capital needs will be further identified after the redistricting plan is
adopted.
11o Curriculum and Assessment
Refinement of all curriculum areas veil/continue, with particular emphasis on ali?ment with
the %r_~ma Standards of ~earmn~,
Grade level performance standards will be established in all cunSculum areas, w/th prio~ty
be'rog placed on the core content areas; and curriculum-based assessments will continued to
be developed and refined in core content areas, Steps will also be taken to begin
development of such assessments in other content areas.
Textbook adoption wilt continue and educational material will be upgraded and aligned with
the revised curriculum.
· The Middle School and High School Task Forces will continue the/r work on d final report to
be used in the development of the FY 1997-98 Budget.
An Elementary Task Force will be convened to develop a clearer vision of the program that is
to exist in all elementary schools.
· Work will begin to assess the effectiveness of the Foreign Language Program in order to
develop a long-term improvement plan for this curriculum area.
IlL Technology
· The Albemarle County Technology Plan will be evaluated and appropriate revisions will be
made to the plan.
· An acceptable Technology Use Policy will be adopted.
1-11
Culture of Continuous School Improvement
Staff will develop a system database to support the School Improvement Plan Process in
order to monitor student achievement and to communicate Division and School performance
to the public tkrough the yearly Pr e~R
lmplementationof the second year 0fthe individrml School-ImProvement Plans Will provide
data for evaluation and improvement.
Programs to provide additional support for at-risk students and other special populations (i.e.,
low achieving or failing students) will continue to be implemented and assessed.
Funds will be designated to support innovative schooMevet instructional initiatives.
· Staff development will conlinue to be focussed to support the Division Mission and Goals
with special emphasis on the 1996-97 Board priorities.
The Strate~c Plan will be updated and revised to include a long range planning process for
improvement.
V. Career Preparation
The Charlottesville-Albemarle School Business Alliance (CASBA) pilot will be assessed at
mid-year To determine this effectiveness of the pannership.
· The Career Education pro~mmn will be assessed and strengthened to better support studem
preparation for the world of work.
VL -, Compensation
The implementation of the newly-adopted tea:her and adminlstrative/classified compensation
plans Will be monitoredc and a progress report will be presented to the School Board before
the end of FY 1996-t997.
Kecommendadons to wansition from the Career Ladder to an Academic Leadership Stipend
model wilt be presented to the Board for the development of the FY 1997-1998 Budget.
VII. Streamlining Operations
· The budget development process and financial accountability, procedures will be fully
reviewed.
The process of reviewing and revising the School Board Policy Manual will begin and
continue until all policies have been completely reviewed and updated, as appropriate.
Steps will be taken to continue cooperative planning surategies with the Board of Supervisors.
1-12
· Procedures and protocols for School Board meetings will be reviewed and appropriate
changes implemented.
· The Board and Superintendent will conduct, in partnership, mid-year reviews and yearly
evaluations based upon the five Albemarle County goals, the long range Vision for the Future
and the short term priorities for 1996-97.
A clear parallel exists between these priorities and the Albemarle County Public Schools Vision
for the Future. Tkis Future Vision provides the long range direction for the Division and clearly
supports the Virginia Standards of Ouatitv. By building on this parallelism, the 1996-97 School
Board Priorities provide the short term structure needed to reach our Future Vision.
IMPLICATIONS
· The 1996-97 Priorities support the Furore Vision, Mission, and Goals contained in the
Strategic Plan and in School Board Policy.
· The 1996-97 Priorities are congruent with the _V_ir__o/nia Standards of Oualirv.
· The 1996-97 Priorities are a cornerstone for long range improvement for this school Division.
1-13
COUNTY OF ALBEMARLE
401 Mclntire Road
Charlottesville, Virgima 229024596
NEWS
RELEASE
FOR IMMEDIATE RELEASE
Date:
Contact:
Phone:
August 16. 1996
Diane Ippolito, Assistant Superintendent for Instruction
(804)296-5820
ALBEMARLE COUNTY SCHOOL DIVISION
RELEASES 1996 PROGRESS REPORT
The Albemarle County School Division is receiv'mg its own report card on its efforts and
results during the 1995/96 school year in the form of the 1996 Annual Progress Report which is
being presented to the County School Board at its meeting on Monday, August 26. This report,
the second such annual report prepared for communky review, is a critical component of the
Albemarle County Public Schools Strategic Plan and measures student achievement and client
satisfaction for the last completed school year.
Information'in the report is divided into four major categories - responsible citizenship,
academic achievement, diverse learners, and client satisfaction. The report details demographics
and trends over time where possible and also includes less traditional indicators of educational
success such as levels of voter registration among eligible students.
A highlight of the report is a special section which profiles each Albemarle County school
in areas including student and staffcharacteristics, test scores, and average class sizes. In
addition, each school has been g~ven the opportumry ro write its own "School Highlights" section
MORE. o.
ANNUAL PROGRESS REPORT - PAGE 2
to tell the community about programs and achievements of particular si~m~ificance to the school
itself.
Copies of the 1996 Annual Progress Report will be available in all county public schools
by September 3 and school officials encourage parents, students and residents in general to
review the report and farniliarize themselves with the county's public school system.
"Given the level of support the community offers to the public school system, k is
important for citizens to feel informed about and involved in the achievements and successes of
our students," said Diane Ippolito, Assistant Superintendent for Instruction, in announcing the
report's release. "This report serves as a cornerstone for school improvement and for measuring
our progress, which is a critical component to the overall well-being of' our community."
A copy o£the Executive Summary of the 1996 Annual Progress Report is attached. For
a complete copy of the report, please contact Diane Ipppotito at 296-5820.
Vision for the Future
Putting Planmng into Practice
Dr. Kevin C. Castner
Division Superintendent
Albemarle County
Public~ Schools
School Board
The Albemarle County School Board govems the School Division as a corporate body according
to law. School Board members serve for four-year terms. These are seven members, one from each
magisterial district and one at large.
The School Board provides the citizens and students of Albemarle County an effective,
responsive, well-managed, wsiouary School Division that ensures the opportunity for a quality education
to all the students. The School Board has primary responsibility to delineate those programs, mission
statements, educational laws, policies that are required by law and desired by the citizens of Albemarle
County and to formalize a process for periodic assessment and evaluation of the Albemarle County
School Board and the Superintendent.
The School Board meets regularly during the school year on the second and fourth Mondays of
each month at 6:30 pm. Meetings are held at the County Office Building, 401 McIntire Road,
Charlottesville, except on the second Monday of alternative months, when meetings are held at selected
schools. Special meetings are called when necessary to conduct school business. All meetings are
announced in advance through local media~
All School Board meetings are open to the public. Citizens are invited to attend and become
informed about the operation of Albemarle County Public Schools. Agendas are published in advance, If
you would like more information about a specific item, please call 972-4055. If you would like to speak
at a School Board meeting, you may register with the Clerk prior to the beginning of the meeting,
School Board Briefs summarize the action and information form regular meetings and are
available at each school.
Karen Pow~ll
Chairman
Jack Jouett District
Exp. 12/31/97
R. Madison Cummings
Samuel Miller District
Exp. 12/31/97
Charles Ward
White Hall District
Exp. 12/31/99
leffrey D. Joseph
Rivanna District
Exp. 12/31/99
John E. Baker
Vice Chairman
At-Large
Exp. 12/31/99
Susan C. Galliot
Rio District
Exp. 12/31/97
Steve Koleszar
Scotts'~ille Dislxict~
Exp. 12/31/99
Albemarle County Public Schools
VISION
FOR
THE
Letter from the Superintendent
Dear Friends:
School systems, like families, communities, businesses, and governments, are constantly changing in response
m the world around them. The ability to change is what makes us able to prepare ourselves and our children for the
future. But change must be thoughtful and deliberate. It requires planning and commitment from all ~e people
involved.
This will be a year of hard work for the Albemarle County public school system. At the same time that we
are holding onto ~nd strengthening the things that have made us successful, we are implementing changes that will
better prepare our children for today's world and the next century. Those changes take into account an increasingly
complex and technological world, one in which our children will not only have to know more, but will be required to
apply that knowledge. In 1996 the Albemarle County SchoolBoard adopted a new set of goals. These 5 goals, along
with the 1996-97 Board priorities and our six year Vision for the Future provide system direction. Specific focus areas
for this school year include:
Continuous School Improvement
Curriculum-Based Assessment
Career Preparation
Constmctiun of Monticello High School
Redistricting of School Attendance Areas
For those of us charged with educating the children of this county, those goals are not just theory. They are a living
document. They require the same careful deliberation to implement as they did to adopt. This year we are in the
process of turning the planning into practice, a process that requires increased cooperation between the school system
and the citizens of the county, and a greater involvement by every member of the community.
It will be a busy year in many other ways. A great deal of attention has been focused on the issues of growth
and funding, and we face difficult decisions. The school division has received strong financial support from the Board
of Supervisors, both through yearly operating budgets and through the Capital Improvements Programs. However,
consistent enrollment growth of 200-250 students per year, decreases in state revenue, and escalating costs present us
with significant challenges as we strive to maintain a strong instructional program. I am confident, however, that by
working together we will find the best possible solutions within the constraints of limited resources. It is all part of
moving forward, of being individuals, families, a community, and a school system looking to the future.
I want to thank the people who made last year an exciting and positive experience. Our stuff has worked long
and hard, and their commilment to children and to new levels of excellence has made our success possible. They are
special people. The dedication the School Board has provided the framework and support for the process. Most of
all, I want to thank the parents and students of Albemarle County. Their participation and enthusiasm are at the heart
of our efforts and ensure that the transition to the future, for both the system and our children, is the best we can make
it.
Kevin C. Castner
Division Superintendent
Albemarle County Pubhc Schools
3
Facts and Figures
The Albemarle County School Division is one of 135 in Virginia. If is the fifth iargesr in
geographical area, encompassing 740 square miles, and has a population of approximately 75,000. The
1996-97 school enrollment of our 11,300 students is one of the targesr divisions in the state. The county
ranks in the top 15% of the state in the educational level of its adults aud in per capital income.
Each of the 23 school in Albemarle County's public school system is unique in such
characteristics as size, student demographics, bdildhig campus, community, and staff. During 1995-96
school year, elementary schools ranged in size from 150 students to 641 students, middle schools ranged
from 423 to 583, the two comprehensive high schools education 1048 and 1745 respectively, and the
alternative high school 68. Racial ethnic makeup of the schools varied from 57.6% white to 97.5% white,
l% black to 38.2% black, and 0% other (American Indian, Asian, Hispanic, em.) re 19.3% other.
Percentages of students on free or reduced lunch ar schools participating in the National School Lunch
Progrmn ranged from 4% to 57%. Mobility of school populations with disabilities ranged from 9.4% to
27.5%.
Because of the variations hi the students and communities served by different schools, it is
t.mportant to note that dravdng comparisons among the schools is like comparing apples to oranges.
The Albemarle Counzy School Board employs approxirnately l
[,845 people
STAFFING RATIO*
The 1995-96 school year, pupil-instructional staff (teachers.
counselors, media specialist* and teaching assistants) ratios
~ ,~re as follows:
Elementary: 15:I
Secondary: 15.84:1
*Special Education, Title J and other federally funded positions
are not included
FACILITIES
l'he Albemarle County Schools includes:
I5 Elementar3 Schools
5 Middle Schools
2 Comprehensive High Schools
l Alternative School
Albemarle County students also have access m progrmns at the
Charlottesville-Albemarle Technical Education Center (CATEC~
wl~ich is jointly operated with the Charlottesville City Schools.
SCHOOL POPULATION
Elementary: 5,4 I4
Middle: 2,616
High: 3,093
TOTAL: 1 I, 123
INSTRUCTIONAL TECHNOLOGY
Alt students, teachers, and adminstrators have access
networked computers which are linked to the Internet.
Albemarle County Public Schools
5
Special Programs
In addition to the general ~ducational programs, the county offers the following pro.ams:
Special Education:
Programs for students with disabilities,
ages birth through 21, are provided in accordance
with federal and state legislation for residents of
Albemarle County. Special Education policies
ensure procedural safeguards in the processes of
identification, evaluation, placement, and
provision of appropriate educational programs.
Approximately 16% of county students receive
Special Education services, which range on a
continuum from mouitoring students progress to
full inclusion in classes with full-time aides to
residential placement.
Gffied Program:
Approximately 10% of Albemarle County
students have been identified through a variety of
measures as intellectually gifted and participate
in the county's gifted program. Elementary
students receive approximately differentiated
instruction through the combined efforts of the
gifted resource teacher and the classroom teacher.
Middle school gifted students are enrolled in core
classes - which are accelerated and differentiated
for high ability learners. High school studenrs
may take advanced level courses in core subjects
and foreign language; they may also explore
topics of interest under the Independem Study
Program.
Charlottesville-Albemarle School Business Alliance
Accelerated Learning Project Schools (ALPS).
The ALPS program is a School Board
initiative that targets schools that have at least 20%
of their student populations eligible for free or
reduced lunch; it provides some additional funding
to support assistance to students at risk of not
meeting academic standards. Each ALPS school
has developed an individual plan based on the
particular needs of the school and its population,
Extended Day Programs:
Over 2,000 Albemarle County elementary
students are enrolled in Before and After School
Enrichment Programs at their schools. Before
School Programs operate daily from 7:00 a.m. -
8:00 a.m. at each elementary school when regular
school is in session provided there is sufficient
enrollment. These programs offer quiet activities,
such as homework help, reading, games, and
puzzles to students who arrive before the regular
school day begins. Alter School Enrichment
Programs provide county elementary students
with a safe and enriching environment from the
time school is dismissed until 6:00 p.m. every full
school day. These programs offer enriching
activities in art, science, nature and outdoors
recreation, and a variety of supplemental classes.
Homework assistance may be provided. These
programs are self-sustaining, t~wncially
supported by tuition and fees charged for
participation.
(CASBA):
CASBA is an alliance between business, government, schools, and community which was formed
m provide structured'coordination of school, business and government partnerships. Projects currently
underway include needs assessment, work-based learning with shadowing, mentoring and internships,
teacher internships with business, and development of a web page on the Interact.
Albemarle County Public Schools
Highlights
By School Board policy, an annual Progress Report outlining the School Division's performance
in meeting its goals is developed and presented to the public. Information in this report is used by the
School Division and the individual schools to formulate improvement plans.
Major accomplishments for the 1995-96 school year are ~ncluded below:
Average daily student attendance of over 95%
Drop out rate: averaged 2% over last 4 years
Continual rise in 4th grade ITBS scores in all subjects over last 4 years
3 year rise in 6th grade pass rates on the Literacy Passport math test to an all-time county high
About 85% of 6th graders passed each of the 3 Literacy Passport tests on their first try compared
with 69.5% statewide
Exceptionally high percentages of students score keys 4 or 5 on AP tests in English Literature and
Composition. Biology, Comparative Government, U, S. History, and French
First time participation in Odyssey of the Mind yielded 10 regional awards and 2 state awards
9 National Merit finalists - three times the expected number for a school system of Albemarle's
size
74.8% of students taking AP tests scored 3 or higher on at least one rest. The percentage of scores
that were 3 or higher was 80.5
The percentage of students completing vocational programs who attain the identified competencies
necessary for success in their career fields continues to be exceptionally high
High parent satisfaction with instructional programs in language ar~s, mathematics, science, social
studies, and physical education
Over 60% of second grade students read above the second grade level
State test program scores rank in the top 10% of school divisions in the state
80% of Advance Placement (AP) test scores keys 3 or higher, compared with 62% nationally
(many colleges accept scores of 3 or higher for credit or advanced standing)
Over 75% of graduates continue their education after high school
Scholastic Assessment test CSAT) scores topped national averages by 40 points
SAT RESULTS - GRADUATING $EN~ORS, 19~6
PERCENTAGE OF SENIORS
TAKING
VERt~AL + MATH
1077
Albemarle County Public Schools
Administrative Staff
Superintendent of Schools
School Board Clerk
Executive Secretary to the Superintendent
Assistant Superintendent for Instruction
Assistant Superintendent for Support Services
Director of Human Resources
Director of Curriculum and Program Analysis
Director of Federal Programs, Grants.
Applied Academics and Community Services
Director of Information Services
Director of Special Education and Student Services
Director of Transportation
Director of Fiscal Services
Director of Building Services
Staff Development Coordinator
Media Center Manager
Chief Food Nutritionist
Coordinator of Community Partnerships and Services
Dr. Kevin E. Castner
Tina Pendleton-Fuller
Bumett Curry
Diane T. Ippolito
Frank E. Morgan
Dr. Juliet C. Jennings
Dr. Anne G. Coughlin
Francine W. Hughes
Fred Kruger
Thomas F. Nash
Willie Smith
D. Jackson Zimtnermann
Al Reaser
Dr. Janet L. Scale
Karen Goebel
Patrieia Carlson
James H. Elmore
SchOols and Principals
Elementary Schools:
Agnor Hurt
Broadus Wood
Brownsville
Paul H. Cale
Crozet
Mary C. Greet
Hollytnead
3201 Berkmar Drive. Charlottesville, VA 22901
HC 0l, Box 22, Eariysville, VA 22936
Route 1, Box 518. Crozet. VA 22932
1757 Avon St. Ext.. Charlottesville, VA 22902
Route 3. Box 188. Crozet. VA 22932
2055 Lambs Road, Charlottesville. VA 22901
2775 Powell Creek Df~ve. Charlottesville, VA 22901
Meriwether Lewis
Virginia L. Murray
Red Hill
Scottsville
Stone Robinson
Stony Point
Woodbrook
Benjamin F. Yancey
1610 Oweusville Road, Charlottesville. VA 22901
P. O. Box 1000, Ivy, VA 22945
Route 2, Box 87, North Garden, VA 22959
Route 4, Box 177, Scottsville, VA 24590
Route 13, Box 25, Charlottesville, VA 22901
Route 2, Box 604, Keswick, VA 22947
202 Woodbrook Drive. Charlottesville, VA 22901
Route 1. Box 285. Esmont, VA 22937
Middle Schools:
Jackson P. Burley
Joseph T. Henley
Jack Jouett
Mortimer Y. Sutherland
Leslie H. Walton
901 Rose Hill Drive, Charlottesville. VA 22901
Route 1. Box 519, Crozet, VA 22932
2065 Lambs Road. CharlottesVille, VA 22901
2801 Power Creek Drive. Charlottesville, VA 22901
Route 1, Box 200, Charlottesville. VA 22903
High Schools:
Albemarle
Western Albemarle
Murray
2775 Lambs Road, Charlottesville, VA 22901
5941 Rockfish Gap Turnpike. Crozet, VA 22932
1200 Forest Street, Charlottesville. VA 22901
VoeationaFTeehnical School:
CATEC 1000 East Rio Road, Charlottesville, VA 22901
973-5211
973-3865
823-4658
293-7455
823-4800
973-8371
973-8301
293-9304
977-4599
293-5332
286-2441
296-3754
973-6405
973-6600
286-3768
295-5101
823-4393
973-5374
975-0599
977-5615
973-5351
823-4314
296~090
973-4461
296-5826
972-4055
296-5826
296-5820
296-5877
296-5827
296-5820
296-5812
296-5814
296-5885
973-5716
296-5829
973-3677
296-4021
296-4021
296-5872
296-5812
Dr. E. Diane Behrens
Mary E. King
John Crnickshank
Gerald L. Terrell
Steve M. Braintwain
Fulton W, Marshall
Cindy Dragich/
Anne Norford
Sylvia J. Henderson
Timothy C. Frazier
Deborah Collins
Jeannette S. Orrock
Dr. Laura McCullough
Pamela R. Moran
Keith L. Hamtnon
S. Mack Tate
Sherrard H. Howen
Donald D. Vale
Russell Jarmtt
Thomas F. Zimorski
Dr. Carole A, Hastings
Lawrence A. Lawwill
Robert Cane
Harriet Morrison
Dr. Vicki Crews
8
SCHOOL STAFFING
General Explanation of School Staffing Practices
Base Instructional Staffing Allocation
All schools in Albemarle County are provided a base instructional staffing allocation
according to a specific ratio of Full-Time Equivalent (FTE) instructional positions to students.
The positions include teachers, counselors, media specialists, and regular education teaching
assistants.
At the elementary level, the ratio used is 15 students to 1 FTE position. At the middle
and high school, the ratio used is 15.84:1. Final staffing allocations are based on ninth day
enrollment. There is also a "stop loss" provision for small elementary and middle schools so
that these schools are always staffed to a minimum point.
There is often a misconception that the instructional staffing ratio means the same as
pupiMeacher ratio in the classroom. Because this ratio encompasses a wide range of
instructional personnel, the actual number of students in a classroom will be larger than 15-
16:1. At the elementary level, a number of FTE positions are utilized for teach'rog assistants.
At the middle and high school level, teaching assistants, elective area staffing, and allowance
for planning and other duty periods take up significant FTE positions.
In addition to the base staffing allocation, all elementary schools receive an additional
teaching assistant and additional .2 FTE for other instructional needs. Middle schools also
receive an additional teaching assistant and a .5 FTE for gifted education. High Schools
receive 2 additional teaching assistants and a .5 FTE for gifted education,
Special Education Staffing Allocation
In addition to the base staffing allocation, all schools receive an additional staffing
allocation for special education. The amount of staffing received for this purpose is based on
the level of services required for those students identified as needing special education services
in a given school.
Identified special education students are counted for both the base staffing allocation
and the special education staffing allocation.
Possible Savings Based on Changes in Present Practices
During the FY 1996-97 Budget process, changing the ratio for base insh-actional
staffing from 15:1 to 16:1 in elementary schools and from 15.84:1 to 16:84:1 in middle and
high schools was considered. This change would have generated approximately $420,000 in
savings. A further change was considered that would have counted those special education
students receiving 50% or more of their services outside of the regular classroom as .6 instead
of 1.0 for the base instructional staffing allocation. This change would have saved
approximately $350,000.
TRANSPORTATION COSTS
FY 1996-97 Costs
Transportation costs for the school division are currently 7 % or approximately $4.7
million of the school division budget. This does not include bus replacement costs, winch are
currently projected to be $1.54 million through the year 2000.
Current Starting/Dismissal Schedule
Presently, the school division operates on the following schedule:
Arrive Bell Time Dismiss
Elementary 8:00 a.m. 8:20 a.m. 2:30 p.m.
Middle 8:45 a.m. 8:50 a.m. 3:15 p.m.
High 8:40 a.m. 8:50 a.m. 3:30 p.m.
Under this schedule, there is an approximately 40-minme transportation "window"
(8:00 to 8:45) in the morning and a 60-minute "window" (2:30 to 3:30) in the afternoon. The
length of the "window" dictates the number of buses that can do multiple runs rather than just
serving one level. The more buses that can be used for multiple runs, the fewer buses are
required, which reduces the operational costs for buses, drivers, fuel, and other maintenance.
A reduction in the number of buses would also eliminate the need for buses to address
enrollment growth and reduce long-term bus replacement costs.
Possible Savings Based on Changes to Current Starting/Dismissal Schedule
As part of the FY 1996-97 Budget process, scenarios for reducing transportation costs
by increasing the "window" were explored. A plan that would have had ingh schools and
middle schools arriving at 7:45 a.m. and dismissing at 2:15 p.m. and elementary schools
arriving at 8:55 a.m. and dismissing at 3:30 p.m. would have saved approximately $220,000
for growth buses and operational costs and avoided approximately $500,000 in bus
replacement costs through FY 1998-99. A plan that would have had elementary schools
arriving at 7:50 a.m. and dismissing at 2:10 p.m. and middle and ingh schools arriving at 9:35
a.m. and dismissing between 3:50 and 4:00 p.m. would have saved approximately $250,000
for growth buses and operational costs and avoided approximately $1,000,000 in bus
replacement costs through FY 1998-99.
Purchase Versus Lease/Purchase of School Buses and Purchasing Buses Through the
Capital Improvements Pro_dram (CIP~
The premise behind a bus replacement fund is to have a fixed pool of money budgeted
from year m year to both plan for future replacement issues and to minimize the massive
budgetary fluctuations associated with large single or multi-year bus replacement. Once
sufficient funds are placed into the bus replacement fund, the only additional funds that need to
be incrementally added will be for inflation or if the bus fleet is expanded. Currently, buses
are on a 13-year replacement cycle. There is substantial flexibility in the replacement policy
to allow the Transportation Department to replace buses earlier or later based on a professional
determination of condition. Buses which are older than 13 years typically have substantially
higher ma'mtenance and operational costs.
A lease/purchase agreement for buses involves the same overall capital cost for each
bus and also requires a compounded interest payment. The cost of purchasing buses in this
fashion will be greater by the compounded annual interest rate and number of years of the
agreement. The advantage of lease/purchasing is that it does not require as large an up-front
payment. The disadvantages are a higher overall cost of obtaining buses, a legally required
payment for each year of the lease and significant operational issues related to insurance and
repair. For example, if a lease/purchased bus ~s ~nvolved in an accident, the leasing company
performs all repairs on a timeframe of its choosing. This has substantial operational impacts
as to availability of buses.
Purchasing buses through the CIP is another option. There are several significant
disadvantages to doing this. Since there are insufficient funds in the CIP to purchase buses
outright, the County would have to use Virginia Public School Authority (VPSA) 30-year
bonds to fmance the purchase of buses having an approximately a 13-year lifespan. The cost
of purchasing buses in this fashion would be substantially higher due to the interest payments
over this timeframe. The advantage of purchasing buses via the CIP would be a lower overall
yearly payment for the first several years. However, the future annual payments would be
substantially higher.
The bus replacement fund has some sigulficant advantages. It results in the lowest
possible costs for obtaining buses. It allows for flexibility, as to when to replace buses as well
as flexibility of making payments into the fund. The main disadvantage to a bus replacement
fund is the higher up-front costs.
An
Elected
Offic~s
Guide-to
FUND BALANCE
By Stephen J. Gauthier
Government l:inance
Officers Association
CONTENTS
v Foreword
~i Preface
I Introduction
2 What are funds?
~ What different kinds of funds do
governments use?
~ What is the difference in focus among the
various types of funds?
8 What is equity?
11 How is fund equity related to ceeh
balancee?
12 What is the meaning of equity in a
govermnental fund?
13 What is the difference between ~de~ignated
unreserved fund balance" and "reserved
fund balance"?
.14 Is "unreserved fund balance" a good
measure of economic health?
15 What is ~he impac~ of "deferred revenue"?
17 How high a level of "unreserved fund
balance" ~hould be maintained in the
general fund?.
19 Gan a government have ~too much"
unreser~d fund balance?
//i
20 What is the relationship between
%~sserved fund balance" and liquidity?
21 What is the me~ing of equity in
proprietary funds?
22 What is "contributed capital"?
25 What ever happens to 'contributed
capital"?
24 What is "retained earnings"? .
25 Is a high level of ~retained earnings"
necessarily a $i~n of good economic health?
27' What is '~essrved retained earnings"?
25 Can '~etained earnings" be 'dssignated"?
29 What is the relationship between "retained
ear~ings' and liquidity?
30 How should equity be interpreted in trust
funds?
32 why is no equity reported in agency funds?
33 Why is equity no~ reported for account
groups?
35 Conclusion
36 Glossary
FUND TYPE. One of seven categories ~nto
which all individual funds must be classified.
LIQUIDITY. The ability ~o mee~ demands for
pa.~rmen~ on a timely basis.
RESERVED FUND B~LANCE. For
governmental funds and expendable trust funds,
the portion of fund balance that is no~ available
for 'appropriation because it is either legally
restricted (e.g., encumbrances) or not spendable
.(e.g., long-term receivables).
For nonexpendable and pension trust funds, the
portion of fu~cl balance .t~at is legally
'restrictecL
RESERVED RETAINED EARNINGS.
Generally, a portion of retained earnings
reflecting the excess of restricted asse~s over
related liabilities.
RETAINED EARNINGS. Net income aud
losses of all prier periods adjusted for tr~-~fers
and amounts of depreciation ohs~.ed to contributed
capital.
UNRESERVED FUND BALANCE. In a'
governmental er expendable trust fund, the
balance of net fln~ncial resources tha~ are
spendable or available for appropriation. In a
nonexpendable or pension trust fund, the
portion of fund balance that is not legally
re~icted.
iv AN ELECTED OFFICIAL'S GUIDE TO FUND BALANCE
GLOSSARY
FOREWORD
ACCOUNT GROUPS. Memorandum lists of
certain aesets and liabilities related to
governmen~ai funds that are not recorded in
those funds.
CONTRIBUTED CAPITAL. Equity of a
proprietary fund that resulted from capital
contributions rather than from ear-i~s or
subsidies.
DEFERRED REVENUE. A liability reflecting
assets that have not yet been recognized as
revenue either because they have not yet been
earned er because they are no~ yet considered
'~available' to pay liabilities of the current
DESlGNAWED UNRESERVED FUND
BALANCE. Net £mancial resources of a
governmental fund that are spendable or
available for appropriation, but which have
been earmarked by the chief executive officer
or the legislative bevy for some specific
purpose.
EQIJfrY. The difference between fund assets
and'fund liab'flities.
FUND. A esp~ra~e fmcs/and accounting entity'
used by governments to esgroga~e resources '
related to specific activities ~e.~, kighway
construction).
FUND BALANCE. The difference between
fund assets and fund liabilities in a
governmental or trust fund.
Almost any discussion of a goverhment's lrmancial
condition will eventually touch upon the issue
of ~famd balance~' Indeed, fund balance is
probably the greatest single item of interest to
many, ff not most, users of sta~e and local
governmen~ finsncial smtemcu~s.-Yet in spite of
all of the attentien it has traditionally received,
fund balance rem~,~, at best, an elusive
concept for many involved in public i'mance.
This publication is designed to provide elected
officials with clear and practical --~wers to the.
most commonly asked questions about fund
balance. The publication not only provides a
simple explanation of fund balance that is
readily.understandable to the nonaccountant,
but it also dispels many mi~'.oncoptions about
fund balance frequently encountered in
The irmcal situation confl'onting state and l~ml
governments in the 1990s has made it
increasingly difficult for elected officlsls to
balance the requirements of sound financial
admi~i~retion and citizens' demands for
increased levels of services. The GFOA hopes
that this publication will be of practical
assistance ~o elected officials in weighing
conflicting claims about fund balance in the
course of allocating scarce public resources.
36 A~ ELECTED OFFICIAL'S GUIDE
The GFOA wishes to th..b Stephan Gauthier,
the Director of the GFOA~s Tecb. lcal Services
Center, for writing thi~ publication. We hope
that this booklet, along with others i~ the
"Elected Officials" series, will provide needed
guidance to elected officials seeking to improve
the t'mancial management of their
governments.
Conclusion
Jeffrey L. Eseer
Executive Direcwr
December 1991
. 'The proper interpretation of."unreserved fund
balance,"- ~reserved fund balance," ~contributed
capital; ~retalned earnings" and other
· measures of equit~ is vital if users of
government balance sheets are to properly
understand and utilize the data presented
there. It is especially important that users of
these Balance sheets distinguish between the
focus on economic resources characteristic of
proprietsry funds and the focus on f/nane/a/
resources available for spending or
appropriation found in governmantal funds.
In the gover~mantal funds, %ureesrved fimd
balance" plays a key role as the measure of
spendable or appropriable resources. While such
a measure is important, it should not be
mistaken for a gauge of economic well bein$
Similarly, while there are rules of thumb that
may be useful, there is no one righ~ answer on
the appropriate level of %nreesr~ed fund
balance" that should be maintained. Only a
careful ..zlysis of a government's specific
cir~m~ances, history and prospects can
provide the perspective needed to properly
interpret the true significance of current levels
of"-,~eerved fund balance,"
vi' AN ELECTED O-FFICIAL'$ GUIDE
TO FUND BALANCE
PREFA CE
equipment is purchased for $20,000 and has a
useful service 'life of 10 years. Further assum~
that $10,000 of the purchase pr/ce was
borrowed and is to'be paid back evenly over the'
1/fe of the asSet. In this caSe. the
pm'chaser's
equity in the asset aS the end of three years
would be:
$20,000 (cost)
(7,000) (Outstanding debt)
(6.000) (accumulated depreciation)
$ 7,000 Equity
The "investment in general fixed asse~s'
account, however, does not reflect outstanding
debt; nor is depreciation typically reported in
the genera] fixed aseets account group.
Accordingly the ~inve~tment in general fLxed
assets" account represents only the original cost
of assets (in this case, $20,000), and is not a
measure of equity in general fixed assets.
In .our system of government, crucial decisions
involving the lives of citizens are placed in the
hands of elected officials. Many of these
decisions involve the allocation of scarce
financial resources. Arguments for and against
propoSed allocations of financial resources often
focus on 'Yaud balance." Unfortunately,
published discussions of fired balance, as a rule,
are directed toward the professional accountan~
rather than toward the elected official or others
who may not have background or experience in
governmental accounting and f'mancial
reporting. Accordingly, elected officials often
find themselves in the difficult position of
having to weigh arguments involving fund'
balance with only a vague, or even erroneous
understanding of its true nature and
significance.
The purpose of this publication is to provide
elected officials with a nontechnical discussion
of the nature and significance of fund balance
for state and local govornmen~s. In addition,
information is provided about a number of
clceely related topics (e.g., ~retained earnings").
Throughout, a simple quastion-and-~-~wer
format has been followe~ This format is
designed both/o highlight the critical points
discussed in the text. and to furnish busy
elected officials easy access ~o needed
information.
I gratefully acknowledge Patrick 'Hardiman
(Deloitte & Touche), Gar~ Norstrem (City of
Saint Paul, Minnesota) and David Bean
(Governmental Accounting Standards Board) for
their invaluable assistance in reviewing the
manusc~pt and offering suggestions for
34 AN ELECTED OFFICIAL'S GUIDE'
TO FUND BALANCE
? emant. In this regani, speeikl
e ~ ~ ~i~, who c~ ~e
~ew effo~. I~ ~ ~ my ~e~ ~ ~
~e ~o~ mem~ of ~e ~ of ~e GPOA
who ~ad ~e m~p~ at ~o~ ~es ~
p~u~ion.
Why is equity not reported for
account groups?
Stephen J. Gauthier
December 1991
viii AN ELECTED OFFICIAL'S GUIDE
· Governmental funds focus on spendable or
appropriable resources. Therefore, these funds
report only financial assets and. certain
li~'flities expected to be liquidated in the near
future. The emphasis on spendability, however,
does not mean that users of fmancial
statements do no~ also require i~formation on
the nonfinancio, l assets of the government.
Similarly, users of the fmanciai statements
need information on all types of obligations
ari~in~ from the operation of the government,
· regardless of when those obligations will be
paid. Acctsdingly, government balance sheets
present account groups (i~., the general fixed
assets account group and the general long-term
debt account group) to reflect the assets and
liabilities related to governmental funds that
are not reported in the individual governmental
funds. These account groups are simply
memorandum lists of assets and liab'fltties and
do not repor~ operations or equity.
Unfortunately, the name of one of the accounr, s
used in conjunction with the general fixed
asse~s account group sometimes confuses users
of government balance sheets. In spite of its
~Ame, the ~inve~tment in general fixed assets"
account does not represent equity, but simply
~=iste to meet the bookkeeping need to balance
debits and credits. For ~r-mple, when a
government buys a piece of equipment, the
'debit" is to the "equipment" account and the
corresponding %~lit" ~s ~o the "investment in
general fixed assets" account. Why is this not a
fair measure of equity?
A fair measure of equity must take into
account both outstanding debt related to an
asset and any exhaustion of the asset's service
capacity, For e-Rmple, assume that a piece of
TO FUND BALANCE
Why is no equity reported in
agency funds?
AN ELECTED OFFICIAL'S
GUIDE TO FUND BALANCE
Introduction
Agency funds exist only to keep track of assets *
held by the government on behalf of others. For
example, a State might use an agency fund to
account for the portion of sales taxes collected -
on behalf of municipal governmenr~ within the
state. Accordingly, a~thing held by an agency
fund is also "owed" at the same time to some
other party or fund. Therefore, agency fund
aasets are always exactly balanced by liabilities
to the assets' rightful owners.
A government's financial statements are
designed to serve the needs ,of a variety of user
groups inclvdi~g tsxpayors and citizens,
legislative and oversight bodies, and investors
and creditors. While some in these user groups
may enjoy considerable expertise in
governmental accounting and financial
reporting, many more do not. The purpose of
this booklet is t~ aid those without specialized
expertise to interpret perhaps the single moat
cited and disputed element found in
government £mancial reporting:. ~fund balance:~
This booklet will focus on the meaning of-fund
balance for the four ~governmental funds~ found
on the vypical state or lo~al government
balance sheet, with special emphasis on the
general fund. This booklet also gees beyond
"fund Balance" to deal with the meaning of the
various components of ~equ/ty" found in
proprietary funds. Fi~slly, the special situation
of trust and agency funds and account groups is
briefly discussed.
Throughout the booklet, a queetion and ~n~4vor
format has been nsed to highlight the
fung~mental questionz at issue and to facilitate
understanding by tho~e n-familiar with
financial reportin~
~The term 'fund balance" ts often used differently by
accountantz and budget professiona~ when the budget is
prepared on a basis other than gener~ly accepted accounting
principle~ (GAAP), This publication will focu~ on the term
fund balance a~ ~ by GAAP and reported on the
balance sheet and the governmental fund operating etatemen~
32 AN' ELECTED OFFICIAL'S GUIDE
What are funds?
Perhaps the biggest surprise encountered by
someoue examining the fifinancial s~a~emen~s of
· a government for the ih-st time is the presence
of numerous ~-unds." Whereas even the largest
com,~ercial enterprise generally will report
only a single amount for each item in its
financial sta~emenrz (e,g., '~ash; '~sales'),
governments both large and small will typically
report a number of separate col,~mn~ or ~Smds:
Each of these funds is considered to function as
a separate fiscal and accounting entity. Funds
normglly are nsecl by governments to sogrega~e
resources related ~o specific activities (e.g.,
highway construction). For most governments,
the principal operating fund is known as the
"general fund:
other purposes). Therefore, ~reserved fund
balance" :of an expendable trust fund may, in
fac~, be available for spending or appropriation
within the scope of the trust fund's activities.
Cite must also be taken in reviewing the
equity of pension trust funds. Under current
authoritative standards, one of several
approaches may be taken to balance sheet
presentation[ In soma ~.s, ~ud balance" may
represent only the ~erence between asee~s
available for benefits and liabilities related to
current operations. In such instances, a pension
trust fund m~y repor~ positive fund balance (a -
portion of which may be reserved] even though
assets available for benefits are insmTlcient to
pay actuarially accrued obligations that have
been incurred based on employes service to
In other instances, the full actuar~ally accrued
obhgation to employees is reflected as ~resorved
fund balance~ of the pension trust fund. When
~hi~ approach is taken (as indicated by the
presence of a number of large, separate
~reserve' accounts in the equity section of the
balance sheet), .unreserved fund balance (most
. often s ~deficit~) serves as a measure of
whether the fund has smTlcient resources at
the date of the b~lR~ce sheet to pay actuarially
accrued obligations incurred as of balance-sheet
date.
2 AN ELECTED OFFICIAL'S GUIDE
TO FUND BALANCE
31
How should equity be interpreted
in trust funds?
What different kinds of funds do
governments use?
There are three types of trus~ funds: expendabl~
crust funds, nonexpendable trust funds .and
pension trust funds. Expendable trust funds
function much as 'do governmental funds.
Nondxpendable trust funds and pension trust
funds, on the other hand, more closely resemble
proprietary funds. Regardless of these
differences, the term "fund balance" is always
used to describe the equity of a trust fund.
Likewise, '~:ontributed capital" is never repert~t
in trust funds. Instead, items that would be
reported as "contributed capital" in a
preprie~zry fund are reported in trust funds as
"reserved fund balance;
In spite of the common' terminology used by all
trust funds, "fund balance" should be
interpreted differently depending on the specific
fund in question. Expendable trust funds, like
their governmental fund counterparts, focus on
net financial assets that are spendable or
available for appropriation. Pension trust funds
and nonexpendable trust funds, on the other
hand. are used to measure economic (rather
than financial) resources and se are similar to
proprietary funds.
It is important to avoid misinterpreting
"reserved fund balance; especially in
expendable trust funds. Many governments
reserve Yund balance in these latter funds, not
to indicate that resources are not spendable or
appropriable (as would be the case in similar
governmental funds), but merely to reflect the
fact that the resources may be used only for the
purposes set forth in the timst agreement. [Such
a "reservation" of fund balance is normally
redundant, given that the establishment of a
trust fund is itself a sm~lcient indication that
resources of that fund may not be used for
30 AN ELECTED OFFICIAL'S GUIDE
Governmenr~ may.ucc any number of
individual funds in .their ~.~ne~ial reporting-
(although they are encouraged te use the least
number of funds practical in their specific
ciro~m~ancee). Regardless of the number of
individual funds used, generally accepted
accounting principles (GAAP) reqUn'e all of
these individual funds to be aggregated into no
more than seven specified "fund types' on the
combined balance sheet (see Exhibit 1}.
Four of these fund ~pes are lmOwa asthe
"governmental funds." They are the general
fund, the special revenue funds, the debt service
funds and the c~pital projects funds. These
funds are typically used ~o account for most of
a government's operations. Two other fund
types are known as the ~proprie~ary funds"
because they function in a msnner similar to
private enterprises. These funds are the
enterprise funds and the internal service funds.
The last of the seven fund types that may b~
found on a combined balance sheet is the trust
and agency fund type. In fact, as will be
diseuseed later, this fund type may combine
data from up to four different types of
subfunds?
*The specifw uses of each of these different fund ~?pes are
described in the Governmental Account~g Standards
Board's (GASB) 1990 CalCification of Governmental
Accoun~ng and F~--cia] P~por~ing Standard~ Sect/on
130~. and in the OFOA'S 1988 Goveramental Account~g.
A~titing and Financial l~eportm~ p 11.
TO FUND BALANCE
Wrhetat is the relationship b..etween
ained earnings" and l~quidity?
· Retained earnings is simply the difference
between a proprietary fund's assets ~nd its
liabilities ~,~d contributed capital. Typically, a~
leas~ some assets of a proprietary fund are
never expect~l to be converted inte cash and so
are not considered to be liquid (e.g., fixed
assets). Other assert, while liquid, may be
converted into cash at varying intervals (e.g.,
receivables). Accordingly, the balance of
'~retained earuings~ in a proprietary fund
should not be taken as a reflection of that
fund's liquidity as of the date of the balance
better ju~ged on the basis of the difference
between current assets and current liabilities
(i~., ~working capital~). Even then, timing
differences between when eurrent assets will be
converted into cash and when various current
obligations will fall due could lead to cash flow
difficulties.
t
4 AN ELECTED OFFICIAL'S GUIDE TO ~UND BALANCE
Can "retained earnings" be
"designated"?
"Designations" are closely linked conceptually.
with the idea of financial resources.
Accordingly, designations traditionally have not
been reported i.n proprietary funds because the
latter focus on economic rather than financial
resources.
A recent change in accounting standards
appears to s~ep away from traditional practice
by re~ri~g designations to be reported in
certain cirm~m~cances for internal service funds
that are used to report risk-financing activities.
It should be noted, however, that this new
accounting requirement explicitly calls for
reporting such designations in the notes to the
financial statements rather than on the face of
the balance sheet.
In the private sector, retained ear~ings can be
earm~-ked by. ~ ~app~p~a~ ~n~
e~i~gs~ ~ appro~ ~ not ~en ~
p~p~et~ ~&, h~r, ~bably b~ of
~e ~tenfi~ ~ion be~n ~ ~cj~li~
~ of ~e ~m %pp~p~ation' ~d ~e mo~
common ~e ~ that ~ in the public ~r w
~fer to the budge~.
28 AN ELECTED OFFICIAL'S GUIDE
Source: Gowrnmental Ac~ounti~ Auditing and Financial
Reporting (Chica~: Governm,'~c Fi-s~ Officers
Az~ociation, 1988), pp. 16-17.
TO FUND BALANCE
5
What is the difference in focus
among the various types of funds?
What is "reserved retained
earnings"?
C~overnmentz typically offer a wid~ range of
services to their citizens. V~rhile many or mos~
gover~men~ services are supported by tax or
grant revenues (e.~, public safety, education),
other activities more closely resemble private-
sector, fee-supperted enterprises (e.g., utilities).
Accordingly, the goal or "measurement focus" of
a given fund will depend upon the types of
activity reported in that fund.
Governmental funds are designed to measure
those financial resources on hand at the end of
a period that are available to be spent or
appropriated in future periods. Proprietary
funds, on the other hand, are designed to
reflect the overall economic health of the fund~
A simplifiod analogy may be usefnl in
clarifying this critical distinction.
The focus of a governmental fund (e.~, general
fund) is similar to that of an individual wishing
to know what his or her checkbook balance will
be after the last paycheck for the month has
been deposited, and after all of.the checks
written ~o pay this month's bills have been
cashed. This balance is significant because it
represents the f~n-ncial resources available to
help pay next' month's hills.
'The focus of a proprietary fund (e.~, enterprise
fund), on the other h~nd, i~ similar in some
ways to that of an individual wishing ~o
determine' his or her "net worthy A checkbook
balance alone would not necessarily provide the
information needed for this purpose. R~ther, all
of the individual's asse~s and liabilities (i~.,
economic resources), not merely the individual's
checkbook balance, would need to he taken into
account.
Some of th~ resources of a preprie ~t ~ary' fund
may be legally rest.~cted for specific uses by.
outside parries. In such instances, a portion of
retained earnings may be ~-eserved' to indicate
that there is an external limitation on the use
of those resources for other purposes. For
example, proprietary funds issuing revenue
bonds may be required to set up special
restricted asset accounts to provide a special
margin of comfort to bondholders. The excess of
such restricted assets over related liabilities is
often reflected as "reselwed retained earnings."
It is important te note that "reserved retained
earnln~s" differs considerably from ~reeerved
fund balance" despite the similarity of
terminology. "Reserved fund balance" in a
governmental fund can result not only from
legal re~U~ctions, hut also from the fact that
certain £mancial resources are not considered
spendable or appropriable (e.~, long-term.
receivables). 'l{esarved retained earnings, on
the other h.nd, is exclusively used to reflect
external legal restrictions upon the use of
6 AN ELECTED OFFICIAL'S GUIDE TO FUND BALANCE 27
It also should be noted in' passing that
transfers of resources from enterprise funds to
other funds can result in a relatively low
balance of retained ear~ings, even .though the '
fund may be generating healthy levels of net
income. Aga/n, the user of governmental
balance sheets is advised to consult the
proprietary fund operating statement to gain
the perspective needed to properly interpret the
significance of the balance of retained earnings
in a given fund.
As will be discussed later, ~ funds use one
or the other of these focuses, depending on the
specific type Of trust fund used.
AN ELECTED OFFICIAL'S GUIDE
TO FUND BALANCE
What is equity?
Is a high level of retained
earnings" necessarily a sign of
good economic health?
Simply put, a fund's equity is the difference
between its assets ~ its liabilities. This
situation holds t~'ue for both governmental
fundz and proprietary funds. Nonethelese, the
meaning of equity is different for governmental
funds than it i~ for proprietary funds because of
important differences in the types of assets and
liabilities reported in each.
Since the focns of governmental funds is on
resources that may be spent or appropriated,
these funds, for the most part, report only
financial assets (i.e., asse~s that are or will
eventually be converted into cash),a Fixed aseer~
(i.e., land, buildings, equipment, improvements
other than buildings and construction in
progress) related to gover~mental fun& are
nonfinancial in character and so are not
reported in individual governmental funds, but
are reported instead in a separate 'general
fixed assets account group:
Also, gover~mental funds do not report all
liabilities that will eventually be paid from those
funds. Long-term debt, for instance, is reported
in a separate "general long-term debt account
group," where it typically remains until it ~s due.
Likewise, cert~i~ obligations (e.g., compensated
absences, cl~i~ and juclgmenm, unfunded pension
contributions) generally axe only reported as
liabilities in governmental funds ~o the ex~en~
that they are expected to be liquidated in the
near future with available financial, resources.
In summary, equity in a governmental fund
the difference between the financial asse~ of
Clearly, a de~'~t balance in re~i~ed ear~ng~
inclicate~ that the fund may-be facing economic
problems: A.~ b~ce of ~n~
e~gs, ho~e~.-m~,be in~ ~
~. ~ subsi~ ~m o~ ~ ~
~ed ~ ~o~ting ~e~~ ~at in~a~
the ~o~t of ~t~in~ e~ngs' ~ ~ a
a he~y b~ce of ~ed e~in~s~ not
be~ i~ a~i~ti~ ~ ~lf-~p~$ but
be~ i~ l~s ~ Berg ~nt~u~y
~si~ ~ ~e gene~ go~ent.
Simil~ly, ~bsi~se ~m ~ g~en~
may help ~ ~i~n a Mgh 1~1 of ~n~-
e~ings" despi~ o~g lo~s. ~e~fo~,
~ of fm~ci~ ~ammen~ shoed c~f~y
e~mlne p~p~e~ ~d opera~g s~men~*
for "nono~t~g ~enues' ~d "o~rating
~n~e~ ~. when a~mpting ~ ~t ~e
si~c~ of m~ e~s.
A special problem also exists for interna]
sor~nce funds. These funds often serve as
allocation" mechaaisms for goed~ or sorvicse
provided by one fund to a number of other
funds witch the government ~e.g., me,or pooh,
print s~ops). In theory, charges ~o other funds
by internal service funds should be designed
only to recover cos~. Therefore, a substantial
balance of retained earnings in an internal
service fund over a period ~f time, rather than
indicating economic health, may indicate
instead that other funds are being overcharged
for the,goods or services they receive from the
internal service fund.
s'Tnventories' and ~pret~,d~' are an ~epti~r~ w tats general
rule.
AN ELECTED OFFICIAL'S GUIDE
SReferred to az the ~statemen~ of revenues, e~pen~es and
changes in retained earnings/fund equ~gy."
TO FUND BALANCE
25
What is "retained earnings"?
The second component of equity for proprietary '
funds is "retained earnings." R~tained eer~ings
is the cumulative amount by which revenues
and operating transfers f/om other funds (i~e.,
earnings and subsidies) have exceeded expenses
and tr~n-fers to other funds (see Exhibit 4). As
such, retained earnings, to some extent, cun be
seen as a measure of how well the fund has
succeeded in recovering its costs through
earmngs and subsidies.
k~hlbit 4
Composition of Retained Earnings
Increases Decreases
Net income of all Net losses of all
previous periods* previous periods*
Operating tra~fers Operating tr~ers
from other funds to other funds
(all prioi periods) (all prior periods)
Residual equity
· transfers out
(all prior periods)
the fund and certain liabilities expected to be
liquidated in the near future from those asse~s.
Proprietary funds, on the other hand, are
concerned with measuring econornw rather than
strictly financial resources. Accordingly, all'
assets related to a proprietary fund's operations.
including/'reed assets, are reported within the
proprietary fund. Similarly, ail debt and
obligations of a proprietary fund are reported in
the fund itself, regardless of when they are
expected to be paich Therefore, equity in a
proprietary fund reflecr~ ail of the fund's
resources, financial and nonf~n~ncial, as well as
all of the claims against those resources.
Exhibits 2 and 3 lllnstrate the differences'
between governmental fund equity and
proprietm~ fund equity.
*For this purpose, net income floss) ts increased (decreazed)
by any amounzs of depreciation that were charged againz~
contributed capital.
24 AN ELECTED OFFICIAL'S GUID'E
TO FUND BALANCE
9
Presentation of Assets, Liabilities and Equity
Related to Governmental Funds
Liabilities to be
Paid in Near Futar~
(Normally not including
the current portion of
long-term debt)
· Fi~s~4al Assets
· . ' ~ Pund Balance
Unreserved Fund B~I~ce
(Undesi~au~i)
I.~gally l~stri~t.~d
...................... l:~,rwd Fm~d Balan~
Not Spondabl~
(e.l~, long.tsrm r~eivables) .
General Fixed Assets General Long-Term Debt
Account Group Account Group
Non-Current Obligations
Fixed Assets Long-Term Debt
Presentation of Assets, Liabilities and Equity
Related to Proprietary Fund
PROPRIETARY FI. rKD
All L'mMlifie~
Contributed Capital
I Retained Eernings
Retained Earnings
10 AN ELECTED OFFICIAL'S GUIDE
What ever happens to "contributed
capital"?
In some ways, contributed capital of a
proprietary f~ad ful~,ions in a m~n~er similar
to "capital stock" and 'paid in capital in excess
of par" for a Ct~mra~.I~i~ enterprise. In other
word~ a contribution, once received, generally
rem~in~ on the baiance abee~ indefinitely
unless returned to the provider.
In an era when the federal gever~ment played
a more active role in fi~s-cing state and local
government activities, some ergaed that thi~
treatment would result in everYmcreamng amoun~
of 'contributed capital' being reported on
proprietary fund balance sheets as the federal '
government replaced one exhausted f~ed asset
with another. Therefore, an accounting rule was
created that allowed g~r~ments to systematically
reduce contributed capital related to capital ~rants
f~om other .~rnment~ This provision is c~,~only
referred to by accountants as the "addback' of
depreciation (i~., depreciation expense that
would otherwise have reduced retained earnings
is 'added back" to retained earnings and charged
i~stead to contn'buted capital). When ~ernmen~s
use the ~acldback' option, contributed capital is
~y~t~m~t,'lCally reduced to reflect decreases in
the depreciated value of the related asset:
Of course, substantial reductions in the
~mounts of federal aid received by sta~e and
local ~over-men~s have ~Teatly diminished the
accountin~ 'preblem' of excess capital
contributions from the federal government.
Nevertheless, the ~y~tem~tic reduction of
contributed capital for these assets (i~.,
"addback of depreciation') continues to remain
an option. In addition, many governments now
also use the %ddback of depreciation~ approach
for assets contributed from som-ces,other than
the federal govermnent (e.~, developere).
TO FUND BALANCE
What is "contributed capital"?
How is fund equity related to cash
balances?
The types of activities accounted for in
proprietary funds, ,~-]ike those typically
accounted for in governmental funds, are
designed to function in am. nner similar m
commerciE enterprises. Nonsthelees, equity in
propr/etary funds is not uniquely the result of
prohts earned by the operation of those funds.
Rather. some equity is normally the result of
"contributions" of capital from outside parties.
One common example of "contributed capital" is
the initial contribution made by th9 general
government to establish a new proprietary
fund. Subsequent additions to "contributed
capital" may arise from grants and gifts of
fixed asse~s, impact fees received from
developers, the receipt of proper~y financed
through special assesSments, and portions of
~ap fees and other sysmms development fees
charged to new cns~omers of an existing utility.
Contributed capital does not result from
operating subsidies. Thus, ff e proprietary fund
receives a grant re~trlcted to capital acquisition
(e.~, buildings, equipment), the grant would be
reflected as contributed capital. On the other .
hand, if a proprietary fund receives a grant
that is not restricted m capital acquisition, the
grant would be repdrted as nonoperating
revenue and become a part of ret-ined earnings
rather than contributed capital.
As mentioned earlier, fund equity is defined as
the difference between'fund assets and fund
liabilities, as expressed in the follovang
equation:
Fund assets - fund liabilities = fund equity.
Bec~nse cash is a fund asset of both
governmental funds and proprietary funds, it
enters into ~hi~ equation and has an effect
upon fund balance. Cash, however, is only one
of a number of fund nsse~s and liabilities.
Therefore, it is pasSible for fund equity w
remain unchanged While cash balances decline
or increase.
Take, for example, the situation of a fund that
lends money to another fund. The lender fund
decreases its c~sh balances(an asset), but at
the same time increases its receivables (also an
asset). Accordingly, the total assets of the fund
rew.i~ unchanged and there is no net effect
upon fund equity, even though c~h balances
have declined.
Similarly, assume that a fund borrows money
on a shor~torm basis from another fund. The
borrower fund increases the amount of cash in
its possession (an asset), but at the same time
also increases its liabilities by the same
amount (a liability). Since the increase m
assets is matched by an increase in liabilities,
there is no net effect on fund equity, although
cash balances have increased.
Therefore, users of fmanciat statements should
be careful to distinguish increases or decreases
in fund equity from increases or decreases in
cash balances.
TO FUND BALANCE
11
22 AN ELECTED OFFICIAL'S GUIDE
What is the meaning of equity in a
governmental fund?
What is the meaning of equity in
proprietary funds?
While all of the assets rep~ in
governmental funds 'are financial, they are not
· all equally.spendable or appropriable.
Therefore, if governmental funds are m meet
thei~ objective of providing useful information
on resources available for spending or
appropriation, a distinction mus~ be made
between the portion of equity (i~., net assets)
that is, in fact, '~pendable" or "available for
appropriation" and that portion Which is not.
This distinction is achieved on the balance
sheet by dividing governmental fund equity
(i.e., "fund bAlAnce") into ~reserved" and
~nreserved' components.
'~Reserved fund balance" is used to segregate
net financial assets that are not spendable or
available for appropriation. Some financial
assets are not spendable by their very nature
(e.~, long-term receivables will not be converted
into cash soon enough ~o be considered
'~pendable" to~.y). Other financial a~sets are
spendable by nature, but not available for
appropriation because of legal restrictions (e.g.,
amounts set aside to meet encumbrances from
the prier year's budget).
Once a portion of fund balance h~ been
reserved, the remaining amount or ~unreserved
fund balance" represents a measure of the net
financial resources ~'vailable for spending or
appropriation in the future.
As with governmental funds, equity in
proprietary funds is the difference.between
fund assets and fufld liabilities. Unlike
governmental funds, however, proprietary funds
should report all related assets and liabilities.
Therefore, equity in proprietary funds serVes as
a rough barometer of the economic health of
such funds,
..Unlike governmental fauds,,proprietary funds
/lo not report ~und balance, Instead, the
equity of proprietary funds is reported in one of
two categories: ~contributed capital" and
"reteln~,d earning~'
12 AN ELECTED OFFICIAL'S GUIDE
TO FUND BALANCE
21
What is the relationship between
"unreserved fund balance" and
liquidity?
What is the difference between
~designated unreserved fund balance"
and ~reserved fund balance"?
As mentioned earlier, um~essrved fund balance
in a governmental fund is designed to measure
the ne~ ~zncial resources that are available to
finance expenditures of future periods. No~ all
such "available" financial resources, however,
are equally liquid. While cash on hand may be
spent at will, differing time periods typically
are needed to conver~ a government's various
receivables into cash. Moreover, fund liabilities
payable from those assets may be due at
different-times. Therefore, while unreserved
fund balance provides a good measure of the
financial resources that will be available for
appropriation in the following year's budget, it
is not necessarily a good measure of the
governmental fund's net liquid resources as of
the date of the balance sheet.
Sometimes governments wish ~o specially
segregate or "em'mark" financial resources for.
specified purposes. Such "earmarking" is
reflected in £manCial statements by ~neans of
"designations? For eY~,-pte, a government may
"designate" resources to help meet obligations
expected to arise in connection with cl~r-~ and
judgments. Only the chief executive officer or
the legislative body of a government may crea~e
a designation.
It is very important to distinguish between
"reserves" (i~., ~reserved fund balance~ and
"designations;' The former are an indication
that fi,~-ncial resources are not available for
appropriation, whereas the latter only indicate
that management would' prefer to use available
financial resources for a specified purpose.
Accordingly, although earmarked, designations
remain an integral part of a govarnment~s
spendable or appropriable resources (i~.,
~unrosarved fund balance~).
20 AN ELECTED OFFICIAL'S GUIDE TO FUND BALANCE
Is "unreserved fund balance" a
good measure of economic health?
Can a government have "too
much" unreserved fund balance?
As noted earlier, "unreserved fund balauce' is
not.designed to reflect economic health, but
s/reply w. provide a measure of~ the financial
resources available for future Spending or
appropriation. While an absence of spendable
resources may well be an indication of actual or
po~entiai economic problems, the presence of
such resources is no guarantee of sound
economic health. For e~r-ple, ~us~ as an
individual can increase his or her checkbook
balance by taking out a loan, so mo can a
governmental fund increase its spendable
resources (Le, %.reserved fund balance") by
issuing long-mm debt. In neither case would
the economic position of the individual or
government be improved because the debt mus~
be repaid. Accordingly, a significant level of
"unreserved fund balance" should not be taken
alone as evidence of sound economic health.
Rather, users of gover-,~ent balance sheets
should also take care to evaluate future claims
on governmental fund assets when assessing
the economic health of a governmental fund. In
part/cular, users of governman~ balance sheets
should be careful to consider a governmental
fund's obligation to finance tong-term debt -
(reported separately in the general long-term
debt account group), as well as the potential
ft~ture drain on governmental fund resources
posed by deficits in other funds Ie.g.,-enterprise
funds).
Many. citizens and taxpayer groups subscribe to
the view that governments ought to do all in
the/r power to minimize the t~ne between the
receipt of tex revenues and their subsequent
disbursement. Put simply, they believe a
government ~should not raise money until it's
needed: Accordingly, some users of government
f'mancial statements occasionally object to what
they perceive as an excessive amount of
unreserved fund balance, arguing that high
levels of unreserved fund balance are an
indication of overtaxation.
Of course, it is possible for governments to raise
more revenues than needed, and high levels of
unreserved fund b-]~nce, in some cases, may
indicate such a situation has occurred. In
practice, however, high levels of unreserved fund
balance are very often justified for a variety, of
reasons (e.~, timing of revenue receipts,
unpredictable revenue sources). Moreover. it
should not be forgotten that inadequate or
unstable levels of unreserved fund balance can
lead to added co~s in the form of un-ecessary
borrowings and worsened credit ratings.
Therefore, citizens and taxpayer groups need to
approach the issue of an appropriate level of
unreserved fund balance carefully to avoid
drawing erroneous conclnsious based on
insufficient dam.
14 AN ELECTED OFFICIAL'S GUIDE TO FUND BALANCE
What is the impact of "deferred
revenue"?
Yet another important consideration involves
reseurces available in other funds. Some
government~ for e-~ple, establish separate
'~oudget stabilizatibn funds" to meet unexpected' .
contingencies. When such additional resources
are available in other funds, a lesser amount of
unreserved fund balance may be appropriate in
the general fund.
In short, the specific i3n2ncial history, prespoc~
and ciro,m~mnces of each individual
governmen~ must be carefully weighed when
evaluating the adequacy of "unreserved fund
balance?
Many state ~nd local governments repor~
"deferred revenue" on thei~ balance sheets. This
l~ability indicates that fin~.cial resources
reported as assets have not yet been recognized
as revenue and so have not been included in
fund balance.
Revenue may be deferred because a government
has received ~n~ndal resources, but hn~ no~
yet "earned" them. For ~mple, grant proceeds
received in advance of relaU~ expenditures
would typically be offset by a liability for
~deferred revenue" on the Balance sheet.
Revenue also may be deferred because
particular revenue sources'are no~ expected to
be collected in c~h soon enough after the end
of the fiscal year w pay liabilities of that
perio~ Such revenues are described by
accountants ss no~ being "available." For
e~zr.ple, a receivable for preperry t~xes that
will not be collected until three months after
the end of the fiscal year would be offset by a
liability for ~leferrecl revenue."'
- Prep~ty tax revenue also may. be deferred if
the "due date" for the proper~y taxes falls
outside the fiscal year.. For instance, a
government with a June 30 fmcal year end.
would recognize a liabilky for deferred revenue
for any proper~y taxes levied during the fiscal
year that are due on July 15 of the.following
year.
'In the specific ca~e of property taxes, the GASB'~ 1990
Codification of Governmental Accounting and Financial
P,e~orti~ Standarda Sect/~n P70.103, ~* ~n ~
~aw~i!,,~,dity~ period for revenue recognition purpo~e~ of 60
18 AN ELECTED OFFICIAL'S GUIDE TO FUND BALANCE
How high a level of "unreserved
fund balance" should be
maintained in the general fund?
In cases where revenue is available, but cenno~
be recegnJzed for technical ress~ns (e,g., taxes
collected prior to the year for which levied,
property taxes due early the following year),'
users of government balance sheets may wish
to take deferred revenue into consideration
when evaluating the amount of resources
available for appropriation. For eY-mpte, if a
government has unreserved fund balance of $1
million and deferred revenue of $47,000 related
to early property tax collections, the
government may be considered, in fact, to have
$1,047,000 mrailable to spend. Such-would not
be the cese~ however, for revenue that has been
"deferred" because it is not available (e.g.,
property taxes expected to be collected more
than 60 days 'following the close of the fiscal
year).
There is little argument that a deficit
"u~reserved fund balance'.is normalky to be
avoided. Indeed, such deficits are illegal in a
number of jurisdictions. The "right amount" of
unreserved fund balance, howeVer, is a question
open to some debate, particularly in the genera]
fund.
Bond raters and others often use "'rules of
thumb" to measure the adequacy of unreserved
fund balance in the general fund. For example,
5 percent of --nual operating expenditures is a
commonly cited miulmum -mount. Others
argue, that unreserved fund balance should
equal no less than one month's operating
expenditures [i~, 8.3 percent). Core must be
taken, however, to avoid applying such rules of
thumb mechanically. A variety of factors must
he taken into account when evaluating the
adequacy of fund balance in the general fund.
One unportant consideration is the reliability ot
a government's revenue sources. Whereas some
governmental revenues are ~raditionally quite
stable (e.g., property taxes), others often can
vary significantly depending on conditions in
the economy (e.~, sales tax). Governments
depending upon less reliable revenue sources
may need to m-intain sigaificantly higher
levels of unreserved fund balance than those
relying upon more stable sources of revenue.
Another important factor is the timing of cash
inflows and outflows. Governments whose cash
flows are less predictable may need relatively
higher levels of unreserved fund balance to
maintain liquidity than those with highly
predictable cash inflows and outflows.
~6 AN ELECTED OFFICIAL'S GUIDE
TO FUND. BALANCE