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Appropriate Fund Balance Levels <br />The Office of the State Auditor recommends that at year -end local governments maintain <br />an unreserved fund balance in their general fund and special revenue funds of <br />approximately 35 to 50 percent of fund operating revenues or no less than five months of <br />operating expenditures, which should provide the local government with adequate funds <br />until the next property tax revenue collection cycle. The adequacy of unreserved fund <br />balance should be assessed based on an individual local government's own <br />circumstances. If the local government's unreserved fund balance is less than or greater <br />than the 35 to 50 percent recommended above the local government should be able to <br />explain the reason for the difference. <br />Local governments should also consider taking a position on the level of unreserved fund <br />balance in other funds that have unrestricted revenues. In setting an appropriate level, the <br />local government should consider any long -term forecasting /planning issues, to avoid the <br />risk of placing too much emphasis on the level of unreserved fund balance at any one <br />time. <br />Reviewed: January 2008 4 <br />Revised: NA <br />2007 -1022 <br />