Facebook Social Icon Facebook Social Icon You Tube Social Icon
 
 
 
 
 
 
 
 
 
 

Budget and Financial Planning

Phone: 913-715-0605

111 S Cherry, Suite 2300, Olathe, KS 66061

You are here

Financial Policies: Section 110 - Reserves

Reserves for governmental entities are generally considered appropriate in order to:

Maintain Working Capital:

  1. Meet cash flow requirements.
  2. Provide contingencies for unpredictable revenue sources.
  3. Provide contingencies for emergencies (such as natural disasters) and unpredictable expenditures.

Fund Capital Asset Replacement and Debt Retirement:

  1. Provide funding for capital asset replacement.
  2. Meet debt reserve covenants/requirements.
  3. Prepay outstanding debt.

The appropriate level of reserves for a given governmental entity depends on an analysis of these six (6) factors, along with any statutory requirements or other applicable criteria.

It is the policy of the Board of County Commissioners (BOCC) to maintain prudent reserves for established funds based on the six (6) factors listed above.

All reserve policies shall be analyzed on a periodic basis according to the six (6) factors listed above.

Reserves are the difference between the current assets (cash, accounts receivable, investments, etc.) and the current liabilities (salary and wages payable, accounts payable, etc.) of each County fund. Reserves are also known by other names, such as rainy day funds, and contingency funds.

Resolution No. 122-02
Revision Number: Original
Date of Last Review: Adopted 12-19-02 Revised 02-28-13

It is the policy of the BOCC to maintain a reserve in the County’s General Fund according to the following calculation:

Reserve Category Policy Calculation

Meet Cash Flow Requirements
(maintain working capital)

Maintain minimum reserve equal to 1/13 of the next year’s budgeted payroll in the General Fund (the equivalent of one payroll, including fringe benefit costs)

Provide contingencies for unpredictable revenue sources
(maintain working capital)

Maintain minimum reserve equal to 10% of next year’s budgeted sales tax revenue in the General Fund

Provide contingencies for unpredictable revenue sources
(maintain working capital)

Maintain minimum reserve equal to 20% of next year’s budgeted compensating use tax revenue in the General Fund

Provide contingencies for unpredictable revenue sources
(maintain working capital)

Maintain minimum reserve equal to 25% of next year’s budgeted mortgage registration fee revenue in the General Fund

Provide contingencies for unpredictable revenue sources
(maintain working capital)

Maintain minimum reserve equal to 25% of next year’s budgeted investment income in the General Fund

Provide contingencies for unpredictable revenue sources
(maintain working capital)

Maintain minimum reserve equal to 10% of next year’s budgeted intergovernmental revenue in the General Fund

Provide contingencies for unpredictable revenue sources
(maintain working capital)

Maintain minimum reserve equal to 3% of next year’s budgeted Ad Valorem Tax Property Taxes in the General Fund

Provide contingencies for unpredictable revenue sources
(maintain working capital)

Maintain minimum reserve equal to 10% of next year’s budgeted charges for services in the General Fund

Provide contingencies for unpredictable revenue sources
(maintain working capital)

Maintain minimum reserve equal to 10% of next year’s budgeted miscellaneous revenue in the General Fund

Provide contingencies for unpredictable revenue sources
(maintain working capital)

Maintain minimum reserve equal to 10% of next year’s budgeted motor vehicle taxes in the General Fund

Provide contingencies for emergencies
(maintain working capital)

Maintain minimum reserve equal to 5% of next year’s budgeted General Fund expenditures, excluding intrafund transfers, cost allocation, and grant expenditures

Meet debt service covenants/requirements

 

Maintain minimum reserve equal to 25% of next year’s budgeted General Fund lease payments to the Public Building Commission

The dollar amount of the reserve for the General Fund will vary each year according to the policy calculation. As a general guideline, the policy calculation is expected to generate a reserve amount that ranges between 20% and 25% of estimated annual General Fund net revenues.

Any General Fund reserve amounts in excess of the policy calculation are one-time revenues and shall be used according to section 120.6 Use of One-time and Unpredictable Revenues.

If the County’s General Fund reserve falls below the minimum policy calculation, the County Manager shall submit a recommended plan to the BOCC, as soon as practical but not to exceed 90 days following receipt of notice from the Director of Budget and Financial Planning, to rebuild the reserve to the minimum level.

Definitions:

The Public Building Commission (PBC) is a separate legal entity which issues lease purchase revenue bonds for the purpose of acquiring, constructing, and renovating facilities. When bonds are issued, the County enters into a lease agreement with the PBC for the use of the facilities and makes an annual lease payment to the PBC. The Board of County Commissioners serves as the governing body of the PBC.

General Fund net revenues are the total annual budgeted revenues for the General Fund which includes grant revenue but excludes intrafund transfers and cost allocation expenditures budgeted in the General Fund.

Resolution No. 122-02
Revision Number: Original
Date of Last Review: Adopted 12-19-02 Revised 02-28-13

It is the policy of the BOCC to maintain a reserve in the County’s Debt Service Fund and the Library’s Debt Service Fund between 5% and 10% of the annual principal and interest amounts due on outstanding bonds, plus 100% of any annual principal and interest amounts due on outstanding temporary notes.

Any Debt Service Fund reserve amounts in excess of 10% can only be used to reduce the amount of outstanding debt or to reduce the debt service property tax levy.

If the County’s Debt Service Fund reserve or the Library’s Debt Service Fund reserve falls below 5%, the County Manager shall submit a recommendation to the BOCC, as soon as practical but not to exceed 90 days following receipt of notice from the Director of Budget and Financial Planning and the Director of Financial Management, to rebuild the reserve to the minimum level.

Resolution No. 122-02
Revision Number: Original
Date of Last Review: Adopted 12-19-02 Revised 02-28-13

It is the policy of the BOCC to have and maintain financial reserves, including funding for plan run-out, within the County’s Health Care Fund. The amount of the reserve shall be determined annually by the BOCC, based upon funding recommendations prepared by the County Manager. As a part of the annual budget process, the County manager or his designee shall provide to the BOCC a full analysis of the Health Care Fund and its reserves, including the difference between projected and actual collections and expenditures, and the change in fund balance, and funding for the reserves shall be included in the annual budget in an amount calculated to provide a reserve level of “secure funding”. The “secure funding” level shall include an amount reasonably calculated to cover expenses “incurred but not reported” for the Fund, an amount reasonably calculated to cover unanticipated administrative expenses related to the run-out claims and “IBNR” expenses, an amount reasonably calculated as a contingency for dental claims, and an amount determined through actuarial methods as a contingency for the medical plan claims. In no event, however, shall the amount be less than that amount determined as reasonably necessary to provide a high minimal level of reserve funding. The County Manager and/or his designee shall develop and adopt criteria and procedures, recognized in the health care insurance industry, for determining the high minimal funding level and the secure funding level and those criteria shall consider the following:

  1. The County’s average monthly claims.
  2. Trending factors for claims and costs.
  3. Trending factors for utilization of the fund.
  4. Exposure to catastrophic or other cost factors.
  5. The ability of the fund to be and remain viable through various experiences.

All funds, including reserve amounts, contained in the Health Care Fund shall be used exclusively for the purpose of that fund, and excess funds, whether considered reserved or otherwise, shall not be transferred to any other fund nor used for any other purpose but may be spent down within the fund to reduce future contributions either by the County or the employees benefiting from the fund.

In the event that the amount of the reserve falls below the determined “high minimum” level for a given year, then the County Manager shall prepare and submit recommendations to the BOCC, as soon as practical but not to exceed 90 days following receipt of notice from the Director of Budget and the Director of Financial Management, to reestablish the reserve at acceptable levels.

In the event that the fund balance for the Health Care Fund at the close of any fiscal year provides reserve funding in an amount that exceeds that past year’s “secure funding” level by 35% or more, then the County Manager shall, as a part of the next year’s budget process, notify the BOCC of the status of the reserves and present options for the BOCC to consider for funding the reserves in the ensuing budget. The BOCC shall adjust the reserve funding as it deems advisable so that the amount of the reserves is reasonably limited to the calculated “secure funding” level.

Resolution No. 122-02
Revision Number: Original
Date of Last Review: Adopted 12-19-02 Revised 02-28-13

It is the policy of the Board of County Commissioners (BOCC) to have and maintain financial reserves, within the County’s Risk Management Fund, to pay claims and claims-related expenses. The County Manager will prepare funding recommendations with the BOCC making the final determination of the amount of the Risk Management Fund reserves.

The Risk Management Fund is comprised of two distinct reserve funds:

  1. Risk Management Reserve (liability and property)
  2. Workers’ Compensation Reserve

In accordance with statutory requirements and County resolution, each of the two reserve funds is segregated and has its own defined purpose, funding methodology, and disbursement procedures.

The County Manager shall submit a statement of projected expenses and funding allocations for each reserve fund as a part of the proposed annual operating budget for consideration by the BOCC. This funding shall be in an amount determined annually by an independent actuary firm. The objective for each reserve fund is to provide a reserve sufficient to pay, at least, expected ultimate limited losses.

The Risk Management Reserve will be funded at least to the expected loss level and up to an 80% confidence level calculated by the Actuary. The Workers’ Compensation Reserve will be funded at the Expected Loss level calculated by the Actuary.

Expected ultimate limited loss is the total amount projected to be paid for a particular claim period to bring all claims for that claim period to closed status. Projected ultimate limited losses are the total loss costs, including claim settlements, legal fees, and other claims related expenses within the County’s self-insured, retained loss, and deductible levels.

The County Manager shall develop and adopt criteria and procedures, recognized in the risk management industry, for determining the funding level and those criteria shall consider the following:

  1. The County’s five-year historical and actuarially projected claim costs.
  2. Exposure to catastrophic claims or other unexpected costs, such as legal or statutory changes.
  3. Levels of self-insurance, self-funded retentions, and deductibles for each type of risk.
  4. The objective to maintain fund balances at a level that provides a positive cash balance during the fiscal year, barring any catastrophic occurrence.

Each fund, including reserve amounts, contained in the Risk Management Fund, shall be used exclusively for the purpose of that fund, and excess funds, whether considered reserved or otherwise, shall not be transferred to any other fund nor used for any other purpose, other than noted within each fund, but may be spent down within the fund to reduce future contributions from the amounts allocated to departments and agencies. Interest earned on the investment on moneys in such reserve fund shall be credited to the Risk Management Fund.

In the event that the amount of the fund reserve falls below the projected ultimate limited loss level for a given year, the County Manager may prepare and submit recommendations to the BOCC, within 90 days following receipt of Notice from the Director of Budget and Financial Planning, to replenish the Fund to an acceptable level.

In the event that the balance for the Risk Management Fund at the end of any fiscal year, exceeds the amount required to pay for compensation, benefits, and expenses, plus any additional amount required to pay all pending claims, the County Manager, may elect to transfer all or part of the excess amount to certain other reserve funds or may apply all or part of the excess to the budget appropriation of the next succeeding fiscal year for the Risk Management Fund, subject to the approval of the BOCC, as required by law.

Resolution No. 025-13
Adopted 06-27-13

It is the policy of the BOCC to maintain a reserve in the County’s Developmental Supports Fund between 8% and 12% of budgeted annual Developmental Supports Fund expenditures.

Any Developmental Supports Fund reserve amounts in excess of 12% are one-time revenues and shall be used according to section 120.6 Use of One-time and Unpredictable Revenues.

If the County’s Developmental Supports Fund reserve falls below 8% of budgeted annual Developmental Supports Fund expenditures, the Developmental Supports Board and staff shall work in conjunction with the County Manager to submit a recommended plan to the BOCC, as soon as practical but not to exceed 90 days following receipt of notice from the Director of Budget and Financial Planning and the Director of Financial Management, to rebuild the reserve to the minimum level.

Resolution No. 122-02
Revision Number: Original
Date of Last Review: Adopted 12-19-02 Revised 02-28-13

It is the policy of the BOCC to maintain a reserve in the County’s Mental Health Fund between 8% and 12% of budgeted annual Mental Health Fund expenditures.

Any Mental Health Fund reserve amounts in excess of 12% are one-time revenues and shall be used according to section 120.6 Use of One-time and Unpredictable Revenues.

If the County’s Mental Health Fund reserve falls below 8% of budgeted annual Mental Health Fund expenditures, the Mental Health Board and staff shall work in conjunction with the County Manager to submit a recommended plan to the BOCC, as soon as practical but not to exceed 90 days following receipt of notice from the Director of Budget and Financial Planning and the Director of Financial Management, to rebuild the reserve to the minimum level.

Resolution No. 122-02
Revision Number: Original
Date of Last Review: Adopted 12-19-02 Revised 02-28-13

It is the policy of the BOCC to maintain a reserve for the Wastewater fund in an amount sufficient to sustain basic operations for a period of at least 90 days and no more than 180 days of budgeted annual Wastewater expenditures.

Reserves for wastewater utilities are generally considered appropriate in order to:

  1. Meet cash flow requirements.
  2. Provide contingencies for unpredictable revenue sources.
  3. Provide contingencies for emergencies (such as natural disasters) and unpredictable expenditures .
  4. Provide funding for capital asset replacement.
  5. Meet debt reserve covenants/requirements.
  6. Maintain rate stability .

Any Wastewater fund reserves in excess of 180 days shall be used according to section 120.6 Use of One-time and Unpredictable Revenues.

If the Wastewater fund reserve falls below the amount that is reasonably necessary to sustain basic operations for at least 90 days, based on the budgeted annual Wastewater fund expenditures , then Wastewater staff shall submit to the County Manager and the Director of Budget and Financial Planning, for recommendation ion to the BOCC, as soon as practical but not to exceed 90 days following notice of the deficiency, a  plan to  rebuild the reserve to the minimum level.

Resolution No. 014-16
Revision Number : Original
Adopted 03-03-2016

 

It is the policy of the BOCC to maintain a minimum reserve between 5% and 10% of budgeted annual expenditures for the following funds:

  • Public Works Fund
  • Transportation Fund
  • Airport Fund
  • Library Operating Fund
  • Library Special Use Fund
  • 911 Fund
  • County Building Fund
  • Alcohol Tax Fund
  • Public Health Fund

Any reserve amounts in excess of 10% shall be used according to section 120.6 Use of One-time and Unpredictable Revenues.

If reserve levels fall below the minimum policy calculation for the funds listed above, excluding the Airport Fund, the Library Operating Fund, and the Library Special Use Fund, the County Manager shall submit a recommended plan to the BOCC, as soon as practical but not to exceed 90 days following receipt of notice from the Director of Budget and Financial Planning and the Director of Financial Management, to rebuild the reserve to the minimum level.

If reserve levels fall below the minimum policy calculation for the Airport Fund, the Library Operating Fund, and the Library Special Use Fund, the appropriate governing board and staff shall work in conjunction with the County Manager to submit a recommended plan to the BOCC, as soon as practical but not to exceed 90 days following receipt of notice from the Director of Budget and Financial Planning and the Director of Financial Management, to rebuild the reserve to the minimum level.

The following funds are not required to maintain a reserve:

  • Stormwater Fund
  • Prosecuting Attorney Fund
  • Stream Maintenance Fund

This policy excludes funds for the Park and Recreation District (the District is subject to a separate set of statutes).

Resolution No. 122-02
Revision Number: Original
Date of Last Review: Adopted 12-19-02 Revised 02-28-13