The fund balance, or cash reserves, in the Harford County Public Schools operating budget has been a topic of concern among school system leaders in recent months, especially as money was assigned to specific capital expenses in this year's budget.Two representatives of the school system's external auditing firm, SB & Company LLC of Hunt Valley, gave Board of Education members a detailed rundown Sept. 12 of how a fund balance is structured and how much of the money is typically reserved for predetermined expenses, such as contracts with third-party vendors."You cannot spend pre-paid expenses, you cannot spend inventory, you cannot spend long-term receivables," Bill Seymour, a partner in the firm, said.Board President Nancy Reynolds said later that several members had requested a public discussion of the fund balance.The school board made two last-minute appropriations from the fund balance in June to keep three aging swimming pools open for another year – $552,293 – and make the capital improvements at the Harford Glen Environmental Education Center to restore overnight visits for fifth graders – $271,453 – two matters of great public concern.The money was not available in the general operating budget, and the board approved the appropriations despite concerns from Superintendent Barbara Canavan and her top aides about using cash reserves for operating or capital expenses.The fund balance has been $20 million or higher nearly every year between fiscal 2005 and fiscal 2015, according to the Comprehensive Annual Financial Report for the 2014-2015 fiscal year,School officials have little wiggle room if they want to use money from the fund balance for ongoing expenses, though.The school system ended fiscal 2015 with $23.7 million in the fund balance, although $17.3 million was categorized as "assigned," meaning it had been designated for a specific purpose, and only $6.4 million was "unassigned," or available for any unexpected expenses, according to the financial report.The board approved a $426.9 million operating budget for that year.The current operating budget is $438.9 million, about $12 million higher than it was two years ago. The projected fund balance is $16.2 million, according to the budget, although only $3 million is unassigned. The rest has been assigned to other uses, such as $1 million for an emergency fuel reserve, $1.2 million for health insurance needs and $5.5 million used to balance the operating budget.A certain amount of the fund balance is appropriated each year to close the anticipated gap between expenses and revenues in the operating budget."Fund balance is set up based upon the flexibility of the dollars available to be spent," Seymour said.Seymour and his colleague, Managing Partner Graylin Smith, stressed the school board can set its own policies regarding spending portions of the fund balance that are not non-liquid assets or restricted because of external needs, such as contracts."Some of the fund balance, you just can't spend it, because it's not going to convert into a liquid form," Seymour said.He cautioned board members regarding setting policies on how much is spent in each category."From an accounting perspective, you would want to go and be consistent from one year to the next and not move it up and down," he said.Board member Al Williamson expressed frustration over how the fund balance is reported in the end-of-the-year fiscal document, the terms used, such as "restricted" and "committed," and exactly when money is available."Not knowing whether you're saying, it could be for last year, it could be for the next year, seems very confusing and difficult to understand," Williamson said.Deborah Judd, assistant superintendent for business services, said the amount shown as assigned in the financial report of the end of the prior fiscal year is what the board had already approved for the current fiscal year."We're not talking about the budget cycle that we're going to begin working on now," Judd said.School officials will start working on the fiscal 2018 budget toward the end of the fall.Smith noted that "from an accounting standpoint, the word 'restriction' has historically meant different items."As an example, he said money set aside for a health insurance rate stabilization fund would be classified as assigned, rather than restricted, because it is an assigned amount the school system has set internally, rather than an amount mandated by law or a covenant agreement.Board member Laura Runyeon asked Smith and Seymour, based on their experience, if they could recommend a "balance or percentage or dollar amount" that should be kept in the unassigned fund balance.They declined to state a dollar figure, but Seymour noted many government finance organizations recommend keeping enough money to cover three to six months of expenditures in case of an emergency."I would caution to say that's really more dependent upon what your revenue cycle is," he said.Seymour said the amount in reserve is "a fingerprint" of any government entity, and it should be based on the "valleys and peaks" of revenue collection.