Each year before the annual audit the city reviews it
financial statements to assign funds anticipated to be spent in the future for
things like capital equipment purchases.
With this review funds are earmarked to be placed in the Revolving Capital
Fund which is a separate section of the general fund of the city. By earmarking these funds we save them for
anticipated expenditure in the future.
Doing this allows for a leveling of both expenditures and levies by
moderating the highs and lows that could occur as larger expenditures are
made.
To make this all work there needs to be some planning
involved which anticipates future expenditures.
There is some degree of frugalness that also occurs. We may budget
for the purchase of a piece of equipment at an amount that makes sense but when
it comes down to the purchase, the cost is further researched to see if it can
be purchased at a lower price. Those
unspent funds do not get involved in a “use it or lose it” mentality as the
difference is saved for a future need.
The largest transfer this year was that of revenues for road
improvements. We had anticipated doing
some road paving projects that didn’t occur and we had budgeted for seal
coating that was put off until 2016.
Some of the budgeted amount was used for a paving project but the
remainder was unspent and earmarked for road improvements, making that transfer
$226,691.10. Added to road improvements
was some state funding we received in the amount of $62,145. Funds were also set aside for public works
equipment, future land acquisition, employee liabilities, administrative needs,
and sewer improvements.
The transfers also provide for the use of funds already
established in the Revolving Capital Fund to offset expenditures that exceed
the annual budget. This year a transfer was made to balance the expenditure of
a squad car. This was a planned transfer
that lowered the amount of the levy as we had funds set aside for this
purpose.
It may seem obvious that having these funds set aside are of
benefit for planned expenditures but they also are a benefit for unplanned
expenditures such as a need to replace a failing piece of equipment. In addition the lack of financing reduces costs. If we have cash on hand
to make a purchase we’re not spending resources on interest expense. It only makes sense that if a plow truck
costs in excess of $250,000 that planning for that expenditure is easier to
handle when some or all of the resources are available to make that
happen.
There is the reality that not all things can be anticipated
or fully funded upfront but having a plan of sorts certainly mitigates our needs. The Revolving Capital Fund is not fully
funded but it does serve a purpose for most things. With
constant attention to details, needs, and budgeting we’re getting closer to that
goal.
