By Aberdeen Insider - June 18, 2026 in RESOLUTION NO. 26-06-04R
A RESOLUTION TO ESTABLISH
A GENERAL FUND RESERVE AND FUND BALANCE POLICY
WHEREAS, the City of Aberdeen recognizes that maintaining adequate reserves within the General Fund is an essential component of sound financial management; and
WHEREAS, the City Council desires to maintain sufficient reserves to ensure the City’s ability to respond to emergencies, stabilize operations during periods of revenue volatility, and maintain continuity of municipal services; and
WHEREAS, establishing a formal reserve and fund balance policy promotes transparency, fiscal discipline, and long-term financial stability; and
NOW, THEREFORE, BE IT RESOLVED by the Aberdeen City Council as follows:
Section 1. Policy
The following General Fund Reserve and Fund Balance Policy is adopted:
I. Purpose and Intent
A. This policy applies to the General Fund of the City, which is represented within the City of Aberdeen’s general ledger as Fund 101. The purpose of this policy is to establish guidelines for maintaining adequate reserves within the City’s General Fund to ensure financial stability, provide sufficient working capital for municipal operations, and allow the City to respond to revenue volatility, emergencies, and strategic capital needs.
B. The City recognizes that certain revenue sources supporting the General Fund, including sales taxes and federal and state shared revenues and grants, may fluctuate due to economic and political conditions. Maintaining appropriate reserve levels allows the City to maintain stable municipal services during periods of revenue disruption.
II. Relationship to Other City Funds
A. Special Revenue Funds, Debt Service Funds, and Enterprise Funds of the City, including other self-supporting activities, are expected to maintain financial reserves sufficient to support their own operations, capital needs, and debt obligations.
B. The General Fund shall not be used to support the ongoing operations of other funds, except for the Airport Fund and in extraordinary circumstances approved by the City Council.
III. Fund Balance Definitions and Authority
A. Fund balance shall be reported in accordance with GASB Statement No. 54, including the classifications of nonspendable, restricted, committed, assigned, and unassigned.
B. The City Council establishes, modifies, or rescinds committed fund balance through ordinances, resolutions, or the annual budget.
C. When both restricted and unrestricted resources are available for an expenditure, restricted resources shall be used first. When unrestricted resources are used, the City shall use resources in the following order: committed fund balance, assigned fund balance, and unassigned fund balance.
IV. General Fund Reserve Structure
The City shall maintain the following reserve structure within the General Fund. Reserve levels shall be measured against annual General Fund operating appropriations authorized in the annual appropriations ordinance, excluding transfers, capital outlay expenditures, and other non-recurring expenditures.
The City shall maintain a minimum combined reserve equal to twenty percent (20%) of annual General Fund operating appropriations, consisting of an Operating Reserve and a Stabilization Reserve. The twenty percent (20%) combined reserve level represents the City’s minimum reserve objective.
The reserve levels established in this policy are intended to provide approximately two to three months of General Fund operating expenditures, helping ensure adequate liquidity and operational stability during periods of revenue disruption or unexpected financial obligations.
Reserve levels above the minimum may be maintained based on operational, capital, or strategic considerations. As a general guideline, total available reserve balance will typically fall within a range of twenty percent (20%) to thirty-five percent (35%) of annual operating appropriations.
A. Operating Reserve. The City shall maintain an Operating Reserve equal to fifteen percent (15%) of annual General Fund operating appropriations. The Operating Reserve provides working capital and short-term liquidity for normal operations, as well as protection against revenue timing differences, minor revenue shortfalls, and unexpected expenditures.
B. Stabilization Reserve. In addition to the Operating Reserve, the City shall maintain a Stabilization Reserve equal to five percent (5%) of annual General Fund operating appropriations. The Stabilization Reserve is intended for extraordinary or non-recurring circumstances, including economic downturns, revenue disruptions, emergencies, or other unexpected financial obligations.
C. Capital Investment Reserve. Amounts exceeding the minimum reserve objective established in this policy may be designated by the City Council for the establishment of a Capital Investment Reserve.
1. The Capital Investment Reserve may be used for pay-as-you-go capital improvements, equipment replacement, infrastructure investments, grant matching requirements, and other non-recurring capital expenditures.
2. Use of the Capital Investment Reserve should generally be considered in conjunction with the City’s capital improvement planning process.
V. Use of Reserves
A. General Fund reserves may be used to respond to emergencies, revenue shortfalls, temporary cash-flow disruptions, or one-time capital investments.
B. Use of stabilization or capital investment reserves for purposes not consistent with this policy shall require approval by resolution.
VI. Reserve Restoration
A. If the combined Operating and Stabilization Reserves fall below twenty percent (20%) of annual General Fund operating appropriations, excluding transfers, capital outlay expenditures, and other non-recurring expenditures, for reasons other than a planned or intentional use of reserves authorized by the City Council, the Finance Officer shall notify the City Council and may recommend a plan to restore reserve levels.
B. Restoration efforts should generally occur within three fiscal years.
C. When reserves are intentionally utilized by action of the City Council for capital projects or other one-time capital purposes, the Council may determine that restoration within this timeframe is not necessary.
VII. Use of Excess Available Fund Balance
A. When year-end General Fund balances exceed policy targets, the City Council may allocate excess funds to fund the Capital Investment Reserve, support pay-as-you-go capital improvements, reduce debt or other long-term obligations, or address other one-time needs.
B. Fund balance should generally not be used to support recurring operating expenditures.
VIII. Investment of Reserves
Funds held within City reserves shall be invested in accordance with the City’s Investment Policy and applicable provisions of South Dakota law.
IX. Budgetary Relationship to Charter and State Law
A. In accordance with the City’s Home Rule Charter, annual appropriations shall not exceed estimated revenues plus carried-forward fund balance.
B. Nothing in this policy modifies the contingency appropriation authority provided under SDCL 9-21-25.1.
X. Measurement and Reporting
A. For purposes of this policy, available reserve balance shall consist of committed, assigned, and unassigned fund balance reported within the General Fund and shall exclude nonspendable and restricted fund balance.
B. Reserve levels established in this policy shall be calculated using the General Fund balance reported in the City’s most recent audited financial statements.
C. Compliance with this policy shall be evaluated annually following completion of the City’s financial audit and reported to the City Council.
XI. Policy Review and Guidance
A. This policy shall be reviewed periodically, but not less than once every five (5) years, to ensure that it remains consistent with the City’s financial condition and long-term financial planning objectives.
B. This policy is intended to provide guidance to the City Council and City administration in the management of the City’s finances. Nothing in this policy shall be construed to create a legally binding obligation upon the City to maintain any specific level of fund balance and is intended solely as a policy guide for financial planning and decision-making.
Section 2. Revisions and Amendments
Any revisions or amendments to this policy shall be adopted by resolution of the Aberdeen City Council.
Section 3. Effective Date
This resolution shall take effect immediately upon passage and approval.
The foregoing Resolution No. 26-06-04R was adopted at a regular meeting of the Aberdeen City Council on the 15th day of June, 2026.
Number of AYES: 8
Number of NAYS: 0
Members abstaining: None
/s/Travis Schaunaman, Mayor
ATTEST:/s/ Jordan McQuillen, Finance Officer
Published once on June 18, 2026, at the total approximate cost of $100.57 and may be viewed free of charge at www.sdpublicnotices.com and www.aberdeeninsider.com