F350
F350
CASH BALANCE AND LIQUIDITY POLICY
The purpose of the Corporation’s Cash Balance and Liquidity Policy (“Policy”) is to provide the School Board and Administration with shared objectives and parameters for the management of its funds, to maintain and improve the financial stability of the Corporation, and to maintain sufficient liquidity of the Corporation’s funds to provide an adequate cushion against unexpected temporary revenue shortfalls or unpredicted one-time expenditures while maintaining stable property tax rates. It is also the intent that this Policy will signal to credit rating agencies, investors, and the capital markets that the Corporation is well-managed and has budgetary flexibility. This Policy shall be reviewed annually to determine if any adjustments are needed by the Chief Financial Officer and the School Board of Finance during the annual Board of Finance meeting.
Definitions:
For purposes of this policy, the following definitions apply:
Available Cash Balance shall be defined as the amount, measured in dollars, of available reserves of the Corporation as measured by the balance remaining after the total expenditures are subtracted from the end-of-year balance in each Impacted Fund.
Corporation shall mean the School Corporation.
Impacted Funds shall be defined as the Corporation’s Education Fund, Operations Fund, Operating Referendum Fund, and Rainy Day Fund.
Operating Funds shall be defined as the Corporation’s Education Fund, Operations Fund, and Operating Referendum Fund.
School Administration shall mean the management team of the Corporation, specifically the Superintendent, the Chief Financial Officer, and the School Board.
School Board shall mean the Board of School Trustees of the School Corporation.
Target Balance:
The minimum and recommended cash balances are intendent to maintain sufficient cash balances in the Operating Funds and Rainy Day Fund to ensure continuity of services, meet case flow requirements due to the semiannual nature of property tax distributions in Indiana, maintain or improve the Corporation’s financial health and credit rating, and to respond to emergencies and unforeseen expenditures.
Fund Minimum Target Balance Recommended Target Balance
Operating Funds 13.5% of annual budgeted expenditures 27% of annual expenditures
(2 months payroll) (4 months payroll)
Rainy Day Fund 4% of combined Operating 8% of combined Operating Fund
Fund expenditures expenditures
The Chief Financial Officer or their designee will measure compliance with this Policy on a quarterly basis and report to the Board of School Trustees, and the Target Cash Balance will be actively monitored throughout the year. The Superintendent or designee shall present an annual cash flow projection as part of the budget development process.
If at any time during a fiscal year the Minimum Target Balance is not met, the Superintendent or designee will present a replenishment plan to the Board of School Trustees within 90 days of the date the account falls below the Minimum Target Balance.
If the Recommended Target Balance for Operating Funds is exceeded, the excess may be used for one-time expenditures, strategic investments in instructional programs, capital improvements, debt education or prepayment, or transfers to the Rainy Day fun. Such uses must be approved by the School Board and should not create structural imbalances.
Maintaining Target Balances:
In order to provide liquidity adequate to meet the needs and demands of providing educational services, the Target Balances will be maintained and managed through a method to minimize the need to borrow in the event of unforeseen financial challenges, including changes in revenue streams and expenses and weathering significant economic downturns or enrollment declines. The Target Balance will generally be funded or replenished by excess revenues over expenses or one-time revenues.
Maintaining Liquidity:
This Policy sets forth the minimum risk management measures that the Corporation must implement to ensure its current and future liquidity position is managed in a prudent manner. Liquidity is the amount of cash and the ease of converting assets to cash with minimum loss of the value of the asset to meet the financial obligations of the Corporation. The marketability or the ability to buy or sell an asset without incurring significant losses to access the funds determines the liquidity and availability of the asset. Adequate liquidity shall be evaluated by the Chief Financial Officer to ensure the Corporation is able to meet foreseeable and unforeseeable financial obligations. This Policy is implemented to provide guidance on the minimum liquidity level that the Corporation should maintain.
The three most prominent tools for cash flow management are using the entity’s reserves, interfund borrowing; and borrowing funds externally, as permitted by state law.
- Key Considerations for Interfund Borrowing
Interfund borrowing may be used for non-restricted funds of the Corporation, but only to the extent allowed by state law. The following are prudent considerations:
• Confirm that interfund borrowing is allowed under the governing statutes and then consult the Indiana State Board of Accounts’ guidance and review for any limitations or restrictions;
• Document each interfund loan along with a repayment schedule;
• Place a term limit on the loan; and
• Maintain appropriate accounting records that reflect the balances of loans in every fund affected by the transaction.
- Key Considerations for Minimum Required Liquidity
The following constitute key elements to consider when determining whether the Corporation has adequate liquidity:
• An evaluation of all commitments resulting from liabilities related to employees’ rights and benefits, including post-employment benefits, accrued paid time off and insurance;
• Target Balances are evaluated as outlined in this Policy;
• Ability to repay outstanding debt obligations, including bonds, lease rental payments and other financial commitments to repay debt; and
• A level of cash available for the normal operational expenditures to ensure the Corporation will be able to withstand fluctuations in monthly revenues/expenditures, as required by this Policy.
Policy Modifications:
The School Board may modify this Policy and may make exceptions to any of its guidelines, including the Target Balances, at any time to the extent that the management of the reserves and liquidity achieves the goals of the Corporation and as long as such exceptions or changes are consistent with the state and local laws. Target Balances may be adjusted based on factors including but not limited to, local revenue timing, enrollment trends, capital needs, or changes in state funding formulas.
Western Wayne Schools
Adopted: 12.10.25
Revised: