FILE:  DCBB

Cf:  DCBA

RESERVE POLICIES IN OTHER FUNDS

While the General Fund reserve is the most prominent reserve for the DeSoto Parish School Board, reserves in other funds are just as important.  For that reason, the funds listed below shall have reserves that are restricted or committed for the purposes specified herein.

Special Revenue Funds – Monies within these funds are derived from specific revenue sources that are restricted or committed for specific purposes.  Reserve policy components for these fund types shall include the following:

• Purpose of Reserves – Special Revenue Fund reserves are needed to:  (a) cover temporary cash flow shortages resulting from educational expenditures paid for with federal grant funds, (b) fund educational programs that are underfunded or not covered by state and federal grants, (c) plan for contingencies and unforeseen events related to the school breakfast and lunch programs, and (d) allow for the payment of school security and resource officers, student transportation, utility costs, and maintenance needs until property tax revenues are received in January, February and March of each fiscal year.
  
  

• Minimum Reserve Levels – The following reserve levels for each of the Special Revenue Funds shall be:

• Authority and Condition for Use of Reserves – Any appropriation or use of the reserves, which would cause any reserve level to fall below the minimum threshold shown above, shall require formal School Board approval.
  
  

• Replenishment of the Reserves – When reserve levels fall below the minimum thresholds described above, the Superintendent shall be required to identify strategies that would restore these reserves to the minimum levels shown above.  These recommendations shall restore the reserves to the required levels within three (3) years and shall be presented to the School Board at the time future budgets and/or budget revisions are submitted for approval.
  
  

• Use of the Reserves – Appropriations or use of the reserves shall require formal approval from the DeSoto Parish School Board at the time future budgets and/or budget revisions are submitted to the School Board 
  
  

• Periodic Review of Targets – The Superintendent shall review the Special Revenue Fund Reserve requirements and thresholds as a part of the annual operating budget process, as well as, each time a Special Revenue Fund budget revision is presented.

Debt Service Funds – Monies in these funds are used to pay the principal and interest payments on long-term debt.  Long-term debt includes:  (a) General Obligation Bonds, (b) Certificates of Indebtedness, (c) Sales and Use Tax Bonds, (d) Tax Anticipation Notes, (e) Limited Tax Bonds, and (f) any other instrument allowed by Louisiana law.  A separate Debt Service Fund is set up each time one of these long-term liabilities is approved by the School Board.  Reserve policy components for these fund types shall include the following:

• Purpose of Reserves – Because Debt Service Funds are legally committed to the retirement of debt, the purposes of having the reserves are to:  (a) avert the need to borrow when cash flow levels are low, (b) comply with legal requirements, and (c) keep the millage levies at their lowest possible rate.
  
  

• Minimum Reserve Levels – When a tax is collected to retire long-term debt, the reserve levels for all outstanding issues, except Sales and Use Tax Bonds, shall remain between 40% and 75% of next year’s principal and interest payments.  The reserves for all Sales & Use Tax Bond issues shall be equal to 100% of the average annual debt service payments. 
  
  

• Authority and Condition for Use of Reserves – Any appropriation or use of reserves, which would cause the reserves to fall below the minimum required limits stated above, shall require formal School Board approval.
  
  

• Replenishment of the Reserves – When reserve levels fall below the minimum thresholds described above, the Superintendent shall identify strategies that would restore these reserves to the required levels.  These recommendations shall restore the reserves to the required minimum levels within three years and shall be presented to the School Board at the time future budgets and/or budget revisions are submitted to the School Board for approval. 
  
  

• Remaining Reserves after Final Payment – Monies remaining within a Debt Service Fund, after the final payment is made and after consulting with the School Board’s bond attorney, shall be transferred under the following conditions:

• Periodic Review of Targets – The Superintendent shall review the Debt Service Fund Reserve requirements and thresholds as a part of the annual operating budget process, as well as, each time a Debt Service Fund budget revision is presented. 
  
  

• EMMA Reporting Requirements – The Director of Business Services or his/her designee shall verify that all required reports/filings are completed and submitted timely

Capital Projects Funds – Monies in these funds are used for capital expenditures.  Capital expenditures are defined as charges for the acquisition at the delivered price, including the cost of transportation, equipment, land and land improvements, buildings and building improvements, and fixtures and other permanent improvements.  Expenditures for capital projects must exceed $1,000 and have a useful life that exceeds one (1) year.  Reserve policy components for this fund type shall include the following:

• Purpose of Reserve - Reserve funds for Capital Projects shall be used to accumulate cash for future capital outlays for each taxing district of the school system; as well as, one for all other parish wide needs.  This practice of planning ahead and systematically saving for future capital needs:  (a) reduces the response time to perform major, unexpected repairs, and (b) allows the staff time to plan for additional capital improvements or structures when funds are available.
  
  

• Minimum Reserve Levels – The minimum reserve level for the funds required to have reserves shall be the greater amount specified under either option shown below.

• Specific Reserves

• Funds Required to Have Reserves – Reserves shall be required for the following funds:

• Authority and Condition for Use of Reserves – Any appropriation and/or use of the reserves, which would cause the reserves to fall below the minimum threshold levels, shall require formal School Board approval.
  
  

• Replenishment of the Reserves – When reserve levels fall below the minimum thresholds described above, the Superintendent shall identify strategies that would restore these reserves to the required levels.  These recommendations shall restore the reserves to the required levels within three years and shall be presented to the School Board at the time future budgets and/or budget revisions are submitted to the School Board for approval.
  
  

• Periodic Review of Targets – The Superintendent shall review the Capital Projects Fund Reserve requirements and thresholds as a part of the annual operating budget process, as well as, each time a Capital Projects Fund budget revision is presented.

Internal Service Funds – Monies within these funds provide:  (a) medical insurance coverage for active and retired employees, (b) dental insurance coverage for active and retired employees, and (c) workmen’s compensation services for employees who are injured on the job.  The objective of each Internal Service Fund is not to make a profit, but rather, to recover over a period of time the total cost of providing the goods or services stated above.  Reserve policy components for this fund type shall include the following:

• Purpose of Reserve – Internal Service Fund reserves are needed to:  (a) bridge times of the year when payments for medical, dental, and workmen’s compensation claims result in temporary low levels of cash on hand, (b) pay for large, unexpected claims that will be reimbursed by the insurance company at a later date, and (c) allow time for the staff to work with its insurance consultant, should the need arise to increase employee and employer premiums.
  
  

• Minimum Reserve Levels – The following reserve levels for each of the Internal Service Funds shall be maintained as follows:

• Authority and Condition for Use of Reserves – Any appropriation or use of the reserves, which would cause any reserve to fall below the minimum threshold shown above, shall require formal School Board approval.
  
  

• Replenishment of the Reserves – When reserve levels fall below the minimum thresholds described above, the Superintendent shall identify strategies that would restore these reserves to the required levels.  These recommendations shall restore the reserves to the required minimum levels within three years and shall be presented to the School Board at the time future budgets and/or budget revisions are submitted to the School Board for approval.
  
  

• Excess Reserves at Year End – At the end of each fiscal year, any amount in excess of the minimum reserve levels shown above within the:

• Periodic Review of Targets – The Superintendent shall review the Internal Service Fund Reserve requirements and thresholds as a part of the annual operating budget process, as well as, each time an Internal Service Fund budget revision is presented.

Other Post Employment Benefits (OPEB) Trust Fund – Monies in this fund are used for resources that are:  (a) held in an irrevocable trust, (b) dedicated solely to provide benefits to retirees and their beneficiaries for medical insurance, life insurance, dental insurance, and vision insurance, and (c) protected from creditors.  Reserve policy components for this fund type shall include the following:

• Purpose of Reserve – Reserves are needed to pay post retirement medical, life, dental and vision insurance coverage that is offered to all current and future retirees.
  
  

• Calculation Needed – In 2004, the Governmental Accounting Standards Board issued Statement No. 45.  This required all governmental bodies to record “a portion” of its Unfunded Actuarial Accrued Liability (UAAL) each year, beginning with the 2008-09 fiscal year, and continuing each year thereafter, for a total of 30 years.  Every two years, the Superintendent or his/her designee shall contract with an accredited actuarial firm for a valuation of the nonpension OPEB to assess the cost and liability associated with those benefits.
  
  

• Minimum Reserve Levels – No specific amount shall be required in the Ending Net Position. 
  
  

• Funding Strategies – The School Board realizes that funding the UAAL by the 2037-38 fiscal year will be difficult and challenging.  Accordingly, the Superintendent shall be required to identify funding strategies and seek School Board approval to reserve monies annually to meet the UAAL when submitting future budgets and/or budget revisions to the School Board for approval.   Such monies would include, but not be limited to, one time sources of revenues.  Approval to place money within this fund shall be granted to the Superintendent at the time the Annual Operating Budget or budget revisions are approved by the School Board. 
  
  

• Any appropriation or use of the reserves to pay post retirement medical, life, dental or vision insurance coverage that is offered to all current and future retirees shall require formal approval from the School Board and the OPEB Board of Trustees.
  
  

• Periodic Review of Targets – The Superintendent shall review the OPEB Fund Reserve requirements and thresholds as a part of the annual operating budget process, as well as, each time an OPEB budget revision is presented.

Ref:    La. Rev. Stat. Ann. §17:100.12

Board minutes, 3-6-14, 3-8-18, 5-3-18, 10-4-18

DeSoto Parish School Board