An Easy Way to Shift Money Between Funds

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Often, trustees are advised not to shift money from one fund to another. 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 there is money needed in the Township assistance fund. When the county auditor receives a property tax settlement, Form 22 determines the expected deposited amount for 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 consulting the board. 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 should 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. 

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If you have questions or would like further information, please contact us at coonrod@coonrodcpa.com to learn more.

This article is intended to provide information of general interest to local government officials in Indiana. The information is not guaranteed to be applicable or appropriate in particular circumstances. Local officials should consult competent professionals before acting on any information contained in this article. We are not attorneys. The advice of a legal nature should be sought only from qualified attorneys.

We inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for (I) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

Copyright © 2021 C. L. Coonrod & Company, CPA P.C.