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HomeMy WebLinkAboutResolution_13-11_08/11/2011 RESOLUTION NO 13 -11 A RESOLUTION OF THE VILLAGE COUNCIL OF THE VILLAGE OF TEQUESTA, FLORIDA, ADOPTING A FUND BALANCE POLICY FOR THE VILLAGE OF TEQUESTA; PROVIDING AN EFFECTIVE DATE; AND FOR OTHER PURPOSES. WHEREAS, the Village Council of the Village of Tequesta, Florida, desires to adopt a Fund Balance Policy consistent with the Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions; and WHEREAS, such a policy has been prepared and a copy thereof is attached hereto; NOW, THEREFORE, BE IT RESOLVED BY THE VILLAGE COUNCIL OF THE VILLAGE OF TEQUESTA, PALM BEACH COUNTY, FLORIDA, AS FOLLOWS: Section 1: The Village Council of the Village of Tequesta, Florida, hereby adopts the "Village of Tequesta Fund Balance Policy ", attached hereto as `Exhibit A ", and hereby directs the Village Manager to implement said policy. Section 2: All resolutions or parts of resolutions in conflict herewith shall be and hereby are repealed. Section 3: This Resolution shall take effect immediately upon passage. The foregoing Resolution was offered by Council Member Humpage who moved its adoption. The motion was seconded by Council Member Brennan and upon being put to a vote, the vote was as follows: For Adoption Against Adoption Mayor Tom Paterno X Vice -Mayor Vince Arena X Council Member Abby Brennan X Council Member Jim Humpage X Council Member Calvin Turnquest Absent The Mayor thereupon declared the Resolution duly passed and adopted this 11 day of August, 2011. MAYOR OF TEQUESTA Tom Paterno ATTEST: !,! \ \ „\! 1!!! 1l,,,,, 0,9 Q. 9 � � iNCO EAL �Q.�( Ct�j RP pR 1'fD Lori McWilliams, MMC ' - --9j 19 C�loQ . Village Clerk 0 ... . O� ' FL ,. ,,,''I3d1 VILLAGE OF TEQUESTA, FLORIDA FUND BALANCE POLICY EXHIBIT A A. PURPOSE The Village hereby establishes and will maintain Fund Balance, as defined herein, in accordance with Governmental Accounting and Financial Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. Fund Balance shall be composed of non - spendable, restricted, committed, assigned and unassigned amounts. A Fund Balance Policy is adopted in order to secure and maintain investment - grade credit ratings, meet seasonal shortfalls in cash flow, and reduce susceptibility to emergency or unanticipated expenditures and/or revenue shortfalls. Fund balance information is used to identify the available resources to repay long -term debt, reduce property taxes, add new governmental programs, expand existing ones, or enhance the financial position of the City, in accordance with policies established by the Village Council. This Fund Balance Policy establishes: a) Fund balance policy for the general fund; b) Reservations of fund balance for the general fund; C) The method of budgeting the amount of estimated unrestricted fund balance (also known as estimated beginning fund balance) available for appropriation during the annual budget adoption process (prior to the actual, audited fund balance being known) and what actions may need to be taken if the actual fund balance is significantly different than the budgeted fund balance; and d) Establish the spending order of fund balances. B. FUND BALANCE CLASSIFICATIONS Fund Balance - As defined by the Governmental Accounting, Auditing and Financial Reporting of the Government Finance Officers Association, fund balance is "The difference between assets and liabilities reported in a governmental fund." The following are the GASB 54 Classifications of Fund Balance3 1 of 6 NON - SPENDABLE FUND BALANCE Non - Spendable Fund Balance — Amounts that are (a) not in spendable form or (b) legally or contractually required to be maintained intact. Non - spendable fund balance is established to report items that are not expected to be converted to cash such as inventory and prepaid items; items not currently in cash form such as the long -term amount of loans and notes receivable as well as property acquired for resale; and, items legally or contractually required to be maintained intact such as the corpus (or principal) of a permanent fund. RESTRICTED FUND BALANCE Restricted Fund Balance — Amounts that can be spent only for specific purposes stipulated by (a) external resource providers such as creditors (by debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Restricted fund balance includes amounts constrained for a specific purpose changed only with consent of the outside party and legally enforceable. Such restrictions typically are imposed by parties altogether outside the government such as; a. Creditors (e.g., through debt covenants); b. Grantors; c. Contributors; and d. Other governments (e.g., through laws and regulations) COMMITTED FUND BALANCE Committed Fund Balance — Represents resources whose use is constrained by limitations that the government imposes upon itself at its highest level of decision making and that remain binding unless removed in the same manner. The underlying action that imposed the limitation would need to occur no later than the close of the reporting period. Commitment of fund balance may be made for such purposes including, but not limited to, a) major maintenance and repair projects; b) meeting future obligations resulting from a natural disaster; c) accumulating resources pursuant to stabilization arrangements; d) establishing reserves for disasters; and/or e) for setting aside amounts for specific projects. Commitment of fund balance may be made from time -to time by formal action of the Village Council limiting use of resources for only the specified purposes stipulated in the action. Commitments may be changed or lifted only by the Village Council taking the same formal action that imposed the constraint. The 2 of 6 formal action must occur prior to the end of the reporting period. The amount which will be subject to the constraint may be determined in the subsequent period. The Village Council hereby establishes the following committed fund balance reserves in the General Fund: a) Disaster Reserve — The disaster reserve fund balance is committed by the Village Council as set forth in the annual budget (and any amendments thereto) to ensure the maintenance of services to the public during disaster situations such as, but not limited to, hurricanes. b) Insurance Deductible Reserve — The insurance deductible reserve fund balance is committed by the Village Council as set forth in the annual budget (and any amendments thereto) to ensure coverage of the City's insurance deductible on its insured properties and equipment. ASSIGNED FUND BALANCE Assigned Fund Balance — Comprised of amounts intended to be used for specific purposes that are neither restricted not committed. Intent can be expressed by the Village Council or delegate(s). The term assigned fund balance is used to describe the portion of fund balance that reflects a government's intended use of resources. Such intent has to be established by either the Village Council or by a body or official(s) to which the Village Council delegates the authority. For this purposes the Village Council delegates this authority to the Village Manager and/or the Finance Director. Assigned fund balance can be used to eliminate a projected budgetary deficit in the subsequent year's budget, not to exceed the excess of expected expenditures over expected revenues. Since a government cannot assign resources that it does not have, the amount reported as assigned fund balance should not exceed total fund balance less its non - spendable, restricted, and committed components. The Village hereby establishes the following assigned fund balance reserves in the General Fund: a) Assignment to Subsequent Year's Budget — The subsequent year's budget fund balance reserve is assigned by Village management as set forth in the annual budget (and any amendments thereto) to appropriate a portion of existing unassigned fund balance to eliminate a projected deficit in the subsequent year's budget in an amount no greater than the projected excess of expected expenditures over expected revenues. 3 of 6 UNASSIGNED FUND BALANCE Unassigned Fund Balance — Unassigned fund balance is the residual fund balance classification for the general fund after deducting non - spendable, restricted, committed and assigned fund balance. If, after the annual audit, prior committed or assigned fund balance causes the unassigned fund balance to fall below an amount equal to two months of operating expenditures, the Village Manager and/or the Finance Director will so advise Village Council in order for the necessary action to be taken to restore the unassigned fund balance to an amount equal to two months of General Fund operating expenditures. The Village Manager and/or the Finance Director will prepare and submit a plan for committed and/or assigned fund balance reduction, expenditure reductions and/or revenue increases to Village Council. The Village shall take action necessary to restore the unassigned fund balance to acceptable levels within three years. C. BUDGETING APPROPRIATION OF UNRESTRICTED FUND BALANCE The actual amount of unrestricted fund balance (total of committed fund balance, assigned fund balance and unassigned fund balance) is not known until the completion of the annual audit which takes place between three to six months after the end of the fiscal year being audited. However, an estimate of unrestricted fund balance (also called estimated beginning fund balance) must be made during the annual budget adoption process July through September) which is prior to the end of the fiscal year, September 30` . ESTIMATED BEGINNING FUND BALANCE In order to achieve the most accurate estimate possible, the Village Manager or Finance Director shall project both Sources of Funds (revenues, prior years unrestricted fund balances carried forward and other financing sources) and Uses of Funds (operating and non - operating expenditures), including accruals, through September 30'' of the then current fiscal year. These projections will be shown in a separate column entitled "Estimated Actual ". The difference between the estimated actual sources of funds and estimated actual uses of funds is the calculated estimated beginning fund balance for the subsequent fiscal year 4 of 6 ESTIMATED ENDING FUND BALANCE For the year being budgeted, a calculation of estimated ending fund balance shall also be made. This calculation shall be the difference between the budgeted sources of funds and the budgeted uses of funds as described above. If, after the annual audit, the actual general fund unassigned fund balance is greater than two months of operating expenditures in the general fund, the excess may be used in one or a combination of the following ways: a) Left in the general fund to earn interest and roll forward into the subsequent year's beginning fund balance; b) Appropriated by resolution of Village Council for a one -time expenditure or opportunity that does not increase recurring operating costs; C) Committed to establish or increase a formal stabilization arrangement or reserve (including but not limited to economic stabilization, contingency reserves or disaster reserves); or d) Appropriated for start-up expenditures of new programs undertaken at mid -year. D. SPENDING ORDER OF FUND BALANCES This policy considers restricted amounts to be spent before unrestricted fund balance when an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed, assigned then unassigned amounts, in that order, will be spent when an expenditure is incurred for a purpose for which amounts in any of those unrestricted fund balance classifications could be used. E. ANNUAL REVIEW AND DETERMINATION OF FUND BALANCE POLICY Compliance with the provisions of this policy shall be reviewed as a part of the annual budget adoption process, and the amounts of restricted, committed, assigned, non - spendable and the minimum level of unassigned fund balance shall be determined during this process. F. CLASSIFICATION OF FUND BALANCES AND ADDITIONAL INFORMATION, REQUIREMENTS /RESPONSIBILITIES The Finance Director is authorized to evaluate existing fund balance classifications (designations, reserves and unreserved/undesignated) and 5 of 6 reclassify them in accordance with GASB Statement 54, for implementation effective the fiscal year ending September 30, 2011. It will be the responsibility of the Finance Director to keep this policy current. G. EFFECTIVE DATE This Policy shall take effect immediately upon adoption and will be applied beginning with the preparation of the Village's September 30, 2011 Comprehensive Annual Financial Report and adoption of the Village's Fiscal Year 2011-12 Budget. Original Issue Date: r Approved: 6 of 6