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HomeMy WebLinkAboutRES NO 212-14RESOLUTION NO. 2 12--L4 A RESOLUTION ADOPTING A FUND BALANCE POLICY FOR THE CITY OF BAKERSFIELD. WHEREAS, The Government Accounting Standards Board (GASB) issued Statement number 54 to enhance the usefulness of fund balance information report by government agencies in their financial reports; and WHEREAS, The GASB recommends that a formal written policy be established by a government entity to properly classify the fund balance in each of the City's governmental funds; and WHEREAS, A recent review by the Government Finance Officers Association (GFOA) emphasized the need to establish a written fund balance policy; and WHEREAS, the GFOA emphasizes the need to comply with GASB rules and implementation of their recommendations to qualify for the GFOA's financial reporting award, which the City has received for 32 consecutive years; and WHEREAS, the City Budget and Finance Committee has reviewed the fund balance policy at it November 24, 2014 meeting and recommends Council adoption of the policy; and NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Bakersfield as follows: 1. The foregoing recitals are true and correct and incorporated in their entirety herein by reference. 2. The "City of Bakersfield - Fund Balance Policy" attached hereto as Exhibit "A" and incorporated herein by reference, is hereby adopted. I SAAccounting\Admin\Admin Reports \Reso for Fund Balance Policy.doc -- Page 1 of 2 Pages -- Ok A KF9 s -t, > m F- r v o ORIGINAL. HEREBY CERTIFY that the foregoing Resolution was passed and adopted by the Council of the City of Bakersfield at a regular meeting thereof held on DEC 10 2014 by the following vote: ✓ ✓ ✓ ✓ AY COUNCIL MEMBER: RIVERA, MAXWELL, WEIR, SMITH, _ 1, SULLIVAN, PARLIER NOES: COUNCIL MEMBER ABST N: COUNCIL MEMBER BSENT' COUNCIL MEMBER CITY CLERK AND EX OFFIPIFD of the APPROVED DEC 10 2014 Council of the City of B kersfield fv►Uyuf APPROVED AS TO FORM: VIRGINIA GENNARO City Attorney JOSHUA H. RUDNICK Deputy City Attorney Attachment: Fund Balance Policy S:\Accounting\Admin\Admin Reports \Reso for Fund Balance Policy.doc -- Page 2 of 2 Pages -- O�0AK�9.� s F' r v a ORIGINAL. CITY OF BAKERSFIELD Fund Balance Policy (Revised for GASB 54) Purpose The purpose of this policy is to establish a key element of the financial stability of the City by setting guidelines for fund balance. Unassigned fund balance is an important measure of economic stability. It is essential that the City maintain adequate levels of unassigned fund balance to mitigate financial risk that can occur from unforeseen revenue fluctuations, unanticipated expenditures, and similar circumstances. The fund balance also provides cash flow liquidity for the City's general operations. Definitions Fund Equity — A fund's equity is generally the difference between its assets and its liabilities. Fund Balance — An accounting distinction is made between the portions of fund equity that spendable and nonspendable. These are broken up into five categories: 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. 2) Restricted fund balance — includes amounts that can be spent only for the specific purposes stipulated by external resource providers either constitutionally or through enabling legislation. Examples include grants and transportation development fees. 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 changed or lifted only by the government taking the same formal action that imposed the constraint originally. 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. 5) Unassigned fund balance — is the residual classification of the general fund and includes all amounts not contained in other classifications. Unassigned amounts are technically available for any purpose. c: \program files ( x86)\ neevia. com\ docconverterpro \temp\nvdc \290ea333 -cf04 -4236 -9881- gAK49 7d8086f4718c \pdfconvert. 1462 .1.cob_fundbalance _policy.docx p1 1'1 � rn E- r v o ORIGINAL Policy Committed Fund Balance • The City Council is the City's highest level of decision - making authority and a formal action by this body (ordinance /resolution) is required to establish, modify, or rescind a fund balance commitment. The action must either be approved or rescinded, as applicable, prior to the last day of the fiscal year for which the commitment is made. The amount subject to the constraint may be determined in the subsequent period. Assigned Fund Balance • The City Council has authorized, by ordinance, the City's Finance Director as the official authorized to assign fund balance to a specific purpose not to exceed $40,000 as approved by this fund balance policy. • The City Council also has the authority to set aside funds for a specific purpose through either a council approved contract or when approving reservations in the annual budget. Any funds set aside as assigned require a simple majority vote of the Council and must be recorded in the minutes. The same action is generally not required to change or remove that assignment. Order of Expenditure of Funds When multiple categories of fund balance are available for expenditure (for example, a construction project is being funded partly by a grant, funds set aside by the City Council, and unassigned fund balance), the City will start with the most restricted category and spend those funds first before moving down to the next category with available funds c: \program files ( x86 )\neevia.com \docconverterpro\ temp\nvdc \290ea333 -cfD4- 4236 -9881- 7d8086fa718c \pdfconvert. 1462 .1.cob_fundbalance _policy.docx o``0AKF9� T > m ~" r U p ORIGINAL.