HomeMy WebLinkAboutResolution No. 08-27 Adopting Financial Management PoliciesRESOLUTION NO. 08-27
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF UNIVERSITY PARK,
TEXAS, ADOPTING FINANCIAL MANAGEMENT POLICIES FOR THE CITY; AND
PROVIDING AN EFFECTIVE DATE.
WHEREAS, formal financial management policies serve as an ongoing context for
management decisions and thereby provide consistency and quality control; and
WHEREAS, such policies are evidence of prudent stewardship and are recommended by
the National Advisory Council on State and Local Budgeting and the Government Finance
Officers Association; and
WHEREAS, such policies promote long-term and strategic thinking and establish
guidelines that outlive their creators; and
WHEREAS, the attached policies have been reviewed, revised, and recommended for
approval by the City's Finance Advisory Committee;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF UNIVERSITY PARK, TEXAS:
SECTION 1. That the Financial Management Policies, dated November 4, 2008,
attached hereto as Exhibit "A" and made a part hereof for all purposes, are adopted for the City
of University Park, for the reasons set out in the premises of this Resolution. The policies shall
be reviewed and renewed on a regular basis by the City Council.
SECTION 2. This Resolution shall take effect immediately from and after its passage,
and it is accordingly so resolved.
DULY PASSED by the City Council of the City of University Park, Texas, on the 4th
day of November, 2008.
APPROVED:
H. HOL~VIES III,II~AYOR
APPROVED AS TO FORM:
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CITY ATTORNEY
ATTEST:
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CITY SECRET Y
EXHIBIT "A"
CITY OF UNIVERSITY PARK, TEXAS
FINANCIAL MANAGEMENT POLICIES
NOVEMBER 4, 2008
City of University Park, Texas
Financial Management Policies
November 4, 2008
Table of Contents
Introduction
1: Annual Budget
1-1 Fiscal year
1-2 Budget preparation
1-3 Budget administration
1-3-1 Amendments
1-3-2 Transfers
2: Basis of Accounting and Budgeting
2-1 Use of GAAP
2-2 Organization of funds and accounts
2-2-1 Governmental funds
2-2-2 Proprietary funds
2-2-3 Internal service funds
2-3 Budget basis
2-4 Encumbrances
3: Financial Reporting and Auditing
3-1 Monthly financial reports
3-2 Annual financial reporting
3-3 External audit
4: Revenues
4-1 Revenue projections
4-2 Property taxes
4-2-1 Tax rate types
4-2-2 Property tax policies
4-3 User fees
5: Operating Expenditures
5-1 Classification operating expenditures
5-2 Annual appropriation
5-3 Service delivery review
5-4 Personnel expenditures
5-5 Capital expenditures
5-5-1 Equipment replacement
5-5-2 Capitalization threshold
6: Fund Balance
6-1 Minimum fund balances
6-2 Fund balance appropriation
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7: Capital Project Expenditures
7-1 Capital project definition
7-2 Capital Improvements Program (CIP)
7-3 Capital Projects Review Committee
8: Debt Expenditures
9: Long-term Financial Plan
10: Internal Controls
11: Cash Management and Investments
11-1 Cash management
11-2 Investments
12: Internal Audit/Review
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City of University Park, Texas
Financial Management Policies
November 4, 2008
Introduction
These financial policies set forth the basic framework for the fiscal management of the City
of University Park. These policies were developed within the parameters established by
applicable provisions of the Texas Local Government Code and the City of University Park
City Charter. The policies are intended to assist the City Council and City staff in
evaluating current activities and proposals for future programs. The policies are to be
reviewed on an annual basis and modified to accommodate changing circumstances or
conditions.
The primary goal of these policies is to help the City achieve and maintain a long-term
stable and positive financial condition. The City's financial management, as directed by
these policies, is based on the foundations of integrity, prudent stewardship, planning,
accountability, and full disclosure.
1: Annual Budget
1-1 Fiscal year
The fiscal year of the City of University Park shall begin on October 1 of each calendar year
and will end on September 30 of the following calendar year. The fiscal year will also
serve as the accounting and budget year.
1-2 Budget preparation
The City Manager, prior to September 1 S` of each year, shall prepare and submit to the
Mayor and the City Council an annual budget for the next fiscal year containing the
following information:
• A description of the proposed budget, including an explanation of any significant
changes from the previous year's expenditures and any major changes of policy.
• An estimate of all revenue from taxes and other sources, including the present tax
structure rates and property valuations for the ensuing year.
• An estimate of proposed user fees for all proprietary funds.
• An itemized list of proposed expenditures by fund, department, and type for the
budget year, compared to the adopted budgets from the two years immediately prior.
• A description of all outstanding bonded indebtedness (if any) of the City.
• A statement detailing significant capital expenditures deemed necessary during the
next budget year and recommendations for financing.
The City Council may refer the proposed budget to the City's advisory committees for their
review and recommendation.
The Council shall conduct at least one public hearing to allow interested citizens to express
their opinions concerning items of expenditures or revenues. The City shall observe the
notice and hearing requirements of the Texas "Truth in Taxation" statutes (Texas Tax Code
Section 26). Following the public hearing, the Council shall analyze the budget, making
any additions or deletions which they feel appropriate, and shall, by ordinance, adopt the
budget by a majority vote.
On final adoption, the budget shall be in effect for the budget year. Final adoption of the
budget by the Council shall constitute the official appropriations for the current year and
shall constitute the basis of the official levy of the property tax.
1-3 Buclget aciministration
AIl expenditur~;s af the C;ity of University Park shall be riaadc in ~ccordance with the ani~ual
bizdg~t. I~ur•ing tklc fiscal yea~r, conditions may arise that require modification to the
adopted budget.
1-3-1 Amendments
The City Council may amend or change the budget by ordinance to provide for any
additional expense. 11s a rnatter of course, continuoL~s bridget monitoring rec~uil•es that
de~~iations fram ex~ected arnounts of revenue ~nci/or e~pendiiures be noted and
estimates rcvised, if necessary, to avoid tinancial distress. I3udget amendrx~cnts arc thus
considercd prudent tinancial management tcchniyues.
1-3-2 3'ransfers
Midyear traiisfers between expcnditure accounts in one departia~ent o~~ between
de}~~irtments ma~- occur w~ith t}le written a}~proval of th~ C;ity N1an<~ger. M idyear
transfers between funds musi be accomplished by budgel amendment apprt~v~ed by the
C'ity Cc~uncil.
2: Basis of Accounting and Budgeting
2-1 Use of GAAP
City finances shall be accounted for in accordance with Generally Accepted Accounting
Principles (GAAP), as established by industry practice and the Governmental Accounting
Standards Board (GASB).
2-2 Organization of funds and accounts
The accounts of the City of University Park are organized and operated on the basis of
funds and account groups. Fund accounting segregates monies according to their intended
purpose and is used to aid management in demonstrating compliance with finance-related
legal and contractual provisions.
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In general, the City will maintain a minimum number of funds, consistent with legal and
managerial requirements. Fund categaries include governmental, proprietary, and internal
service:
2-2-1 Governmental funds
Governmental funds are used to account for the City's general government activities
and include the General, Capital Projects, and Debt Service funds (if necessary).
Governmental fund types use the flow of current financial resources measurement focus
and the modified accrual basis of accounting. Under the modified accrual basis of
accounting revenues are recognized when susceptible to accrual (both "measurable" and
"available"). "Measurable" means the amount of the transaction can be determined and
"available" means collectible within the current period, or soon thereafter. Substantially
all material revenues are considered to be susceptible to accrual. A sixty-day
availability period is used for revenue recognition for all governmental fund revenues.
Expenditures are recognized when the related fund liability is incurred, if ineasurable.
Compensated absences, claims, and judgments are recorded when the obligations are
expected to be paid with current available financial resources.
2-2-2 Proprietary funds
Proprietary funds are used to account for those activities that are business-like in nature,
and include the Utility and Sanitation funds Proprietary fund types are accounted for on
a flow of economic resources measurement focus and use the accrual basis of
accounting. Under this method, revenues are recorded when earned and expenses are
recorded at the time liabilities are incurred.
2-2-3 Internal service funds
Internal service funds account for the services provided by one department to other
departments of the city on a cost reimbursement basis and include the Equipment
Service and Comprehensive Self-Insurance funds.
2-3 Budget basis
Budgets shall be prepared and adopted on a cash basis for the General Fund and on accrual
basis for the Utility and Sanitation funds. Annual budgetary appropriations will lapse at
fiscal year end.
2-4 Encumbrances
Encumbrance accounting shall be used. Purchase orders, contracts and other commitments
for the expenditure of monies are recorded to reserve that portion of the applicable
appropriation. Outstanding encumbrances are reported as reservations of fund balances and
do not constitute expenditures or liabilities since the commitments will be re-appropriated
and honored during the subsequent fiscal year(s).
3: hinancial Reporting and Auditin~
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3-1 Monthly financial reports
IVlonthly rcports sk~~~ll be prepared comparing expenditures and reventzes to the amenclecl
budget. Explana~to~y notes and eharts will be included. as needed. These reports shall l~e
providecl to the City C~ouncil and Tinance Advisoiy Committee e~ch month, and t1~ey may
also be postcd to the City's Web sitc.
3-2 Annual financial reporting
Following the conclusion of the fiscal year, the Finance department shall prepare a
C~onlprchensive ~t~~aual I~inanci~l t2eport (CAE~'Rj in acc~rdancc with GAAP. 'l~he
docurl~ent shall be prepared tc> satisfy all criteria of thc (:iovernment Finance Officers
Ass~~~c~iation's Certilica~te of~Acluevement for Excellence in Fin~ncial Rep~7rtin~ progr~im.
Included as pari ol the CAFR shall be the results ol the anuual aL~dit prepared by
independent certi~ied public accountants designated by the Cfty Council.
3-3 Extern~l audit
As required by State law, the City shall engage an eatern~l ~uditor each ~year tc~ ex~unine its
tinancial rccords and providc an opinic~n. "1'he auditor shall be chasen by the City Council
fc>r a multiyear ~eriod, and audit proposals 5hall bc reviewed by the F inance Advisory
C'omm~ii~tee. In general, the City will seek prC>pos~ils ~~r~m exterl~l~~1 audi~tc7rs every~ five y~e~irs.
4: Revenues
4-1 Revenue projections
When developing the annual budget, the City Manager shall project revenues from each
source based on actual collections from the preceding year and estimated collections of the
current fiscal year, while considering known circumstances which will impact revenues for
the new fiscal year. Revenue projections for each fund should be made conservatively so
that total actual fund revenues exceed budgeted projections
4-2 Property taxes
4-2-1 Tax rate types
The City shall levy two property tax rates: operations and maintenance, and debt
service. The operation and maintenance levy shall be accounted for in the General Fund.
The debt service levy, if any, shall be sufficient for meeting all principal and interest
payments associated with the City's outstanding general obligation debt for that budget
year and shall be accounted for in a Debt Service fund.
4-2-2 Property tax policies
The City will levy the lowest tax rate on the broadest tax base. Exemptions will be
provided to home owners, senior citizens (age 65 years and over), and disabled citizens.
The homestead exemption shall be equal to 20% of a property value. Additionally, the
City Council will review the senior citizen and disabled persons homestead exemptions
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with a goal to maintain a tax benefit of approximately 25% of the average single-family
home value.
4-3 User fees
The City will establish user charges and fees at a level that fully supports the total direct and
indirect cost of operations, including depreciation. User fees, particularly utility rates,
should identify the relative costs of serving different classes of customers, if possible.
The City of University Park will make every reasonable attempt to ensure accurate
measurement of the variables impacting taxes and fees (e.g., verification of business sales
tax payments, verification of appraisal district property values, accuracy of water meters,
and so on).
5: Operating Expenditures
5-1 Classification of operating expenditures
Expenditures shall be accounted, reported, and budgeted for in the following major
categories:
• Salaries and Benefits
• Supplies
• Professional Services
• Utilities
• Insurance
• Outside Services
• Other
• Capital
5-2 Annual appropriation
The annual budget shall appropriate funds for operating and recurring expenditures
sufficient to maintain established quality and scope of city services. The City shall operate
on a current funding basis. Expenditures shall be budgeted and controlled so as not to
exceed current revenues.
5-3 Service delivery review
The City shall constantly examine the methods for providing public services to reduce
recurring operating expenditures and/or enhance the quality and scope of public services
with no increase in cost. The City will utilize contract labor for the provision of City
services whenever private contractors can perform the established level of service at less
expense to the City. Agreements with private contractors will be regularly reviewed to
ensure the established levels of service are performed at the lowest possible cost.
5-4 Personnel expenditures
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Salaries and benefits expenditures will reflect the optimal staffing needed to provide
established quality and scope of city services. To attract and retain employees necessary for
providing high-quality service, the City shall maintain a compensation and benefit package
competitive with relevant public and private sector employers.
5-5 Capital expenditures
Within the resources available each fiscal year, the City shall maintain capital assets and
infrastructure at a level sufficient to protect the City's investment, minimize future
replacement and maintenance costs and maintain acceptable service levels. Existing capital
equipment shall be replaced when needed, to ensure the optimal productivity of City of
University Park employees.
5-5-1 Equipment replacement
The City shall establish a fleet equipment program that includes a detailed maintenance
and replacement schedule. Funding for equipment replacements will be made through
budgeted contributions by the user departments. These charges shall be held in the
Equipment Services Fund until expended. Additional funding may be obtained through
year-end budget surpluses, if any. Expenditures for new (not replacement) capital
equipment shall be made only to enhance employee productivity, improve quality of
service, or expand scope of service.
5-5-2 Capitalization threshold
The GFOA recommends that "best practice" guidelines be followed in establishing
capitalization thresholds for tangible capital-type items. Accordingly, the following
criteria are followed:
• Individual items costing $5,000 or more and capital projects whose total cost (in the
aggregate) exceeds $50,000 or more will be capitalized and depreciated according to
GASB rules.
• Tangible, capital assets will only be capitalized if they have an estimated useful life
of at least two years following the date of acquisition.
• Capitalization thresholds will be applied to individual items rather than groups of
similar items.
• Adequate control procedures at the departmental level will be established to ensure
adequate control over non-capitalized tangible items.
6: Fund Balance
6-1 Minimum fund balances
To provide the resources necessary to ensure the continued operation of the City in the
event of a natural disaster or significant shortfall in revenues, the following funds will
maintain minimum ending fund balances as follows:
• General Fund - 60 days of budgeted expenditures.
• Utility Fund - 90 days of budgeted expenditures.
Should fund balance levels fall below the above minimums, the City shall refrain from
making additional appropriations from fund balance. Additional reserves ("rainy day
funds") may be designated by the City Council as necessary.
6-2 Fund balance appropriation
Fund balances in excess of the minimum level established may be appropriated for non-
recurring capital projects or programs. The City of University Park will exercise diligence
in avoiding the appropriation of fund balance for recurring operating expenditures. In the
event fund balance is appropriated for recurring operating expenditures to meet the needs of
the community, the budget document shall include an explanation of the circumstances
requiring the appropriation and the methods to be used to arrest its future use.
7: Capital Project Expenditures
Capital projects will be constructed to 1) protect, maintain or improve the community's
quality of life and economic vitality, and 2) to provide significant rehabilitation of City
infrastructure for sustained service. All projects shall be prioritized based on an analysis of
current needs and resource availability. Capital project expenditures will not be authorized
by the City Council without identification of a sufficient funding source. Potential funding
sources include but are not limited to: reserve funds, debt issuances, matching fund
revenues, user fees, grants, or reallocation of existing capital funds with the recognition that
construction of previously authorized capital projects may be delayed or postponed.
7-1 Capital project definition
Capital projects are defined as non-recurring expenditures for improvements that exceed
$50,000 and have useful lives exceeding one year. Examples include water and wastewater
line replacement, street resurfacing, building construction and renovation, major software
and hardware projects, and park improvements.
7-2 Capital Improvement Program (CIP)
The City will develop a multi-year plan for capital projects which identifies all projects
likely to be constructed within five years. It is acknowledged that the preference of the City
is to support capital projects with appropriations from operating revenues or excess fund
balances (i.e. "pay-as-you-go"), rather than debt.
7-3 Capital Projects Review Committee
The City Council shall annually review the CIP, and it shall adopt by resolution the first
year of the CIP as the capital budget. The Council will appoint a Capital Projects Review
Committee to review and provide recommendations about the CIP.
8: Debt Expenditures
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It is the intention of the City Council to avoid the issuance of debt, preferring to fund capital
expenditures on a"pay-as-you-go" basis. However, should the issuance of debt become
necessary, the following principles shall apply:
• To minimize interest payments on issued debt, the City will maintain a rapid debt
retirement policy by issuing debt with maximum maturities not exceeding 20 years.
• The City of University Park will attempt to maintain base bond ratings (prior to
insurance) of at least Aa2 (Moody's Investors Service) and AA+ (Standard & Poor's)
on its general obligation debt.
• When needed to minimize annual debt payments, the City will obtain insurance for
new debt issues.
• Generally, competitive underwriting is preferred to a negotiated sale.
9: Long-term Financial Plan
The City Of University Park will adopt the annual budget in the context of a long-term
financial plan, or other multi-year budget analysis. The long-term financial plan will
establish assumptions for revenues, expenditures and the changes to fund balances over a
five-year horizon. The assumptions will be evaluated periodically, as part of the budget
development process.
10: Internal Controls
The City shall maintain written guidelines on accounting, cash handling, segregation of
duties, investing, and other financial matters shall be maintained. Each department director
shall ensure that departmental procedures are adequate to safeguard City funds. Staffing
and training shall be reviewed periodically to ensure adequacy. The City shall conduct
periodic reviews of Internal Controls and Cash Handling Procedures.
11: Cash Management and Investments
11-1 Cash management
Daily deposits of cash shall be made unless the amounts collected (or expected to be
collected) warrant less frequent deposits, as determined by the Finance Director.
The timing and amount of cash needs and availability of funds shall be analyzed in order to
maximize interest earnings from investments. City staff shall monitor and manage activity
in the City's bank accounts to optimize availability of funds and interest earned.
11-2 Investments
The City's investment portfolio shall be managed in accordance with the Public Funds
Investment Act and the City's Investment Policy. The City Council shall adopt a formal
investment policy by resolution annually, following review and recommendation by the
Finance Advisory Committee.
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11-3 Selection of Depository Bank
The City will undertake a comprehensive review of its banking needs and seek competitive
proposals for bank services on a regular basis. The Finance Advisory Committee shall
review the proposals and make a recommendation with City staff for selection.
12: Internal Audit/Review
Recognizing that the cost of a control should not outweigh its intended or actual benefit, the
City does not currently employ an Internal Audit Department. Instead, City staff, under the
guidance of the Finance Director, will identify operations, processes and practices to be
periodically reviewed for compliance with City policy and best practices. Projects may be
added, amended, or deleted as deemed necessary by the Finance Director or City Manager.
Recommendations and findings will be submitted to the Finance Director upon completion
of the review, and discussed with the applicable department Director. It is the responsibility
of the departmental Director to ensure policies and procedures are correctly implemented.
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