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| Andrew Chromy, Chief Business & Finance Officer |
By: Andrew Chromy, Chief Business & Finance Officer
Definition
Fund balance is the net difference between our District’s
total assets and our total liabilities.
A common misconception is that fund balance equals
cash. In reality, cash represents a
portion of our fund balance.
Why Have Fund Balance?
For OCFJSD, fund balance serves two main purposes. First and foremost, our fund balance,
specifically the cash portion of the fund balance, allows us to avoid the need
to cash flow borrow. Cash flow
borrowing, a common practice among school districts in the state of Wisconsin,
is the need to borrow money for the purpose of operating on a daily basis. That includes paying bills and paying
employees. Cash flow borrowing is most
commonly done through a line of credit, similar to a home equity line. Interest is paid on funds as they are
withdrawn from the bank and up until they are repaid to the bank. In the case of OCFJSD, it is not uncommon for
us to have received only 20% of our budgeted revenue in the first six (6)
months of our fiscal year. This slow
revenue stream is directly related to the timing of state aid and property
taxes. Currently, state aid is paid five
(5) times per year with a first payment in October. Property taxes, and only a portion, will not
be collected until January, our 7th month of the fiscal year.
The second purpose for us to have fund balance is for
emergencies and one-time projects. The
type of emergencies referenced are facility in nature and unplanned but do
present an immediate need. One-time
projects reference a district initiative where capital outlay is needed for a
one-time payment, not on a recurring basis.
Board Policy
In an effort to be fiscally responsible and maximize every
dollar possible for our students, the Board of Education has adopted a board
policy (610 #7) that requires the administration to “maintain a fund balance at
an amount capable of funding short-term operations without the need to do short
term borrowing.”
