4.3 SR 04-15-2013 - Laserfiche WebLink

Home Browse Search

Fund Balance Fund balance reserves are an important component in ensuring the overall financial health of a community, by giving the city sufficient funds to meet contingency and cash-flow timing needs. In establishing an appropriate fund balance, the city needs to consider the demands of cash flow, need for emergency reserves, ability to manage fluctuations of major revenue sources, credit rating and long-term fiscal health. A.Classification of Fund Balance/Procedures 1.Nonspendable Amounts that are not in a spendable form or are required to be maintained intact. Examples are inventory or prepaid items. 2.Restricted Amounts subject to externally enforceable legal restrictions. Examples include grants, tax increment and bond proceeds. 3.Unrestricted The total of committed fund balance, assigned fund balance, and unassigned fund balance:  Committed fund balance – amounts that can be used only for the specific purposes determined by a formal action of the government’s highest level of decision-making authority. Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally.  Assigned fund balance – amounts a government intends to use for a specific purpose; intent can be expressed by the government body or by an official or body to which the governing body delegates the authority.  Unassigned fund balance – residual amounts that are available for any purpose in the general fund. The General fund should be the only fund that reports a positive unassigned fund balance amount. This classification is also used to account for deficit fund balances in other governmental funds. B.General Fund  The city will maintain an unassigned General fund balance of not less than 40-45% of budgeted operating expenditures; however, this need could fluctuate with each year’s budget objectives.  Annual proposed General fund budgets shall include this benchmark policy. Council shall review the amounts in fund balance in conjunction with the annual budget approval, and make adjustments as necessary to meet expected cash-flow needs.  In the event the unassigned General fund balance will be calculated to be less than the minimum requirement at the completion of any fiscal year, the city shall plan to adjust budget resources in the subsequent fiscal years to bring the fund balance into compliance with this policy.  The City Council may consider appropriating (for authorized purposes) year-end fund balance in excess of the policy level or increasing the minimum fund balance. An example of preferred use of excess fund balance would be for one-time expenditures, such as: Financial Management Policies Page 8