3.01.030 General.
Adequate fund balance and reserve levels are a necessary component of the town’s overall financial management strategy and a key factor in external agencies’ measurements of the town’s financial strength. Maintenance of fund balance for each accounting fund assures adequate cash flow and to mitigate short-term effects of revenue shortages. Reserve funds are necessary to enable the town to deal with unforeseen emergencies or changes in condition.
(1) General Policy.
(a) The town shall maintain reserves by law, ordinance and/or debt service covenants.
(b) All expenditures drawn from reserve accounts shall require prior council approval unless previously authorized by the town council for expenditures within the town’s annual budget.
(c) If reserves and/or fund balances fall below required levels as set by this policy, the town shall include within its annual budget a plan to restore reserves and/or fund balances to the required levels.
(2) Cumulative Reserve Funds. The town will maintain cumulative reserve funds with reserve balances within the fund that must be used only for specifically identified expenditures and shall not be available for use if the fund balance is below the amount identified within this policy. Funds shall be there to cover revenue shortfalls resulting from unexpected economic changes or recessionary periods or to provide funds in the event of major unexplained expenditures the town could face or to be used as designated for other expenditures or capital projects that benefit the town’s gain and financial health.
(3) Fund Operating Reserves. The town will maintain a cash flow reserve within each designated fund as stated in Exhibit B to the ordinance codified in this chapter. The town will review annually the required cash flow reserve level that is necessary to meet the town’s cash flow needs and if it is determined that the reserve amount is in excess or is not adequate, the clerk-treasurer shall propose an amendment to these policies. (Ord. 653 § 2, 2021; Ord. 618 § 1 (Exh. A), 2019)