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Using the General Fund Operating Reserve:

Question:

Under what conditions can a district use money from their General Fund Operating Reserves?

 

Answer:

 

Operating reserves provide limited financial cushion for 2 purposes:

  1.  To ensure the school district has enough cash to pay the district’s obligations between July 1 and the receipt of the first semi-annual tax collection in November.
  2. To pay for emergencies that were not planned in the original adopted budget. 

The operating reserves also help cover instances where actual revenue received is less than anticipated.  One example of such a case is a tax protest by a large taxpayer in the district that significantly reduces the amount of tax revenues collected.  As long as the district does not spend more than the adopted budget for a fund, the use of the operating reserve is automatic in cases where cash is short for any reason.  The district does not need to take any special action to spend reserves within the adopted budget.

At each year-end, the remaining fund balance is divided into the operating reserve (up to the legal percentage allowed for the fund)  and the fund balance to be “reappropriated,” or used to fund the following year’s budget.  During the year, the operating reserve is not distinguishable from the ordinary fund balance.  When the district’s adopted budget is not sufficient to cover emergency needs, the district may adopt a budget amendment under (MCA 20-90-161(6)).  The operating reserve may be specified as the funding source for the emergency budget amendment.  Because the general fund budget is “capped,” the district cannot replenish the operating reserve easily.  The district can, however, plan to spend less than budgeted, in order to have more fund balance at year-end to designate as a reserve, up to the legal percentage allowed.

OPI Contact:  Janelle Mickelson at (406) 444-3249 or email jmickelson@mt.gov



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Article Details

Last Updated
10th of February, 2010

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