Other policies and methodologies that may be helpful for understanding the County’s budget:
After the budget is adopted it becomes necessary to amend the budget from time to time. Department heads have the authority to amend budgets for changes within a category (e.g., Services & Supplies). County Administrator approval is required for adjustments between categories (e.g., Services & Supplies to Fixed Assets) or between program budgets within the department.
Budgetary amendments that change total revenues or appropriations for a department require Board of Supervisors approval. These include: (1) the appropriation of revenues not included in the adopted budget; (2) reductions to estimated revenues and related appropriations when it is determined that the revenues will not be received; (3) appropriation increases supported by use of available fund balance or Appropriations for Contingencies; and (4) the transfer of monies or appropriations from one fund or department to another.
Use of General Fund Contingencies
The County will commit a portion of the General Fund general purpose revenues as a Contingency Reserve to provide the Board of Supervisors: (1) for unforeseen events causing increased County costs during the fiscal year; (2) funding to invest one-time funds into potential opportunities that support the Board’s Strategic Priorities; and (3) fee waivers. The Contingency Reserve should not be used to support recurring operating expenditures outside of the current fiscal year. Unless there is a justified unavoidable timing need, any decision to use Contingencies should only occur at the Board’s annual budget hearing, and during mid-year budget updates
Funding Methodology for Self-Insurance Program
The following describes the funding and budgeting methodologies the County uses for some of the self-insurance programs.
The funding methodology for the workers’ compensation and the liability insurance programs is designed to establish charges to departments to finance the current year costs at the 70% confidence level as estimated annually by an actuary. The Health ISF (county medical insurance plan) is funded based on actuarially determined trends in claims payments with the intent of maintaining a year-end fund balance equivalent to anticipated costs necessary to close out each year’s activity and to cover expenses in excess of projected levels due to unexpected increases in the number of size of claims. For workers’ compensation and liability insurance programs, cash reserves above and below the 70% confidence levels for outstanding liabilities for individual insurance funds are amortized on a rolling three-year basis, by decreasing or increasing rates by one-third of the difference, in accordance with Board policy. The rolling three-year amortization policy was implemented to: 1) alleviate large fluctuations in rates caused by changes in actuarial estimates or funding status; 2) facilitate long-term rate planning; and 3) provide consistent financial policy for the internal service funds.
For budgeting purposes, claims expense for the workers’ compensation and liability funds are based on the actuary’s estimated loss for the budget year at the 70% confidence level. In situations where this is not expected to provide sufficient appropriations to cover actual cash payments, additional funds are budgeted under Excess Claims Expense. Claims expense for the Health ISF is based on the actuary’s estimated loss for the budget year.
At the time the budget is prepared, the total year-end outstanding liability for the budget year is not known. When this information becomes available from the actuary during the budget year, the change in the total outstanding liability is recorded to the budgeted account Accrued Benefits Adjustment in order to conform to accounting principles. This budgetary figure is used merely to designate cash reserves to cover the outstanding liability and does not represent a cash revenue or expenditure. The Accrued Benefit Adjustment for liability and workers’ compensation is budgeted at 10% of the total liability. The accrued benefit adjustment for the County Health Plan is budgeted using the most recent 1-year trend and 10% of the total liability. The total liability is based on the prior year estimate of total liability projected forward using the most recent claims expense trend.
Within the ISF insurance funds, the budgetary information presented is not readily comparable on a year-to-year basis because expenditures and use of cash reserves are related to past years’ claims experience, as well as the fiscal year for which the budget is presented. Claims payments fluctuate depending on year of settlement, rather than occurrence of the claim, so payments may be made in excess of a current year's expected claims costs. In addition, actuarial estimates of total liability may vary substantially from year to year, depending on claims history, population changes, legislation, and other factors.
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