Procedure
Procedure 4010.2 - Target Accumulated Operating Surplus
1. | OPENING STATEMENT| 1.1. | The Board of Education has established a target for the accumulated operating surplus balance to ensure financial stability, effective resource allocation, and risk mitigation strategies in the event of unexpected increases in expenses and/or decreases in anticipated revenues. Distribution of funds from the accumulated operating surplus balance will be considered and approved by the Board of Education.
| | 1.2. | When the accumulated operating fund balance is below what is determined to be sufficient, a replenishment strategy will be developed and approved by the Board of Education within an appropriate time period.
| | 1.3. | The projected Target Accumulated Operating Surplus balance will be reported to the Board when presenting the annual budget, quarterly forecasts, and the year-end audited financial statements.
| | 1.4. | A portion of the projected accumulated operating fund balance may be transferred to Local Capital in accordance with Procedure 4010.3 Capital Reserve.
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2. | DEFINITIONS| 2.1. | Accumulated Operating Surplus is the accumulated excess of Operating Revenues over Operating Expenses less Inter-Fund Transfers from current and prior years.
| | 2.2. | Inter-Fund Transfer is a transfer between the District’s Operating Fund and Capital Fund.
| | 2.3. | Local Capital is comprised of previous years’ available operating funds surpluses, which are transferred to Local Capital with approval from Board of Education; revenues from sale of capital assets; and investment income earned on these funds.
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3. | PROCEDURE(S)| 3.1. | The maximum amount that will be held as the Target Accumulated Operating Surplus will be 3% of the total budgeted operating fund revenues. Once this target amount is reached, any additional surplus will be available for supporting one-time expenses until such a time as they are required to replenish the Target Accumulated Operating Surplus balance.
| | 3.2. | Internal restrictions can be made on the Target Accumulated Surplus for items that are approved by the Board of Education, have defined timelines, are directly related to a Board of Education’s strategic plan. The Board will provide information in the notes to the audited financial statements identifying internally restricted fund balances as well as details of the restrictions placed on these funds. The three streams of internally restricted operating surplus are:
| a) | Restricted due to the nature of constraints on the funds;
| | b) | Restricted for anticipated unusual expenses identified by the board; and
| | c) | Restricted for operations spanning multiple school years.
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| | 3.3. | The Secretary-Treasurer will identify the need for access to the Target Accumulated Operating Surplus and confirm that the use is consistent with Policy 4010 – Management of Operating & Capital Surplus. Determination of need requires analysis of the sufficiency of the current level of reserve funds relative to the maximum required Target Accumulated Operating Surplus per 3.1 above, the availability of any other sources of funds before using reserves, and evaluation of the time period for which the funds will be required and replenished.
| | 3.4. | Any annual surplus amount above the required Target Accumulated Operating Surplus can fund one-time non-recurring expenses. In the event of an excess surplus, the Secretary-Treasurer will submit a request to use the Target Accumulated Operating Surplus to the Board of Education. This request will include the analysis and determination of the use of funds and plans for replenishment. The goal is to replenish the funds used within 12 months.
| | 3.5. | Annually, the Secretary-Treasurer is required to present a report to the Board of Education detailing the utilization, balance, and pertinent details regarding the Target Accumulated Operating Surplus. Should the Target Accumulated Operating Surplus fall below the specified amount as per 3.1 above, the Secretary-Treasurer will update the Board of Education on the efforts made to replenish and bring the Target Accumulated Operating Surplus back to 3% of budgeted operating revenues.
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4. | REFERENCES AND RELATED DOCUMENTS |
5. | AUTHORITY AND RESPONSIBILITY| 5.1. | Secretary-Treasurer
| | 5.2. | Finance Director |
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6. | HISTORY |
