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7056 <br /> City of Orono <br /> Financial Management Policies <br /> Policy 2 - Fund Balance <br /> 2-1. PURPOSE <br /> The City understands it has a responsibility to maintain prudent financial operations to ensure <br /> stable city operations for the benefit of city residents and businesses. Fund balance reserves <br /> are an important component in ensuring the overall financial health of a community, by giving <br /> the City cushion to meet contingency or cash-flow timing needs. The Office of the State Auditor <br /> recommends that at year-end, local governments maintain an unreserved fund balance in their <br /> general fund and special revenue funds of approximately 35 to 50%of fund operating revenues, <br /> or no less than five months of operating expenditures. <br /> 2-2. POLICY <br /> 1. The City will maintain a minimum unassigned General Fund balance of 45%of the fund's <br /> annual operating budget. <br /> a) Unassigned fund balances in excess of 50%will be transferred to the Community <br /> Investment Construction Fund. Such transfer is pursuant to Council approval. <br /> b) Unassigned fund balance of less than 45%will be addressed through the budgeting <br /> process or by transfers in from other funds. <br /> c) An assignment or restriction of fund balance may be used to offset revenues earned <br /> in one year where substantial services are required to be performed in the next <br /> fiscal period. <br /> 2. When both restricted and unrestricted resources are available for use, it is the City's <br /> policy to first use restricted resources, and then use unrestricted resources as they are <br /> needed. When unrestricted resources are available for use, it is the City's policy to use <br /> resources in the following order: 1) committed, 2) assigned, 3) unassigned. These fund <br /> balance classifications apply only to Governmental Funds, not Enterprise Funds or <br /> Internal Service Funds. <br /> 3. The Park Fund is a Special Revenue Fund that provides for parkland acquisition and <br /> improvements. Its major funding source is Park Dedication Fees which are restricted for <br /> this use. <br /> 4. The Drug/Felony Forfeiture Fund is a Special Revenue Fund that provides for expenditures <br /> related to drug and alcohol enforcement activities. Its major revenue sources are the sale <br /> of forfeited vehicles and drug enforcement activities. The funds are restricted for law <br /> enforcement use related to drug and alcohol enforcement. <br /> 5. The Lurton Park Fund is a Special Revenue Fund that provides for the development and <br /> maintenance of Lurton Park. These funds are restricted by a stipulation of the property's <br /> owner when the land was donated to the City. <br /> 2-1 <br />