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1742 r Office of the County Manager November 17, 2014 To: The Board of County Commissioners From: Pamela S. Dubois, Deputy County Manager Subject: Transfer of excess fund balance policy The County has a board - adopted fund balance policy which states, "that after the completion of the annual audit of County finances, any unrestricted, unassigned fund balance above 15 percent will be transferred to the Capital Reserve Fund, to reduce reliance on debt financings, or transferred to the Self- Funded Hospitalization Fund, as required to maintain the integrity of those funds." To date, the annual audit has not been completed by the audit firm due to a delay in receiving Medicaid numbers from the state. Once those numbers are received, additional compliance testing will take place prior to the auditors' completion of their final report. Then, the report will be submitted to the Local Government Commission (LGC) for approval. After approval by the LGC, the audit will be presented to the commissioners for approval. Upon approval, the Board is presented the calculation of the excess fund balance above 15 percent and can approve the transfer to the Capital Reserve Fund per the policy. In June of this year, two budget revisions were prepared by staff and approved by the Board to fund $1,500,000 for the upfit of the RCCC cosmetology center and $1,319,000 to partially fund the architectural and design fees for Kannapolis Middle School. Both agenda items and related budget revisions are attached for review. The $1,500,000 was funded through increases in underbudgeted revenues such as property tax collections and Medicaid hold harmless. The $1,319,000 was funded through the release of two assignments of fund balance. As indicated in the agenda item, the balance of the Kannapolis Middle School design fees would be funded after the FY14 audit is completed (the additional funds for the design amount to $681,000). Staff does not recommend proceeding forward with the transfer until the audit is finalized and approved by both the Local Government Commission and the Board of Commissioners. Should any change affecting fund balance be discovered by the LGC, the funds once transferred, cannot be used for operational purposes. However, if the Board decides to move forward, the current calculation for excess funds is $5,373,678. In order to approve this request, the fund balance policy will need to be waived, indicating that the funds will be transferred prior to the completion and approval of the audit. 65 Church Street SE (28025) - P.O. Box 707 Concord, NC 28026 -0707 Phone: 704.920.2100 - Faykt7##trn?Wnber 1 Website: www.cabarruscounty.us G -3 Page 104