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HomeMy WebLinkAboutReso 2011-1770 RESOLUTION NO. 2011- JJ.J.O A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF SUNNY ISLES BEACH, FLORIDA, ESTABLISHING A FUND BALANCE POLICY FOR ALL GOVERNMENT AL FUNDS CONSISTENT WITH GOVERNMENT AL ACCOUNTING STANDARDS BOARD (GASB) STATEMENT NO. 54, A TT ACHED HERETO AS EXHIBIT "A"; AUTHORIZING THE CITY MANAGER TO DO ALL THINGS NECESSARY TO EFFECTUATE THIS RESOLUTION; PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, Governmental Accounting Standards Board (GASB) Statement No. 54 was issued in February 2009; and WHEREAS, this Statement changes how fund balance is presented and its various components in the financial statements, and it clarifies the use of governmental fund types; and WHEREAS, GASB No. 54 shifts the focus of fund balance reporting from the availability of fund resources for budgeting to the extent to which the government is bound to honor constrains on the specific purposes for which amounts in those funds can be spent; and WHEREAS, the new policy is required under GASB No. 54 and the City Commission wishes to establish the Fund Balance Policy, attached hereto as Exhibit "A", for governmental funds consistent with GASB Statement No. 54: Fund Balance Reporting and Governmental Fund Type Definitions; and WHEREAS, the new Fund Balance Policy will be applied beginning with the preparation of the City's September 30,2011 Comprehensive Annual Financial Report. NOW THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF SUNNY ISLES BEACH, FLORIDA, AS FOLLOWS: Section 1. Establish a Fund Balance Policy. The City Commission hereby establishes a Fund Balance Policy, attached hereto as Exhibit "A". Section 2. Authorization of City Manager. The City Manager is hereby authorized to do all things necessary to effectuate this Resolution. Section 3. Effective Date. This Resolution will be become effective upon adoption. PASSED and ADOPTED this 15th day of September 2011. b an S. Edelcup, May'or ATTEST: ,cL~A ~ \Jane A. Sines, CMC, City Clerk .''''~ I . '. f 1 . ;; \ . , \ \ ~ .1 , ' . ';: \ .'- '-. 'APPROVED: . . " i .... .-.. ~ . AN ;G Moved by: Q{)~~~ ~\-IOL.L Second by: ~,u rl\l1jav- T~H.\L<CR VOTE AS FOLLOWS: S-D Mayor Edelcup Vice Mayor Thaler Commissioner Aelion Commissioner Gatto Commissioner Scholl -\..L-(Y es )_(No) -l.,.L(Y es )_(No) V(Yes) (No) - - V (Yes) (No) - - -tL(Yes)_(No) 2 FUND BALANCE POLICY CITY OF SUNNY ISLES BEACH Sunny Isles Beach, FL 33160 (305) 947-0606 Effective Date: Se tember 16,2011 Revision Date: Poli '10: DEFINITIONS Fund Balance - As defined by the Governmental Accounting, Auditing and }<lnamial Reporting of the Government Finance Officers Association, fund balance is "The difference between assets and liabilities reported in a governmental fund." Non-Spendable Fund Balance - Amounts that are (a) not in spendable form or (b) legally or contractually required to be maintained intact. "Not in spendable form" includes items that are not expected to be converted to cash (such as inventories and prepaid amounts) and items such as long-term amount of loans and notes receivable, as well as property acquired for resale. The corpus (or principal) of a permanent fund is an example of an amount that is legally or contractually required to be maintained intact. Restricted Fund Balance - Amounts that can be spent only for specific purposes stipulated by (a) external resource providers such as creditors (by debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Committed Fund Balance - Amounts that can be used only for the specific purposes determined by a formal action (resolution) of the City Commission, the City's highest level of decision making authority. Commitments may be changed or lifted only by the City Commission taking the same formal action (resolution) that imposed the constraint originally. Resources accumulated pursuant to stabilization arrangements sometimes are reported in this category. Assigned Fund Balance - Includes spendable fund balance amounts established by City Manager that are intended to be used for specific purposes that are neither considered restricted or committed. Unassigned Fund Balance - 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. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those specific purposes. Unrestricted Fund Balance - The total of committed fund balance, assigned fund balance, and unassigned fund balance. Reservations of Fund Balance - Reserves established by City Commission (committed fund balance) or City management (assignedfund balance). PURPOSE The City hereby establishes and will maintain Fund Balance, as defined herein, in accordance with Governmental Accounting and Financial Standards Board Statement No. 54, Fund Balance Reporting and Governmental P'und TYpe Definitions. The objective of GASB 54 is to improve the usefulness, including the understandability, of governmental fund balance information. Beginning fiscal year ending 9/30/2011, Fund Balance shall be composed of non-spendable, restricted, committed, assigned and unassigned amounts. FUND BALANCE POLICY ACCOUNTING POLICIES AND PROCEDURES CITY OF SUNNY ISLES BEACH A Fund Balance Policy is adopted in order to secure and maintain investment-grade credit ratings, meet seasonal shortfalls in cash flow, and reduce susceptibility to emergency or unanticipated expenditures and/or revenue shortfalls. Fund balance information is used to identify the available resources to repay long-term debt, reduce property taxes, add new governmental programs, expand existing ones, or enhance the financial position of the City, in accordance with policies established by the City Commission. This Fund Balance Policy establishes: a) Fund balance policy for the general fund; b) Reservations of fund balance for the general fund; c) The method of budgeting the amount of estimated unrestricted fund balance (also know as estimated beginning fund balance) available for appropriation during the annual budget adoption process (prior to the actual, audited fund balance being known) and what actions may need to be taken if the actual fund balance is significantly different than the budgeted fund balance; and d) Establish the spending order of fund balances. FUND BALANCE POLICY (GENERAL FUND): 1. RESTRICTED FUND BALANCE There is no restricted fund balance in the General Fund. Amounts that can be spent only for specific purposes stipulated by (a) external resource providers such as creditors (by debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation will be budgeted and reported in special revenue funds, capital project funds or debt service funds. 2. COMMITTED FUND BALANCE Commitment of fund balance may be made for such purposes including, but not limited to, a) major maintenance and repair projects; b) meeting future obligations resulting from a natural disaster; c) accumulating resources pursuant to stabilization arrangements; d) establishing reserves for disasters; and/ or e) for setting aside amounts for specific projects. Commitment of fund balance may be made from time-to time by resolution of the City Commission. Commitments may be changed or lifted only by the City Commission taking the same formal action that imposed the constraint originally (resolution). The use (appropriation) of committed fund balances will be considered in conjunction with the annual budget adoption process or by budget amendment approved by resolution of City Commission during the fiscal year. 3. ASSIGNED FUND BALANCE Assignment of fund balance may be a) made for a specific purpose that is narrower than the general purposes of the government itself; and/ or b) used to reflect the appropriation of a portion of existing unassigned fund balance to eliminate a projected deficit in the subsequent year's budget in an amount no greater than the projected excess of expected expenditures over expected revenues. Assigned fund balance shall reflect management's intended use of resources as set forth in the annual budget (and any amendments thereto). Assigned fund balance mayor may not be appropriated for FUND BALANCE POLICY ACCOUNTING POLICIES AND PROCEDURES CITY OF SUNNY ISLES BEACH expenditure in the subsequent year depending on the timing of the project/reserve for which it was assigned. 4. NON-SPENDABLE FUND BALANCE Non-spendable fund balance is established to report items that are not expected to be converted to cash such as inventory and prepaid items; items not currently in cash form such as the long-term amount of loans and notes receivable as well as property acquired for resale; and, items legally or contractually required to be maintained intact such as the corpus (or principal) of a permanent fund. 5. MINIMUM LEVEL OF UNASSIGNED FUND BALANCE Unassigned fund balance is the residual classification for the general fund and represents fund balance that has not been restricted, committed or assigned to specific purposes within the general fund. RESERVATIONS OF FUND BALANCE (GENERAL FUND): COMMITTED FUND BALANCE The City Commission hereby establishes the following committed fund balance reserves in the General Fund: Hurricane/Emergency and Disaster Recovery Operating Reserve - The Hurricane/Emergency and Disaster Recovery Operating Fund Balance Reserve is to be maintained by the City Manager at a minimum level of $10,000,000 for the purposes of responding to and providing relief and recovery efforts to ensure the maintenance of services to the public during hurricane/ emergency/disaster situations. Such emergencies include, but are not limited to hurricanes, tropical storms, flooding, terrorist activity and other natural or man-made disasters. Additional funds may be appropriated when necessary via a budget amendment ordinance. This Reserve may not necessarily be established in the annual budget. In the event these funds are utilized, they should be replenished in order to prepare for possible future events. The City will make every effort to replenish this reserve over a two year period beginning with the completion of recovery from the event for which the reserve funds were used. Fiscal Stability Reserve - The Fiscal Stability Operating Fund Balance Reserve is to be maintained by the City Manager at a minimum level of 25%, (three months) of the general fund operating expenditures for the purposes of providing for sufficient cash liquidity in times when operating expenditures (cash outflow) exceed the operating revenue receipts (cash inflow). This Reserve may not necessarily be established in the annual budget. The City will make every effort to establish this reserve over the next six years. Once this reserve is established and if the reserve subsequently falls below 25% of general fund operating expenditures, the City shall take action to restore this Reserve to acceptable levels within one year. FUND BALANCE POLICY ACCOUNTING POLICIES AND PROCEDURES CITY OF SUNNY ISLES BEACH BUDGETING 1. APPROPRIATION OF UNRESTRICTED FUND BALANCE The actual amount of unrestricted fund balance (total of committed fund balance, assigned fund balance and unassigned fund balance) is not known until the completion of the annual audit which takes place between three to six months after the end of the fiscal year being audited. Therefore, these amounts will not be reflected in the annual budget. 2. ESTIMATED BEGINNING FUND BALANCE. In order to achieve the most accurate estimate possible, the City Manager or designee shall project both Sources of Funds (revenues, prior years unrestricted fund balances carried forward and other financing sources) and Uses of Funds (operating and non-operating expenditures), including accruals, for each department in each governmental fund through September 30th of the then current fiscal year. These projections will be shown in a separate column entitled "Projections" for each fund in the proposed, tentative and final budget documents. The difference between the estimated actual sources of funds and estimated actual uses of funds is the calculated estimated beginning fund balance for the subsequent fiscal year. If planned for use in the subsequent fiscal year, committed and assigned fund balance may be included in the estimated beginning fund balance. 3. ESTIMATED ENDING FUND BALANCE. For the year being budgeted, a calculation of estimated ending fund balance shall also be made. This calculation shall be the difference between the budgeted sources of funds and the budgeted uses of funds as described above. Since the uses of funds are restricted, committed or assigned in all other governmental fund types there is no policy to the amount of ending fund balance unless the project is completed and the fund should be closed. In this situation, a residual equity transfer will be made to zero-out any remaining fund balance. If, after the annual audit, there is a balance in the unassigned general fund balance, this balance may be used in one or a combination of the following ways: a) Left in the general fund to earn interest and roll forward into the subsequent year's beginning fund balance; b) Appropriated by resolution of City Commission for a one-time expenditure or opportunity that does not increase recurring operating costs; c) Committed to establish or increase a formal stabilization arrangement or reserve (including but not limited to economic stabilization, contingency reserves or disaster reserves); or d) Appropriated for start-up expenditures of new programs undertaken at mid-year, provided that such action is considered in the context of Commission-approved multiyear projections of revenues and expenditures. FUND BALANCE POLICY ACCOUNTING POLICIES AND PROCEDURES CITY OF SUNNY ISLES BEACH SPENDING ORDER OF FUND BALANCES The City uses restricted amounts to be spent first when both restricted and unrestricted fund balance is available unless there are legal documents/contracts that prohibit doing this, such as in grant agreements requiring dollar for dollar spending. Additionally, the City would first use committed fund balance, followed by assigned fund balance and then unassigned fund balance when expenditures are incurred for purposes for which amounts in any of the unrestricted fund balance classifications could be used. ANNUAL REVIEW Compliance with the provisions of this policy shall be reviewed annually. The City Manager or designee shall issue a report on an annual basis to the City Commission outlining compliance with the fund balance policy. FUND BALANCE POLICY Preview Page 1 of 1 City of Sunny Isles Beach 18070 Collins Avenue Sunny Isles Beach, Florida 33160 (305) 947-0606 City Hall (305) 949-3113 Fax MEMORANDUM TO: The Honorable Mayor and City Commission FROM: MinaI Shah, Assistant City Manager-Finance DATE: 9/15/2011 RE: Establishment of a Fund Balance Policy for all Governmental Funds consistent with Governmental Accounting Standards Board Statement No. 54. RECOMMENDATION: Staff recommends the City Commission adopt the attached resolution establishing a Fund Balance Policy for governmental funds consistent with Governmental Accounting Standards Board (GASB) Statement No. 54: Fund Balance Reporting and Governmental Fund Type Definitions. REASONS: GASB Statement No. 54 was issued in February 2009. Although, this statement does not affect the calculation of the fund balance, it does change how fund balance is presented and its various components in the financial statements. Most importantly, it clarifies the use of governmental fund types. GASB No. 54 shifts the focus of fund balance reporting from the availability of fund resources for budgeting to the extent to which the government is bound to honor constrains on the specific purposes for which amounts in those funds can be spent. The new policy is required under GASB No. 54 and shall take effect immediately upon adoption and will be applied beginning with the preparation of the City's September 30, 2011 Comprehensive Annual Financial Report. ATTACHMENTS: . Resolution . Fund Balance Policy http://sibagenda. sibfl.net/agenda/Preview .aspx?I temID=568&MeetingID=0&MeetingDate=... 9/2/2011