2025 Financial Policies Certificate Program, Course III. Fund Balance Policy
It is essential that a town strive to maintain adequate fund balance levels to mitigate current and future risks, such as emergencies, unanticipated expenditures, revenue shortfalls or economic downturns, and to aid in maintaining relatively stable tax rates. Fund balance levels are a crucial consideration in long-term financial planning. Defining fund balance uses and limits for your municipality within the scope of a policy ensures a balance exists between collecting more taxes than are necessary while still allowing for the prudent accumulation of funds.