Tapping Your Reserve Funds

By Charles K. Trainor

School districts in the U.S. spent $528.7 billion for elementary and secondary education in 2006, according to the Institute of Education Sciences. Tracking that much cash takes expertise, but most school districts have staff with the necessary training and experience to ensure that budgets are monitored, cash flow reports are prepared, and vendors and employees get paid on time.

But sometimes money management can get far more complicated.

For example, financing a large construction or renovation project may involve millions of dollars. How are these special projects funded? Anticipating an expensive project in the future, districts often accrue financial reserves, but preplanning is not always possible when a boiler fails or a school needs emergency roof repairs.

You do have alternatives for tapping into reserves to generate cash. One option is issuing a bond, while another is using derivative transactions. You must know what you are getting yourself into, however.

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