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<br /> <br />The city will minimize investment custodial credit risk by permitting brokers that obtained investments for the <br />city to hold them only to the extent there is SIPC and excess SIPC coverage available. Securities purchased that <br />exceed available SIPC coverage <br /> <br />The city will diversify its investments by security type and institution. In establishing specific diversification <br />strategies, the following general policies and constraints shall apply: <br />1. Portfolio maturities shall be staggered to avoid undue concentration of assets at a specific maturity <br />sector, with one broker-dealer or financial institution, or any one type of instrument. The maturities <br />selected shall provide for stability of income and reasonable liquidity. <br />2. The finance director shall establish an annual process of independent review by an external auditor. This <br />review will provide internal control by assuring compliance with policies and procedures. <br />3. The investment portfolio will be designed to obtain a market average rate of return during budgetary and <br />economic cycles, taking into account the investment risk constraints and cash flow needs. <br />4. The finance director shall provide an investment report to the City Council quarterly to include: <br />a. Listing of individual securities held at the end of the reporting period <br />b. Listing of investments by maturity date <br />c. Percentage of the total portfolio which each type of investment represents <br />b. Market to market analysis <br />c. Rate of return for the quarter <br /> <br />Fund Balance <br />Fund balance reserves are an important component in ensuring the overall financial health of a community by <br />providing sufficient funds to meet contingency and cash-flow timing needs. In establishing an appropriate fund <br />balance, the city considers the demands of cash flow, need for emergency reserves, ability to manage fluctuations <br />of major revenue sources, credit rating and long-term fiscal health. <br />1. Classification of Fund Balance/Procedures <br />a. Non-spendable - Amounts not in a spendable form or are required to be maintained intact such <br />as inventory or prepaid items. <br />b. Restricted - Amounts subject to externally-enforceable legal restrictions such as grants, tax <br />increment and bond proceeds. <br />c. Unrestricted - The total of committed fund balance, assigned fund balance, and unassigned fund <br />balance: <br />i. Committed Fund Balance amounts that can be used only for the specific purposes <br />determined by a formal action of the cityhighest level of decision-making authority. <br />Commitments may be changed or lifted only by the city taking the same formal action <br />that imposed the constraint originally. <br />ii. Assigned Fund Balance amounts intended for a specific purpose; intent can be <br />expressed by the city or by an official or body to which the city delegates the authority. <br />iii. Unassigned Fund Balance residual amounts available for any purpose in the General <br />Fund. The General Fund should be the only fund that reports a positive unassigned fund <br />balance amount. This classification is also used to account for deficit fund balances in <br />other governmental funds. <br />2. General Fund <br />Unassigned General Fund balance shall not be less than 40-45% of budgeted operating expenditures; <br />however, this may fluctuate <br />Financial Management Policies Page 5 <br /> <br />