Here Is A Way to Shift Money Between Funds – Easily!

Here Is A Way to Shift Money Between Funds – Easily!

Trustees often wish they could shift money from one fund to another, but usually they are told they can’t.

However, your township may have a way around that. 

If a fund receives a property tax levy, it may also be charged rate cap credits (circuit breaker credits).  Rate cap credits reduce the net revenue to the fund.

The levy collections must be deposited into the fund for which they were raised.  However, the  rate cap credits can be allocated to almost any fund.  By reallocating the rate cap credits, the trustee can shift some revenue between funds.

Example: Suppose your township has extra money in a cumulative fire building and equipment fund, and the money is needed in the township assistance fund.  When a property tax settlement is received from the county auditor, Form 22 shows the amount to be deposited into each fund.  The trustee must strictly follow Form 22 when depositing the property tax collections, but the trustee is free to allocate the rate cap credits to any fund the trustee chooses.  If township assistance needs more money, the trustee can reduce rate cap credits in the township assistance fund and increase them in the cumulative fund.

The reallocation can be applied to any combination of funds, except that rate cap credits can never be allocated to a debt service fund.

Naturally this idea works only if your township has rate cap credits on Form 22.  Not all townships have them.

No statute requires a township board resolution to reallocate rate cap credits, but we recommend the board be consulted.   We also recommend notifying the county auditor and the Department of Local Government Finance of any reallocation of rate cap credits.  The township does not need their permission, but they will want to have the information for their records.

Caution: before increasing the rate cap credits in any fund, make sure the fund can still collect enough revenue to cover its expenditures for the current year. 

C.L. Coonrod & Company
3850 Priority Way South Dr, Indianapolis, IN 46240
(317) 844-4450
coonrod@coonrodcpa.com