Financial Policies

Financial policies serve as the guiding principles for the County’s financial management and annual budgetary process. Generally, financial policies are desirable in order to maintain or improve an entity’s financial position, financial management and credit rating(s). The County’s financial policies will comply with applicable state statutes.

Policy 100: Overview

100.1 - Introduction

It is the policy of the Board of County Commissioners (BOCC) that all financial transactions conducted by or on behalf of Johnson County, its agencies, departments, officials and authorized agents shall be made in a manner and method that efficiently and effectively utilizes available financial resources and demonstrates good stewardship in the management of public funds and resources according to established financial management practices, accounting standards, and auditing requirements.

102.2 - Applicability of Financial Policies

The financial policies adopted by the BOCC shall apply to all elected officials, employees, agencies, departments, boards, commissions, representatives, and authorized agents in the performance of their official duties for or on behalf of Johnson County Government.

100.3 - Fiscal Year, Generally Accepted Accounting Principles and Financial Reporting

The County’s fiscal year is January 1st to December 31st.

It is the policy of the BOCC that:

  • the County will follow accounting principles generally accepted in the United States of America applicable to governmental units (GAAP), as promulgated by the Governmental Accounting Standards Board (GASB), in the preparation of the County’s annual audited financial statements.
  • the County will submit to an annual audit by an independent certified public accountant.
  • the County will employ an internal auditor to complete an annual audit plan approved by the BOCC.
  • the County will prepare a Comprehensive Annual Financial Report.
  • the County will follow the standards of full disclosure in all financial reporting and debt offering statements.
  • For financial reporting purposes according to generally accepted accounting principles, all unencumbered appropriations lapse at the end of the year.

Responsibilities:

The Director of Treasury and Financial Management is responsible for establishing a solicitation and selection process for securing professional auditing services from an independent certified public accountant. Goals of the solicitation and selection process shall include encouraging participation from qualified service providers and securing services at competitive prices. 

100.4 - Establishment of Financial Procedures

It is the policy of the BOCC that the County Manager shall establish and maintain financial procedures. These procedures shall be consistent with existing financial policies and will comply with applicable state statutes. In addition, these procedures shall apply to all elected officials, employees, agencies, departments, boards, commissions, representatives and authorized agents in the performance of their official duties.

100.5 - Process for Amending Financial Policies

The BOCC may initiate changes to the existing financial policies at any time. In addition, the County Manager shall review the County’s existing financial policies on a periodic basis. If changes to the existing financial policies appear to be necessary and appropriate, the County Manager shall submit a recommendation to the BOCC for consideration and action.

100.6 - Explanation of Basis of Accounting

The basis of accounting used for preparation of the County’s annual operating budget and CIP is different from the basis of accounting used to prepare the County’s annual audited financial statements.

Definitions:

The term “basis of accounting” is used to describe the timing of recognition for financial transactions—i.e., when the effects of transactions or events should be recognized. The basis of accounting used for purposes of financial reporting in accordance with GAAP is not necessarily the same basis used in preparing the annual operating budget document.

Basis of Accounting for Financial Statements

The modified accrual basis of accounting is used for governmental funds. Under this basis of accounting, revenues are recognized when the revenues are both measurable and available to finance expenditures of the current fiscal period. “Measurable” means the amount of the transaction can be determined, and “available” means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures are generally recognized in the accounting period in which the fund liability is incurred, except for unmatured interest on general long-term debt, which is recognized when due.

The accrual basis of accounting is used for proprietary funds. Under this basis of accounting, revenues are recognized when earned and expenses are recognized when liabilities are incurred.

Basis of Accounting for Annual Operating Budget

The modified accrual basis of accounting is used for governmental funds, with the following exceptions:

  • operating transfers in are classified as revenues and operating transfers out are classified as expenditures in the annual operating budget.
  • changes in the fair value of investments are not treated as adjustments to revenues in the annual operating budget.

The accrual basis of accounting is used for proprietary funds, with the following exceptions:

  • property tax revenues are recognized as revenue in the year collected, and not the year billed, in the annual operating budget.
  • operating transfers in are classified as revenues and operating transfers out are classified as expenses in the annual operating budget.
  • changes in the fair value of investments are not treated as adjustments to revenues in the annual operating budget.
  • accrued vacation and sick pay benefits are not recognized as proprietary fund expenses in the annual operating budget.
  • debt service and capital lease principal payments are treated as expenses in the annual operating budget.
  • debt service interest costs are recognized when due, and not when incurred, in the annual operating budget.
  • depreciation expense is not recognized in the annual operating budget.
  • capital purchases are recognized as expenses in the annual operating budget.

Open encumbrances for outstanding purchase orders do not lapse at the end of the fiscal year and continue as an obligation of the prior year budget.

Policy 110: Reserves

Policy 110.1 - Introduction

Reserves (or fund balances) for governmental entities that are classified as spendable 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.

Definitions:

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 fund balances, rainy-day funds, and contingency funds.

In accordance with Governmental Accounting Standards Board (GASB) Statement No. 54, fund balance classifications have been clarified to allow reserves to be more consistently applied.  There are two primary type of fund balance reserves: Spendable and Non-spendable. 

Non-spendable amounts are fund balances associated with noncash items such as inventories.  These funds are not available to help maintain working capital or fund capital replacement or debt retirement.

Spendable reserves or fund balances can be further classified into the following categories:

Restricted fund balance category includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation.

Committed fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the government’s highest level of decision-making authority.

Assigned fund balance classification are intended to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed. In governmental funds other than the general fund, assigned fund balance represents the remaining amount that is not restricted or committed.

Unassigned fund balance is the residual classification for the government’s general fund and includes all spendable amounts not contained in the other classifications.

Governments are required to classify, and report amounts in the appropriate fund balance classifications by applying their accounting policies that determine whether restricted, committed, assigned, and unassigned amounts are considered to have been spent. Disclosure of the policies in the notes to the financial statements is required.

110.2 - General Fund

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 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 calculations.  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.

In addition to other General Fund reserves, an Auxiliary Fund shall be established primarily to provide additional funding stability for the Health Care Fund. These funds would be kept within the General Fund and transferred to the Health Care Fund if the current reserves in the Health Care Fund are less than the secured funding amount, as required by the Health Care Policy (110.4). Auxiliary funds in excess of “secured funding” may be authorized for other purposes by the Board of County Commissioners, dependent on the stability and current performance of the Health Care Fund. The Auxiliary Fund will be classified as committed balances within the General Fund on the County’s financial statements in accordance with the GASB Statement No. 54.

Any General Fund reserve amounts in excess of the policy calculation are one-time revenues and may 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.

110.3 - Debt Service Funds

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 Treasury and Financial Management, to rebuild the reserve to the minimum level.

110.4 - Health Care Fund

It is the policy of the BOCC to maintain financial reserves, including funding for plan run out, within the County’s Health Care Fund.  The amount of the reserve target shall be authorized 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 her designee shall provide to the BOCC a full analysis of the Health Care Fund and its reserves. The analysis will include the difference between projected and actual collections and expenditures and the change in fund balance.  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 be determined based on three components to reasonably calculate: 

  1. One-month of medical, dental and vision expenses “incurred but not reported” (IBNR) to the Health Care Fund.
  2. An amount reasonably calculated to cover three-months of unanticipated administrative expenses related to the run-out claims and “IBNR” expenses.
  3. An actuarially based percentage above the expected claims over a two-year period that would not be reimbursed under the County’s aggregate stop-loss coverage so that the County’s risk is consistently calculated in order to manage large claims fluctuations.

In addition to reserves in the Health Care Fund, the County will also maintain an Auxiliary Fund (as committed reserves) within the General Fund, in accordance of Policy 110.2, for the purpose of augmenting the Health Care Fund reserves. During the annual budget process, projected funding levels for both the Health Care Fund and the Auxiliary Fund funding will be based on actuarial trends and projections of the upcoming year, with the apportionment between the Health Care Fund and the Auxiliary Fund reserve based on the projected performance of the Health Care Fund, and the funding necessary to reach or maintain the Health Care Fund reserves at the secure funding level. Interest earned on the investment on moneys in the Health Care fund shall be credited to the Health Care Fund.

All funds, including reserve amounts, contained in the Health Care Fund shall be used exclusively for the purpose of that fund. As  committed reserves, the Auxiliary Reserve funds will be available for transfer to the Health Care Fund from the General Fund to maintain its reserves at the secure funding level.  Auxiliary fund reserves in excess of secured funding may also be reclassified and appropriated by the Board of County Commissioners for other purposes, subject to the stability and performance of the Health Care Fund.

In the event that the auxiliary reserve funds are depleted and the Health Care Fund reserve falls below 50% of secure funding, 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 Treasury and Financial Management, to reestablish the reserve at acceptable levels.  During the annual budget process, funding will be based on actuarial trends and projections of the upcoming year, with the apportionment between the Health Care Fund and the auxiliary reserve based on the projected performance of the Health Care Fund and the funding necessary to reach or maintain the Health Care Fund reserves at the secure funding level.

110.5 - Risk Management Reserve Fund

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.

110.6 - Developmental Supports Fund

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 Treasury and Financial Management, to rebuild the reserve to the minimum level.

110.7 - Mental Health Fund

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 Treasury and Financial Management, to rebuild the reserve to the minimum level.

110.8 - Wastewater Fund

It is the policy of the BOCC to maintain a reserve in the Wastewater Operations & Maintenance (O&M) fund between 90 days and 180 days of the budgeted annual Wastewater O&M 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 should be used in accordance with Policy 120.6 Use of One-time and Unpredictable Revenues.

If the reserve falls below 90 days of budgeted annual Wastewater O&M fund expenditures, Wastewater 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 to rebuild the reserve to the minimum level.

110.9 - Other Budgeted Funds

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 Treasury and 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 Treasury and 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).

Policy 120: Operating Budget

120.1 - Introduction

It is the policy of the Board of County Commissioners (BOCC) to promote efficiency and effectiveness in the management and operation of County programs and the utilization of available financial resources by the adoption of a balanced annual operating budget for the fiscal year. It is the responsibility of all elected officials, agency directors, department directors, governing boards, and employees to exercise good stewardship in the management of public funds and resources according to applicable statutes, BOCC policies, County procedures, and approved budgets.

Responsibilities:

The BOCC shall plan for the orderly operation of the County by the adoption of a balanced annual operating budget of anticipated revenues and proposed expenditures for the fiscal year. The proposed expenditures are presented in broad categories (personal services, contractual services, commodities, etc.) and, upon adoption of the budget, become appropriations of monies for that stated purpose. Use of funds shall be as appropriated unless transfers, amendments, or revisions are approved.

The County Manager is responsible for recommending a prudent, balanced annual operating budget to the BOCC for adoption.

The Director of Budget and Financial Planning is responsible for:

  • drafting and monitoring the budget calendar.
  • coordinating agency and department budget requests.
  • coordinating and evaluating revenue estimations, expenditure estimations, and financial impacts of budget requests.
  • ensuring compliance with applicable budgetary statutes.
  • providing the BOCC with the information necessary to make resource allocation decisions.
  • administering policies and procedures regarding the annual operating budget.

The Director of Treasury and Financial Management and the Director of Budget and Financial Planning are responsible for preparing periodic financial reports that monitor actual financial results as compared to the annual operating budget.

Elected officials, governing boards, agency directors, and department directors are responsible for:

  • anticipating and providing input on annual budgetary needs, including revenue and expenditure estimates.
  • explaining and justifying annual budget requests.
  • complying with the budget calendar and budgetary policies and procedures.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.2 - Annual Budget Calendar

The County Manager shall establish the budget calendar for the next operating budget cycle. The budget calendar shall comply with applicable statutes regarding adoption of the annual budget, and shall include the following provisions:

  1. The County Manager shall submit a prudent, balanced annual budget for the next operating cycle to the BOCC at least 45 days prior to the statutory deadline for adopting the annual budget.
  2. The BOCC shall adopt the annual budget for the following fiscal year on or before the statutory deadline for adopting the annual budget.
  3. The Director of Budget and Financial Planning shall file the adopted annual budget with the County Clerk on or before the statutory deadline for filing the annual budget.

Procedure 120.2 Annual Budget Calendar

  1. The Director of Budget and Financial Planning shall submit a preliminary draft of the budget calendar for the next operating budget cycle to the County Manager on or before January 15th of each year.
  2. The County Manager shall finalize the calendar for the next operating budget cycle on or before February 1st of each year.
  3. The Director of Budget and Financial Planning shall distribute operating budget request forms and instructions by May 1st of each year to agencies and departments. All agencies and departments shall submit operating budget requests according to the instructions and forms provided by the Director of Budget and Financial Planning.
  4. The Director of Budget and Financial Planning and staff shall assist the County Manager in formulating a proposed operating budget by June 30th of each year.
  5. After the BOCC has reviewed and modified (if necessary) the proposed budget, the Director of Budget and Financial Planning shall publish the proposed budget, with any modifications, in the County’s official newspaper. Along with the proposed budget, the Director of Budget and Financial Planning shall also publish the day and time of the public hearing. The public hearing shall be scheduled at least ten (10) days later than the date of publication of the proposed budget, but no later than August 15th of each year.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.3 - Multi-Year Budget Projection

It is the policy of the BOCC to maintain a Multi-Year Budget Projection of revenues, expenditures, and reserves. The projection shall be reviewed during the annual operating budget cycle and shall be updated periodically due to changes in policy, legislation, and the economy. The projection will cover a minimum of five years.

Definitions:

The Multi-Year Budget Projection is a forecasting model that includes estimates of revenues, expenditures, and reserves for the County’s budgeted funds. The forecasting model is prepared to illustrate the impact of potential policy decisions on the County’s fiscal condition and to provide an advance warning of potential fiscal problems.

Responsibilities:

The County Manager is responsible for presenting the Multi-Year Budget Projection as part of the proposed operating budget.
The Director of Budget and Financial Planning is responsible for coordinating, updating, and maintaining the Multi-Year Budget Projection.
Elected Officials, agency directors, and department directors are responsible for providing information, as requested by the Director of Budget and Financial Planning, in order to update and maintain the Multi-Year Budget Projection.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.4 - Revenue Estimation and Budgeting

The Director of Budget and Financial Planning is responsible for coordinating and evaluating the estimation of major revenue sources included in the annual operating budget. Revenues shall be estimated using a conservative approach to avoid budget shortfalls during the fiscal year.

If a revenue shortfall is anticipated after the annual operating budget is adopted, 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 balance the estimated revenues and expenditures.

Responsibilities:

The County Manager shall establish financial procedures that define the County’s major revenue sources.

Restricted Revenues:

It is the policy of the BOCC that revenues restricted by either statute or BOCC direction shall be expended in accordance with the specified intent.

Procedure 120.4 Revenue Estimation and Budgeting

The County’s major revenue sources are defined as the following revenues:

  1. Assessed Valuation and Ad Valorem Taxes (Property Taxes)
  2. Local Sales Taxes (County share of ½ cent)
  3. Stormwater Sales Taxes
  4. Public Safety Sales Taxes
  5. Economic Development Sales Taxes
  6. Interest on Delinquent Taxes
  7. Motor Vehicle Taxes
  8. Motor Vehicle Registration Fees
  9. Investment Income
  10. Mortgage Registration Fees
  11. Recording Fees
  12. City-County Revenue Sharing (CCRS)
  13. Local Ad Valorem Tax Reduction (LAVTR)
  14. Special Highway Revenues
  15. Wastewater System Development Charges (SRCFP – Sewer Repair and Construction Finance Plan)
  16. Wastewater Connection Fees (SRCFP – Sewer Repair and Construction Finance Plan)
  17. Equivalent Dwelling Unit (EDU) Charges (SRCFP – Sewer Repair and Construction Finance Plan)
  18. Wastewater User Fees (Operations and Maintenance Fund)

The Director of Budget and Financial Planning is responsible for appointing a Revenue Coordinator from the Budget and Financial Planning Department. The Revenue Coordinator is responsible for coordinating the annual revenue estimating process for the County’s major revenue sources.

The annual revenue estimating process for the County's major revenue sources will include a Revenue Estimating Committee. This committee will be comprised of the following positions:

  • County Appraiser
  • County Manager or his/her designee(s)
  • County Treasurer or his/her designee(s)
  • Director of Budget and Financial Planning or his/her designee(s)
  • Revenue Coordinator
  • Director of Financial Management or his/her designee(s)
  • Director of Planning, Development, and Codes or his/her designee(s)
  • Register of Deeds or his/her designee(s)
  • Director of Infrastructure or his/her designee(s)
  • Director of Wastewater or his/her designee(s)
  • At-large member to represent the Human Services area appointed by the County Manager or his/her designee (this position will rotate every two years)
  • At-large member to represent the governing boards (Airport, Developmental Supports, Library, Mental Health, Park and Recreation); this position will be reviewed annually by the County Manager or his/her designee in conjunction with the Executive Directors of the governing boards.

The Revenue Estimating Committee will meet periodically to review major revenue trends and to provide a revenue forecast for the annual budget and the Multi-year Budget Projection.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.5 - Fees for Service

It is the policy of the BOCC to attempt to reduce the County’s degree of reliance on ad valorem taxes (i.e., property taxes) for annual operating revenues by pursuing appropriate fees for services rendered. Reasonable fees for goods and services shall be based on the following criteria: (i) BOCC policies (ii) cost of service provided, (iii) community standards, and (iv) applicable laws, rules and regulations.

Fees will be set taking into account the full cost of service, both direct and indirect, the primary beneficiary of the service, prevailing market conditions when appropriate, and specific policy direction of the BOCC. The full cost of services will be calculated in a method consistent with current cost accounting principles and will include overhead, or indirect costs, of both the department and the County, as well as direct costs.

The portion of the full cost of services included in the fee rate structure will reflect the beneficiaries of the services. Fee rates for services solely benefitting individuals should be set to recover the full costs for those services. Services benefitting the community rather than individuals should be funded by taxes rather than fees. For services that benefit both individual recipients and the community, the portion of fees and taxes should approximate the apportionment of the benefits. An exception would be made for those County programs and services that are designed to support or incent participation by the public and thus may not have cost recovery as a primary objective. Agencies and departments shall regularly review their fee schedules in order to meet these criteria.

Fees for service will be reviewed for adjustments annually and included for the BOCC’s consideration in the annual budget process. Market conditions and inflationary cost increases will be reviewed to determine necessary annual increases and large increases in a single year shall be avoided if at all possible. Full cost calculations will be performed every three to five years to ensure the accuracy of services’ cost basis.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.6 - Use of One-time and Unpredictable Revenues

It is the policy of the BOCC that one-time (non-recurring) and unpredictable revenues shall not be used to fund on-going expenditures. On-going expenditures shall be funded with on-going sources of revenue. However, reserves may be used on a short-term basis to offset the impact of economic downturns, so long as adjustments are made to restore the structural balance of the operating budget within one to two fiscal years. (see Section #110 for more information on reserves).

At a minimum, potential uses for one-time and unpredictable revenues (including excess reserves) will be reviewed on an annual basis by the BOCC as part of the operating budget cycle. If necessary, the BOCC and appropriate governing board will review potential uses for one-time and unpredictable revenues outside of the annual operating budget cycle which, if approved, will require special appropriation for expenditure. In addition, reserves in excess of the amount established by policy may be retained, and not expended, by the County at the discretion of the BOCC.

Definitions:

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. See Section #110 for more information on reserves.

Excess reserves are amounts that exceed the target level for reserves established by BOCC policy. Excess reserves may exist due to one-time revenues, unpredictable revenues, expenditures being less than originally budgeted, the accumulation of resources for capital asset replacement, and/or the accumulation of resources for prepayment of outstanding debt.

One-time revenues are the result of a unique or special event (sale of a building, auction revenues, excess reserves, etc.).

Unpredictable revenues are the increment of a volatile revenue source, which is above the amount that can normally be expected to be collected during a fiscal year.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.8 - Operating Deficits

The County seeks to maintain or improve existing credit ratings through strong financial management, including the avoidance of operating deficits and short-term borrowing for operations. It is the policy of the BOCC that the County’s annual adopted operating budget will avoid the following situations for the combined budgets of the General Fund and the Special Revenue Funds:

Two (2) consecutive years of operating deficits.

  1. A current operating deficit greater than the previous year.
  2. A current operating deficit in two (2) or more of the last five (5) years.
  3. If any of the events listed above is reflected in the actual audited financial statements, the BOCC and County Manager shall review and address the situation(s) in a timely manner.

Agencies and departments shall notify the County Manager and Budget and Financial Planning Department of any potential budgetary problems (i.e., projected revenue shortfalls and/or projected expenditures greater than budget) as soon as practical, but no later than 90 days prior to the end of the fiscal year.

Definitions:

A current operating deficit occurs when total revenues are less than total expenditures during a given fiscal year. For the purposes of the deficit calculation, total expenditures exclude one-time expenditures that have been approved by the BOCC and are funded through use of reserves (examples would include one-time capital expenditures such as capital projects in the County’s Capital Improvement Program).

Responsibilities:

The County Manager is responsible for monitoring financial operations, reviewing the reason(s) for operating deficits, and addressing operating deficits in a timely manner.

Elected officials, agency directors, department directors, agency budget managers, and department budget managers are responsible for managing their annual budgets and working with the Budget and Financial Planning Department to anticipate potential problems. By anticipating potential problems, delays in processing financial transactions due to insufficient budgetary appropriations can be avoided.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.9 - Vacation/Sick Leave Payout Estimation and Budgeting

It is the policy of the BOCC to budget and appropriate sufficient funds in each budget year to pay the estimated and expected expenditures occurring during that fiscal year for the payout of accrued vacation and sick leave to employees who have retired or otherwise terminated their employment with the County in good standing.

Such funds shall be included in the Countywide (non-departmental) budget within the General Fund and shall be available for use in making such payments on behalf of all departments and agencies.

Responsibilities:

The County Manager shall establish procedures that define the eligibility criteria for vacation and sick leave payouts.

Elected officials, agency directors, and department directors are responsible for notifying the Director of Human Resources of any known separations or retirements that will occur in the upcoming fiscal year. The Director of Human Resources is responsible for compiling this separation/retirement information and providing the relevant information to the Director of Budget and Financial Planning and the Director of Treasury and Financial Management.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.10 - Unexpected or Unfunded Expenditures - Budget Amendments

Since the annual operating budget is formulated well in advance of its execution, the BOCC recognizes that it may be necessary to amend the budget of a County fund. If unexpected or unfunded expenditures must be made, department directors are expected to manage their available resources, economize, and reevaluate priorities before requesting a budget amendment.

lt is the policy of the BOCC to amend a fund’s budget for emergencies, federal and state mandates, or other circumstances which could not be anticipated, and only if sufficient funds are available; a budget may not be amended simply because additional revenues become available.

The BOCC may authorize an amendment of any current fiscal year budget, at the fund level, after giving public notice and holding a public hearing as required by state statute (K.S.A. 79-2929a).

Definitions:

A budget amendment is defined as an increase in the published budget authority, at the fund level, for the current fiscal year operating budget. By statute, any budget amendments require formal approval by the BOCC.

Published budget authority, at the fund level, is defined as the total of budgeted expenditures and budgeted reserves for a given County fund.

Responsibilities:

The County Manager is responsible for recommending budget amendments to the BOCC.

The Director of Budget and Financial Planning is responsible for coordinating agency and department budget amendment requests and ensuring compliance with applicable state budget laws and County budgetary policies and procedures.

Elected officials, agency directors, and department directors are responsible for submitting, explaining, and justifying budget amendment requests. Elected officials, agency directors, department directors, agency budget managers, and department budget managers are responsible for managing their annual budgets and working with the Budget and Financial Planning Department to anticipate potential problems. By anticipating potential problems, delays in processing financial transactions due to insufficient budgetary appropriations can be avoided.

Procedure 120.10 Unexpected or Unfunded Expenditures - Budget Amendments

  1. Requests for budget amendments shall be submitted to, and in a format determined by, the Director of Budget and Financial Planning no later than November 1st of each year. Any requests submitted after November 1st may be too late to be considered by the BOCC.
  2. Requests for budget amendments shall include a complete explanation and justification of why it is necessary to amend the current fiscal year budget.
  3. The Director of Budget and Financial Planning and staff shall assist the County Manager in evaluating requests for budget amendments.
  4. If the County Manager determines that a request for budget amendment is not necessary, he/she will advise the BOCC that an amendment has been requested and denied. The County Manager or his/her designee shall inform the elected official, agency director, or department director of the County Manager’s decision.
  5. If the County Manager determines that a request for budget amendment is necessary, the Director of Budget and Financial Planning shall prepare and submit an agenda item for BOCC consideration during the weekly business session.
  6. Upon review by the BOCC and action to set a public hearing date, the Director of Budget and Financial Planning shall publish the proposed budget amendment and notice of public hearing in the County’s official newspaper. The public hearing shall be scheduled at least ten (10) days later than the date of publication of the proposed budget amendment, but no later than December 31st of each year.
  7. The Director of Budget and Financial Planning shall file any budget amendments approved by the BOCC with the County Clerk no later than December 31st of each year.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.11 Unexpected or Unfunded Expenditures - Budget Revisions

Since the annual operating budget is formulated well in advance of its execution, the BOCC recognizes that it may be necessary to revise the budget of a County agency or department. If unexpected or unfunded expenditures must be made, department directors are expected to manage their available resources, economize, and reevaluate priorities before requesting a budget revision.

The County Manager may authorize budget revisions to reallocate budgeted expenditures between departments within the General Fund without the formal approval of the BOCC whenever:

  1. the reallocation is advisable to carryout the policies and/or priorities established by the BOCC; or
  2. the reallocation is necessary to provide responsive service to or for emergency situations.

If a reallocation will materially alter any specific departmental budget or potentially conflict with a policy direction of the BOCC, then prior to authorizing any revision, the County Manager will provide notice to the BOCC.

The County Manager may authorize budget revisions to reallocate budgeted expenditures within an agency or department.

The County Manager may authorize budget revisions to increase the current fiscal year expenditure budget for the General Fund in a cumulative amount up to $250,000, funded from the General Fund reserve, without approval of the BOCC. Any budget revisions, on a cumulative basis, which increase the General Fund expenditure budget by greater than $250,000, funded from the General Fund reserve, require approval of the BOCC.

The County Manager may authorize budget revisions to increase the current fiscal year expenditure budget for a County fund, except the General Fund, in a cumulative amount up to $100,000, funded from the reserve in the relevant County fund, without approval of the BOCC. Any budget revisions, on a cumulative basis, which increase the expenditure budget for a County fund, except the General Fund, by greater than $100,000 require approval of the BOCC.

The County Manager may authorize the increase of the current fiscal year expenditure budget for any County fund in any amount if the increase is funded from unanticipated grant revenue, state contract revenue, or reimbursement revenue. The County Manager may authorize the increase of the current fiscal year expenditure budget for certain structured accounts that are 100% funded from fees.

Budget revisions may not increase the total published budget authority of any County fund. These types of requests must be handled according to Section 120.10 Unexpected or Unfunded Expenditures – Budget Amendments.

The County Manager may authorize the reallocation of existing budgeted full-time equivalent positions (FTEs) between departments. The County Manager may not increase the total number of FTEs authorized in the operating budget. The BOCC must approve any increase in the authorized FTE count.

Definitions:

A budget revision is defined as a change in current fiscal year budget expenditure authority for any County agency or department that does not result in an increase in the published budget authority of any County fund.

A budget revision may involve changes in the expenditure categories (personal services, contractual services, commodities, capital outlay, etc.) within a single agency or department budget. A budget revision may also involve increasing an agency or department budget and decreasing another agency or department budget or reserve amount within the same County fund.

Published budget authority, at the fund level, is defined as the total of budgeted expenditures and budgeted reserves for a given County fund.

Responsibilities:

The Director of Budget and Financial Planning is responsible for coordinating agency and department budget revision requests and ensuring compliance with applicable state budget laws and County budgetary policies and procedures.

Elected officials, agency directors, and department directors are responsible for submitting, explaining, and justifying budget revision requests. Elected officials, agency directors, department directors, agency budget managers, and department budget managers are responsible for managing their annual budgets and working with the Budget and Financial Planning Department to anticipate potential problems. By anticipating potential problems, delays in processing financial transactions due to insufficient budgetary appropriations can be avoided.

Procedure 120.11 Unexpected or Unfunded Expenditures - Budget Revisions

  1. Requests for budget revisions shall be submitted to, and in a format determined by, the Director of Budget and Financial Planning.
  2. Requests for budget revisions shall include a complete explanation and justification of why it is necessary to revise the current fiscal year budget.
  3. As defined in section 120.11 (Unexpected or Unfunded Expenditures – Budget Revisions) of the adopted financial policies, certain budget revisions can be authorized by the County Manager or his/her designee.
  4. If the County Manager or his/her designee determines that a request for budget revision is not necessary and appropriate, the County Manager or his/her designee shall inform the elected official, agency director, or department director of the decision.
  5. The Budget and Financial Planning Department shall maintain documentation for all approved budget revisions.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.12 - Project Accounts

It is the policy of the BOCC to establish accounts, when appropriate and necessary, to track project-related revenues and expenditures. These project accounts, which may have financial transactions that occur in multiple fiscal years, shall be appropriated by the BOCC in a separate action or included in the annual budget adopted by the BOCC. Such funds are considered appropriated for a specific project and cannot be used for any other purpose unless the project is closed and the funds are re-appropriated. The BOCC shall review existing project accounts during the annual budget process.

Definitions:

A capital project account is for the construction, improvement, or acquisition of capital assets. A capital project account may have financial transactions that occur in multiple fiscal years.

A non-capital project account is for infrequent and/or unusual activities that may have financial transactions that occur in multiple fiscal years. These project accounts may or may not include on-going activities of the County. Examples include studies, asset replacement accounts (for assets that do not meet the definition of a capital asset, but are replaced less frequently than an annual basis), and other variable expenditures (such as costs for storm-related cleanup).

Responsibilities:

The BOCC is responsible for the authorization of all project accounts.

The County Manager is responsible for recommending the establishment of proposed project accounts. Recommendations may occur in the annual budget process or in a separate process.

The Director of Budget and Financial Planning is responsible for coordinating agency and department project account requests, and ensuring compliance with applicable state budget laws and County budgetary policies and procedures.

Elected officials, agency directors, and department directors are responsible for submitting, explaining, and justifying project account requests and for managing budgetary resources in a prudent manner.

Procedure 120.12 Project Accounts

  1. The County Manager or his/her designee(s) shall review existing project accounts on an annual basis. Elected officials, agency directors, and department directors shall explain and justify why existing project accounts should remain open if requested by the County Manager or his/her designee(s).
  2. The County Manager may close an existing project account if he/she feels the purpose of the project account has been completed. The County Manager or his/her designee(s) shall inform the elected official, agency director or department director of the County Manager's action.
  3. When an existing project account is closed, any remaining funds shall be returned to the original funding source(s) or to a debt service account if required by debt covenants.
  4. Project accounts shall be established by the County Manager or his/her designee(s) as approved by the BOCC in the annual operating budget and annual Capital Improvement Program (CIP).
  5. If it is necessary to request a new project account outside of the annual budget process, a request must be submitted to the Director of Budget and Financial Planning.
  6. Requests for new project accounts shall be submitted in a format determined by the Director of Budget and Financial Planning and shall include a complete explanation and justification of why the request is necessary. All requests must be submitted to the Director of Budget and Financial Planning no later than November 1st of each year. Any requests submitted after November 1st may be too late to be considered by the BOCC.
  7. The Director of Budget and Financial Planning and staff shall assist the County Manager in evaluating requests for new project accounts.
  8. If the County Manager determines that a request for a new project account is not necessary, he/she will advise the BOCC that a project account has been requested and denied. The County Manager or his/her designee(s) shall inform the elected official, agency director, or department director of the County Manager's decision.
  9. If the County Manager determines that a request for a new project account is necessary, the Director of Budget and Financial Planning shall prepare and submit an agenda item for BOCC consideration during a weekly business session. The BOCC shall act on requests for project accounts submitted outside of the annual budget process during a weekly business session by December 31st of each year.
  10. The Budget and Financial Planning Department shall maintain documentation for all approved project account requests.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

120.13 - Encumbrances

It is the policy of the BOCC that open encumbrances for outstanding purchase orders less than $25,000 lapse at the end of the fiscal year. Open encumbrances for outstanding purchase orders equal to or greater than $25,000 will continue as an obligation of the prior year budget for a maximum of twelve (12) months. The Director of Budget and Financial Planning may extend this twelve (12) month maximum for individual purchase orders.

Definitions:

An encumbrance is a commitment of budgeted funds to purchase an item or service prior to actual payment and prior to actual delivery of the item or service. Generally, an encumbrance is created after a contractual obligation has been incurred.

Procedure 120.13 Encumbrances

  1. Open encumbrances for outstanding purchase orders do not lapse at the end of the fiscal year. Open encumbrances for outstanding purchase orders will continue as an obligation of the prior year budget for an additional twelve (12) months until the close of the purchase order or the subsequent fiscal year. At the close of that subsequent fiscal year, i.e. the additional twelve (12) months, the Director of Budget and Financial Planning may extend the open encumbrance for individual purchase orders, on a case by case basis, for an additional period of time when necessary to protect the financial interests of the County. In addition, the Director of Budget and Financial Planning is authorized to increase the budget amounts recorded in the County’s financial system as necessary for the financial system to properly process, during the current fiscal year, those open encumbrances derived from outstanding purchase orders from previous fiscal years.
  2. Requests to extend the additional twelve (12) period shall be submitted in a format determined by the Director of Budget and Financial Planning and shall include a complete explanation and justification of why the request is necessary. All requests must be submitted to the Director of Budget and Financial Planning no later than December 1st of each year.
  3. If the Director of Budget and Financial Planning determines that a request to extend the additional twelve (12) month period is not necessary and appropriate, he/she shall inform the elected official, agency director, or department director of the decision.
  4. Requests to increase the budget amounts in the County’s financial system for open encumbrances derived from outstanding purchase orders from previous fiscal years shall be submitted in a format determined by the Director of Budget and Financial Planning and shall include a complete explanation and justification of why the increase is necessary. All requests must be submitted to the Director of Budget and Financial Planning no later than December 1st of each year.
  5. If the Director of Budget and Financial Planning determines that a request to increase the budget amounts for open encumbrances derived from outstanding purchase orders from previous fiscal years is not necessary and appropriate, he/she shall inform the elected official, agency director, or department director of the decision.
  6. Treasury and Financial Management shall maintain documentation for all open encumbrances that continue as an obligation of the prior year budget.
  7. The Budget and Financial Planning Department shall maintain documentation for all increases to budget amounts for open encumbrances derived from outstanding purchase orders from previous fiscal years.

Resolution No. 122-02
Revision Number: 015-14
Date of Last Review: Adopted 12-19-02, Revised 04-03-14

Policy 130: Capital Improvement Program

130.1 - Introduction

It is the policy of the Board of County Commissioners (BOCC) to adopt a five-year Capital Improvement Program (CIP), which shall be published on an annual basis. The first year of the annual CIP shall be appropriated as the County’s capital improvement budget for the upcoming fiscal year.

The CIP shall be reviewed, evaluated, prioritized, and updated on an annual basis in conjunction with the operating budget cycle. The CIP shall include a schedule of capital improvement projects by year, including the estimated total capital cost, estimated annual operating costs or savings, and anticipated funding source(s) for each project.

Definitions:

A capital improvement project is an investment of public and/or private funds of at least $100,000, which relates directly to the County’s strategic plan and has a useful life of at least five (5) years. Examples of a capital improvement project include, but are not limited to:

  1. Land Acquisition.
  2. New construction or acquisition of public buildings or structures.
  3. Remodeling and/or additions to public buildings or structures.
  4. Construction of new and replacement infrastructure projects (roads, storm drains, bridges, sewers, etc.).
  5. Equipment, individual vehicles, and major computer/software systems.
  6. Soft costs related to items 1 through 5 above, including legal costs, engineering costs, and architectural design costs.
  7. Studies less than $100,000, which are preparatory to a capital improvement project of at least $100,000.

Responsibilities:

The BOCC is responsible for adopting a five-year CIP on an annual basis. The BOCC is also responsible for appropriating the first year of the five-year CIP on an annual basis.

The County Manager is responsible for preparing and submitting a preliminary five-year CIP to the BOCC before May 1st of each year as required by the Home Rule Charter for Johnson County. In addition, the County Manager is responsible for submitting a final recommendation for the proposed five-year CIP to the BOCC at least 45 days prior to the statutory deadline for adopting the annual budget.

The Director of Budget and Financial Planning is responsible for compiling agency and department capital improvement project requests, evaluating the impact of each request on the County’s debt structure and multi-year budget projection, and assisting the County Manager with the development of a proposed five-year CIP. In developing the proposed five-year CIP, the Director of Budget and Financial Planning will ensure that project costs are indexed for estimated inflation.

The Director of Planning is responsible for providing demographic research for use in developing a proposed five-year CIP. In addition, the Director of Planning shall review all CIP requests in regard to compatibility with the County’s Comprehensive Plan and the comprehensive plans of other jurisdictions.

Elected officials, agency directors, and department directors are responsible for preparing, submitting, explaining, and justifying capital improvement project requests for the annual CIP. Project requests will include a specific percentage of the project budget as a contingency amount, as defined by the County Manager in the financial procedures, to reduce the probability of cost overruns if the project is approved for funding.

Objectives:

A five-year CIP shall be adopted by the BOCC on an annual basis to accomplish the following objectives:

  1. To reflect the County’s strategic planning regarding the future development of Johnson County and the County’s desired level of support for future development.
  2. To identify all capital improvement project requests in the five-year period covered by the CIP.
  3. To link plans for physical facilities to available financial resources.
  4. To calculate the estimated financial impact of the five-year CIP on the County’s debt structure and multi-year budget projection, including the estimated annual operating costs for each project.
  5. To illustrate and communicate the County’s proactive control over the management and issuance of new debt.
  6. To encourage orderly growth by informing the private sector of public facility plans.
  7. To facilitate intergovernmental coordination of capital planning in Johnson County.
  8. To encourage citizen participation in the annual CIP process and citizen understanding of the County’s capital improvement needs.

Procedure 130.1 Introduction

  1. The County Manager is responsible for appointing a Capital Improvement Program (CIP) Coordinator. The CIP Coordinator is responsible for coordinating the annual CIP process, including the development, distribution, and collection of forms used to submit capital improvement project requests.
  2. The CIP Coordinator shall distribute capital improvement project request forms by March 1st of each year to agencies and departments. All agencies and departments shall submit capital improvement project requests according to the instructions and forms provided by the CIP Coordinator.
  3. The Budget and Financial Planning Department shall maintain documentation for all capital improvement projects requested in the five-year CIP.
  4. The annual CIP process will include a CIP Review Committee. This committee will be comprised of the following positions:
    1. County Manager or his/her designee(s)
    2. Director of Budget and Financial Planning or his/her designee(s)
    3. CIP Coordinator
    4. Director of Facilities
    5. Director of Planning or his/her designee(s)
    6. Director of Information Technology
    7. Director of Infrastructure
    8. Director of Wastewater
    9. At-large member from the Human Services area appointed by the County Manager or his/her designee (this position will rotate every two years)
    10. At-large member to represent the governing boards (Airport, Developmental Supports, Library, Mental Health, Park and Recreation); this position will be reviewed annually by the County Manager or his/her designee in conjunction with the Executive Directors of the governing boards
    11. At-large member to represent elected officials (District Attorney and Sheriff); this position will be reviewed annually by the County Manager or his/her designee in conjunction with the District Attorney and the Sheriff.

The CIP Review Committee is responsible for reviewing capital improvement project requests and submitting a recommended five-year CIP to the County Manager.

The CIP Review Committee will meet periodically to review project requests, evaluate project requests according to a number of criteria, and prepare a recommended five-year CIP.

130.2 - Financing Philosophy

It is the policy of the BOCC to finance tax-supported projects included in the annual CIP with a combination of pay-as-you-go (cash) financing and debt financing. For each project, pay-as-you-go financing shall be considered first before any debt is issued. If debt financing is necessary for the annual CIP, the debt shall be issued and managed according to section 150 Debt Management.

Policy 140: Replacement of Assets

140.1 - Introduction

It is the policy of the Board of County Commissioners (BOCC) to budget for the orderly replacement of existing capital and non-capital assets through the annual operating budget and Capital Improvement Program (CIP). Funding for the replacement of capital assets which have a cost of at least $100,000 and have a useful life of at least five (5) years shall be budgeted through the CIP (see section 130 Capital Improvement Program). The replacement of all other existing capital and non-capital assets shall be included in the annual operating budget.

Responsibilities:

The County Manager is responsible for recommending a prudent, balanced annual operating budget to the BOCC for adoption that includes the orderly replacement of existing capital and non-capital assets.

The Director of Budget and Financial Planning is responsible for compiling agency and department asset replacement schedules and assisting the County Manager with a recommendation regarding the amount of asset replacement funding to include in the proposed operating budget.

Elected officials, agency directors, and department directors are responsible for preparing, submitting, explaining, and justifying annual asset replacement schedules.

Definitions:

A capital asset is defined in section 160 Capital Assets.

A non-capital asset is an asset with a cost of $1,000 to $10,000 and a useful life of three (3) years or more.

An asset replacement schedule is a schedule that itemizes relevant financial information, including estimated replacement costs, for existing capital and non-capital assets in a given agency or department.

Procedure 140.1 Introduction

  1. Elected officials, agency directors, and department directors shall submit capital and non-capital asset replacement schedules annually as part of the operating budget process in a format determined by the Director of Budget and Financial Planning.
  2. The Director of Budget and Financial Planning and staff shall compile the submitted capital and non-capital asset replacement schedules and assist the County Manager in formulating a recommendation for asset replacement financing as part of the proposed operating budget.
  3. An asset replacement project account(s) shall be established for each agency and department, if applicable.
  4. In the first quarter of each year, the Budget and Financial Planning Department shall transfer capital and non-capital replacement funding approved by the BOCC in the annual operating budget to the appropriate asset replacement project accounts for each agency and department.
  5. Elected officials, agency directors, and department directors shall manage the asset replacement project accounts to ensure that existing capital and non-capital assets are replaced in an appropriate and orderly manner.
  6. Existing asset replacement project accounts shall be reviewed on an annual basis by the County Manager or his/her designee(s) to ensure balances are necessary and appropriate.
  7. The County Manager may decrease or eliminate the balance of an asset replacement project account if he/she feels the existing balance is larger than necessary. The County Manager or his/her designee(s) shall inform the elected official, agency director or department director of the County Manager’s decision.
  8. Any excess funds identified by the County Manager in asset replacement project accounts shall be returned to the original funding source(s).
  9. The Budget and Financial Planning Department shall maintain documentation for all asset replacement project accounts.

140.2 - Financing Philosophy

The financing philosophy of the BOCC for capital assets which have a cost of at least $100,000 and have a useful life of at least five (5) years is described in section 130 Capital Improvement Program. For all other existing capital and non-capital assets, it is the policy of the BOCC to finance asset replacement with either pay-as-you-go (cash) financing or lease financing through the annual operating budget. The County Manager shall include appropriate funding and financing for the replacement of existing capital and non-capital assets in the proposed operating budget, unless otherwise directed by the BOCC during the annual budget process.

Policy 150: Debt Management

150.1 - Introduction

It is the policy of the BOCC to maintain or improve existing credit ratings through strong financial management, including the avoidance of short-term borrowing for operations. The County seeks to maintain or improve existing credit ratings since better credit ratings result in lower borrowing costs. To help maintain or improve the County’s credit ratings, an established program of managing the County’s debt becomes essential.

The Board of County Commissioners establishes these debt management policies to provide a functional tool to ensure that the County’s debt is managed in a fiscally prudent manner and in the best economic interest of the County. These debt management policies shall provide general guidelines for debt decisions rather than absolute rules or formulas to determine the level of County debt. Each situation requires a thorough review of the County’s debt position, financial health and economic forecast, as well as any mandated or legally imposed obligations.

The County’s debt management policies are established to achieve the following objectives:

  1. To preserve the public trust and prudently manage public assets to minimize costs to the taxpayers and ensure current decisions do not adversely affect future generations.
  2. To maintain the County’s ability to obtain access to the municipal bond market at favorable interest rates in amounts needed for capital improvements, economic development, and facilities or equipment to provide essential County services.
  3. To minimize borrowing costs and preserve access to credit markets.
  4. To seek to minimize debt interest costs whenever prudent in consideration of other cost factors and/or tax burden.
  5. To maintain a balanced relationship between debt service requirements and current operating costs, encourage growth of the tax base, actively seek alternative funding sources, minimize interest costs and maximize investment returns.
  6. To assess all financial alternatives for capital improvements prior to issuing debt. These could include categorical grants, loans, or state/federal aid.
  7. To preserve the County’s flexibility in capital financing by maintaining an adequate margin of statutory debt capacity.
  8. To maintain compliance with regulatory standards such as, but not limited to, Internal Revenue Service (IRS) codes and regulations.

Definitions:

Arbitrage: The practice of simultaneously buying and selling an item in different markets in order to profit from a spread in prices or yields resulting from market conditions. Arbitrage profits are created by selling tax-exempt debt and investing the proceeds in higher-yielding taxable securities, when referencing municipal debt. Municipal issuers are allowed to make arbitrage profits under certain restricted conditions.

Assessed Valuation: A value that is established for real or personal property for use as a basis for levying property taxes.

Bond Years: The product of the number of bonds (1 bond = $1,000 regardless of actual denomination) and the period of time from issuance to the stated maturity. It is used in calculating the average life (the total bond years/number of bonds) and net interest costs of an issue. Computations often include bond years for each maturity or for each interest rate, as well as total bond years for the entire issue.

Derivative: Contract whose value depends on, or derives from, the value of an underlying asset, reference rate, or index.

Direct Debt: The sum of the total bonded debt and any unfunded debt (typically short-term notes of the issuer). Direct debt may be incurred in the government’s own name or assumed through the annexation of territory or consolidation with another governmental unit.

General Obligation Bond: A bond secured by the issuer’s full faith and credit.

Market Valuation: The estimated appraised value of real and personal property.

Net Debt: Direct debt less sinking fund accumulations and all self-supporting debt.

Net Interest Cost (NIC): A common method of computing the interest expense to the issuer of bonds, and which usually serves as the basis of award in a competitive sale. NIC allows for premium and discount and represents the dollar amount of interest payable over the life of an issue, without taking into account the time value of money. While net interest costs actually refers to the dollar amount of the issuer’s interest costs, it is also used in reference to the average net interest cost rate, which reflects the overall rate of interest to be paid by the issuer over the life of the bonds.

Overlapping Debt: The issuer’s proportionate share of the debt of other local governmental units which either overlap it (the issuer is located either wholly or partly within the geographic limits of the other units) or underlie it (the other units are located within the geographic limits of the issuer). The debt is generally apportioned based upon relative assessed value.

Property Tax-Base Supported: Supported by property tax-base generated revenues, such as general property tax. Includes all general obligation pledges of the County, even those bonds supported by dedicated revenue sources.

Property Tax Supported: Directly supported by property taxes. Includes all net debt bond issues and the portions of those issues that are paid for by property taxes.

Revenue-Supported: Non-general obligation bonds which are solely supported by revenues not based on real estate property values, such as sales taxes, special assessments, parking fees, water charges and river terminal user fees.

Self-Supporting or Self-Liquidating Debt: Debt which is to be repaid from proceeds derived exclusively from the enterprise activity for which the debt was issued.

Special Obligation Revenue Bonds: Revenue bonds for which the County grants its tax-exemption, but for which no financial or moral obligation is assumed; including but not limited to, second party supported Industrial Development, Commercial and Housing Bonds.

Total Debt: All debt other than Special Obligation Revenue Bonds and general obligation debt sponsored by a specific rate structure. “Total debt” does not include overlapping debt or deduct sinking fund assets.

True Interest Costs (TIC): Under this method of computing the borrower’s cost, interest cost is defined as the rate, compounded semiannually, necessary to discount the amounts payable on the respective principal and interest maturity dates to the purchase price received for the bonds. TIC computations produce a figure slightly different from the NIC method since TIC considers the time value of money, which NIC does not.

Responsibilities:

  1. The Director of Budget and Financial Planning is responsible for establishing a solicitation and selection process for securing professional services that are required to develop and implement the County’s debt management program. Goals of the solicitation and selection process shall include encouraging participation from qualified service providers and securing services at competitive prices. In addition, the Director of Budget and Financial Planning is responsible for monitoring outstanding debt issues to identify opportunities of reducing interest costs through refinancing of existing debt.
  2. The Director of Treasury and Financial Management is responsible for monitoring outstanding debt issues to ensure compliance with debt covenants and regulatory standards such as, but not limited to, Internal Revenue Service (IRS) codes and regulations and to establish and maintain procedures and guidelines to facilitate that compliance.
  3. The County’s bond counsel shall render opinions on the validity, enforceability, and tax-exempt status of County debt and related matters, and prepare the necessary resolutions, agreements, and other documents.
  4. The County’s financial advisor shall advise on the structuring of obligations to be issued, inform the County of various options, advise the County as to how choices will impact the marketability of County obligations and provide other services as defined by contract. In addition, the financial advisor shall maintain complete independence from the underwriting process.

150.110 IRS Post Issuance Compliance

1. In General.

The Internal Revenue Service (the “IRS”) has strongly recommended that issuers of municipal bonds assist with the efforts to administer the income tax laws by adopting written policies and procedures that are intended to assure that appropriate compliance measures are implemented by such issuers after their bonds have been issued.

2. Definitions.

“Authorized Representative” means the Post-Issuance Compliance Officer (PICO) of Johnson County (the “Issuer”) designated below and any officer or staff of the Issuer designated by the Post-Issuance Compliance Officer to perform any of the functions described in this Post Issuance Compliance Procedure (PICP).

“Bad Use” means expenditure on projects to be used by other than a governmental user, a loan to a non-governmental person or use of a bond-financed facility by a non-governmental person.  As indicated herein, such use may arise pursuant to a management agreement, research agreement, naming rights agreement, lease or any similar agreement relating to a bond-financed facility.

“Bad Payments” means any payments derived from Bad Use of bond financed property.

“Bond Counsel” means any nationally recognized bond counsel engaged by or on behalf of the Issuer to review or opine on matters covered by this PICP.

“Code” means the Internal Revenue Code of 1986, as amended.

“Governing Body” means the Board of County Commissioners of Johnson County, Kansas and the Chairman of the Board of County Commissioners.

“Regulations” means the Income Tax Regulations promulgated pursuant to the Code.

“Tax-Advantaged Bonds” means, collectively, any of the Issuer’s Tax Credit Bonds and Tax Exempt Bonds.

“Tax Closing Documentation” means any and all covenants, certificates, instructions and information reporting documentation contained in the closing transcript or record of proceedings for any series of Tax-Advantaged Bonds, whether executed in connection with the issuance of any such series of obligations or executed post-closing.

“Tax Credit Bonds” means the one or more series of governmental purpose tax credit bonds or other form of obligations that the Issuer has previously issued or may in the future issue that entitle the Issuer, the owners of the Tax Credit Bonds, or any other permitted party to either a credit against federal income tax liability or a refundable credit from the United States Treasury.

“Tax Exempt Bonds” means the one or more series of governmental purpose bonds or other form of tax exempt obligations that the Issuer has previously issued or may in the future issue, the interest on which is excludable from gross income of the owners thereof pursuant to Sections 103 and 141-150 of the Code and Regulations.

3. Incorporation of Tax Closing Documentation.

This PICP shall be deemed to include and hereby incorporates all Tax Closing Documentation for each issue of the Issuer’s Tax-Advantaged Bonds.

4. Incorporation of Appendices.

This PICP shall be deemed to include and hereby incorporates all special post-issuance compliance policies and procedures set forth in each of the Appendices hereto.

5. Overall Responsibility for Compliance.

a. Assignment of Responsibility.

Oversight responsibility for post-issuance compliance responsibilities are divided and assigned to the individual designated by the Finance Director.  Such officer is hereby designated the Post-Issuance Compliance Officer (“PICO”).  Certain specific compliance responsibilities may be assigned by the PICO to a designated Authorized Representative of the Issuer.

b. Consultation with Outside Professionals.

The PICO and any Authorized Representative may consult with any Bond Counsel or other municipal finance advisors or professionals that they deem appropriate to meet the requirements of this PICP.

6. Tax Documentation and Closing Filing Requirements.

a. Tax Documentation Assembly.

The PICO will assemble and document to his or her satisfaction the location of all the Tax Closing Documentation for each issue of Tax-Advantaged Bonds of the Issuer. The PICO will keep all post-closing documentation as a supplement to the Tax Closing Documentation.

b. Closing Filing Requirements.

1) The PICO will assemble and document to his or her satisfaction the location of all the Tax Closing Documentation for each issue of Tax-Advantaged Bonds of the Issuer.  The PICO will keep all post-closing documentation as a supplement to the Tax Closing Documentation.

2) The PICO will confirm to his or her satisfaction whether Tax Exempt Bonds have been issued as ‘bank qualified’ bonds pursuant to Section 265(b) of the Code and Regulations.  If the Tax Exempt Bonds are “bank qualified,” the PICO will note as part of the Issuer’s books and records the limits on additional Tax Exempt Bonds that may be issued in the remaining portion of the calendar year.

c. Coordination with Accounting Systems. With respect to all compliance topics set forth in this PICP and where relevant, the PICO will confirm recording of all  information relating to any of the compliance topics set forth in this PICP in either the Issuer’s or any third-party or trustee accounting system.

7. Arbitrage Investment Limitations and Rebate Requirements.

a. Information Assembly, Collection and Procedures.

If not already set forth in the Tax Closing Documentation for an issue, the PICO will determine and record the following information and establish the following procedures:

1) Determine whether the Tax-Advantaged Bonds are a fixed yield issue of bonds or are variable yield issue of bonds.

2) Determine whether the Issuer has entered in a hedging transaction (e.g., interest rate swap, cap, floor or collar) either before, during, or after the bond issue date.

a. With respect to all hedging transactions, determine or confirm with Bond Counsel prior to entering into any hedging transaction (including interest rate swaps and caps) with respect to the bonds whether or not such swap agreement is to be identified as a qualified hedge as defined in the Regulations, and if such a qualified hedge is to be entered into, determine or confirm with Bond Counsel prior to amending or terminating the hedge the impact of any amendment or termination of such a qualified hedge.  A qualified hedge must be identified in the first information reporting form relating to a bond issue filed with the IRS on or after the date on which the qualified hedge contract is executed.

3) Determine whether the bonds are secured by a bond insurance policy, letter of credit, or other form of credit enhancement or liquidity facility. With respect to all bond insurance, letter of credit, other credit enhancement or liquidity facilities entered into with respect to the bonds, determine or confirm with Bond Counsel the impact of such a transaction on the bonds prior to entering into or amending or terminating any such credit enhancement.

4) Identify or provide for the computation of the bond yield for each issue of the Tax-Advantaged Bonds.

5) Identify each fund or account containing “gross proceeds” of the bonds (as that term is defined in the Regulations), including any fund or account established under agreements other than the bond ordinance, resolution, indenture or Tax Closing Documentation, particularly any fund or account that may be expected to be used to pay debt service on the bonds.

6) Identify the applicable temporary periods and investment yield restrictions with respect to each such fund or account, including the investment yield restrictions applicable at the end of each temporary period.

7) Confirm that the size of any “reasonably required reserve fund” for the bonds (as that term is defined in the Regulations) has not been funded in an amount more than 10% of the issue price or principal amount of the bonds as may be applicable.  Identify any investment yield restrictions applicable for deposits of any other moneys into such a reserve fund in excess of the applicable limits for such reserve fund as set forth in the Tax Closing Documentation.

8) Record each type of investments in which gross proceeds have been invested. Record whether investments were purchased at a fair market value and whether they were purchased on a negotiated basis or were put out for bid.  If by bid, obtain all documentation relating to whether there was compliance with the bidding rules established for the specific investment.  Consult with Bond Counsel and/or financial advisors, if needed.

9) Provide for the documentation, computation and payment of any yield reduction payments in the same manner as set forth for rebate payments below.

b. Rebate Information.

  1. Determine for each issue of Tax-Advantaged Bonds no later than the date set forth in the Tax Closing Documentation (and in no event later than the fifth anniversary date of the date of issuance of each issue), if a rebate consultant needs to be retained and the timing for hiring of such a rebate consultant.  Obtain a copy of all rebate reports provided by a rebate consultant.
  2. Establish whether each issue is eligible for any spending or small issuer exception to the rebate requirements.
  3. Except as may otherwise be provided in the Tax Closing Documentation, establish a calendar of each date for each of the Issuer’s bond issues that the Issuer will be required to make any rebate payment to the United States (generally, every 5 years and upon final payment of all bonds).  Such a calendar must recognize that the dates of any required rebate payment to the United States must be adjusted to reflect any redemption date of a bond issue prior to final maturity.
  4. Provide a procedure for timely filing of any required rebate payment to the United States, including the completion of any IRS Form 8038-T.
  5. For Special Arbitrage and Rebate Spending Procedures.  To the extent that any bond proceeds are used to reimburse the Issuer for expenditures paid prior to the date of issuing the bonds, the PICO will assure that such proceeds are allocated to the reimbursement of such expenditures no later than 18 months after the later of (i) the date the expenditure was paid, or (ii) the date that the project was placed in service, but in no event more than 3 years after the expenditure was paid.
  6. For Error Correction Procedures the PICO will document, as soon as practicable after bond closing, all steps to be taken in order to correct any investment and rebate compliance errors.  These steps may include, but are not limited to, consultation with Bond Counsel or any of the procedures described below as may be applicable.

8. Bond Proceeds Spending Requirements.

a. Assignment of Compliance Duty.

With respect to this compliance topic, the PICO will coordinate compliance for each issue of Tax-Advantaged Bonds under this PICP and the Tax Closing Documentation for each such issue.

b. Information Assembly, Collection and Procedures.

If not already set forth in the Tax Closing Documentation for an issue, the PICO, with the assistance of the County departments or agencies utilizing the bond proceeds, will determine and record the following information and establish the following procedures:

  1. Assemble a list of all purposes and projects to be financed by the bonds, including information on the expected useful lives of projects.
  2. Designate which of these purposes represent capital expenditures or working capital.
  3. Establish the exact amount of bond proceeds and all other sources of funding for the project. In connection with this procedure, the PICO will document all requirements applicable to such other sources of funding.
  4. Determine the amount, if any, of bond proceeds that may be expended on payment of interest on the bonds (i.e., capitalized interest) and all applicable spending and time limits applicable to such payment of interest on the bonds.
  5. Identify and calendar any time periods that may be applicable as to when bond proceeds must be spent.

c. Spending Limitation Procedures.

The PICO will determine and record the following information and establish the following procedures:

  1. Establish such accounting controls as are necessary to guarantee that no more than the lesser of (i) 10% of the net proceeds or (ii) $15 million will be expended on projects used by persons other than a governmental unit.
  2. Establish such accounting controls as are necessary to guarantee that no more than 5% of net proceeds of the bonds may be used for a purpose that is unrelated to, or disproportionate to, the governmental purpose of the bond issue (e.g., a privately operated cafeteria in a government office building is generally related use; leasing of space in the government office building to private commercial tenants is unrelated use).
  3. Establish such accounting controls as are necessary to guarantee that no more than 5% of net proceeds of the bonds are loaned to a non-governmental person.
  4. Establish such accounting controls, calendars and reporting procedures as are necessary to confirm that any time periods limiting spending have been met.  For new money issues, establish such accounting reports as are necessary to determine at least annually the amounts and percentages of bond proceeds that have been spent on the intended projects.
  5. Establish such accounting controls as are necessary to confirm that the proceeds are spent on the approved projects.
  6. Establish such accounting and review procedures as are necessary to record and approve a change from an expected qualified project to a qualified substitute project.
  7. Establish such accounting and review procedures as are necessary to arrange for qualified expenditures of any unspent moneys that remain after completion of the original list of projects to be financed by the Tax-Advantaged Bonds. In connection with this procedure, the PICO will prepare a written, detailed explanation regarding why such proceeds remain unspent. Also, if Tax Exempt Bond proceeds or any amount of Tax Credit Bond proceeds remain unexpended as of the third anniversary date of the date of issue of the bonds, the PICO will confirm with Bond Counsel the proper steps to take to protect the qualified status of such bonds (including but not limited to the continued investment of such amounts) and will confirm with Bond Counsel whether the existence of such unspent proceeds impacts the ability of the Issuer to issue any new issue of Tax-Advantaged Bonds.
  8. Establish such accounting controls, calendars and reporting procedures and such other review procedures as are necessary to confirm the actual expenditure or deemed allocation to expenditure of all bond gross proceeds by the date that is no later than 18 months after the later of the date the expenditure is paid or the date any project that is financed by the issue is placed in service.  A final record of all actual expenditures or deemed allocations to expenditures must in all events be made by the date that is 60 days after the fifth anniversary date of the issuance of the bonds or 60 days after the retirement of the bonds, if earlier.

9. Use of Bond‑Financed Property and Bad Use or Bad Payments Limitations.

a. Assignment of Compliance Duty.

With respect to this compliance topic, the PICO will coordinate compliance for each issue of Tax-Advantaged Bonds under this PICP and the Tax Closing Documentation for each such issue.  The PICO will work with the County departments or agencies utilizing the bond proceeds to accomplish these procedures.

b. Information Assembly, Collection and Procedures.

If not already set forth in the Tax Closing Documentation for an issue, the PICO will determine and record the following information and establish the following procedures:

1) Basic Information.

  1. Determine as of the date of issue of the bonds how each source of funding is to be expended on or allocated to any Bad Use.
  2. Determine the amount of bond proceeds loaned or granted to non-governmental entities.
  3. Determine the list of payments to be derived from operation of the bond‑financed property and whether the bond‑financed property secures the repayment of the bonds.

2) Bad Use and Bad Payments Control Procedures.

  1. The PICO will establish such monitoring procedures as are necessary to bring to the attention of the PICO for approval prior to execution any lease, sales contract or other disposition of bond‑financed property.
  2. With respect to the operation of bond‑financed property, the PICO will establish such monitoring procedures as are necessary to bring to the attention of the PICO for approval prior to execution any naming rights, sales or licensing contract; any management or service contract, research contract; any output contracts; cell phone tower agreements; solar power contracts or windmill-generation contracts or similar types of contracts.
  3. Immediately upon the execution of any lease, sale or other disposition that constitutes a Bad Use, and in all events no less than annually during the term of any bond issue, the PICO will provide a calculation of the amount of Bad Use and Bad Payments with respect to bond‑financed property.
  4. Should the amount of Bad Use and Bad Payments approach the limits described above, the PICO will refer to the Change in Use and Remediation requirements of this PICP and shall immediately consult with Bond Counsel as to the best course of action to respond to such a situation.

10. Change in Use and Remediation.

a. Assignment of Compliance Duty.

With respect to this compliance topic, the PICO will coordinate compliance for each issue of Tax-Advantaged Bonds under this PICP and the Tax Closing Documentation for each such issue.  The PICO will work with the County departments or agencies utilizing the bond proceeds to accomplish these procedures.

b. Information Assembly, Collection and Procedures.

If not already set forth in the Tax Closing Documentation for an issue, the PICO will determine and record the following information and establish the following procedures. The PICO will locate any information with respect to this compliance topic including any list of options stated in the Tax Closing Documentation that is available to remediate excess Bad Use and Bad Payments.

c. Change in Use and Remediation Procedures.

  1. Should the information collected by the PICO with respect to Bad Use and/or Bad Payments indicate that the use or payments are in excess of the prescribed limits for the bond issue, the PICO will consult with Bond Counsel as to the remedial actions available under the Regulations to correct such excess use or payments.
  2. Should the information collected by the PICO with respect to Bad Use and/or Bad Payments indicate that the use or payments are in excess of the prescribed limits for the bond issue and the remedial actions set forth in the Regulations are not applicable, the PICO will consult with Bond Counsel as to the options that are available for voluntary correction of failures by entering into a closing agreement under the Tax Exempt Bonds Voluntary Closing Agreement Program described in IRS Notice 2008-31.

11. Refundings.

a. Assignment of Compliance Duty.

With respect to this compliance topic, the PICO will coordinate compliance for each issue of Tax-Advantaged Bonds under this PICP and the Tax Closing Documentation for each such issue. The PICO will work with the County departments or agencies utilizing the bond proceeds to accomplish these procedures.

b. Information Assembly, Collection and Procedures.

If not already set forth in the Tax Closing Documentation for an issue, the PICO will determine and record the following information and establish the following procedures:

1. Basic Information.

  1. Determine the redemption dates for all refunded bonds.
  2. Determine the list of projects being refinanced with proceeds of the bonds and any Bad Use or Bad Payments incurred with respect to such bond‑financed property.

2. Refunding Procedures.

  1. The PICO will establish such accounting reporting procedures as are necessary to assure that any refunded bonds are redeemed or retired within 90 days of the date of issue of the refunding bonds or, if the refunded bonds are not callable within 90 days, that such refunding is permitted under the Tax Closing Documentation or the Regulations and that such call date is the first call date for the refunded bonds required by the Tax Closing Documentation or the Regulations.
  2. The PICO will apply the same policies and procedures as set forth in sections 7 and 8 of this PICP to any refunding bonds. With respect to this procedure, the PICO will ensure that any final rebate calculations for the refunded bonds will be performed within 60 days of redemption of refunded bonds and timely filing of Forms 8038-T or Forms 8038-R with such payment as may be required, as appropriate, will be made. 
  3. The PICO will apply the same policies and procedures as set forth in sections 7 and 8 of this PICP to the property being refinanced by the refunding bonds.

12. Modification of Bond Terms and Events of Default.

a. Assignment of Compliance Duty.

With respect to this compliance topic, the PICO will coordinate compliance for each issue of Tax-Advantaged Bonds under this PICP and the Tax Closing Documentation for each such issue.  The PICO will work with the County departments or agencies utilizing the bond proceeds to accomplish these procedures.

b. Information Assembly, Collection and Procedures.

If not already set forth in the Tax Closing Documentation for an issue, the PICO will determine and record the following information and establish the following procedures:

1. Basic Information.

The PICO will assemble, and make all gathered information and documentation regarding the modification of bond terms or events of default, part of the Issuer’s books and records.

2. Modification of Bond Terms and Events of Default Procedures.

  1. The PICO will establish such accounting and reporting procedures as are necessary to confirm that any tax levy, tax credits or other revenues securing the bonds have been received and that the debt service on the Tax-Advantaged Bonds has been paid and compliance with non-payment covenants with respect to the Tax-Advantaged Bonds has occurred. In the event that any payment or other type of default occurs, the PICO will consult with Bond Counsel.
  2. The PICO will establish such reporting requirements and information gathering procedures as are necessary to identify whether any events have occurred that would have or could have triggered a deemed discharge or reissuance of the bonds.  Such reporting requirements will include assembling, prior to execution, if possible, information concerning (i) changes (modifications) of any of the contractual terms of the bonds (including modifications of the bond interest rates, maturity dates or payment schedule), (ii) changes to the credit enhancement of or liquidity facility for the bonds, (iii) changes in the nature of the security for the bonds, (iv) purchase of the Tax-Advantaged Bonds by the Issuer, or (v) any deferral or default of payment of principal and interest due on the Tax-Advantaged Bonds. With respect to this procedure, the PICO should consult with Bond Counsel as to the options that are available to the Issuer for dealing with such events, including acquiring any bond security from a federal agency or instrumentality.

13. General Recordkeeping Requirements and Records Retention.

a. Assignment of Compliance Duty.

With respect to this compliance topic, the PICO will coordinate compliance for each issue of Tax-Advantaged Bonds under this PICP and the Tax Closing Documentation for each such issue.  The PICO will work with the County departments or agencies utilizing the bond proceeds to accomplish these procedures.

b. Information Assembly, Collection and Procedures.

If not already set forth in the Tax Closing Documentation for an issue, the PICO will determine and record the following information and establish a General Recordkeeping Requirement and Records Retention Procedure.  Pursuant to this procedure, the PICO will record in a retrievable paper or electronic form all of the information required by this PICP.  At a minimum for each issue of Tax-Advantaged Bonds, the PICO shall record and keep copies of:

The bond transcript of proceedings;

  1. all resolutions, ordinances and reimbursement declarations and minutes pertaining to the projects financed, if not included in the bond transcript;
  2. all surveys, feasibility or demand studies with respect to the bonds, if not included in the bond transcript;
  3. all bond yield computations including supporting certificates and investment records (including, if applicable, trustee records) pertaining to the issue price of the bonds, proceeds of the bonds, investment agreements and related bidding documents, credit enhancement and liquidity documents, swap documents, rebate reports and rebate payments;
  4. all documents pertaining to the expenditure or granting of bond proceeds for the acquisition, construction or renovation of bond‑financed property including, if applicable, any trustee records, requisitions, reimbursements, draw schedules, draw requests, construction contracts, invoices, bills, land/project related appraisals, payment records, requisition statements, reimbursement records, cancelled checks, a final schedule of property financed by the bonds and final allocations of bond proceeds;
  5. all formal elections made for the bond financing (e.g., an election to employ an accounting methodology other than specific tracing)
  6. all records of trade or business use, purchase, lease, sublease or sale of bond‑financed property including any leasehold improvement contracts and ownership documentations such as joint venture arrangements, limited liability corporation arrangements or partnership arrangements;
  7. all management contracts and other service agreements, research contracts, naming rights contracts and other contracts listed in this PICP;
  8. all accounting audits for bond‑financed property;
  9. all information reports filed for the bonds;
  10. all documentation pertaining to any prior IRS examination of Issuer and/or tax exempt bonds; and
  11. all correspondence related to the above (faxes, emails and letters).

c. Record of payments.

The PICO will develop such procedures as are necessary to document the payments made of all principal, interest and any redemption payments on the Tax-Advantaged Bonds.

d. Retention.

All records accumulated for the bond issue shall be maintained for a period of six years following the later of (i) final maturity of the bonds or (ii) any Tax-Advantaged Bonds issued to refund the bonds.

14. IRS Correspondence and Audits.

The PICO will consult with Bond Counsel immediately upon receipt of any correspondence from, or opening of an examination of any type, with respect to Tax-Advantaged Bonds by the IRS.

15. Periodic Review Requirements.

The PICO will review the implementation of this PICP with the County Manager at least annually prior to October 1st during the term of any Tax-Advantaged Bonds. The PICO will also periodically seek the advice of Bond Counsel or other municipal finance advisors or professionals that he or she deems appropriate to review and/or revise the terms of this PICP.  Such revisions will need to be approved by the County Manager.  The PICO may approve clarifications to this PICP that he or she deems appropriate in consultation with Bond Counsel.

16. Continuing Disclosure Obligations.

a. Annual Report.

In each year that the Issuer has Tax-Advantaged Bonds or taxable obligations outstanding subject to SEC Rule 15c2-12, no later than the SEC report date included in the Issuer’s transcript of proceedings for such obligations (the “Annual Report Due Date”), the  PICO shall file, or cause its dissemination agent, if applicable, to file, its annual report (the “Annual Report”) with the Municipal Securities Rulemaking Board (the “MSRB”) through its Electronic Municipal Market Access facility for municipal securities disclosure (“EMMA”).  In preparing its Annual Report, the PICO shall review each of its outstanding continuing disclosure undertakings (collectively, the “Undertakings”) to determine the quantitative financial information and operating data which, together with the audited financial statements, shall constitute the content of the Annual Report.

b. Event Filings.

So long as the Issuer has Tax-Advantaged Bonds or taxable obligations outstanding subject to SEC Rule 15c2-12, the PICO shall maintain a list of the material events required to be disclosed under each of the Undertakings to determine whether such events have occurred.  The PICO shall be responsible for filing notice of such events as required by the applicable Undertaking.  The PICO will work with such other County departments or agencies as necessary to obtain timely notice when such material events occur.

Financial Procedures, Section #150
Date of Last Review: 9/15/2019

150.2 - Debt Administration

It is the policy of the BOCC for County debt to be administered according to the following guidelines:

  1. The County shall maintain good communications with bond rating agencies to ensure a complete and clear understanding of the creditworthiness of the County.
  2. Every financial report and bond prospectus will follow a policy of full and complete disclosure of financial conditions and operating results, in conformance with guidelines issued by applicable entities to meet the disclosure needs of rating agencies, underwriters, investors, agencies, and taxpayers. These disclosures shall be reported in appropriate financial documents as enumerated in section 150.9 Appropriate Disclosure Documents.
  3. The County should market its debt issues on a competitive basis, unless specific criteria are met.
  4. If a negotiated sale is advised, the County will competitively select the underwriter(s) needed to accomplish the structuring, marketing, pricing, and sale of the bonds.
  5. A negotiated sale process will only be considered if specific criteria are met, specifically tests relating to unusual credit quality, issue size and market access.
  6. All pricing for negotiated sales will be performed with direct involvement by County staff and the County’s financial advisor. The administration and management of the pricing sessions should always be conducted with the understanding that pricing can be done another day.
  7. For capital needs of enterprise operations, debt financing should be considered so that the ratepayers who utilize the capital improvement over the life of the improvement are required to support the capital financing. Although a pay-as-you-go (cash) strategy for enterprise operations may reduce interest costs, it may also increase user rates well above equitable and affordable levels.
  8. Tax-supported debt for settlements should be used only when payments from the self-insurance fund (Risk Management Fund) are not sufficient to provide for the payment. Payment of litigated judgments against the County shall be reviewed on a case-by-case basis by the Legal Department and Treasury and Financial Management to determine the best strategy for payment and least cost method. Based upon that review, a recommendation will be presented to the Board for consideration.
  9. The County shall identify a reserve level for debt service equal to a minimum of 5% of the annual principal and interest due on outstanding debt in order to ensure adequate debt service liquidity while minimizing the exposure to arbitrage liability, subject to debt covenants requiring a specific reserve in excess of this amount. Specific policies on reserve levels are described in section 110 Reserves for Working Capital.
  10. Proceeds from long-term debt should not be used to fund current operating costs.
  11. The scheduled maturities of long-term obligations should be less than the expected economic life of the capital project or asset(s) financed.
  12. The County shall seek to maintain a minimum of 20% of its statutory debt capacity.
  13. In determining the type of bond to issue, the following factors should be considered:
    1. The direct and indirect beneficiaries of the project. A significantly large proportion of citizens should benefit from projects financed by general obligation bonds.
    2. The time pattern of the stream of benefits generated by the project, and the asset’s useful life.
    3. The revenues that may be raised by alternative types of user charges.
    4. The cost-effectiveness of user charges.
    5. The effect of proposed bond issues on the County’s ability to finance future projects of equal or higher priority.
    6. The interest costs for each type of bond.
    7. The impact on the County’s financial condition and credit ratings.
    8. The impact on statutory debt limit.
  14. In determining when to issue bonds, the following factors should be considered:
    1. The timing of other proposed issues.
    2. The availability of the County’s audited financial statements for the previous fiscal year.
    3. The potential impact on the County’s bond ratings.
    4. The general condition of the municipal bond market.
    5. The need for capital to complete the project.
    6. Call dates of existing debt issues (refinancing opportunities).
    7. Present value interest savings (refinancing opportunities).
    8. Current reserves (refinancing opportunities).
  15. Where debt repayment relies on a limited number of principal revenue sources, the County will review the principal revenue sources with both a profile and a sensitivity analysis. Monitoring these revenue sources will have a positive impact from a credit rating perspective as well as future property tax impact.
  16. Bond proceeds should be used only for the following: construction project costs; acquisition of other fixed assets; bond issue costs; capitalized interest; debt service reserve requirements; judgments against the County; and refunding of outstanding bond issues.
  17. The County will use “true interest costs” as the means to determine the best bid on its debt issues.
  18. The County will consider refinancing outstanding debt when legally permissible and financially advantageous. In addition, the County may consider refinancing outstanding debt for restructuring purposes where revenue streams have declined and it is necessary to avoid default. When refinancing outstanding debt to reduce interest costs, the County shall seek to achieve a net present value benefit of at least 3% of the present value of the refunded debt service. This 3% level is only a minimum target when refinancing to reduce interest costs – the County may elect not to refinance outstanding debt even if the 3% savings target can be achieved.
  19. The County will maintain adequate debt service coverage ratios for the double-barreled bonds or revenue bonds in each applicable fiscal year. The maintenance of the coverage ratios shall be consistent with preserving the credit rating for each particular issue.
  20. The County will establish separate accounts to monitor investment earnings from dept proceeds in order manage potential arbitrage liability. Any investment earnings retained by the County (i.e., not rebated as an arbitrage liability) will be used according to relevant debt covenants, including the financing of debt issuance costs and retirement of outstanding debt. Investment earnings may not be used to finance project costs unless formally approved by the BOCC.

150.3 - Debt Planning

It is the policy of the BOCC for the County to plan future debt issuance according to the following guidelines:

  1. The County shall establish and maintain limitations on the issuance of new property tax-base supported bonded indebtedness which will promote a balanced relationship between expenditures for debt service and current County costs while assisting in minimizing the overall property tax burden.
  2. The County shall monitor the absolute amounts and year-to-year trends of key financial and debt ratios. If credit market norms exist, the County should strive to meet those standards.
  3. The County shall monitor the following trends:
    1. Ratio of property tax-supported debt service to discretionary revenues.
    2. Ratio of property tax-supported debt service to total revenues.
  4. All bond issues shall have a post sale analysis that will include the Delphis Hanover and any Kansas or other similar types of issues that have sold in the same recent market.

150.4 - General Obligation Bonds Supported by Property Taxes

It is the policy of the BOCC for the County to plan issuance of general obligation bonds supported by property taxes according to the following guidelines:

  1. General obligation bonds supported by property taxes should be used to finance only those capital improvements and long-term assets which have been determined to be essential to the maintenance or development of the County.
  2. General obligation bonds supported by property taxes should be used only after considering alternative funding sources, such as federal and state grants and other revenues.
  3. Excess balances in completed project accounts should be utilized as a substitute for new debt issues to fund projects that have been approved by the BOCC.

105.5 - Revenue Supported Bonds

It is the policy of the BOCC for the County to plan issuance of revenue-supported bonds according to the following guidelines:

  1. Utilize revenue-supported bonds, whether solely revenue backed or issued as general obligations with non-property tax revenue pledges, to finance public improvements that can be shown to be self-liquidating or fully supported by dedicated revenue sources, and needed for the infrastructure and economic development of the County.
  2. Revenue-supported bonds should be used to limit potential dependence on property taxes for those projects with available revenue sources, whether self-generated or dedicated from other sources.
  3. Adequate financial and, if necessary, engineering feasibility studies should be performed for each project to provide assurances as to the self-liquidating nature of the project or adequacy of dedicated revenue sources.
  4. General obligation revenue bonds should be issued for projects in order to obtain the lowest possible interest costs, unless the revenue bonds benefit only specific users, but not the community as a whole or where specific authority to issue general obligation backed bonds does not exist.

150.6 - Special Obligation Revenue Bonds

It is the policy of the BOCC for the County to plan issuance of special obligation revenue bonds according to the following guidelines:

  1. Special obligation revenue bonds, those bonds for which the County incurs no financial or moral obligation, should be issued only if the associated development projects can be shown to be financially feasible and contributing substantially to the welfare and economic development of the County and its citizens.
  2. Written assurances should be received that the proposed project will contribute to the economic goals of the County and to the growth of employment and other services for the citizens.
  3. Adequate financial feasibility studies should be performed for each project to provide assurances as to the financial viability of the project, and the marketability of the bonds.
  4. Adequate written assurances should be obtained that the users of the project are financially viable, financially committed to the project, and that the property will be used for its intended purpose for an extended period.

150.7 - Lease, Lease-Purchase, Lease Revenue Bonds & Other Long-Term Agreement

It is the policy of the BOCC for the County to plan issuance of lease obligations and other long-term financing agreements according to the following guidelines:

  1. Lease financing is appropriate in the following situations:
    1. Whenever the introduction of leased equipment or a capital improvement results in verifiable operating savings that, properly discounted, outweigh the lease financing costs.
    2. To purchase important capital equipment or finance improvement projects for which lease financing costs can be paid for by:
      1. existing non-general fund revenues; or
      2. new, earmarked revenues approved by the voters; or
      3. incremental general fund revenues that can be specifically attributed to the introduction of the capital project.
    3. To finance projects deemed important enough (for safety, legal requirements, efficiency, or other reasons) to justify a reallocation of existing revenues.
  2. The Budget and Financial Planning Department and Treasury and Financial Management will determine and document the justification for each proposed lease transaction. The justification should include the following:
    1. detailed explanation of the factors listed in the capital improvement guidelines;
    2. reasons for not recommending a “current payment” alternative;
    3. explanation for not recommending financing through general obligation or other non-lease revenue option or non-lease revenue bond issuance.

The Budget and Financial Planning Department will advise the respective department with the appropriate financing mechanism using short-term general obligation bonds/notes as the first financing option and lease-purchase option as a subsequent option. The analysis shall be conducted using appropriate analytical tools to make such evaluations.

  1. The project lease payments and a cash flow statement over the life of the transaction are required for every proposed lease agreement.
  2. The scheduled maturity should be less than the expected useful life of the capital project or asset(s) financed.
  3. An analysis of various financing strategies should be performed to allow for the lowest possible costs to the County.

150.8 - Derivative Products

It is the policy of the BOCC for the County to cautiously plan for the potential use of any derivative products. The County will carefully examine these products, which usually take the form of non-traditional financing structures, on a case-by-case basis with particular attention to the life-cycle costs and benefits of the given product.

150.9 - Appropriate Disclosure Documents

It is the policy of the BOCC to meet the disclosure needs of rating agencies, underwriters, investors, agencies, taxpayers, and other interested parties through the following documents:

  1. Comprehensive Annual Financial Report – This report shall contain audited financial statements in conformity with generally accepted accounting principles on the County’s reporting entity. The notes shall disclose all aspects of the debt structure for both enterprise and non-enterprise functions.
  2. Annual Financial Trend Monitoring Report – This report shall review the historic trends of revenues, expenditures/expenses, operating position and fund balance, debt ratios, and various tax structures, demographic and economic conditions.
  3. Annual Financial Forecasts – This report shall review the future forecasts for revenues, expenditures/expenses, operating position and fund balance.
  4. Operating Budget Document – This document shall include the annual operating budget adopted by the BOCC.
  5. Five-Year Capital Improvement Program (CIP) - This document shall include a schedule of capital improvement projects by year, including the estimated total capital cost, estimated annual operating costs or savings, and anticipated funding sources(s) for each project.

Policy 160: Capital Assets

160.1 - Introduction

It is the policy of the Board of County Commissioners (BOCC) to utilize generally accepted accounting principles to record and account for the capital assets of the County Government and its agencies, offices, and operating departments.

This policy shall apply to all assets of the County Government and shall be complied with by all employees, officials, agencies, offices, and departments of County Government.

160.2 - Definitions

The term capital assets is defined as costs incurred to acquire items that will be used in operations for the benefit of multiple periods. Examples of capital assets include land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure, and all other tangible or intangible assets that are used in operations that have initial useful lives extending beyond a single reporting period.

The term infrastructure is defined as long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples of infrastructure include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems.

The term intangible assets is a nonfinancial asset that lacks physical substance and with an initial useful life that extends beyond a single reporting period. Examples of intangible assets include easements, water rights, timber rights, patents, trademarks, and purchased or internally generated computer software.

160.3 - Accounting Principles for Capital Assets

The capital assets for County Government shall be recorded and accounted for according to the following principles:

  1. Both tangible and intangible assets will be capitalized using the following criteria:
    1. Land assets will always be capitalized; will be capitalized without regard to cost; and will not be depreciated.
    2. Infrastructure will be capitalized if it has a life expectancy of five (5) years or greater and a designated value exceeding $100,000.
    3. Easements associated with a capital project will be capitalized as part of the capital project, with the exception of roads, in which case the easement will be capitalized separately. Easements that are independent of a capital project or part of a road project will be capitalized if the designated value exceeds $100,000. Temporary easements will not be capitalized.
    4. Intangible assets, other than easements, will be capitalized if the asset has a designated value exceeding $1,000,000.
    5. Assets other than land, infrastructure, and those which are intangible, including leases on assets, will be capitalized if the asset or lease interest has a useful life of five (5) years or more and a designated value exceeding $10,000.
    6. Assets which are acquired with grant funding or other committed revenues and which do not meet the criteria for capitalization will nonetheless be capitalized whenever the Director of Financial Management determines it to be necessary or advisable.
  2. All capitalized assets shall be recorded and inventoried on forms established by the Director of Financial Management, and periodic physical inventories will be required. The separate agencies, departments, and offices shall maintain recorded and physical inventory of assets in its possession which have a cost of $1,000 to $10,000. Assets with a value of less than $1,000 should be inventoried as needed for the prudent care of County funds and property.
  3. Capitalized assets, other than land, will be depreciated using the straight-line depreciation method.
  4. Capitalized assets will not be written off from the records or accounts of the County until the asset is disposed of physically.

Policy 170: Health Care Fund

170.1 - Introduction

It is the policy of the Board of County Commissioners (BOCC) to account for the County’s employee health insurance program in a separate fund known as the “Health Care Fund”. This fund shall be used to pool resources accumulated from employee contributions for the health insurance program, County contributions to for the health insurance program, investment income, and other miscellaneous resources. These combined resources in the Health Care Fund shall be used to pay health care claims, insurance premiums, consulting fees, administrative fees, and other costs related to the health insurance program.

Responsibilities:

The County Manager or his/her designee is responsible for preparing and monitoring financial projections for the Health Care Fund. The County Manager shall submit a statement of projected receipts and disbursements for the Health Care Fund as part of the proposed annual operating budget for consideration by the BOCC. This statement of projected receipts and disbursements for the Health Care Fund shall be submitted to the BOCC by June 30th of each year, and shall document the budgetary and accounting assumptions used to prepare the projections.

The Director of Budget and Financial Planning is responsible for including the final statement of projected receipts and disbursements for the Health Care Fund as part of the annual budget resolution adopted by the BOCC.

Procedure 170.1 Introduction

  1. The County Manager will appoint a Healthcare Fund Management Team (HFMT) to review healthcare utilization, identify trends, analyze data, estimate costs, recommend premiums and cost sharing, and consider plan design. This team will be comprised of the following positions:
    1. County Manager or his/her designee(s)
    2. Director of Financial Management or his/her designee{s)
    3. Health Insurance Program Manager
    4. Director of Human Resources or his/her designee(s)
    5. Director of Budget and Financial Planning or his/her designee(s)
    6. Director of Legal Services or his/her designee(s)
    7. At-large member from the Infrastructure area (this position will rotate every two years)
    8. At-large member from the Human Services area (this position will rotate every two years)
    9. At-large member to represent the governing boards which includes Airport, Developmental Supports, Library, Mental Health, Park and Recreation (this position will rotate every two years)
    10. At-large member to represent elected officials which includes District Attorney and Sheriff (this position will rotate every two years)
  2. The County Manager or his/her designee is responsible for providing strategic oversight of the health insurance program.
  3. The Director of Financial Management is responsible for providing oversight of day-to-day management of the health insurance program, including supervision of the Health Insurance Program Manager.
  4. The Health Insurance Program Manager is responsible for providing day-to-day management of the health insurance program, coordinating periodic meetings of the HFMT, and coordinating County interaction with external consultants.
  5. The Director of Human Resources or his/her designee{s) is responsible for assisting the Health Insurance Program Manager with health insurance plan design as it relates to the County's overall compensation philosophy.
  6. The Director of Budget and Financial Planning or his/her designee(s) is responsible for assisting the Health Insurance Program Manager with financial projections for the Health Care Fund.
  7. The Director of Legal Services or his/her designee is responsible for assisting the Health Insurance Program Manager with legal issues related to the health insurance program.
  8. The two year terms for the at-large members will be staggered so that Human Services and Infrastructure will rotate on odd-numbered years and Governing Boards and Elected Officials on even-numbered years.
  9. Upon staff recommendation, the County Manager may approve extensions of terms beyond stated term rotations if needed for the successful operation of the Health Care Fund.

170.2 - Investment Income

It is the policy of the BOCC to allocate any investment income earned on the cash balance of the Health Care Fund to the Health Care Fund.

Policy 180: Investments

180.1 - Introduction

The Board of County Commissioners has authority to invest all funds held by, or belonging to, Johnson County, its agencies or departments. The investment powers of the Board are derived from the statutory provisions of K.S.A. 12-1675, as amended, and have been established by home rule resolution. The provisions of this Investment Policy shall be enacted and interpreted in a manner that ensures compliance with all applicable state and federal laws and legal requirements, including specifically the provisions of K.S.A. 12-1675, as now adopted or hereafter amended.

Procedure 180.1 Introduction

Responsibilities:

The Investment Review Group (IRG) shall review the investment procedures at least annually and they shall suggest changes to the County Manager, who will have the authority to implement changes to procedures.

The County Treasurer, in the performance of his statutory duties, shall be responsible for the receipt and disbursement of funds for and on behalf of the County, and shall develop and implement procedures, within his office, that are consistent with the policies adopted by the Board for the use, investment, and management of County funds. The County Treasurer shall be responsible for establishing depository and banking practices which ensure that all funds received by the County, its agencies and departments are immediately available for and deposited in accounts and investments authorized by the Board.

The Finance Director shall be responsible for the establishment and development of cash management practices and shall adopt and implement administrative procedures to comply with and effectuate the investment policies and objectives of the Board. The Finance Director shall be responsible for establishing practices and procedures which ensure that funds held by, and belonging to, the County are managed in a manner that complies with all State and Federal Laws, and the policies and strategies of the Board, and that provides for adequate funds to be available to timely meet all disbursement requirements and obligations of the County.

180.2 - Policy Statement

The primary objectives of the Board of County Commissioners are (in order of priority) safety of principal, maintenance of adequate liquidity, and maximization of earnings from County funds. It is the policy of the Board of County Commissioners of Johnson County that all available funds shall be invested in conformance with this policy and with applicable legal and administrative guidelines at the highest rates obtainable at the time of investment, and that all investments made by, or on behalf of, the County shall seek to adhere to the following objectives:

  • Preservation of capital and protection of principal
  • Security of County funds and investments
  • Maintenance of sufficient liquidity to meet operating needs
  • Diversification of investments to avoid unreasonable or avoidable risks
  • Maximization of return on the investments

Procedure 180.2 Adherence to Policy Statement

These investment procedures shall conform to the policy statement.

180.3 - Adoption of Policy

The investment policy of Johnson County is adopted pursuant to the authority granted to the Board of County Commissioners under K.S.A. 12-1675, K.S.A.19-101 et seq. and other statutory provisions such as K.S.A. 10-131.

Procedure 180.3 Adoption of Procedures

These investment procedures are, and any related changes will be, proposed by the IRG and staff and are approved by the County Manager.

180.4 - Investment Review Group

The Investment Review Group (IRG), as established under BOCC Resolution, has as its function to assist the Board of County Commissioners in monitoring the performance and structure of the County's investments. Members of the IRG include a member of the Board of County Commissioners as designated by the Board and who will serve as the chair, the Director of Treasury and Financial Management, the Deputy Treasurer, and two outside investment professionals, who shall be appointed by the Board of County Commissioners upon the advice and recommendation of the IRG. The outside investment professionals of the IRG shall serve at the pleasure of the Board of County Commissioners, subject to biennial reappointment by the Board of County Commissioners. At a minimum, one outside investment professional shall have the Chartered Financial Analyst (CFA) and one investment professional shall have the Certified Cash Management (CCM) or Certified Treasury Professional (CTP) designation. The County Commissioner serving on the IRG shall serve for a term of two years and may be reappointed by the Board of County Commissioners. The IRG shall meet quarterly to discuss investment reports, investment strategy, and investment policy and procedures.

The primary duties of the IRG shall be the following:

  1. Review the Cash Manager’s economic forecasts and investment strategy for the next two quarters.
  2. Review the investment reports and the investment performance of the past quarter and determine any variances that occurred and the documented reasons for the variance.
  3. Review the reports on collateral and determine if sufficient collateral has been established.
  4. Review reporting on the availability of all funds and their rate of return by investment type.
  5. Review compliance with the Investment Policy and measure any variance. Report any variance and any recommendations of changes to the policy and procedures to County Management and the Board of County Commissioners.
  6. Develop future guidelines for possible changes to the State investment statutes.

Procedure 180.4 Investment Review Group

As outlined in section 180.4 of the Investment Policy, the IRG has two members that are investment professionals from the community. When membership for one of the outside investment professional’s position needs to be submitted for reappointment or to be filled with a new person the following procedures shall be followed:

  1. Local professional organizations (e.g. Kansas City Association for Finance Professionals, Eastern Kansas Government Finance Officers Association) shall be contacted to gain a list of interested individuals for serving on the IRG. Major Kansas City corporations shall also be a source for qualified candidates.
  2. No person shall be considered that works for a firm, or is on the Board of a firm, that the County deals with to conduct investment transactions. Any potential conflicts of interest should be reviewed by the IRG.
  3. Candidates must be Johnson County residents.
  4. Resumes for interested candidates shall be reviewed by the IRG to establish a list of three to five of the top candidates.
  5. The current IRG members shall conduct interviews.
  6. A simple majority vote of IRG members is required to determine the most qualified candidate.
  7. The IRG will submit a request to the BOCC for appointment of the chosen candidate.

180.5 Investment Structure

The following policies will assist the County with attaining the objectives stated in Section 180.2

Acceptable Investments

In accordance with and subject to restrictions imposed by current statutes applicable to both the operating fund and proceeds of bonds or temporary notes, the following list represents the entire range of investments that Johnson County will consider and which shall be authorized for the investments of aforementioned funds by the County. Cited maturities represent maximum durations, which may be reduced depending upon applicable statutory authority:

  1. United States Treasury and Agency Securities. The County may invest in obligations of the United States government or any agency thereof insured as to principal and interest by the United States or any agency thereof and obligations and securities of Government Sponsored Enterprises (GSE’s) which under federal law may be accepted as security for public funds and shall not exceed the maximum length of maturity allowed by statute. The Agency Securities include GSE’s, which include the Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Federal Farm Credit Bank and the Student Loan Marketing Association, except that proceeds of bonds or temporary notes cannot be invested in Federal Farm Credit Bank or the Student Loan Marketing Association per KSA 10-131.
  2. Repurchase Agreements (Repo). The County may invest in contractual agreements between the County and commercial banks, state or federally chartered saving and loan associations, federally chartered savings banks, or primary government securities dealers. The purchaser in a repurchase agreement (repo) enters into a contractual agreement to purchase Treasury and government agency securities while simultaneously agreeing to resell the securities at predetermined dates and prices.
  3. Collateralized Public Deposits (Certificates of Deposit). Instruments issued by financial institutions which state that specified sums have been deposited for specified periods of time and at specified rates of interest. The certificates of deposit are required to be backed by acceptable collateral securities as dictated by State statute. Interest will be calculated on a 365-day year/actual-day month basis, or another method approved by the Director of Treasury and Financial Management or designee in writing.
  4. State Municipal Investment Pool Fund. A pool of funds which are managed by and under the authority of the Pooled Money Investment Board (PMIB).
  5. Bank Trust Departments with commercial banks. Investments with trust departments of commercial banks with offices located in Johnson County or with trust companies which have contracted to provide trust services under the provisions of K.S.A. 9-1402, and amendments thereto, with commercial banks which have offices located in Johnson County. Investments under this category are limited to (1) time deposits of depository institutions doing business in Kansas with maturities as noted in (c) above, (2) Treasury or government agency securities with maturities as noted in (a) above, and (3) repurchase agreements of less than 30 days' duration as noted in (b) above.
  6. Investments in shares or units of a money market fund. Money market funds are mutual funds that invest in short term debt instruments. The County may only invest in money market funds comprised entirely of securities in direct obligations of the U.S. government or any agency thereof, including GSE’s as described in sub-paragraph a. above.
  7. Municipal bonds. Bonds or other obligations issued by any municipality of the State of Kansas as defined in K.S.A. 10-1101, and amendments thereto, which are general obligations of the municipality issuing the same.
  8. Federal Deposit Insurance Corporation (FDIC) guaranteed instruments. Fixed income bonds, including corporate bonds that are explicitly guaranteed by the FDIC.

Investment Instrument Guidelines

The Cash Manager will consider the composition of the current investments and determine whether the securities being considered will maintain the investments within procedural guidelines.

The following maximum limits, by instrument, are established for the County's total investments:

  1. Repurchase Agreements ……………………………….………………………………………….40%
  2. Collateral Time and Demand Deposits ………………………………….………………………100%
  3. U.S. Treasury Notes and Bills…………………………………………..……………………….100%
  4. U.S. Govt Agency Coupon Obligations…………………………………………………..………80%
  5. U.S. Govt Agency Discount Obligations……………………………………...…………………50%*
  6. U.S. Govt Agency Callable Obligations ……………………………………………………..…30%
  7. U.S. Govt Agency Step-Up Obligations ………………………………………………………..15%
  8. Money Market Funds and Instruments…………….……………………………..……………..25%*
  9. Kansas Municipal Investment Pool Fund (MIP)…………………………………………………25%*
  10. Federal Deposit Insurance Corporation (FDIC) guaranteed instruments............................25%

* These limits are adjusted during tax collection periods which run from ten days prior to the due date for taxes to be remitted through the distribution dates set by Kansas Statute. The Discount Obligation percent increases to 65%, Money Market Funds and Instruments percent increases to 50% and the limit on the MIP may be increased to 50%

To allow efficient and effective placement of proceeds from bond sales, the limit on either repurchase agreements or the MIP may be exceeded for up to five consecutive days, per bond issue, following the receipt of bond proceeds.

Portfolio Management

All investments of County funds shall be managed through the Treasury and Financial Management department consistent with this policy and in compliance with all applicable state and federal laws and regulations. The Treasury Division shall establish operating procedures to coordinate all financial transactions with the Cash Manager. The Cash Manager shall provide to the Treasury Division complete written records of all investment information.

As provided by statute, this policy shall be submitted to the State’s Pooled Money Investment Board (PMIB) for their review and approval annually, or at such time as the policy may be amended, and upon approval, investments may include those authorized through the PMIB. Investments made utilizing the “Expanded Powers” available through the PMIB shall be managed in accordance with the provisions of K.S.A. 12-1675, as amended, and the requirements of the PMIB.

Investment Strategy

The County shall follow the most aggressive investment guidelines allowed by State law. County funds shall be managed as multiple portfolios in order to meet liquidity needs of the organization while enhancing total yield of the portfolio.

Cash Management & Investment Practices

It is the policy of the County that its cash management practices shall ensure that funds held by, and belonging to, the County are managed in a manner that complies with all State and Federal Laws, and the policies and strategies of the Board, and that provides for adequate funds to be available to timely meet all disbursement requirements and obligations of the County.

Competitive Placement

It is in the interest of the County to solicit competitive rate quotations for all investment purchases and for the deposit of public funds. Therefore, the investment and/or deposit of County funds will be made on the basis of competitive investment rates that support the County’s investment strategies and objectives, as identified in Section 180.2. In addition, it is in the interest of the County to establish and use business relationships with financial institutions located in Johnson County for the investment and deposit of public funds, consistent with the requirements of K.S.A. 12-1675 and 12-1676. Therefore, investment and/or deposit of the County's public funds will be offered first, on a competitive basis to qualified financial institutions located within the County. The County Treasurer and the County’s Cash Manager shall establish and implement procedures for posting notice on a County website when funds are available for deposit or investment; for notifying local financial institutions of this website and the process for submitting bids; and for ensuring that, on days that funds are available, local financial institutions have a fair opportunity, until a designated time, as posted on the website, to respond with an offered rate for maturities matching the County’s cash flow needs. Financial institutions unable to access the website shall be given the opportunity to contact the Cash Manager by phone or email.

In the event that the County does not receive any qualified or responsive offerings to the posting or the offered rates do not equal or exceed the "investment rate" as defined by the State Treasurer, then the County may solicit offers for investments of those available funds in the State's investment pool or through brokers and dealers. At least three quotes must be obtained for all types of investments. All quotations received must be documented and filed for auditing purposes. In the case of tie bids, all bidders will be asked if they wish to break the tie. The first bidder who breaks the tie will win the bid. If no bidder breaks the tie then the Cash Manager will decide which broker wins the bid.

Trading Accounts

All trading accounts will be held in the name of “Johnson County, Kansas”. The Board shall have all trading authority for the investment of County funds, and that trading authority shall be exercised by the Cash Manager and the County Treasurer.

Compliance Reporting

The Cash Manager shall be responsible for ensuring that the County’s investment practices comply with state and federal laws and regulations. The Cash Manager shall prepare and file such documents, applications, and other information as may be necessary or is required to comply with state statutes, including the information required by the provisions of K.S.A. 12-1675 (c). 

Procedure 180.5 Investment Structure

  1. Safekeeping of Securities
    1. Safekeeping Agreement - The County shall contract with a safekeeping (custodial) agent(s) for the safekeeping of securities. All securities which serve as collateral against the deposits of a depository institution must be safekept either with a non-affiliated custodial facility located within the State of Kansas, with the Federal Reserve Bank in Kansas City, or with the Federal Home Loan Bank in Topeka. All securities purchased by the County, both outright and under repurchase agreements, must be delivered to the possession of the County's safekeeping agent(s). Depository institutions pledging collateral against deposits must, in conjunction with the custodial agent, furnish the necessary custodial receipts within two business days from the settlement date. The safekeeping agent(s) may not hold any security pledged as collateral for deposits or investment made with it as an institution or any affiliated institution. All security purchases that are eligible for delivery versus payment shall be settled in that manner. All securities shall be perfected in the name of Johnson County and shall be delivered to the safekeeping agent(s).
    2. Handling of Certificate of Deposit Collateral - The collateral for certificates of deposit in banks will be registered in the name of "Johnson County, Kansas". Custodial receipts will be received and logged by the County Treasurer's staff. The Cash Manager shall verify that collateral is in place prior to delivery of County funds to the Financial Institution. Letters from custodial agent(s) assigning the collateral and fax transmittals will be acceptable for release of funds.
    3. Handling of Repurchase Agreement Securities - The securities for which repurchase agreements will be transacted will be limited to Treasury and government agency securities that are eligible to be delivered via the Federal Reserve's Fedwire book entry system. Securities will be delivered to the County's designated Custodial Agent. Funds and securities will be transferred on a delivery versus payment basis. Confirmations will be received and logged by the County Treasurer's staff. Securities underlying a repurchase agreement must be maintained at the following levels, with respect to par value accrued interest:
      • US Treasury Bonds - 1 Year or Less = 101%, 1 Year to 5 Years = 102%, Over 5 Years = 103%
      • US Agencies Securities - 1 Year or Less = 101%, 1 Year to 5 Years = 102%, Over 5 Years = 104%
  2. Investment Diversification - In order to enhance total yield and fulfill the objectives of these procedures, the investment management style will be directed toward an active rather than passive investment role. Market risk shall be minimized by diversification of investment types. The County shall diversify its investments so that reliance on any one issuer or financial institution will not place an undue financial burden on the County.
  3. Master Repurchase Agreement - The County shall require each issuer of repurchase agreements to sign a copy of the County's Master Repurchase Agreement. An executed copy of this agreement must be on file before the County will enter into any repurchase agreements with an issuer.
  4. Maturities for All Investments - Subject to the collateral and authorization statutory requirements, as now adopted or hereafter amended, the maximum maturity length shall strictly follow the Kansas Statutes.
  5. Security Marketability - Only U.S. government and agency obligations with active secondary markets will be purchased. Marketability shall be determined by the Cash Manager, the Finance Director or the County Treasurer.
  6. General County Funds - As outlined in section 180.5 of the Investment Policy, the General County funds shall be managed as multiple separate portfolios. An operating portfolio shall be managed with sufficient liquidity to meet all operating needs. The weighted average duration of the operating portfolio must be less than one and one half (1.5) years. A long-term portfolio shall be established and managed on a total return basis. The long-term portfolio may be at least 45% of the County’s total portfolio from the previous rolling two-year period but shall not exceed 65% of the total portfolio. The weighted average duration of the long-term portfolio must be less than three (3) years. If the long-term portfolio falls below 45% of the County’s average total portfolio, it should be reported to the IRG. The IRG will monitor the maturity level and recommend changes as appropriate.
  7. County Building Funds - No investment shall have a maturity exceeding the next lease payment date, unless the account is fully funded. If fully funded, investments can be made to the next unfunded date.
  8. Investment Returns - Johnson County shall seek to optimize return on investments within the constraints of safety and liquidity. The objective of the County investment practices shall be to exceed the average rate of return on U.S. Treasury securities with similar maturities to the average weighted maturity of the County's portfolio or another appropriate performance measure as defined by the Investment Review Group. Progress on this objective will be reported to the Investment Review Group on a quarterly basis at a minimum.
  9. Investments Maturity Management - When structuring the maturity composition of the investments, the Cash Manager shall evaluate current and expected interest rate yields. The longer the time remaining to maturity for a security, the greater the price fluctuation that will occur given a change in interest rate levels.
  10. Current and Expected Yield Curve Analysis - The Cash Manager will monitor the current and expected yield curves. When interest rates are expected to decline, consideration will be given to extending maturity dates within investment and procedural constraints. When interest rates are expected to rise, consideration will be given to shortening maturity dates.
  11. Portfolio Management - As outlined in section 180.5 of the Investment Policy, all investments of County funds shall be managed through Treasury and Financial Management. The office of the County Treasurer shall establish operating procedures to coordinate all financial transactions with Treasury and Financial Management. Treasury and Financial Management shall provide to the Office of the County Treasurer complete written records of all investment information.

a. Disbursement Scheduling

i. In order that all necessary disbursements may be met:

1) The County Treasurer shall submit to the Cash Manager a "Schedule of Anticipated Tax Disbursements". The Schedule should be updated and provided to the Cash Manager on an as needed basis.

2) The Operations Manager shall submit a schedule of accounts payables and payroll information.

3) The Accounting Department shall submit the appropriate debt schedules.

ii. In the interim, if changes are found to be necessary in such Schedules, written notice must be provided to the Cash Manager immediately, and if possible, in less than five business days prior to the anticipated disbursement date, so that funds may be made available with which to make such disbursement.

iii. The following information is to be provided in the Schedule of Anticipated Tax Disbursements: the date of the anticipated disbursement, the amount of the anticipated disbursement, how the disbursement is to be made (by check, ACH, wire transfer, etc.), and if by check, whether the check will be hand delivered or sent by mail.

b. Disbursement Funding

Based upon the County Treasurer’s Schedule of Anticipated Tax Disbursements and the responsibilities of the Cash Manager under this Section (180.5), the Cash Manager will be responsible for managing the County's investment portfolio in such a manner as to timely meet all necessary disbursements and all such other statutory and regulatory responsibilities.

12. Compliance Reporting - The Cash Manager shall be responsible for ensuring that the County’s investment practices comply with state and federal laws and regulations. The Cash manager shall prepare and file such documents, applications, and other information as may be necessary or is required to comply with state statutes, including the information required by the provisions of K.S.A. 12-1675 (c). In addition, the Cash Manager shall submit the County’s investment Policy to the PMIB at least annually or at such time as the County makes changes to the Investment Policy, and will include a certification from the investment management staff that the above procedures were followed and in compliance with all applicable statutes, including the information required by the provisions of K.S.A. 12-1675 (c).

Procedure 180.51 Competitive Placement

The investment and/or deposit of County funds will be made on the basis of competitive investment rates that support the County’s investment strategies and objectives, as identified in Section 180.2 of the Investment Policy. In addition, it is in the interest of the County to establish and use business relationships with financial institutions located in Johnson County for the investment and deposit of public funds, consistent with the requirements of K.S.A. 12-1675 and 12-1676. Therefore, investment and/or deposit of the County's public funds will be offered first, on a competitive basis to qualified financial institutions located within the County. To inform the local financial institutions of the County’s requirements, the County will maintain the following information on the County website: (1) Qualifications of financial institutions that are eligible to respond to the County’s requests, (2) Contact information of County staff, and (3) Procedures that the financial institution will need to follow. Local financial institutions will be notified of this website and the procedures, via e-mail and a letter, and will be reminded at least quarterly of this information. Financial institutions unable to access the website may contact the investment manager by phone or email which will be provided in the letter sent to the financial institutions. When funds are available to the County for investment or deposit, the County will post a notice on the County website which provides the information necessary for local financial institutions to respond to the County’s request. Such information shall include (1) the deadline for responding to the County’s request, (2) the County’s cash flow needs, (3) process for submitting bids, and (4) any other information that the County deems necessary in order for the financial institution to submit a response to the County’s financial needs

If the offered rate does not equal or exceed the "investment rate" as defined by the State Treasurer, the County may solicit offers for investments in the State's investment pool or through brokers and dealers. It is in the interest of the County to solicit competitive rate quotations for all investment purchases. At least three quotes must be obtained for all types of investments. All quotations received must be documented and filed for auditing purposes. In the case of tie bids, all bidders will be asked if they wish to break the tie. The first bidder who breaks the tie will win the bid. If no bidder breaks the tie then the Cash Manager will decide which broker wins the bid.

Procedure 180.52 Investment Acquisition and Redemption

  1. Treasury and Agency bonds, Federal Deposit Insurance Corporation (FDIC) guaranteed investments and Repurchase Agreements: The Cash Manager, within guidelines established in the Investment Policy, chooses these instruments for purchase or sale. The Cash Manager will notify the Treasurer’s office of the selected investment transaction and the Treasurer then has the duty of inspecting the transaction for approval. All transactions are conducted with the Fed Wire Book Entry system of Delivery Versus Payment (DVP). The County’s principal bank may be used as the safekeeping custodian. The County’s principal bank will submit funds to the broker for a purchase once the security has been delivered to the custodial account at the bank in the name of the Johnson County Treasurer. Conversely, for a sale, the County’s principal bank will not release the security until the purchasing broker has delivered funds to the Johnson County Treasurer’s designated bank account. Proceeds from the sales(s) will only be sent by the County’s principal bank to this specific Johnson County Treasurer’s designated bank account.
  2. Money Market Accounts and the Municipal Investment Pool: These instruments are utilized to manage the County’s short-term cash positions. The Cash Manager selects which money market fund is best suited for the County’s needs, once again within guidelines established in the Investment Policy. The Cash Manager will notify the Treasurer’s office of the selected investment transaction and the Treasurer then has the duty of inspecting the transaction for approval. All Money Market accounts are set up in the name of the Johnson County Treasurer. The Treasurer’s office will then initiate the wire transfer for a purchase. The Treasurer also verifies funds have been received for a redemption. Proceeds from the sales(s) will only be sent by the County’s principal bank to this specific Johnson County Treasurer’s designated bank account.
  3. Certificate of Deposit (CD): The Cash Manager, within guidelines established in the Investment Policy, may choose these instruments for purchase. The Cash Manager will notify the Treasurer’s Office of this decision. The Treasurer’s office completes the approval process by accepting collateral for the CD (within guidelines established in the Investment Policy), and completing the signatory cards for the bank. The Treasurer’s office designates the individuals who can redeem the CD. Two signatures are required for redemption. The banks are also instructed that redemptions can only be wired to the Johnson County Treasurer’s designated bank account.

Procedure 180.53 Portfolio Performance and Evaluation

Investment performance is continually monitored and evaluated by the Cash Manager and the County Treasurer. Investment performance statistics and activity reports are generated by the Cash Manager. The Cash Manager will provide summary reports quarterly for the IRG.

A. Monthly Performance Analysis

The following reports will be produced monthly and be included in the monthly report to the Board of County Commissioners, Finance Director, and County Manager.

  1. Month-end Investments - The month-end investments will be listed by type of investment within fund. The report will include cost and market values and settlement and maturity dates for each security.
  2. Investments Criteria Reports - This report will outline conformance to the restrictions of the procedures in the areas of diversification and term to maturity.
  3. Other Reports.

Other reports may include the following statistics:

  1. Earned investment yield for period
  2. Interest received for period
  3. Interest earned for period
  4. Earned interest yield versus performance standard
  5. Weighted average days to maturity
  6. Investment activity - buys/sells
  7. Banks and Savings and Loan transactions
  8. Certificates of deposit versus collateral
  9. Repurchase agreements versus securitization
  10. Distribution by banks and savings and loans
  11. Distribution by type of investment
  12. Quarterly Performance Analysis

A quarterly report will be prepared for the IRG, relating actual performance to policy and procedural objectives. This report may include:

  1. Cash availability
  2. Market review
  3. Investment strategy - next quarter
  4. Performance measurement
  5. Investments statistics
  6. Security adequacy - repurchase agreements
  7. Collateral adequacy - certificates of deposit
  8. Investment activity
  9. Market valuation
  10. Distribution by institution
  11. Distribution by type of investment

C. Annual Review Procedures

Due to the constantly changing nature of types of investments, legislative changes, etc., an annual review will be made of the procedures. Every year at the beginning of the County's fiscal year, a review of the Investment Procedures will be made by the IRG. The Cash Manager will provide a summary report of recommended procedural changes to the Investment Review Group for review and deliberation.

180.6 - Investment Policy Revisions

A. Board of County Commissioners - The Board of County Commissioners may initiate or approve any changes to the Investment Policies as originally adopted.

B. Investment Review Group - As authorized by this document, the Investment Review Group (IRG) may suggest policy and procedural changes.

C. Annual Review of Investment Policies - According to section 180.4, the IRG will perform an annual review of Investment Policies and submit suggested changes to the Board of County Commissioners.

Procedure 180.600 Investment Procedures Revisions

A. County Manager - The County Manager shall have authority to make changes to procedures based upon recommendations from the IRG. Upon approval and adoption of any changes, the County Manager will provide documentation notifying the Finance Director, who in turn will ensure the Investment Procedure manual is updated.

B. Investment Review Group - As authorized by this document, the IRG may suggest procedural changes with any of the current procedures. Proposed changes to the procedures will require a simple majority vote of the IRG. Upon approval of any proposed changes, the Finance Director will submit the proposed procedural changes to the County Manager for final approval and adoption. 

180.7 - Legal Authority

The Board of County Commissioners of Johnson County is granted the authority to invest temporarily idle funds under applicable Kansas Statutes. The statutes also identify the types of investments the County may purchase. 

180.8 - Arbitrage

The Tax Reform Act of 1986 provides calculation requirements on the County's yield from investing tax-exempt General Obligation and Revenue bond and temporary note proceeds and debt service funds. These new arbitrage rebate provisions require that the County compute earnings on investments from each issue of bonds on an annual basis to determine if a rebate is required. To determine the County's arbitrage position, the County is required to calculate the actual yield earned on the investment of the funds and compare it to the yield that would have been earned if the funds had been invested at a rate equal to the yield on the bonds sold by the County. The rebate provisions state that periodically (not less than once every five years, and not later than sixty days after maturity of the bonds), the County is required to pay the U.S. Treasury a rebate of any excess earnings. These restrictions require extreme precision in the monitoring and record keeping of investments, particularly in computing yields to ensure compliance. Failure to comply can dictate that the bonds become taxable, retroactively from the date of issuance.

The County's investment position relative to arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is a fiscally sound policy to continue maximization of yield and to rebate excess earnings, if necessary.

180.9 - Procedures and Practices

The County Manager and the Director of Treasurer and Financial Management shall adopt and implement procedures and practices for the efficient cash management of all funds held by, or belonging to, Johnson County, for the coordination of cash management practices with the operations and duties of the Treasury and Financial Management department, and for the prudent investment of funds.

180.10 - Ethics and Conflicts of Interest

All County employees, and officials, whether elected or appointed , who have authority or act on behalf of the County in the investment of County funds shall perform their duties impartially and in compliance with the ethical standards applicable to the investment of public funds, including the Code of Ethics for Johnson County Government adopted by the Board of County Commissioners, so as to assure fair, competitive access to and participation in the County’s investment process by all responsible financial institutions, suppliers, contractors, and providers of services. Public investing is a public trust balancing the objectives of this policy (Section 180.2) with protecting the integrity of the County. Employees and officials shall conduct themselves in such a manner as to foster public confidence in the integrity of the County’s investment process..

The Cash Manager, or any other County employee or official who makes or influences any investment decision for the County, shall refrain from any personal or financial business activity which would create an actual or apparent conflict of interest related to the proper performance and execution of the investment program. The Cash Manager will annually submit a disclosure statement as prescribed by the Investment Review Group and shall immediately report any potential conflict of interest to the Investment Review Group.

Employees and officials of the County who are involved in the investment of County funds shall not, at any time, receive, accept, take, seek, or solicit, directly or indirectly, anything of economic value as a gift, gratuity, award, reward, favor or other compensation of any type from any person or financial institution with whom the County does or may invest public monies or conduct investment related business.