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AHOSKIE – In an effort to avoid cash flow interruptions and to generate investment income, the Ahoskie Town Council has adopted a measure to maintain its unrestricted fund balance at a certain level.

Town Manager Leigh Etheridge introduced the proposed new policy at the Council meeting held Aug. 8.

Etheridge said that the Governmental Finance Officers Association recommends local government entities to establish a formal policy regarding the level of unrestricted fund balance.

“Governmental auditors also recommend the adoption of fund balance policies,” Etheridge noted.

She told Council members that the town’s most recent audit revealed an unrestricted fund balance of 25.74 percent, which is enough to cover three months of expenditures.

“I am asking for our policy to be set at 20 percent,” Etheridge stated. “This would mean that cash reserves on hand would not drop below 20 percent of our resources.”

Fielding a question from Councilman Charles Reynolds, Etheridge said setting the minimum fund balance at 20 percent of annual expenditures would be cause a financial burden. She added the percentage could be increased in the future if the Council so desired.

“What does the [North Carolina] League of Municipalities recommend,” asked Councilman Charles Freeman.

“They recommend having at least three months of expenditures in your unrestricted fund balance,” Etheridge answered. “That would be 20 percent of our budget. When the staff and I go over our finances every month, we must ensure that the fund balance remains at that 20 percent level.”

Etheridge pointed out that the current 25.74 percent level can be maintained, but the policy would state, if approved, that the fund balance must not go below 20 percent.

Freeman offered a motion to approved the policy. Councilman David Hunt offered a second and the motion was approved by a 5-0 vote.