HomeMy Public PortalAboutResolution 2015-12-14 Adopting the Town of Fraser's Financial Policies TOWN OF FRASER
RESOLUTION NO. 2015-12-14
A RESOLUTION ADOPTING THE TOWN OF FRASER'S FINANCIAL POLICIES
BE IT RESOLVED BY THE BOARD OF TRUSTEES OF THE TOWN OF FRASER,
COLORADO THAT:
1. The Fraser Town Board hereby adopts the financial policies as attached.
READ, PASSED AND ADOPTED BY THE BOARD OF TRUSTEES THIS 2nd DAY OF
DECEMBER, 2015.
Votes in favor: (p BOARD TR STEES OF THE
Votes opposed: ( TOWN OF A SER, 'I LO DO
Absent: JSZI—
Abstained: BY: ` /
Mayor •
N of ATTEST:
(S - A�
' i q Town Clerk
oo°R
ADO
Town of Fraser, Colorado
Financial Policies
The Town of Fraser, a statutory Colorado community operating under a Mayor-Manager form of
government, has adopted the following financial policies that allow the governing body to view
its present approach to financial management from an overall, long-range vantage point.
Under the Mayor-Manager form of government the elected governing body is responsible for the
legislative function of the municipality; such as establishing policy, passing local ordinances and
resolutions, approving appropriations, and developing an overall community vision. These
financial policies help to frame resource allocation decisions and establish objectives,
standards, and internal controls for the Funds of the Town.
Financial policies help; provide for the continuity of service delivery, help to improve the Town's
fiscal stability, and prepare the Town for any potential financial emergencies. Many authorities
provide direction in regards to the Town's financial policies including, the Federal Government,
the State of Colorado and it's Constitution and the Fraser Town's Code. All these authorities
provide for the basic legal requirements and timelines for these policies.
Section 1 - Financial Management Overview
The following financial policies adopted by the Fraser Town Board on December 2nd, 2015
establish the framework for the Town's overall fiscal planning and management. It is the intent
of the Town that these policies demonstrate to residents, the credit rating industry, municipal
bond investors, auditors, and the State that the Town is committed to sound financial
management and fiscal integrity. The goals of the Town's financial policies are:
• To support sustainable municipal services.
• To have a capital improvement program that adequately maintains and enhances the
public's assets over their useful life.
• To provide cost effective services to citizens and visitors.
• To provide financial and other service information to enable citizens to assess the costs
and efficiency of Town services.
• To follow prudent and professional financial management practices to assure residents
of the Town of Fraser and the financial community that our Town government is well
managed and in sound fiscal condition.
Section 2 - General Financial Policy
I. Fund Accounting
The Town uses Fund accounting protocols and procedures as outlined by the Generally
Accepted Accounting Principles (GAAP) and following the pronouncements of the
Governmental Accounting Standards Board (GASB).
A fund is a separate, self-balancing set of accounts used to account for resources that are
segregated for specific purposes in accordance with special regulations, restrictions or
limitations. The separation of the Town's activities into funds allows the Town to maintain the
1iPage _ �
appropriate (required) controls over expenditures for each activity and to report on specific
activities to interested citizens.
Fund Types: All funds are classified into six(6)fund types. These fund types, and the purpose
of each are:
a. General Fund -To account for the required administrative functions of municipal
governance, police protection, public works, parks-open space and trails, community
development, street infrastructure, other capital asset operations and preservation, and snow
management functions of the Town.
Principal sources of revenue for the Town's General Fund (GF) consists of: property taxes,
sales, use and excise taxes. Secondary revenues are derived from franchise fees, licenses and
permits, grants, charges for services, intergovernmental revenue, interest earnings, and
operating transfers from other funds.
Major expenditures within the Town's General Fund are for personnel costs, materials and
supplies, purchased services, capital outlay and transfers to other funds.
b. Special Revenue Funds -To account for and report the proceeds of specific revenue
sources that are restricted or committed to expenditures for specified purposes other than debt
service or capital projects.
The Town at this time operates four Special Revenue Funds:
The Conservation Trust Fund(CTF) is funded by the State's net lottery proceeds and interest
earnings. Fund balance within the CTF is generally leveraged with grant dollars and donations
for new park, open space and trail investments. CTF funds are highly regulated and no
expenditures are allowed for ongoing maintenance costs related to any project.
The Capital Equipment Replacement Fund(CERF) is funded by State Highway User Trust Fund
proceeds along with interest earnings and GF transfers. The CERF is utilized to track
expenditures for our public safety fleet, and our public work's heavy equipment, regular
equipment and fleet purchases.
The Fraser River Enhancement Fund(FREP) has been used in the past to track inter-
governmental projects along the Fraser River corridor from the base of Berthoud Pass to the
Joint Facility.
The Joint Facilities Fund(JFF) is utilized to operate the Upper Fraser Valley Wastewater
Treatment Plant and the facilities capital projects. Operation and maintenance expenditures are
refunded to the.Fund based upon the current member utilization of treatment capacity. Capital
projects at the facility are funded at the member plant ownership percentages.
c. Capital Project Funds -To account for and report financial resources that are restricted,
committed, or assigned to expenditures for capital outlays, including the acquisition or
construction and preservation of capital facilities and other capital assets.
The Capital Asset Fund(CAF) is used to provide resources for current and future General Fund
capital assets, i.e. streets, bridges, buildings, trails, parks and open space. Currently the CAF is
funded by inter-fund transfers, grants and partnerships on a project specific basis. On-going
operating revenues need to be identified and dedicated along with reserve accumulations for
current and future assets.
d. Debt Service Fund (DSF) -To account for and report financial resources that are restricted,
committed, or assigned to expenditures for principal and interest on any bonded indebtedness.
The Town's DSF tracks and allocates resources for the payments of its long term bonded
indebtedness. The Fund has both Restricted Reserves and Committed Reserves.
e. Enterprise Funds (also called Business or Proprietary Funds)-To account for operations
that are financed and operated in a manner similar to private business enterprises. The intent of
the governing body is that the costs(expenses including depreciation)of providing goods or
services to the general public on a continuing basis be financed or recovered primarily through
user fees covering all expenses incurred, and/or net income as appropriate for capital
maintenance, public policy, management control, accountability, or other purposes.
The Town's Water Fund (WF) accounts for the water production and distribution systems and its
Wastewater Fund (WWF)accounts for the wastewater collections system. Capital projects are
budgeted for both enterprises within each fund.
f. Fiduciary Funds -To account for resources received and held by the Town in a fiduciary
capacity (Trust). Disbursements from these funds are made in accordance with the Trust or
other agreements or conditions of the Trust for the particular source of funds. The Town
currently has no fiduciary funds in operation.
II. Accounting and Auditing Policies
The Town maintains a system for financial monitoring, control and reporting for all operations,
funds and agencies in order to provide effective means to ensure that overall Town goals and
objectives are met and to instill confidence in the Town's partners and investors that the Town is
well-managed and fiscally sound.
The Town maintains its accounting records and reports on its financial condition and results of
operations in accordance with Federal and State laws, regulations and Generally Accepted
Accounting Principles (GAAP), which are set by the Governmental Accounting Standards Board
(GASB) and the Financial Accounting Standards Board (FASB).
Annually, an independent firm of certified public accountants performs a financial and
compliance audit of the Town's financial statements.
III. Basis of Accounting and Reporting Focus
The term "basis of accounting" refers to when revenues, expenditures - and the related assets
and liabilities—are recognized in the accounts and reported in the financial statements.
Specifically, it relates to the timing of the measurements made. The following are the basis of
accounting available for use by the Town:
a. Cash Basis—Transactions are recognized only when cash is received or disbursed.
31Page --- --- - --- —
b. Accrual Basis—Transactions are recognized when the economic event occurs, regardless
of whether or not cash is received or paid. Proprietary funds (Water and Wastewater Funds),
use the accrual basis of accounting. These funds have an income measurement/capital
maintenance focus. The accrual basis of accounting is used by private enterprises as well.
c. Modified Accrual Basis—Expenditure transactions are recognized when incurred.
Revenues are recognized when they are both measurable and available to finance the
expenditures of the current period. Governmental funds, including general, special revenue,
debt service, and capital projects, use the modified accrual basis of accounting. For a revenue
to be recognized in a governmental fund, it must be "measurable" (the amount must be known
or be reasonably estimated), and it must be "available"to finance the expenditures of the same
fiscal period for which the revenue is recorded. "Available," in this case, means collectible in the
current period or soon enough thereafter to be used to pay liabilities of the current period. For
purposes of consistency, that time-frame shall be sixty(60)days which was set for purposes of
Property Tax revenues.
Reporting Focus (Budget vs. GAAP)-This concept is used to refer to the way transactions are
recorded and reported for compliance with Colorado Budget Law as opposed to financial
statement presentation in conformance with GAAP.
1. Budget Basis- The Town's monthly statement of revenues and expenditures are
reported during the fiscal year on what is informally called a "budget basis." The Town's
transactions are recorded throughout the year in accordance with the financial statement
requirements as set forth within the Colorado Revised Statutes. By recording the
transactions in general compliance with this law, the revenues and expenditures can be
more easily monitored on a monthly basis to ensure compliance with the legal
requirements as set forth within the Colorado Revised Statutes.
2. GAAP-At the end of the fiscal year, adjustments are made to present the financial
information in a format that is comparable to that used by other local government units
around the country. The standards for this reporting are referred to as GAAP. The
adjustments to convert the Town's financial records from "budget basis" to "GAAP basis"
are made to ensure that the Town's financial statements are fairly and consistently
presented in conformance with GAAP.
IV. Internal Control Structure
The Town maintains an internal control structure consisting of the following three elements:
a. Control Environment—an overall attitude and awareness of actions as they influence the
Town.
b. Accounting System—an effective accounting system which results in identification and
recording of all valid transactions, description on a timely basis of the type of transaction in
sufficient detail to permit proper classification of the transaction for reporting purposes,
recording of the transaction in the correct time period and proper presentation of all transactions
and related disclosures in the financial statements.
c. Control Procedures—proper authorization of transactions and activities, adequate
segregation of duties, adequate documentation and records, adequate safeguards regarding
access and use of assets and records, and independent checks on performance. Funds are
Wage -- --------- -- —
categorized by standard GAAP functional classifications; and the development of new funds,
departments, programs and accounts shall be approved by the Finance Department. Each fund
in the Town's budget will have an introductory statement of purpose which shall consist of the
intent of the fund; sources of revenue and restricted revenues, if any; required reserves and
justification for such reserves.
V. Financial Monitoring
The Town Manager is charged with the primary responsibility for monitoring the fiscal
implementation of the approved budget. In addition, the Town Manager and Finance Manager
will work closely with other departments to apprise them of their financial status and of any
potential issues that may affect their budgets. The Town Manager and the Finance Manager will
review fiscal issues affecting any part of the Town's organization. This activity supports the
monitoring role and focuses on the protection of Town assets and the legal, efficient, and
effective use of Town resources. Together, the Town Manager and the Finance Manager will
provide the Town Board with regular reports on the Town's finances including a financial report
containing budget versus actual revenue and expenditures information. Individual departments
are responsible for monitoring and managing their resources to ensure that the legal and
administrative appropriation to the department is not overspent and that all expenditures and
uses of Town resources are in conformity with Town, State, and Federal ordinances, statutes,
policies, and regulations.
1. Legal Appropriation - Each department is responsible for ensuring that expenditures
do not exceed the legal appropriation level for their department within each fund
(operating and capital expenditures combined).
2. Revenues- Each department is responsible for monitoring revenues that are collected
as a result of programs administered.
VI. Audit
Colorado statutes, along with Federal laws and regulations will be followed wherever they apply
to the financial activities of the Town.
The source of historical financial information will be located in the central accounting system as
operated and maintained by the Finance Department. The source of all current and future
budget information, including spending plans, revenues, and expenditures, is the annual budget
document.
a. Internal Audit- The Town's Finance Department and Independent Auditors evaluate the
adequacy of financial controls, systems, records and organizational operations. They provide
the Town Board with management and employees objective analysis, appraisals and
recommendations for improving systems and activities.
b. External Audit- In accordance with Federal law and State statutes, an annual external audit
will be performed by an independent public accounting firm with the subsequent issuance of a
financial report and opinion.
c. Single Audit- Per the Federal Office of Management and Budget(OMB) Circular A-133, all
non-federal entities that expend $500,000 or more in a year with Federal awards, either as the
grantee or the sub-grantee, shall have a single or program-specific audit conducted for that year
in accordance with the provisions of the circular guidance. The single audit encompasses both
51
F a g e - ---- - - -- ---
the entity's financial statements and the federal awards received by the entity; whereas a
program-specific audit will audit one federal program and can only be used when the grantee
receives grant awards only from one federal program.
Section 3 - Budpet Policy
I. Overview
The annual budget is an operational tool which provides the Town Board and Manager with the
financial information necessary to guide resource allocation to accomplish the goals and
objectives of the Town.
The budget, along with the annual appropriation including supplemental appropriations, provide
the basis for the control of expenditures and set the Town's financial guidelines. Basic legal
requirements and budget processes are defined by the State and Town Code.
II. Budget Philosophy
The Town is committed to developing a sound financial plan for the operations and capital
improvements that meet the Town's Comprehensive Plan goals. The Town provides a wide
variety of services to residents and visitors. It is the responsibility of the Town Board to adopt a
budget that provides resources to best meet the service needs for the overall good of the
community. To achieve this, the Town:
a. Utilizes conservative growth and revenue forecasts;
b. Prepares plans for operations and capital improvements;
c. Allows staff to manage the operating and capital budgets, with the Town Board approving the
allocations for both;
d. Adopts financial policies;
e. Establishes budgets for all funds based on adopted policies;
f. Appropriates the budget in accordance with the Town Code and State law;
g. Develops a budget that minimizes adverse impacts to the community and plans for the
uncertain and unpredictable by establishing and funding adequate reserves in each major fund.
III. Budget Preparation Process
The Town identifies important community outcomes and develops a financial and service
delivery plan to achieve those outcomes. The Town Board allocates funding based on current
priorities and results.
Each year, the Town Manager prepares a forecast for the following year's budget. In July, the
Town Manager prepares a ten year budget projection with the Town Board's budget objectives
and guidelines for developing the following year's budget.
In July and August, departments develop revenue and expense projections for the following
year and submit them to the Town Manager. Not later than October 15th the Town Manager
submits a preliminary budget to the Town Board for review. In November, the citizens of Fraser
provide their feedback on the proposed budget when the Town Board holds its Budget Hearings
on the proposed budget.
By the first meeting in December, or earlier when possible, the Town Board adopts the budget
and commits appropriations by ordinance. By State statute December 31st the Town Board must
adopt the following year's budget and no later than December 15th property taxes must be
levied to the County for collection. Any revisions to the current year's budget must be adopted
with the next year's budget, if not earlier. Revisions shall be adopted on a per line item basis
versus any wholesale revised budget protocol, this allows for transparency to the community at
large.
IV. State Statutory Requirements
The State Statute indicates that no later than October 15 of each year, the budget shall be
submitted to the governing body. As a result, the Town Manager and Finance Manager present
the recommended budget for the ensuing fiscal year to Town Board no later than October 15th
of each year.
V. Town of Fraser's Code Requirements
Budget Fiscal Year— Fraser Town Code Section; "The fiscal year of the Town shall commence
on the first day of January and end on the last day of December of each year."
Section 4 - Debt Policy
I. Overview
The Town recognizes the primary purpose of"facilities" is to support the provision of services to
its residents. The Town must balance debt financing and "pay-as-you-go" methods to meet the
capital needs of the community. The Town realizes failure to meet the demands of growth may
inhibit its continued economic viability but also realizes too much debt has detrimental effects.
Historically, the Town's total bonded indebtedness has been limited.
The Town uses lease purchase financing for several purposes including the acquisition of real
property and the replacement of equipment and vehicles. Lease purchases decrease the impact
of the cost to a department by spreading the costs over several years, and are subject to annual
appropriation by the Town Board.
II. Town of Fraser Code Requirements Debt Limitations
a. No bonds or other evidences of indebtedness, payable in whole or in part from the proceeds
of ad valorem property taxes or to which the full faith and credit of the Town are pledged in
writing or otherwise shall be issued, except in pursuance of an ordinance authorizing the same,
and unless the question of the issuance of the bonds shall at any special or general municipal
election be submitted to a vote of the qualified electors of the Town and approved by a majority
of those voting on the question. However, the Town Board pursuant to Town Code and without
election may:
• Issue local improvement district bonds;
• Borrow money or issue bonds for the purpose of acquiring, constructing, extending or
improving water, electric, gas, sewer, or other public utilities or income-producing
projects provided, further, that said borrowing shall be repaid and said bonds shall be
made payable solely out of the net revenue derived from the operation of the utility,
utilities, or other income-producing projects, or any or all thereof. Net revenue shall
mean gross revenue less all operation and maintenance expenses of the project for
which the money has been borrowed or bonds issued.
b. The Town shall not become indebted for any purpose or in any manner to an amount which,
including existing indebtedness, shall exceed 3% of the assessed valuation of the taxable
property within the Town as shown by the last preceding assessment for Town purposes
provided; however, that in determining the amount of indebtedness, there shall not be included
within the computation of indebtedness local improvement district bonds, revenue bonds, or
general obligation bonds or other evidences of indebtedness issued for the acquisition,
construction, extension, or improvement of water or wastewater facilities or supplies, or both.
III. Security and Exchange Commission (SEC) Rule 15c2-12 "Municipal
Securities Disclosure"Requirements
As a means reasonably designed to prevent fraudulent, deceptive, or manipulative acts or
practices, it shall be unlawful for any participating underwriter(broker, dealer, or municipal
securities dealer)to act as an underwriter in a primary offering of municipal securities with an
aggregate principal amount of$1 million or more unless the participating underwriter complies
with SEC Rule 15c2-12 requirements or is exempted from the provisions of the Rule.
The Town is committed to providing timely and consistent dissemination of financial information
with SEC regulatory requirements. It is imperative that disclosure be accomplished in a timely
fashion in accordance with SEC required SEC Rule 15c2-12 compliance and the Town's
Disclosure Dissemination Agent Agreement(DDAA). This disclosure policy confirms the Town's
commitment to fair disclosure. Its goal is to develop and maintain guidelines for presenting
related financial reports and events to interested third parties, financial institutions and the
general public. This policy covers all Town employees and elected officials of the Town of
Fraser. It covers disclosure documents filed with the SEC, statements made in the Town's
Audited Financial Statements, and any unaudited interim reports.
Section 5- Cash Management Policy
I. Scope
The Town recognizes that effective cash management is an integral component of sound
financial management.
II. Cash Deposits and Receipts
Wage -- - ---- -----
a. Departments collecting cash receipts, whether in cash or other forms of payment, must turn in
such receipts to the Finance Department on a daily basis together with records required to verify
accuracy of such collections.
b. Departments authorized to make deposits will promptly submit bank deposit receipts and
daily cash reports to the Finance Department to verify the accuracy of collections.
c. The Finance Department will set forth general cash handling procedures to be followed for all
Town departments. Departments may have more restrictive policies but will not have less
restrictive policies as set forth from the Finance Department.
Section 6 - Investments
I. Investment Policy
Existing State Statutes provide standards for cash and investment management operations. The
Town will invest in securities in a manner authorized by Colorado statutes.
The purpose of the Towns Investment Policy is to establish the investment scope, objectives,
delegation of authority, standards of prudence, reporting requirements, internal controls, eligible
investments and transactions, diversification requirements, risk tolerance, and safekeeping and
custodial procedures for the investment of the funds of the Town of Fraser.
Section 7- Fund Balance Policy
I. Overview
The Town's Fund Balance is the accumulated difference between assets and liabilities within
governmental funds. A sufficient fund balance allows the Town to meet its contractual
obligations, provide funds for new and existing programs established by the Town Board,
mitigate negative revenue implications of federal or state budget actions, mitigate local
economic downturns, fund disaster or emergency costs, provide funds for cash flow timing
discrepancies and fund non-recurring expenses identified as necessary by the Town Board.
II. Governmental Fund Balance Type Definitions
The Governmental Accounting Standards Board (GASB) issued Statement Number 54, "Fund
Balance Reporting and Governmental Fund Type Definitions"effective for periods after June 15,
2010. The objective of this Statement was to enhance the usefulness of fund balance
information by providing clearer fund balance classifications that can be more consistently
applied and by clarifying the existing governmental fund type definitions. This Statement
establishes limitations on the purposes for which Fund Balance can be used.
a. Non-spendable Fund Balance—Some assets reported in governmental funds may be
inherently non-spendable from the vantage point of the current period.
-Assets that will never convert to cash such as; prepaid items or inventories,
-Assets that will not convert to cash soon enough to affect the current period such as;
non-financial assets held for resale,
91 P a g e — -- ---
- Resources that must be maintained intact pursuant to legal or contractual requirements
such as; capital of a revolving loan fund
b. Restricted Fund Balance—This represents the portion of fund balance that is subject to
externally enforceable legal restrictions. Such restrictions are typically imposed by parties
altogether outside the Town such as creditors, grantors, contributors or other governments.
Restrictions can also arise when the authorization to raise revenues is conditioned upon the
revenue being used for a particular purpose.
c. Committed Fund Balance—This represents the portion of fund balance whose use is
constrained by limitations that the Town imposes on itself by the Town Board (highest decision
making level)and remains binding unless removed in the same manner. The Town does not
use committed funds in its normal course of business.
- Requires action by the Town Board to commit fund balance
- Formal Town Board action is necessary to impose, remove or modify a constraint
reflected in the committed fund balance
d. Assigned Fund Balance—This describes the portion of fund balance that reflects the
Town's intended use of resources. Representing the current years funded and approved budget
and or amended budget.
e. Unassigned Fund Balance—The residual portion of fund balance.
Ill. General Fund Unassigned Fund Balance
A priority goal of the Finance Manager is to improve the long-term fiscal health of the Town.
Revenue projections are conservative and authorized expenditures are closely monitored and
projected. In stable economic times, the combination of these two strategies leads to revenue
collections higher than actual expenditures.
Net revenue (actual revenue collections less actual expenditures) is available to first fund the
required restricted reserves the Town is legally obligated to meet, and then to the committed
reserves.
Year-end balances in the unassigned reserves may be used as a funding source in the next
budget year. The Town's policy is to accumulate adequate committed reserves to protect the
Town during economic downturns or large scale emergencies. The Town will achieve a
committed General Fund balance of one million dollars, or an amount equal to 3% of assessed
value of the Town. The Town also maintains reserves that are required by law or contract and
that serve a specific purpose. These types of reserves are considered restricted and are not
available for other uses. Within specific funds, additional reserves may be maintained according
to adopted policies.
The Government Finance Officers Association (GFOA) is a professional association of state and
local finance officers in the US and Canada whose members are dedicated to the sound
management of government financial resources. GFOA recommends that "governments
establish a formal policy on the level of unrestricted fund balance that should be maintained in
10 P a g e -- ------- - -------- -
the General Fund." The GFOA recommended, at a minimum, that general-purpose
governments, regardless of size, incorporate in its financial policies an unassigned fund balance
in their General Fund be no less than three months of regular general fund operating revenues
or regular General Fund operating expenditures.
The Town will maintain an unassigned fund balance (the balance of funds after all restrictions
and reserves have been assigned) equal or greater than four months of budgeted expenditures.
In addition the Town will maintain a committed fund balance equal to one quarter of the
projected sales tax collections for the year for General Fund emergencies. Additionally a
committed fund balance equal to or greater than twenty-five percent(25%) of the insured value
of capital assets owned by the General Fund, these funds can be reduced once adequate
reserves are collected within the CAF, and the CERF.
IV. Other Funds
a. Enterprise and some Special Revenue Funds - Reserves within the Water and Waste-
water Enterprise Funds provide for unexpected revenue losses or unanticipated expenditures
during the year, capital projects and future system enhancements and requirements. A portion
of these reserves may be appropriated as part of the annual budget and may be utilized at the
end of the fiscal year if necessary.
In addition the Water and Wastewater Funds will have a committed fund balance for operational
emergencies of five hundred thousand dollars ($500,000.00) each. Both Enterprise Funds will
maintain a committed fund balance of five hundred thousand dollars plus twenty-five percent
(25%) of the value of the depreciated system value for capital projects. This committed fund
balance will also increase as the Fund will attempt to operate on a "pay-as-you-go" manner
based upon a five year capital investment project schedule as maintained by the system
operator.
In addition the Water and Wastewater Funds will have an unassigned fund balance equal to or
greater than four months of operational expenditures of the budget year.
When unexpected repairs/enhancements or unfunded mandates require expenditures in either
enterprise exceeding the committed fund balance by 50% the fund will be authorized to issue
debt if this is in the long range best interest of the fund. In addition, the Wastewater Fund will
maintain a committed fund balance of at least one million dollars, designated for the Joint
Facilities Fund Capital Replacement Reserve and Capital Investment Plan projects.
b. Internal Services Funds - Internal Services Funds are expressly designed to function on a
cost reimbursement basis and should not accumulate a significant reserve. A small reserve is
appropriate to allow for differences in timing of revenues and expenditures. Currently the Town
does not utilize Internal Services Funds (ISF) —although our Joint Departments with the Town
of Winter Park could be assumed to be ISFs.
c. Self-Insured Fund Reserves -As required by the State of Colorado Self Insurer's Reserve
Trust Agreement, the Town would maintain a fund balance reserve for Liability and Workers
Compensation. Currently the Town of Fraser does not self-fund its insurance liabilities.
11IPage -- — ---- ----
IV. Debt Reserves
Debt reserves are established to protect bond holders from payment defaults. Adequate debt
reserves are essential in maintaining good bond ratings and the marketability of bonds. The
amount of restricted fund balance is established by bond ordinance for each fund in association
with each bond issuance. At times, it may be desirable to use bond insurance rather than debt
reserves. This is usually based on the recommendation from our Financial Advisor.
V. Use of Fund Balances
Available fund balances shall not be used for ongoing operating expenditures.
Section 8 - Capital Improvement Program Policy
I. Overview
The Town has a significant investment in its streets, facilities, parks, natural areas and other
capital improvements. In past years, the Town Board and the residents of Fraser through their
actions have demonstrated a firm commitment to and investment in Town capital projects.
II. Five Year Capital Improvement Plan (CIP)
The Town will maintain government wide capital project plans encompassing a five year
planning window. These strategic plans will include projects outlined in the Town's
Comprehensive Plan along with the Enterprise Fund's municipal needs.
III. Funding Sources and Requirements
All Town capital improvements will be constructed and expenditures incurred for the purpose as
approved by the Town Board, with funds rolling over from year to year until a project is deemed
complete, otherwise remaining budgeted funds will return to the appropriate funds unassigned
or committed fund balance.
The Town will use a variety of different sources to fund capital projects, with an emphasis on the
"pay-as-you-go" philosophy.
Funding for future operating and maintenance costs for approved capital projects must be
identified at the time projects are approved. Future revenues should be identified for the
associated operation and maintenance charges for the approved projects/investments in the
Town's ten year budget worksheet.
Section 9 - Revenue Policy
The Town shall strive to maintain a balanced and diversified revenue structure to protect the
Town from fluctuations in any one source due to changes in local economic conditions which ,
adversely impact that source.
12IPage — — ---- -- -- ---
Revenue estimates will be conservative and based upon trend analysis, economic conditions
and other factors. Estimates will be established by the Finance Manager and reviewed by the
Town Manager.
Non-recurring (one-time) revenues and other financing sources will not be used to finance
ongoing operations.
Federal aid, state aid, gifts, and grants will be accepted only after an assessment is made of
potential cost implications.
The Town will review its fees and other charges for services annually to ensure that revenues
are meeting intended program goals and are keeping pace with inflation, other cost increases
and any applicable competitive rate. The Town will evaluate cost recovery and align fees with
cost recovery goals. Enterprise and Internal Service operations will be self-supporting.
Section 10 - Expenditure Policy
The Town will pursue goals of efficiency and effectiveness by balancing short-term and long-
term community needs. Current operating expenditures will be funded with current operating
revenues, approved grants, or the use of unassigned fund balance in accordance with fund
balance policies.
The Town Manager and Finance Manager will monitor revenues and expenditures during the
year to provide an opportunity for actions to be taken to bring expenditures in line with revenues
received.
The Town will undertake periodic reviews of Town programs for both efficiency and
effectiveness. Programs that are determined to be inefficient and/or ineffective shall be reduced
in scope and eliminated.
Privatization and contracting with other governmental agencies will be evaluated as alternatives
to service delivery.
Section 11 - Grants Policy
Grants will follow all regulations included in the grant contract. Town Departments and staff that
occupy positions of responsibility with respect to grant activity have specific roles and
responsibilities that they shall perform and uphold both ethically and in the best interests of the
Town.
a. Grants will be spent for the purposes intended and will not be relied on for basic General
Fund services.
b. The Town will review grants for operating programs on an individual basis to determine
suitability of accepting the grants from a sustainable long-term financial perspective.
c. The Town will vigorously pursue grants for capital projects that fit long-range community
improvement goals.
13IPage
d. All potential grants will be carefully examined for matching requirements; both dollar and
level-of effort matches.
Section 12 - Identify Theft Prevention Policy
In 2008, Congress directed the Federal Trade Commission (FTC) and other agencies to
develop regulations requiring "creditors" and "financial institutions" to address the risk of identity
theft. The resulting Red Flag Rules requires all such entities that have "covered accounts" to
develop and implement written identify theft prevention programs.
The FTC defined "creditors" as businesses or organizations that regularly defer payment for
goods or services and bill customers later. This includes nearly any organization extending
credit, whether by granting loans, making credit decisions, etc.
Pursuant to the FTC enforcement policy of the Identify Theft Red Flags Rule, the Town of
Fraser will evaluate risk factors to develop and implement a policy designed to help identify,
detect, and respond to patterns, practices, or specific activities— known as "red flags" —that
could indicate identify theft. Specifically the Town of Fraser has identified that access to account
information in its water and wastewater utility system and its accounts receivable customer
information as proprietary data and is not released unless and as requested by law enforcement
or additional court orders.
141 Page --- - - _
TOWN OF FRASER
FINANCIAL POLICIES
RESERVE POLICY APPENDICES
General Fund Reserve Policy
The Town will achieve a Committed General Fund (GF) Reserve balance of one million dollars,
or an amount equal to 3% of annual assessed valuation. The Town also maintains reserves that
are required by law or contract and that serve a specific purpose.
• GF Committed Reserve: 2015 Assessed Valuation = $34,268,840 x 3% = $1,028,000.
The committed reserves allowable uses are for large scale emergencies or in the event
of an extended economic downtown. These reserves can also be utilized for un-
identified opportunities, with a prompt re-payment to the reserve fund.
• Currently the Town's preliminary budget has $1,000,000 accumulated in its General Fund
Committed Reserve.
The Town will maintain an unassigned fund balance (the balance of funds after all restrictions
and reserves have been assigned) equal or greater than four months of budgeted expenditures.
• GF Unassigned Fund Balance for 2016 will be approximately: $3,180,644/12 x 4=
$1,060,000 this number may adjust depending upon the final GF adopted budget for the
year. (This number could be rounded down to $1,000,000—however the current
preliminary GF unassigned fund balance will be only $868,000—missing the goal by
$132,000.)
In addition the Town will maintain a Committed Reserve fund balance equal to one quarter of
the projected sales tax collections for the year for General Fund challenges and opportunities.
• Additional GF Committed Reserves—2016 Projected Sales Tax Collections =
$1,800,000 x 25% = $450,000. This amount has not been funded in any of the reserves.
Additionally a Committed Reserve fund balance equal to or greater than twenty-five percent
(25%) of the insured value of capital assets owned by the General Fund will be established or
equivalent funds will be transferred to the CAF as a Committed Reserve to cover
unexpected/unanticipated/unfunded liabilities related these assets.
• Additional GF Committed Reserves—the GF insures roughly $9,300,000 in assets x
25% = $2,325,000. A majority of these insured assets would fall under the CAF's
responsibilities—meaning streets, bridges, buildings, parks and trails. Currently no
reserves or unassigned fund balances have been established in the CAF.
• Another way of computing the above reserve could be a computation utilizing the
Investment in Fixed Assets line item in the GF (which includes CAF assets)of
$4,088,207 x 25% = $1,000,000 (rounded down).
CONSERVATION TRUST FUND (CTF)
The CTF always carries an unassigned fund balance, received from State Lottery proceeds,
with no reserves. Expenditures utilizing CTF dollars would be considered restricted. The State
mandates allowable expenditures of CTF funds for the acquisition of or capital expenditures
related to public park and recreational related facilities. CTF funds are leveraged with General
Fund expenditures and with other granting partners when appropriate.
CAPITAL EQUIPMENT REPLACEMENT FUND (CERF)
The CERF's revenue streams are: State Highway User Tax Fund disbursements and General
Fund transfers. Transfers from the GF are designated for both our Public Safety Officers Fleet
and Public Works (PW) heavy and light equipment purchases. Police vehicles are currently
funded on a purchase year basis, while the PW funds are spent per the fifteen year capital
investment plan with all remaining dollars in the Fund being held within the unassigned fund
balance.
CAPITAL ASSET FUND (CAF)
The CAF is currently funded by transfers from the General Fund. The CAF has two
responsibilities—the current maintenance and repair of existing assets (Streets, Parks, Open
Space, Buildings, Trails and Bridges)and the future acquisition or expansion of the above
referenced asset classes.
DEBT SERVICE FUND (DSF)
The DSF is where the Town allocates resources for the repayment of its long term bonded
indebtedness. The DSF has a Restricted Reserve (represents the portion of fund balance that is
subject to externally enforceable legal restrictions) of$300,000, and a Committed Reserve
estimated to be $273,000at year-end 2015.
ENTERPRISE FUNDS (Water, Wastewater and Joint Facilities Funds)
Water, Wastewater and the Joint Facilities Funds (WF, WWF and JFF, respectively)will have a
committed fund balance for operational emergencies of five hundred thousand dollars $500,000
each. Both Enterprise Funds (WF and WWF)will maintain a committed reserve fund balance of
$500,000 plus twenty-five percent(25%)of the depreciated system value for capital projects.
This committed fund balance will also increase as the Fund will attempt to operate on a "pay-as-
you-go" manner based upon a five year capital investment project schedule as maintained by
the system operator.
Water Fund Reserves:
• WF Committed Reserve—Currently the WF has $460,000 in its committed reserve, the
addition of$40,000 should be expensed to the reserve.
16 P a g e --— — ------- —
• WF Additional Committed Reserves— represents 25% of the depreciated value (DV) of
the system. DV= $3,568,312 x 25% = $892,000 (rounded). This reserve should be
funded as soon as possible. (An alternate metric would be based upon Insured assets of
$11,830,212 x 25% = $2,960,000,)
• WF Unassigned Fund Balance— based upon the numbers in the preliminary 2016
Budget would be: $1,664,253/12 x 4= $550,000 (rounded). The WF's unassigned fund
balance at year-end is roughly $400,000 short of target.
Wastewater Fund Reserves:
• WWF Committed Reserve—Currently the WWF has only an unassigned fund balance.
The Board should expense $500,000 of unassigned fund balance to a committed
reserve for operational emergencies.
• WWF Additional Committed Reserves—"as above" DV= $884,726 x 25% = $221,000
(rounded) —these funds should be combined with the above and expensed to committed
reserves (An alternate metric would be based upon Insured assets of$608,766 x 25% =
$1,520,000).
• WWF Additional Committed Reserves—the WWF has additional responsibilities in
regards to its membership within the Upper Fraser River Wastewater Treatment Plant,
these relate to the JFF's Capital Replacement Reserve, and future capacity increases,
and unfunded mandates. In fiscal years 2016 thru 2020 this membership represents a
liability for the TOF currently estimated in the amount of$1,500,000 - $7,000,000—for
copper and nutrient treatment. Also, there is looming a mandatory capacity increase of
the plant(dependent on Inflow& Infiltration) but currently there is no good estimate of
costs available nor an accurate timeline—but we should be identifying and reserving
funds appropriate for this inevitability. As above I would recommend a committed
reserve amount equal to 25% of the Investment in Capital (the Plant); $3,972,180 x 25%
= $993,000, the TOF's ownership share of this amount would be roughly $330,000.
• WWF Unassigned Fund Balance— (minimum four months of operating expenses) based
upon the numbers in the preliminary 2016 Budget this balance should be: $880,244/12 x
4= $293,000 (rounded). Unassigned fund balance at year end 2016 is estimated to be
roughly$2,235,000, this amount includes funding the committed reserves for the WWF
in the amount of$1,051,000.
Summary:
General Fund
• Committed Reserve of$1,000,000 will be met at year-end 2015 with Board approval of
the $250,000 expense to reserves.
• Unassigned Fund Balance will drop below recommended levels in 2016
• Additional Committed Reserves are not met for sales tax"insurance"
• Additional Committed Reserves are not met nor transferred to the CAF to cover GF fixed
assets.
17IPage — ------ - - ---
Conservation Trust Fund
• Reserves are not applicable, but unassigned fund balance should be grown for the next
identified project/s.
Capital Equipment Replacement Fund
• Currently reserves are not utilized within the CERF, instead efforts are made yearly to
increase unassigned fund balance with GF transfers.
Capital Asset Fund
• Reserves have not been funded.
Debt Service Fund
• Reserves are fully funded.
Water Fund
• Committed Reserve for operational emergencies is $40,000 from being fully funded.
• Committed Reserve for the depreciated value of the system has not been funded.
• Unassigned Fund Balance in 2016 is $400,000 short.
Wastewater Fund
• Committed Reserves for operational emergencies should be funded from unassigned
fund balance.
• Committed Reserves for the depreciated value of the system should be funded from
unassigned fund balance.
• Committed Reserves for JFF depreciated value of the system should be funded from
unassigned fund balance.
• Committed Reserves for future expansion at the plant should be evaluated and funded in
the near-term.
• Unassigned Fund Balance in 2016 meets recommendations.
18 I P a ge — -- — -- ------ ---- — -