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HomeMy WebLinkAboutCC Resolution 13173 (Classifications and Fund Balance)RESOLUTION NO. 13173 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL ESTABLISHING THE CLASSIFICATIONS OF FUND BALANCE IN ACCORDANCE WITH GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 54 WHEREAS, the Governmental Accounting Standards Board has issued Statement No. 54 ("GASB 54") entitled "Fund Balance Reporting and Governmental Fund Type Definitions" with the intent of improving financial reporting by providing fund balance categories that will be more easily understood; and WHEREAS, GASB 54 is a new standard that became effective in governmental fiscal years starting after June 15, 2010; and WHEREAS, the City Council elects to implement GASB 54 requirements and to apply such requirements to its financial statements beginning with the current fiscal year (July 1, 2010 — June 30, 2011); and WHEREAS, the City Council of the City of San Rafael has considered the administrative policy entitled "Fund Balance Policy for the General Fund" which outlines the policy and procedures enacted to accurately categorize and report fund balance in the General Fund in compliance with GASB 54; and WHEREAS, GASB 54 states that the City Council may commit General Fund balance for specific purposes by taking formal action and these committed amounts cannot be used for any other purpose unless the City Council removes or changes the specific uses through the same formal action taken to establish the commitment; and WHEREAS, the City Council has determined that the emergency and cash flow commitment should be established and approved at the level of the reserves identified in the City's Audited Financial Statements as of June 30, 2010 in the amount of $1,439,586 with the goal of restoring and maintaining this reserve to an amount equal to 10% of annual General Fund budgeted operating expenditures; and 10 °g° WHEREAS, the City Council has determined that when an expenditure is to be made for a purpose for which amounts are available in multiple fund balance classifications, resources will be expended in the following order: restricted fund balance, committed fund balance, assigned fund balance, and lastly unassigned fund balance. follows: NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of San Rafael as Section 1. The Council hereby approves and defines the various components of fund balance reported by the City as defined in Governmental Accounting Standards Board Statement No. 54 effective starting with the current fiscal year (July 2010 — June 2011). Section 2. The City Council delegates to the City Manager the authority to define and determine the portions of those components of fund balance that are reported as "Assigned" in the City's Audited Financial Statements. Section 3. The City Council has determined that the specific purposes for which the emergency and cash flow commitment may be used are to meet future capital needs, to offset economic hard times, to stabilize fluctuations in cash flow requirements, and to provide for emergency situations. And that these uses may only be changed by approval of a subsequent resolution. I, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the City Council of said City held on Monday the 20th day of June, 2011, by the following vote, to wit: AYES: COUNCILMEMBERS: Brockbank, Connolly, Heller, Levine & Mayor Boro NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None ESTHER C. BEIRNE, City Clerk Exhibit A City of San Rafael Fund Balance Policy for the General Fund APPROVED June 20, 2011 PURPOSE The purpose of the Fund Balance Policy is to establish the procedures for reporting components of fund balance in the General Fund financial statements. Delineation of components will help to ensure that there will be adequate financial resources to protect the City against unforeseen circumstances and events such as revenue shortfalls and unanticipated expenditures. This policy also authorizes and directs the City Manager to determine and define the amounts of those components of fund balance that are classified as "Assigned." Use of these funds will continue to require the approval of the City Council. PROCEDURES Fund balance is defined as the difference between the assets and liabilities reported in a governmental fund. Under Governmental Accounting Standards Board Statement 54 there are five separate components of fund balance, each of which identifies the extent to which the City is bound to honor constraints on the specific purposes for which amounts can be spent. CLASSIFICATIONS OF FUND BALANCE The following classifications shall be used for presentation of General Fund balance in City financial statements: r Nonspendable: That portion of the fund balance that cannot be spent because it is either: (a) literally not in a spendable form, such as prepaid items, inventories, or loans receivable; or (b) legally or contractually required to be maintained in tact, such as the principal portion of an endowment. This classification is used for non-cash assets. ➢ Restricted: That portion of the fund balance in which the use of the funds is constrained by: (a) external sources such as creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. This classification is used for funds that are constrained by legal requirements not under City control. Page 1 City of San Rafael Fund Balance Policy June 6, 2011 ➢ Committed: That portion of the fund balance that is reserved for specific purposes pursuant to constraints imposed by formal action of the City Council, and which remains binding unless removed in the same manner. This classification is used when the City Council elects to formally set aside funds via resolution for a specified purpose, such as the emergency and cash flow reserve. Any future change to such a reserve must also be formally enacted by the City Council. ➢ Assigned: That portion of the fund balance that is constrained by the City's intent to be used for specific purposes, but that are neither restricted nor committed, and which may be established by the City Manager as designated by the City Council. This classification is used for specific reserves deemed prudent by the City, such as liability and workers comp in which experience, actuarial data and the status of ongoing claims provide reasonable estimates for future payments. ➢ Unassigned: Amounts that do not fall into any of the above categories and exist in the General Fund Balance only. EXPENDITURES INVOLVING MULTIPLE CLASSIFICATIONS When an expenditure is to be made for a purpose for which amounts are available in multiple fund balance classifications, the order in which resources will be expended is as follows: restricted fund balance, followed by committed fund balance, assigned fund balance, and lastly unassigned fund balance. Reduction to committed fund balance due to expenditure must have prior authorization by City Council ordinance or resolution. CLASSIFICATIONS FOR OTHER FUND BALANCES These components may also be used to classify fund balance in other funds such as special revenue fund types, debt service fund types, and capital projects fund types. These classifications are not appropriately used in internal service or enterprise fund types. ONGOING MONITORING The City Council shall review fund balance components annually to classify new sources of revenue, to consider the management of assigned fund balances, and to act as needed to update committed balances via ordinance or resolution. Page 2