RD208 - General Fund Preliminary (Unaudited) Annual Report for the Fiscal Year Ended June 30, 2008, Presented on a Budgetary (Cash) Basis


Executive Summary:
The Commonwealth ended fiscal year 2008 with a total fund balance in the General Fund of $2.22 billion measured on the cash basis of activity. This is a decrease of $735.3 million, or 25 percent, from last year’s ending fund balance of $2.96 billion. Planned (budgeted) decreases in General Fund balance for this year were $1.07 billion. The difference between the planned and actual decrease is primarily attributed to expenditures being approximately $310 million less than budgeted and revenue collections being approximately $20 million more than expected. The first graph on page 9 shows a comparison of the General Fund balance for the last five years.

Revenue Stabilization Fund

The Revenue Stabilization Fund is routinely segregated from the General Fund, but Virginia law directs that the Revenue Stabilization Fund be included as a component of the General Fund for financial reporting purposes. Therefore, it is included here both as a cash asset and as a reserved component of fund balance. The Revenue Stabilization Fund can be used only for constitutionally authorized purposes.

The Revenue Stabilization Fund has principal and interest on deposit of $1.0 billion reserved as a part of the General Fund balance. A deposit of $114.8 million was made during FY 2008 as required by Section 2.2-1829 of the Code of Virginia. During FY 2008, in accordance with the provisions of Article X, Section 8 of the Constitution of Virginia and Section 2.2-1830 of the Code of Virginia, a withdrawal of $351.5 million was made from the fund. The $21.3 million deposit calculated based on FY 2007 revenues and planned to be made in FY 2009 has been reserved.

The Constitution requires a deposit based on growth in income and retail sales tax revenue and allows revenue growth from increases in tax rates or the repeal of exemptions to be excluded, in whole or part, from the deposit calculation for up to six years. Under the provisions of Article X, Section 8 of the Constitution of Virginia, a deposit is not required during FY 2010 based on FY 2008 revenue collections when revenue increases from tax reform were included or excluded (including those derived from estimates).

Section 2.2-1829(b) of the Code of Virginia requires an additional deposit into the Fund when specific criteria have been met. No such designation is required since the specified criteria were not met for FY 2008.

Amounts Available for Reappropriation

Section 4-1.05a.1 of Chapter 847 requires reappropriation of 2008 fiscal year unexpended appropriations for Legislative and Judicial Departments, as well as Independent Agencies. Additionally, this Section of the Act gives the Governor discretionary authority to reappropriate all or a portion of the unexpended balances in Executive Department appropriations. Section 4-0.01b provides that all appropriations, however, are declared to be conditioned on the receipt of sufficient revenue to support them.

Based on an analysis by the Department of Planning and Budget of unexpended appropriations at June 30, 2008, $382.9 million is designated for capital outlay project needs; $50.0 million for central capital planning; $21.1 million for natural disaster sum sufficient amounts; $417.1 million for mandatory reappropriation in fiscal year 2009; $8.5 million for Water Quality; $17.1 million for FY 2008 budget reductions designated for FY 2009 budget reductions; and $45.3 million for discretionary Reappropriation in fiscal year 2009 for operations. Additionally, $149.8 million is designated as available balances to meet the requirements of Chapter 879.

Virginia Water Quality Improvement Fund

Section 10.1-2128 of the Code of Virginia established the Virginia Water Quality Improvement Fund. The Fund was established to provide Water Quality Improvement Grants to various entities to assist in pollution prevention and reduction. The Fund shall consist of amounts appropriated by the General Assembly. Unless otherwise specified by the general appropriation act, these appropriations shall consist of ten percent of revenues collected in excess of the official estimate and ten percent of any unreserved fund balance not required for reappropriation. For the year ended June 30, 2008, $1.6 and $6.9 million that represent ten percent of the excess revenue collections and ten percent of the unreserved fund balance not required for reappropriation, respectively, have been designated. Upon appropriation by the General Assembly, $8.5 million will be transferred from the General Fund to the Water Quality Improvement Fund.

Basis of Presentation

This preliminary annual report is comprised of budgetary (cash) basis financial statements that present the financial condition, results of operations, and changes in fund balance of the Commonwealth's General Fund. The notes to the financial statements are an important and integral part of the statements.

This preliminary report is presented on an unaudited basis. In preparing this report, we relied upon the internal accounting controls of the Commonwealth that are designed to provide management with reasonable, but not absolute, assurances that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and are properly recorded to permit the preparation of financial statements.

Final Report and Award

The final Annual Report of the Comptroller, due on December 15, 2008, will include certain accruals and other information required for conformance with generally accepted accounting principles. It will be audited by the Auditor of Public Accounts.

We are proud to report that the Comprehensive Annual Financial Report for the year ended June 30, 2007, was awarded the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association of the United States and Canada (GFOA). This is the twenty-second consecutive year that Virginia's Annual Report has received this award. In addition, Virginia expects to receive a companion award from the GFOA for its fiscal year 2007 Popular Report, entitled Virginia Financial Perspective. Upon receipt of this award, Virginia’s Popular Report will have received this award for the past thirteen consecutive years.