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Home My Public Portal About2011.149 (06-21-11) RESOLUTION NO. 2011.149 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LYNWOOD APPROVING THE FUND BALANCE POLICY FOR THE GENERAL FUND BALANCE AS DEFINED IN GOVERNMENTAL ACCOUNTING STANDARD BOARDS STATEMENT NUMBER 54 WHEREAS, the Governmental Accounting Standard Board (GASB) has issued its Statement No. 54, entitled "Fund Balance Reporting and Governmental Fund Type Definitions"; and WHEREAS, the requirements of this statement are intended to improve financial reporting by providing fund balance categories and classifications that will be more easily understood; and WHEREAS, part of the implementation of this statement is the formal adoption of a fund balance policy. This policy is effective beginning in Fiscal Year 2010-11 until further amended. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LYNWOOD DOES HEREBY RESOLVE AND DETERMINE AS FOLLOWS: Section 1. The City Council of the City of Lynwood approves and adopts the policy of the General Fund Balance as outlined in Attachment 1. Section 2. The classification and reporting of fund balance components as required by Governmental Accounting Standards Board Statement No. 54 shall become effective starting with FY 2010-2011. Section 3. The City Council of the City of Lynwood designates the City Manager or his designee to determine and define the amounts of those components of fund balance that are classified as "Assigned Fund Balance". Section 4. The policy shall remain in effect until further amended. PASSED, APPROVED and ADOPTED this 21 day of June, 2011. ' � � ,Le�- `' Aide Castro, Mayor ATTEST: APPROVED AS TO CONTENT: � / � � � ;__�� '. Maria Quinonez, City Clerk Roger . aley, City Manager APPROVED AS TO FORM: ,- �-� r �---'_ '� t Fred Galante, City Attorney Robert S. Torrez, Assi t City Manager STATE OF CALIFORNIA ) ) SS. COUNTY OF LOS ANGELES ) I, the undersigned, City Clerk of the City of Lynwood, do hereby certify that the foregoing Resolution was passed and adopted by the City Council of the City of Lynwood at a regular meeting held on the 21 day of June, 2011. AYES: COUNCIL MEMBERS FLORES, RODRIGUEZ, SANTILLAN, MORTON AND CASTRO NOES: NONE ABSENT: NONE ABSTAIN: NONE � /� Maria Quinonez, City Clerk STATE OF CALIFORNIA ) ) SS. COUNTY OF LOS ANGELES ) I, the undersigned City Clerk of the City of Lynwood, and the Clerk of the City Council of said City, do hereby certify that the above foregoing is a full, true and correct copy of Resolution No. 2011.149 on file in my office and that said Resolution was adopted on the date and by the vote therein stated. Dated this 21 day of June, 2011. � Maria Quinonez, City lerk Attachment 1 June 21, 2011 ,.. =� ;,��. �. � :� � FUND BALANCE POLICY FOR THE GENERAL FUND POLICY This Fund Balance Policy establishes the procedures for reporting unrestricted fund balance in the General Fund financial statements. Certain commitments and assignments of fund balance will help ensure that there will be adequate financial resources to protect the City against unforeseen circumstances and events such as revenue shortfalls and unanticipated expenditures. The policy also authorizes and directs the Finance Director to prepare financial reports which accurately categorize fund balance as per Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. PROCEDURES Funds balance is essentially the difference between the assets and liabilities reported in a governmental fund. There are five separate components of fund balance, each of which identities the extent to which the City is bound to honor constraints on the specific purposes for which amounts can be spent. • Nonspendable fund balance ( inherently nonspendable) • Restricted fund balance ( euternally enforceable limitations on use) • Committed fund balance ( self - imposed limitations on use� • ASSlglled fUnd balallCe (limitation resulting from intended use) • Unassigned fund balance ( residual net resources The first two components listed above are not addressed in this policy due to the nature of their restrictions. An example of nonspendable fund balance is inventory. Restricted fund balance is either imposed by law or constrained by grantors, contributors, or laws or regulations of other governments. This policy is focused on financial reporting of unrestricted fund balance, or the last three components listed above. These three components are further defined below. Committed Fund Balance The City Council, as the City's highest level of decision-making authority, may commit fund balance for specific purposes pursuant to constraints imposed by formal actions taken, such as an ordinance or resolution. These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the same type of formal action taken to establish the commitment. City Council action to commit fund balance needs to occur within the fiscal reporting period; however the amount can be determined subsequently. • General Fund EmercLency Continqency The City's General Fund balance committed for emergency contingencies is established at $500,000. The City Council may choose to increase this amount to two (2) months of regular general fund operating expenditures as recommended by the Government Finance Officers Association (GFOA) in any fiscal year in which recurring sources exceed recurring uses in the General Fund. The City Council may, by the affirming vote of 4/5 members, change the amount of this commitment and/or the specific uses of these monies. • General Fund Reserve Policv The General Fund Reserve Policy is set at ten percent of the General Fund Budget. At the conclusion of each fiscal year and the availability of a financial audit, the City Manager reports to the City Council whether the General Fund Reserve Policy has been met. This reserve may be appropriated by the City Council only to fund unusual, unanticipated and seemingly insurmountable events of hardships of the City. Assiqned Fund Balance Amounts that are constrained by the City's intent to be used for specific purposes, but are neither restricted nor committed, should be reported as assigned fund balance. This policy hereby delegates the authority to assign amounts to be used for specific purposes to the Finance Director for the purpose of reporting these amounts in the annual financial statements. A few examples of assigned fund balance as follows: • Continuinq Appropriations Fund balance levels must be sufficient to meet funding requirements for projects approved in prior years and which must be carried forward into the new fiscal year. • Department Services Established to provide for future department service obligations. • Budqet Balancing Measures Funds set aside for the purpose of stabilizing the delivery of City services during periods of operational budget deficits and to mitigate the effects of major economic uncertainties resulting from unforeseen changes in revenues and/or expenditures. Unassiqned Fund Balance These are residual positive net resources of the general fund in excess of what can properly be classified in one of the other four categories. Fund Balance Classification The accounting policies of the City consider restricted fund balance to have been spent first when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the City considers committed amounts to be reduced first, followed by assigned amounts and then unassigned amounts. This policy is in place to provide a measure of protection for the City against unforeseen circumstances and to comply with GASB Statement No. 54. No other policy or procedure supersedes the authority and provisions of this policy.