PURPOSE AND SCOPE:
The general purpose of this policy is to improve Pound Ridge Library’s financial stability by protecting itself against emergencies and economic downturns. The policy is designed to help the Library not only to prepare for a financial emergency but to also to ensure the continuity of financial operations. This policy sets forth the minimum required fund balance reserves, the allowable uses of the fund balance reserves, an the Library’s plan to achieve the target level of fund balance reserves.
DEFINITIONS:
Fund balance: the accumulated equity balance in a governmental fund resulting from operations over the years. This is the difference between fund assets and fund liabilities.
Undesignated fund balance: The fund balance, excluding all reserves and any other balance dedicated to another purpose.
Operating budget: All expenditures necessary to meet the daily operations of the Library and any debt service payments.
Capital expenditures: Funds for the improvement of, and/or the addition to, the physical plan and for the purchase of furniture, fixtures, and equipment.
GUIDELINES:
The trustees of the Library shall require a Board restricted fund balance to be no less than the estimated cost of four (4) months of operation. These funds are reserved for use between the months of January, the beginning of the Library’s new fiscal year, and May, the month the Library typically receives the second installment check of the tax levy from the Town of Pound Ridge.
The minimum amount shall be $375,000 and shall be increased annually until the target amount is reached. Once all two installments of the tax levy have been received, the funds shall be replenished to at least the minimum amount.
These funds shall be deposited in a separate interest-bearing account that meets the requirements as set forth in the Investment Policy. An affirmative vote of a majority of the total membership of the Board shall be necessary in order to change either the target amount or the minimum amount.
GASB 54 Fund Balance Classification Definitions:
Fund balance is a measurement of available financial resources and is the difference between total assets and total liabilities in each fund.
The Governmental Accounting Standards Board (GASB) issued GASB Statement Number 54, Fund Balance Reporting and Governmental Fund Type Definitions. GASB Statement 54 abandons the reserve and unreserved classifications of fund balances and replaces them with five new classifications for Governmental Funds based on the strength of the constraints that control the purposes for which specified amounts can be spent. Beginning with the most restrictive constraints, fund balance amounts will be reported in the following categories:
Non-spendable fund balance – amounts that are not in a spendable form (i.e. Prepaid Expense) or are legally or contractually required to be maintained intact (i.e. principal of a permanent fund);
Restricted fund balance – amounts that can be spent only for a specific purpose stipulated by external parties or legislation (i.e. Grants or Donations);
Committed fund balance – amounts that can be used only for the specific purposes determined by a formal action of the Library Board of Trustees. Commitments may be changed or lifted only by referring to the formal action that imposed the constraint originally (i.e. Parking Lot Expansion and Children’ room construction);
Assigned fund balance – amounts intended for a particular purpose (i.e. health, pension) expressed by the Library Board of Trustees or by a designee to whom the governing board delegates the authority; Unassigned fund balance – includes all funds not contained in other classifications or not restricted in any manner. Unassigned amounts are available for any legal purpose.
The Library Director is in charge of the policy at the discretion of the Library Board of Trustees. The responsibility for designating funds to a specific classification shall be as follows:
Committed fund balance – The Library Board of Trustees must take formal action in the form of a resolution approved by the Board to establish, modify, or rescind a fund balance commitment.
Assigned fund balance – The Library Board of Trustees authorizes the Director to assign a fund balance to a specific purpose as approved by the fund balance policy.
Established by the Library Board of Trustees under advice of the Library’s independent auditor’s to comply with GASB Statement 54.
Policy Adopted May 24, 2022
