Fulton-El Camino Recreation & Park District

POLICY & PROCEDURE MANUAL

POLICY TITLE:       Financial Reserves Policy

POLICY NUMBER:  3035

3035.1    PREMISE

     The Fulton-El Camino Recreation and Park District reserve policy is a financial policy guided by sound accounting principles of public fund management. The policy establishes reserve funds to minimize adverse annual budgetary impacts from anticipated and unanticipated District expenses.

The adequacy of the target reserve year-end balance ranges and/or annual contributions will be reviewed annually during the budgeting process and may be revised accordingly as necessary. The following District reserve fund categories are established:

3035.2  Capital Replacement Reserve Fund

3035.2.1      Purpose: To provide funds for the orderly and timely maintenance of the District facilities to meet future demand and to maintain and/or improve the District's existing level of facility quality.

3035.2.2      Target Balance: Fund 40% of the reserve balance based on a life cycle study of the District’s capital assets with the goal to self-fund upkeep and maintenance as required.

3035.2.3      Methodology/Rational: Use of a professional Reserve Study which includes an inventory of all current District capital equipment and facilities, an estimate of their useful life, and a schedule of repair/replacement funding needs based on estimated future costs.

3035.2.3.1         This Study will become a part of the Reserve Fund documentation as  an Appendix.

3035.2.3.2         Funds will be specifically identified for each asset repair/replacement need in proportion to their cost and the actual Capital Improvement Fund Balance available. The reserve summary will indicate by category the level of reserve funding.

3035.2.4      Use of Funds: The funds shall accumulate in a Reserve Fund and may only be used for the purposes identified in the Reserve Study, or other purposes deemed appropriate by a 4/5th vote of the Board of Directors. The annual District budget shall identify both additional contributions to the Reserve Fund, and authorized expenditures from the Reserve Fund as identified in the Reserve Study.

3035.3 Capital Acquisition Reserve Fund

                  3035.3.1      Purpose: To provide funds for the future acquisition of park lands when available and facilities as identified in the Master Plan.

                  3035.3.2      Target Balance: Fully funded acquisition fund based on the District’s Master Plan in conjunction with current and future cost estimates.

                  3035.3.3      Methodology/Rational: The Master Plan is used to identify and plan for future needs of the District. Funding can be through grants as they are available, but reserves are necessary to take advantage of opportunities that arise with little advance notice including the need for matching funds for grants. The restricted appropriation fund exists to provide for an orderly land acquisition program.

                  3035.3.4      Use of Funds: The accumulated funds in this area will be disbursed through an annual budgeted appropriation in accordance with the District's programmed acquisition requirements. The Board of Directors may, by a 4/5th vote, use the accumulated funds for an emergency land acquisition during the fiscal year.

3035.4   Operating Reserve Fund

3035.4.1      Purpose: To ensure cash resources are available to fund daily administration, operations and maintenance of the District without the use of “Dry Period Financing” from the County of Sacramento.

3035.4.2      Target Balance: Sufficient to fund six months of District expenditures.

3035.4.3      Methodology/Rational: District tax revenues are credited twice annually. The District will identify the target balance needed through the annual budgeting process. This fund need is expected to fluctuate based on each year’s identified and approved expenditure needs as well as expected revenues from sources other than taxes.

3035.4.4      Use of Funds: These funds will be used to pay for expenditures according to budget and expenditure authority.

3035.1        Shared Use

Capital Reserve Funds in excess of the current Fiscal Year budget needs may serve as all or part of the Operating Reserve Fund necessary to prevent the need for “Dry Period Financing”.