What is the maximum appropriation of fund balance from an authority or utility to the local governmental unit?

The correct answer indicates that the maximum appropriation of fund balance from an authority or utility to the local governmental unit is set at 5% of annual costs of operation. This limit is established to ensure prudent financial management and accountability within municipal budgeting practices.

By restricting the amount to 5%, jurisdictions are encouraged to maintain a stable financial environment while still allowing for some flexibility in using reserves for unexpected expenses or initiatives. This measure helps to balance the need for immediate funding against the long-term fiscal health of the local government, ensuring that authorities do not become overly reliant on fund balances for their ongoing operations.

Understanding this guideline is crucial for local governments in planning their budgets. It helps safeguard against potential deficit scenarios that may arise if too much of the fund balance is appropriated in any given fiscal year. The limit reflects a common practice in public finance to promote sustainability and accountability.