Fund Balance Guidelines for the General Fund
About West Metro Fire Protection Disctrict, Lakewood Colorado
The West Metro Fire Protection District is a full service, all hazard fire and rescue agency, headquartered in Lakewood, Colorado. The district covers more than 108 square miles in two Colorado counties and serves nearly 280,000 residents, with crews at 17 fire stations. The mission of the organization is to protect the lives and property of the people who live and work in the district and West Metro is committed to doing whatever it takes to achieve that goal.
The district needed a well-thought-out plan to ensure its financial sustainability. West Metro’s Finance Division addressed the situation by creating a plan to revise the comprehensive fund balance policy and the approach to analyzing reserves, based on risk factors that are specific to the district’s economic and financial situation. The Finance staff considered general standards for how much money should be maintained and growth of the current fund reserve, creating a policy and risk analysis to identify target reserve levels, appropriate capital/ committed projects, and contingency levels for paying expenditures until the property tax revenue collection cycle begins the following year. Through this process, the district gained a new knowledge base and established a strong foundation for future obligations.
Implementation of Best Practice
The policy developed for governing the level of unrestricted fund balance in the general fund included the following goals and structure:
- The predictability of revenues and the volatility of expenditures.
- The perceived exposure to significant one-time outlays.
- The potential drain on general fund resources from other funds as well as the availability of resources in other funds.
- Commitments and assignments.
Identification of Risks Tiered by GFOA recommendations through the Risk Analysis template. Structured below are the identifying factors used for the 2019 fund balance recommendation to the Board:
- Cash Flow of expenses during crucial times at beginning of each year.
- Natural Disaster or any catastrophic event that would decrease property values.
- Property tax revenue at 76% of overall general revenue.
- EMS Revenue is at 11% of overall general revenue.
- Contractual Revenue is at 5%.
- Payout of vacation and sick leave on the first payroll of the year.
- Insurance premiums due first of the year.
- Collective Bargaining agreement negotiation up in 2019.
- Cash and equivalents with investments due to renew during high expenditure months.
- The District’s economic forecasting measures in Jefferson County and Douglas County have experienced a slight .75% growth from 2018 to 2019 during the off set year in Market Values. The prior year (2018) assessment in market values increased with an overall of 23% in assessed valuation for the District. The District only saw an overall increase in general property tax revenue of 11%. The State decreased the residential assessment rate (RAR) from 7.9% to 7.2%. The District carries 88% residential market overall for property tax in comparison 12% to other properties within its boundaries. Due to the ratchet down of RAR the District lost the capable revenue of ~$5M The November 2018 Election posted a positive outcome for the tax sustainability.
- Annual committed Capital Projects are reviewed and assigned for approval to the Board, with identified 5year capital improvement plan for upcoming projects.
- Click to see Financial Risk Analysis Presentation
- Click to see Budget Presentation
- Click to see Strategic Plan
GFOA Best Practice: Fund Balance Guidelines for the General Fund
GFOA recommends that governments establish a formal policy for the level of unrestricted fund balance that should be maintained in the general fund for generally accepted accounting practice and budgetary purposes. The guideline should articulate a framework and process for how the government would increase or decrease the level of unrestricted fund balance over a specific time period. In particular, governments should provide broad guidance in the policy for how resources will be directed to replenish the fund balance if it falls below the prescribed level.