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HomeMy WebLinkAboutResolution No. 11-08 Amend Financial Management Policies RESOLUTION NO. 11-08 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF UNIVERSITY PARK, TEXAS, AMENDING RESOLUTION 10-11, 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 City Council last approved a resolution adopting comprehensive financial management policies for the City on June I, 20 I 0; and WHEREAS, Governmental Accounting Standards Board (GASB) Statement Number 54 requires local governments adhering to generally applied accounting principles to enact specific policies regarding classification and use of fund balance in governmental funds; and WHEREAS, the City of University Park becomes subject to GASB Statement Number 54 takes effect for financial statements in periods beginning after June 15,2010; and WHEREAS, the attached amendment to the policies has been reviewed and recommended for approval by the City's Finance Advisory Committee and the City's external auditors; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF UNIVERSITY PARK, TEXAS: SECTION 1. That the Financial Management Policies, dated June I, 2010, are hereby amended for the City of University Park as attached hereto as Exhibit "A", 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. That the City shall commit a spendable part of fund balance in the General Fund totaling $2,500,000, which shall be available for expenditure upon authorization by the City Council for emergency relief of economic or natural disaster or other urgent purpose for which the Council sees fit. SECTION 3. This Resolution shall take effect immediately from and after its passage, and it is accordingly so resolved. DUL Y PASSED by the City Council of the City of University Park, Texas, on the 6th day of September, 2011. APPROVED: U/~~ w. RICHARD DAVIS, MAYOR ~Tm] ..I:. ~ ROBERT L. DILLARD, III CITY ATTORNEY ATTEST: EXHIBIT A City of University Park, Texas Financial Management Policies June 1, 2010/Amended September 6, 2011 6: Fund Balance 6-1 Purpose The purpose of this policy is to establish guidelines for governmental fund balances in accordance with Governmental Accounting Standards Board Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions. 6-2 Definitions 6-2-1 Nonspendable fund balance - includes amounts that are not in a spendable form or are required to be maintained intact. (Examples are inventory or permanent funds.) 6-2-2 Restricted'fund balance - includes amounts that can be spent only for the specific purpose stipulated by external resource providers either contractually, constitutionally or through enabling legislation. (Examples include grants and child safety fees.) 6-2-3 Committed fund balance - includes 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 modified or rescinded only by the government taking the same formal action that imposed the constraint originally. 6-2-4 Assigned fund balance - comprises amounts intended to be used by the government for specific purposes. Intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority. In governmental funds other than the general fund, assigned fund balance represents the amount that is not restricted or committed. This indicates that resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund. 6-2-5 Unassigned fund balance - is the residual classification of the General Fund and includes all amounts not contained in the above mentioned classifications. Unassigned fund balance is available for any valid governmental purpose and may include negative balances for any governmental fund in which expenditures exceed the amounts restricted, committed, or assigned for its specific purpose. 6-3 Policy by category 6-3-1 Committed fund balance The City Council is the City's highest level of decision-making authority and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Council at a City Council meeting, The EXHIBIT A City of University Park, Texas Financial Management Policies June 1, 2010/Amended September 6, 2011 resolution must be approved, modified or rescinded, as applicable, prior to the last day of the fiscal year for which the commitment is made. The amount subject to the commitment may be determined in the subsequent period. 6-3-2 Assigned fund balance The City Council has authorized both the City Manager and the Finance Director to assign fund balance to a specific purpose. 6-3-3 Unassigned fund balance The City recognizes that unassigned fund balance is an important measure of economic stability. It is the goal of the City to achieve and maintain an unassigned fund balance in the General Fund equal to at least 30 days of expenditures to mitigate financial risk that can occur from unforeseen revenue fluctuations, significant unanticipated expenditures and natural disasters. The City considers a balance of less than 30 days to be cause for concern, barring unusual or deliberate circumstances. Should unassigned fund balance fall below the above minimum, the City shall refrain from making additional appropriations from fund balance. 6-4 Order of fund expenditure When multiple categories of fund balance are available for expenditure (for example, a construction project being funded partly by a grant, funds set aside by the City Council, and unassigned fund balance), the City will first spend the most restricted category of funds before spending the next most restricted category with available funds. Normally, this will result in the use of committed, then assigned, and lastly, unassigned fund balance when expenditures are made, with the exception of the emergency reserve established by the City Council. Under normal circumstances, the City would first elect to utilize unassigned fund balance before considering use of its emergency funds. 6-5 Fund balance appropriations Fund balances in excess of the minimum level established above 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 (or other authorizing) document shall include an explanation of the circumstances requiring the appropriation and the methods to be used to arrest its future use. 6-6 Non-governmental fund balances Insofar as the above definitions, policies and fund balance categories do not apply to proprietary funds, the City recognizes the need to apply a different minimum balance policy to the Utility Fund, in order to ensure continued operation in the event of a natural disaster or significant shortfall in revenues. Therefore, the City shall maintain a minimum ending working capital balance (current assets minus current liabilities) of at least 90 days of budgeted EXHIBIT A City of University Park, Texas Financial Management Policies June 1, 2010/Amended September 6, 2011 expenditures. Should working capital fall below the desired minimum, the City shall refrain from making additional appropriations from fund net assets.