DERRY — Town leaders have taken the advice received following a recent audit and have adopted a formal fund balance policy.
The Town Council unanimously accepted the policy, which establishes a method to fund capital improvements while defining a reasonable level of unassigned general fund balance to meet normal cash flow and potential emergency spending needs, according to town finance director Frank Childs.
Town Administrator John Anderson said Childs and town controller Janice Mobsby worked hard with auditors and examined fund balance policies in other communities to draft the Derry policy.
“This is something they felt comfortable with,” said Anderson.
Several years ago, the town was required to reclassify its fund balance into five categories by the Governmental Accounting Standards Board.
“It describes how and when to utilize various categories of fund balance,” said Childs. “It sets forth a process by which unassigned fund balance would be reclassified to capital reserve funds for fire, information technology, police and public works.”
The policy also stipulates that the Town Council will maintain an appropriate level of unassigned fund balance as set by the state’s department of revenue administration when the annual tax rate is set, which is 8 to 17 percent of the regular general fund operating expenditure.
The town’s target is to maintain an unassigned fund balance of 12.5 percent, right at the midpoint of that range.
“This policy will have a favorable fiscal impact now and into the future by creating a framework that will promote financial stability,” said Childs.