GENERAL FUND

BALANCE
Vanessa Glushefski, Acting Comptroller
City of Buffalo Department of Audit and
Control
 GENERAL FUND BALANCE DEFINED

 The Fund Balance does not represent how much cash is on

hand. Rather, it represents the difference between assets and
liabilities and includes non-cash elements (i.e. land, solid
waste receivable, etc.).
 The Fund Balance is affected by the result of operations,
namely an excess of actual revenues over actual expenditures
or a deficiency of revenues over expenditures.
 Another way to understand the concept of the general fund
balance is to analogize it to a family’s net worth.
 PERSONAL NET WORTH EXAMPLES
IDEAL LESS THAN IDEAL PROBLEMATIC
Jones Family Smith Family Renegade Family

Assets

Cash 20,000 50,000 5,000

Home 160,000 160,000 160,000

Total Assets 180,000 210,000 165,000

Liabilities

Mortgage 100,000 100,000 100,000

Home Equity LOC - 60,000 60,000

Credit Cards - 30,000 50,000

Total Liabilities 100,000 190,000 210,000

Net Worth (i.e. Fund

Balance) 80,000 20,000 (45,000)

Note: Because of the Renegade family’s negative net worth, borrowing capacity is severely
diminished, leaving them with very few options in the event of unforeseen expenses.
 COMPONENTS OF GENERAL FUND
BALANCE
(DEFINITIONS)
General Fund Balance

Unrestricted Restricted

Committed Fund Balance

Assigned Fund Balance [Self-imposed limit at the Restricted [Subject to Non-spendable
[Intended use of Resources] highest level (e.g. City external legal restrictions] [Due to Form]
Charter)]

Rainy Day Fund [30 Days’

Judgements and Claims Encumbrances Emergency Medical Service Capital Outlay Receivables Land
Operations]

Unassigned ($0) Prepaids

 GENERAL FUND BALANCE
AS OF FY 2014-2018
The past five years
show a consistent June 30, June 30, June 30, June 30, June 30,
2014 2015 2016 2017 2018
decrease in fund
balance that
ASSETS $448.6 $414.6 $455.8 $400.2 $341.9
ultimately brought
the unassigned fund
balance down to $0.
LIABILITIES 302.2 263.4 306.3 285.2 249.9
Continuing this trend
will most certainly
GENERAL FUND
lead to a BALANCE
downgrading by Non-spendable 26.7 27.7 27.7 28.3 31.0
Restricted 8.8 7.9 8.2 6.1 8.8
ratings agencies, Committed (Rainy
and, consequently, Day) 37.7 37.2 36.3 38.8 38.7
Assigned 42.5 35.0 35.4 35.2 13.4
higher interest costs Unassigned 30.7 43.4 41.9 6.5 0
as well as long-term Total $146.4 $151.2 $149.5 $114.9 $91.9
problems with our
overall debt
capacity.
 CITY OF BUFFALO
 The negative fund 1991-2018
balance in 1992 of
almost $9 million was $180,000,000
followed by tax levy S&P Rating & Fund Balance
6 6 $160,000,000
increases of 19.3 % City of
2016;
2015; Buffalo
62014;
6 6 1991-2018
and 9.5% in FYs 1992 $140,000,000
and 93, respectively. 114930243
2013;
2012;
52011;
5 5
$120,000,000

2010;
2009;
4 4
$100,000,000
 As a result our credit
$80,000,000
rating was 2008; 3 1991; 3
downgraded twice, $60,000,000
and it took several 2
2 2
2002; 2 1999;
2
S&P21997;
Rating
1996;
2 21994; $40,000,000
1993;
21992;
2 2
years of improved
1
19789000
Fund Balance $20,000,000
performance to 2007; 12005;
2004;
12003;
1 1 10922221

upgrade our rating. $0

($20,000,000)
 It’s important we
don’t ignore warning
signs (e.g. Detroit).
 RAINY DAY FUND
 The rainy day fund is a committed component of our unrestricted general
fund balance totaling approximately $39 million.
 The rainy day fund is mandated by the Charter, which requires thirty days of
expenditures be set aside as committed for emergency purposes only. See,
§20-17.1.
 The rainy day fund is not a pot of cash in the bank, rather it is a designation
within the fund balance.
 Setting aside cash for an emergency is a policy decision, but, in our opinion it
is ill advised, as the extraordinary nature of triggering events does not justify
idle cash balances. More productive uses of the cash are high yield
investments or the avoidance of short-term borrowing.
 In order to ensure the necessary borrowing capacity exists in the event of an
emergency, we, instead, suggest the Council consider updating the City’s
fund balance policy.
 PROPOSED FUND BALANCE POLICY
 In keeping with best practices and
to avoid susceptibility to the long-
term impacts of one-time
revenues and revenue shortages,
we strongly recommend the
council update the City’s fund
balance policy to require
replenishment of fund balance
back to its minimum requirement
within two fiscal years.
Benefits
 Meets GFOA recommendations;
 Maintains a healthy fund
balance;
 Protects our credit rating (cost
of borrowing);
 Presents a picture of financial
health to our auditors,
investors, and the public,
demonstrating that Buffalo is a
wise investment.
CONCLUSION/RECOMMENDATIONS
A failure to maintain our general fund balance at healthy levels can have
a number of harmful consequences including:
 Credit rating downgrades leading to increased interest cost and
diminished capacity to borrow;

 Substantial tax increases and/or the inability to fund important

operations; and

 Negative impact on the public’s perception of the City.

Therefore, we strongly recommend that the Council:

 Adopt a stronger fund balance policy that will ensure a healthy fund
balance and providing for the replenishment of general fund balance in
the event it is used.