HomeMy WebLinkAboutDocumentation_Regular_Tab 13_7/13/2023Agenda Item #13.
Regular Council
STAFF MEMO
Meeting: Regular Council -Jul 13 2023
Staff Contact: Jeffery Snyder, Finance Director
Department: Finance
4W 4W
Consider Approval of the Village of Tequesta's Emergency Reserve Policy
Industry best practices recommends providing guidelines for establishing emergencyfund reservesso
that the Village is prepared for continuity of operations in the event of an emergency, e.g. hurricanes,
floods, terrorist attacks, pandemics, state budgets cuts, etcetera. A reserve fund allows the Village
staff to be able to meet the service needsforour residents during an emergency. This policy addresses
all of the funds with personnel, establishes minimum reserves, establishes and provides a funding
source to react quickly and decisively during emergencies. The policy requires communicating the
emergency reserve balance during the budget process. This policy also establishes a reporting and
action plan mechanism in the eventthatthe required minimums are not met.
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BUDGET AMOUNT N/A AMOUNT AVAILABLE N/A EXPENDITURE AMOUNT: N/A
FUNDING SOURCES: N/A IS THIS A PIGGYBACK:
❑ Yes 0 N/A
DID YOU OBTAIN 3 QUOTES?
❑ Yes 0 N/A
COMMENTS/EXPLANATION ON SELECTION Policy set limit on the reserves available in the
appropriate funds.
Consider approving the Village of Tequesta Emergency Reserve Policy.
Financial Reserve Policy
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Agenda Item #13.
Village of Tequesta
Emergency Reserve Policy
Table of Contents
SECTION 1. Purpose .......
SECTION 2. Definitions..
SECTION 3. Policy..........
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SECTION 1. Purpose
To follow industry best practices and to provide guidelines for the establishment, use, and
replenishment of operating funds emergency reserves. This policy will also designate critical operating
funds that should have reserves available to protect persons and property to bring normalcy to the
citizens as quickly as possible. This policy will allow the Village to be prepared for continuity of
operations in the event of an emergency, e.g. hurricanes, floods, terrorist attacks, pandemics, state
budget cuts, etcetera.
SECTION 2. Definitions.
Budget - A plan of financial operation for a specified time embodying an estimate of proposed
expenditures and the proposed means of financing them.
Business -Type Activities (BTAs) - These represent funds that operate like a for profit business. The
consumer is charged for services rendered. Some bear a further resemblance to private -sector business
activities because they are self-sufficient and operate as separate, legally constituted organizations, e.g.
Stormwater Fund and Water Utility Fund.
Expenditure - Use of funds, a cost, and an expense which results in a reduction to net worth. For
governmental accounting, an expense is labeled as an expenditure.
Formula - The budgeted Unassigned Reserve for the General Fund, the Storm Water Enterprise Fund,
the Water Utility Enterprise Fund, and the Building Department Special Revenue Fund operating funds.
Operating funds is expressed as a percent (25%, 17%, or 50%) of the operating budget. Fund
expenditures/expenses less capital are multiplied by the desired percentage to calculate the
recommended amount to be budgeted.
Fund Balance Disclosure/Net Position - In accordance with Governmental Accounting Standards Board
sets the requirements for the fund balance disclosures for governmental activities (GAs) and the net
position disclosures for business -type activities (BTAs) for reporting in the Annual Comprehensive
Financial Report (ACFR). The Village follows these standards for reporting. To bridge the gap between
budget and the ACFR, the Village classifies governmental fund balances/business-type funds as follows:
Nonspendable/Net Investment in Capital Assets - Nonspendable fund balance (GAs) and net
investment in capital assets (BTAs) includes amounts that cannot be spent because they are not in
spendable form, such as inventories, prepaid amounts for GAs and capital assets for BTAs.
Spendable Fund Balance/Net Position - Restricted fund balance/net position amounts that are
constrained for specific purposes which are externally imposed through debt covenants or amounts
constrained by federal and state law. These amounts are further identified as:
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Agenda Item #13.
Committed fund balance amounts that can only be used for the specific purposes that are
internally imposed by Village Council Ordinances. Commitments may be changed by the Village
Council amending or repealing the Ordinance that imposed the constraint initially. Contractual
obligations are included to the extent that existing resources in the fund have been specifically
committed for use in satisfying those contractual obligations.
Assigned fund balance amounts that are intended to be used for specific purposes that are neither
considered restricted nor committed. This indicates that resources in these funds are, at a
minimum, intended to be used for the purposes of that fund. Fund balance may be assigned by
Village Council Resolution, by transfer to a special revenue or capital project fund as authorized by
Village Council.
Unassigned/Unrestricted fund balance/net position - This represents the residual positive fund
balance within the Funds which has not been classified within the other above -mentioned
categories. Unassigned/unrestricted fund balance may also include negative balances for any fund
if expenditures exceed amounts restricted, committed, or assigned for those specific purposes.
This classification is where the emergency reserves are located and reported upon in the budget
document.
Governmental Activities (GAs) — These represent funds (i.e. General Fund, Special Revenue Funds,
Capital Project Funds) that operate primarily on taxes imposed and provide services which are not
provided by for profit entities, e.g. police services, fire services, streets, grants, parks, other public
safety, etc.
Operating Budget - Budgeted personal services and operating expenses for each of the appropriate
funds.
Revenue - Funds that are collected from customers and property owners. Revenues can be in many
forms: charges for services, taxes, fees charged, etc.
Unassigned Reserve - An account used to hold funds available for a future public purpose. This will
include the portion which is related to the emergency reserves. This budgeted amount is not considered
available for appropriation. A reserve can be held as a budgeted contingency for financial reasons or
held for legal purposes or held for a designed purpose or project.
SECTION 3. Policy.
A required emergency unassigned reserve shall apply to all critical operating funds for the safety of our
constituents, i.e. General Fund, Water Utility Fund, Stormwater Fund, and Building Fund. The following
emergency reserves shall apply:
General Fund - The Village's General Fund is the chief operating fund for the Village. The Unassigned
Reserve will be set at a minimum of 25% of the operating budget.
Special Revenue Fund - The Building Department Special Revenue Fund ensures that our building codes
are adhered to for the safety of our citizens. The Unassigned Reserve will be set at a minimum of 50% of
the funds operating budget. The Building Department Special Revenue Fund's unassigned reserve is set
at this higher level because the fees are collected in advance of the required work that is often
completed months later.
Note: Florida Statute 553.80(7)(a) states in part that "A local government may not carry forward an
amount exceeding the average of its operating budget for enforcing the Florida Building Code for
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Agenda Item #13.
the previous 4 fiscal years."
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Agenda Item #13.
Enterprise Funds - The Stormwater Enterprise Fund is responsible for the conveyance of the Village's
storm water runoff. The Unrestricted Net Position will be set at a minimum of 17% of the operating
budget.
The Water Utility Enterprise Fund is responsible for the water services within the Village. The
Unrestricted Net Position will be set at a minimum of 17% of the operating budget.
All Other Funds — This policy does not set minimum Unassigned Reserve/Unrestricted Net Position for
all Village Funds not separately identified by name in this policy.
Spending Policy - For the Village's General Fund, it is the Village's policy to spend the most restricted
dollars before less restricted dollars in the following order:
• Restricted Fund Balance
• Committed Fund Balance
• Assigned Fund Balance
• Unassigned Fund Balance
This Spending Policy assumes costs are incurred for purposes for which both restricted and unrestricted
funds are available.
For all other governmental funds other than the General Fund, interest income, if any, will be utilized
first followed by restricted, committed and assigned revenues when an expense is incurred for purposes
for which both restricted and unrestricted funds are available. Transfers to other funds are considered
committed for these purposes.
Reporting Requirements - For each fund requiring an emergency reserve the minimum amount shall be
identified and separately presented each year in the annual budget process. The continued compliance
with this policy will be confirmed anytime the budget is amended.
Replenishment of Minimum Reserve Requirements - If circumstances require the use of the emergency
reserves and a fund does not meet the established minimums the Village Manager will present a fiscal
plan to replenish the reserves to be reviewed/modified and approved by Village Council. This plan will
include the following information:
• The cause of the shortfall.
• Anticipated recovery from the external event.
• Financial planning time horizon.
• Long-term forecasts and economic conditions.
• Milestones for gradual replenishment.
• External financing expectations, if any.
The replenishment plan submitted will not exceed five (5) years in duration. At Village Council's
discretion this plan can be extended for up to five (5) additional years.
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