Fund Balance Policy

PURPOSE

The Palos Heights Public Library has developed this Policy to classify and direct the usage of funds maintained by the Library, consistent with the Governmental Accounting Standards Board (GASB) Statement 54. The Fund Balance Policy is intended to assist in long range planning, annual budget development and current fund maintenance, usage, oversight and reporting. This Policy will ensure that adequate fund balances and reserves are maintained in order to: (a) provide sufficient cash flow for daily financial needs; (b) offset significant economic downturns or revenue shortfalls; and (c) provide funds for unforeseen expenditures related to emergencies.

This Policy is intended to establish order of the use of resources.

FUND CLASSIFICATIONS

The following classifications will be used by the Palos Heights Public Library for accounting and reporting purposes.

The General Fund is used for all financial resources not accounted for and reported in another fund classification.

Special revenue funds account for the proceeds of specific revenue sources which are restricted or committed to expenditures for specific purposes other than debt service or capital projects, including:

• IMRF funds account for the Library’s participation in the Illinois Municipal Retirement Fund. Revenues are obtained by a specific line item in the annual property tax levy sufficient to pay contributions on behalf of the Library’s employees. Use of these fund balances is restricted to the purpose of this fund.
• Social Security funds account for the Library’s compliance with the Federal Insurance Contributions Act (FICA). Revenues are obtained by a specific line item in the annual property tax levy and their use is legally restricted to the purpose of this fund.
• Audit funds account for expenditures related to the statutorily mandated annual financial compliance audit. Revenues are obtained by a specific line item on the annual property tax levy and their use is restricted to the purpose of this fund.
• Liability Insurance funds account for the insurance expenditures related to the Library’s risk management activities. Revenues are obtained by a specific line item in the annual property tax levy and their use is restricted to the purpose of this fund.
• Workers’ Compensation funds account for the Library’s compliance with the requirements of the Illinois Workers´ Compensation Act as an employer. Revenues are obtained by a specific line item in the annual property tax levy and their use is restricted to the purpose of this fund.
• Unemployment Compensation funds account for the Library’s compliance with the requirements of the U. S. Department of Labor as an employer with tax liability for the payment of potential unemployment compensation. Revenues are obtained by a specific line item in the annual property tax levy and their use is restricted to the purpose of this fund.

Debt Service funds account for all financial resources restricted, committed or assigned to expenditure for principal and interest on bonds which the library is obligated to pay. The Library levies an amount that approximates the principal and interest expected to be paid in the current taxing year. The use of these funds is restricted for debt service. Currently, the Debt Service fund of the Palos Heights Public Library is used for payment of principal and interest of the City of Palos Heights General Obligation Bond and, however, may be used for payment of principal and interest in connection with any future obligations incurred by the Library.

Special Reserve funds for Capital Projects account for all financial resources, restricted, committed or assigned to expenditures for the acquisition or construction of capital assets.

CATEGORIES OF FUND BALANCE RESTRICTION using GASB Statement 54 terms and definitions

Fund balances and the restriction, or lack of restriction, upon the expenditure of all or a portion of them, will be reported in governmental funds under the following categories:

Non-spendable fund balance

Definition: Funds are non-spendable if they are not in a spendable form or are required to be maintained intact, including but not limited to: the balance of any long-term outstanding balances due from others (including other internal funds); the value of prepaid items and any inventory balances; the principal of any permanent funds held legally or contractually required to be maintained intact; and the balance of non-financial assets held for sale. It shall be a priority to determine non-spendable funds before all other categories.

Restricted fund balance

Definition: Restricted fund balances are amounts that can be spent only for specific purposes, as dictated by existing laws, external resource and revenue providers.

Committed fund balance

Definition: Committed fund balances include amounts which can only be used for the specific purposes determined by a formal action of the Board of Trustees.

Assigned fund balance

Definition: Assigned fund balances include amounts intended to be used by the Library for a specific purpose but which do not meet the criteria to be classified as “restricted” or “committed”. Assigned fund balances represent the remaining amounts that are not restricted or committed and are available for a purpose expressed by the Library and the action of its Board, including by specific authority it may confer upon its representative.

Unassigned fund balance

Definition: Unassigned fund balances are the residual balances of the governmental unit’s general funds which are not defined in any other classification and are spendable.

FUND BALANCE POLICIES

It will be the policy of the Palos Heights Public Library to establish and maintain a fund balance level of 0% in the Debt Service Fund.

It will be the policy of the Palos Heights Public Library to maintain a Special Reserve Fund balance sufficient to meet the requirements of plans adopted by the Library Board of Trustees, consistent with Section 5/5.8 of the Illinois Library Laws and Rules (75 ILCS).

It shall be the policy of the Palos Heights Public Library to maintain a General Fund, the balance of which will be managed to a range of 35 to 45% of the most recent year’s audited expenditures. This fund balance shall be used to meet any unanticipated reduction in real estate taxes or other revenues, as well as for emergency and contingency expenditure needs which may have arisen after the ensuing fiscal year’s budget has been approved.

Adopted: February 2014