HomeMy Public PortalAbout09) 7F Reaffirmation of Committed & Assigned Fund BalanceCity Council
June 19, 2012
Page 2
informal discussions occurred with both Mayor Yu and Council member Blum
regarding minimum and maximum ranges . For ease of administration and for
accounting and reporting purposes of this reserve policy, it was suggested by staff, and
concurred by the Budget Ad Hoc Committee members, that one reserve level or dollar
amount be brought forward for approval by the City Council.
4. On April 17, 2012, the City Council received and filed the Comprehensive Annual
Financial Report (CAFR) at June 30 , 2011, and Fund Balances were reported and
classified in accordance with GASB 54, as a formal policy had yet to be adopted by the
City.
5 . On May 1, 2012 , the City Attorney and Administrative Services Director recommended
to the City Manager, that for ease of clarity, the adoption of the GASB 54 Fund Balance
Policy and the Budget Reserve Fund Balance requirements to be adopted by
Ordinance (as recommended by the Budget Ad Hoc Committee), should be considered
separately as each proposed action has a different objective. The GASB 54 is a fund
balance classification and financial reporting mandate only and is recommended to be
adopted by policy only.
6. On May 4, 2012, staff met with the Budget Ad Hoc Committee (i.e., Mayor Yu and
Council member Blum) to discuss the merits of separating the GASB 54 Fund Balance
Policy and the Budget Reserve Fund Balance requirements. The City Council Budget
Ad Hoc Committee concurred with staffs recommendation.
7 . On May 15, 2012, the City Council adopted the GASB 54 Fund Balance Policy.
8. Also on May 15, 2012, the City Council introduced Ordinance No . 12-953, adding a
new Chapter, "Budget Reserve Fund Balance Requirements" to the Temple City
Municipal Code.
9 . On June 5, 2012, the City Council held a second reading on Ordinance No . 12-953 and
took action to adopt the Ordinance.
ANALYSIS:
In order to be in compliance with the City's GASB 54 Fund Balance Policy adopted on
May 15, 2012, the City Council must reaffirm Committed Fund Balances and Assigned
Fund Balances for the General Fund prior to the end of the fiscal year for financial
statement reporting purposes at June 30, 2012 . All other Funds (i.e ., Special Revenue
Funds) are automatically classified as Restricted by the nature of the revenues received,
as they are required to be used for specific purposes.
Staff is recommending the Committed and Assigned Fund Balances be designated for
financial statement reporting purposes as June 30, 2012 as outlined in Ordinance 12-953,
Introduced on May 15, 2012 and adopted on June 5, 2012, adding a new Chapter,
"Budget Reserve Fund Balance Requirements" to the Temple City Municipal Code . Those
City Council
June 19, 2012
Page 3
budget reserve fund balance requirements adopted are outlined in Attachment "B ". If
the City Council reaffirms the Fund Balance classifications for the General Fund for
financial statement purposes, the classifications will be as follows:
• Committed Fund Balance (General Fund)
• Assigned Fund Balance (General Fund)
$ 4,500,000
$ 17,200,000
Any remaining Fund Balance at the close of the fiscal year will be designated as
Unassigned. Unassigned fund balance is the residual classification for the general
fund. This classification represents fund balance that has not been assigned to other
funds and that has not been Restricted, Committed, or Assigned to specific purposes
within the general fund .
CONCLUSION:
In order to be in compliance with the GASB 54 Policy and to ensure General Fund
Balance is classified as intended by the City Council at June 30, 2012, the City Council
must reaffirm the Committed and Assigned Fund Balances be designated for financial
statement purposes at June 30, 2012.
FISCAL IMPACT:
This action does not have an impact on the Fiscal Year (FY) 2011-12 City Budget.
ATTACHMENT:
A. City of Temple City GASB 54 Policy
B. General Fund Recommended Reserves (including GASB 54 Recommended
Classifications)
PURPOSE:
CITY OF TEMPLE CITY
FUND BALANCE POLICY
Attachment "A"
The purpose of this policy is to classify current fund balance categories to be in
accordance with the fund balance classificatiqns contained in the reporting
requirements of Statement 54 of the Government Accounting Standards Board (GASB)
effective June 15, 2010.
The elements of the policy are created by the City of Temple City for its own purposes
and may, therefore, be revised by the City as needed in the future .
STATEMENT OF POLICY:
The following classifications of Fund Balance are established in conformance with
GASB 54.
a. Nonspendable fund balance
b. Restricted fund balance
c. Committed fund balance
d . Assigned fund balance
e . Unassigned fund balance
The authorization level for committing is established by the City Council. Formal action
of the City Council will be defin!3d as an adoption of a Resolution taken at a publicly
noticed meeting.
The City Council will undergo an annual reaffirmation process prior to the fiscal year-
end, to review the Restricted , Committed and Assigned amounts to be reported as a
result of previous actions in the fiscal year in accordance with the adopted Policy, to
ensure they accurately reflect the City Council's desired Fund Balance classifications.
As part of the reaffirmation process, the City Council will review all levels of Fund
Balance and determine what action-if any-is needed to modify the existing Fund
Balance levels or to leave them as is .
DEFINITIONS AND REPORTING:
Fund Balance:: is defined as all finan~ial assets less liabilities normally expected to be
liquidated with current financial resources.
The following are categories of fund balance:
a . Nonspendable
The Nonspendable Fund Balance classification includes amounts that cannot be
spent because they are either (a) not in a spendable form or (b) legally or
contractually required to be maintained intact. The "not in spendable form"
criterion includes items that are not expected to be converted into cash (e .g.,
inventories and prepaid amounts). This also' includes long-term loans and notes
receivable and property held for resale. However, if the use of the proceeds from
the collection of those receivables or from the sale of those properties is
Restricted, Committed, or Assigned, then · they should be included in the
appropriate fund balance classification (Restricted, Committed, or Assigned),
' rather than Nonspendable Fund Balance. The corpus (or principal) of a
permanent fund is an example of an amount that is legally or contractually
required to be maintained intact •
b. Restricted
Except as provided for in the Nonspendable Fund Balance definition , amounts
that are restricted to specific purposes, should be reported as Restricted Fund
Balance. Fund balance should be reported as restricted when constraints placed
on the ·use of resources are either: (a) externally imposed by creditors , grantors,
contributors, or regulations ofother governments or (b) imposed by law through
constitutional provisions or enabling legislation.
c. Committed
Amounts that can only be used for the specific purposes pursuant to constraints
imposed by formal action of the adoption of a Resolution, the government's
highest level of decision-making authority should be reported as Committed Fund
Balance. Those Committed amounts cannot be used for any other purpose
unless the government removes or changes the specified use by adoption of a
Resolution. Committed Fund Balance also incorporates contractual obligations to
the extent that existing resources in the fund have been specifically committed
for use in satisfying those contractual requirements .
d. Assigned
Amounts that are constrained by the government's intent to be used for specific
purposes, but are neither Restricted nor Committed, should be reported as an
Assigned Fund Balance, except for stabilization arrangements which will be
reported as restricted or committed or unassigned. Intent can be expressed by
2
(a) the governing body itself or (b) a body (Ad Hoc Budget Committee) or official
to which the governing body has delegated the authority to assign amounts to be
used for specific purposes. By adoption of this Policy, the City Council delegates
the authority to the City Manager to assign amounts to be used for specific
purposes. Both the Committed and Assigned Fund Balance classifications
include amounts that have been constrained to being used for specific purposes
by actions taken by the government itself. Assigned Fund Balance includes (a)
all remaining amounts (except for negative balances) that are reported in
governmental funds, other than the general fund, that are not classified as
Nonspendable and are neither Restricted nor Committed and (b) amounts in the
general fund that are intended to be used for a specific purpose.
c ompanson: c •tt d ommr e vs. A . ssrgne d
Committed Assigned
A decision to use funds for a specific
purpose requires action of governing Yes No
body
Formal action of governing body is
necessary to impose, remove or modify
this constraint and formal action has Yes No
taken place before end of reporting
period
e. Unassigned
Unassigned fund balance is the residual classification for the general fund. This
classification represents fund balance that has not been assigned to other funds
and that has not been Restricted, Committed or Assigned to specific purposes
within the general fund. The general fund should be the only fund that reports a
positive Unassigned Fund Balance amount. In other governmental funds, if
expenditures incurred for specific purposes exceeded the amounts Restricted,
Committed, or Assigned to those purposes, it may be necessary to report a
negative Unassigned Fund Balance
3
Classification
Emergency/Disasters
Liquidity
Local Economic Uncertainty
Other Post Employment
Benefits (OPEB)
Risk M;magement -Not recommended at this time.
Fleet Management
Facilities Management
Technology Replacement
Economic Development
Opportunitoes and One-Time Expenditures
Undesicnated Fund Balance
Total Estimated Unassigned Fund Balance atJune 30, 2012
Per Adopted Budget
CITY OF nMPLE CITY
GENERAL FUND RECOMMENDED RESERVES
FY 2012-13
Criteria
To ensure the City can provide
essential services to the public
during a disaster.
The City's portfolio is currently $38 million.
With a total Budget of $15 million, the Oty
can cash flow 2 + years of operations and
budseted capital at current levels. However,
with the Rosemead Blvd Enhancement
Project coming up, a liquidity reserve is
recommended as the City will have substantoal
cash outlays, receivong reimbursement for
expenses at a later date.
Reduction in sales tax and property tax
revenues and certain fees that can be
sensitive to the local economic cycles.
There is no mandate to fund however some
level of funding is recommended.
Temple City has first dollar coverage for all
risks.
To provide for future replacement.
To provide for future replacement.
To provide for future replacement.
To provide resources for future
economic growth.
To provide resources for leveragong
opportunities and unforeseen one-time
expenditures.
Recommended
Reserves •
$ 1,000,000
$ 2,000,000
s 500,000
s 1,000,000
$ 400,000
$ 4,000,000
$ 200,000
$ 8,000,000
$ 4,600,000
$
s 21,700,000
If all or a portion of the Re~erve ·~utilized, the Reserve woll be restored to the original level as adopted wothon the next five fiscal years
or whenever rea~onably possible
Attachment "B"
GASB 54 Recommended
Classification
Committed
Committed
Committed
Committed
Assigned
Assigned
Assigned
Assigned
Assigned
Unassigned