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Home My WebLink About22928 RESOLUTION NO. 22928 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, ADOPTING THE CITY'S FUND BALANCE DESIGNATION POLICY GOVERNING THE ACCOUNTING FOR CITY FUND BALANCES. WHEREAS, Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, was issued in February 2009 and imposes new requirements for fund balance classifications; and WHEREAS, the Director of Finance and City Treasurer has prepared a Fund Balance Designation Policy which meets the requirements delineated in GASB Statement No. 54; and WHEREAS, the City Council desires procedures for reporting unrestricted fund balance in the City's Governmental Funds financial statements in compliance with GASB Statement No. 54; and WHEREAS, the proposed Fund Balance Designation Policy provides a measure of protection for the City against unforeseen circumstances and to comply with GASB Statement No. 54; and WHEREAS, the proposed Fund Balance Designation Policy was reviewed by the City Attorney and the City's independent auditors; THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The Fund Balance Designation Policy attached to this resolution as Exhibit "A" is hereby adopted. ADOPTED THIS 1st DAY OF JUNE, 2011. David H. Ready, Cit nager ATTEST: ames Thompson, City Clerk Resolution No. 22928 Page 2 CERTIFICATION STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF PALM SPRINGS ) I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that Resolution No. 22928 is a full, true and correct copy, and was duly adopted at a regular meeting of the City Council of the City of Palm Springs on the 1st day of June, 2011, by the following vote: AYES: Councilmember Foat, Councilmember Hutcheson, Councilmember Mills, Mayor Pro Tern Weigel, and Mayor Pougnet. NOES: None. ABSENT: None. ABSTAIN: None. am esThompson, CityClerk oB Pg/Lptl City of Palm Springs, California 768961.1 CITY OF PALM SPRINGS FUND BALANCE DESIGNATION POLICY Exhibit A 1.0 POLICY The Fund Balance Designation Policy establishes procedures for reporting unrestricted fund balance in the City's Governmental Funds financial statements. Certain commitments and assignments of fund balance may be designated to help ensure that there will be adequate financial resources to protect the City against unforeseen circumstances and events such as revenue shortfalls and unanticipated expenditures. The policy also authorizes and directs the Director of Finance and Treasurer to prepare financial reports which accurately categorize fund balance as per Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. 2.0 SCOPE This Fund Balance Designation policy applies to the unrestricted and spendable portions of fund balance for all Governmental Funds for the City of Palm Springs. These funds are accounted for in the Comprehensive Annual Financial Report and include, but are not limited to: General Fund Special Revenue Funds Capital Projects Funds Debt Service Funds Internal Service Funds Community Redevelopment Funds Funds that are not included in this Fund Balance Designation policy include, but are not limited to: Enterprise Funds Trust and Agency Funds 3.0 PROCEDURES Fund balance is essentially the difference between assets and liabilities reported in a governmental fund. There are five separate components of fund balance, each of which identifies the extent to which the City is bound to honor constraints on the specific purposes for which amounts can be spent: • Nonspendable fund balance (inherently nonspendable) • Restricted fund balance (externally enforceable limitations on use) • Committed fund balance (self-imposed limitations on use) • Assigned fund balance (limitation resulting from intended use) • Unassigned fund balance (residual net resources) 768952.1 99 City of Palm Springs Fund Balance Designation Policy Page 2 The first two components listed above are not addressed in this policy due to the nature of their restrictions. Examples of nonspendable fund balance are land, buildings, and inventory. Restricted fund balance is either imposed by law or constrained by grantors, contributors, or laws or regulations of other governments. This policy is focused on financial reporting of unrestricted fund balance, or the last three components listed above. These three components are further defined below. Committed Fund Balance The City Council, as the City's highest level of decision-making authority, may commit fund balance for specific purposes pursuant to constraints imposed by formal actions taken, such as an ordinance or resolution. These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the same type of formal action taken to establish the commitment. City Council action to committed fund balance needs to occur within the fiscal reporting period; however, the amount can be determined subsequently. If the Council were to decide to establish a General Fund Emergency Contingency, this would be an example of a committed fund balance. Assigned Fund Balance Amounts that are constrained by the City's intent to be used for specific purposes, but are neither restricted nor committed, should be reported as assigned fund balance. This policy hereby delegates the authority to assign amounts to be used for specific purposes to the Director of Finance and Treasurer for the purpose of reporting these amounts in the annual financial statements. A few examples of assigned fund balance follow. Continuing Appropriations: Amounts that are appropriated but unspent may be continued or 'carried-over' from one fiscal year to the next fiscal year. Encumbrances: Amounts tied to purchase orders where all or part of the original amount has not been converted into expenditures. Some purchase orders may span several fiscal years. Large construction projects are the best example of this type of situation. Debt Service: Designation providing for future debt service obligations. Unassigned Fund Balance These are residual positive net resources of a governmental fund in excess of what can properly be classified in one of the other four categories. Historically, this is what has been referred to as 'unrestricted fund balance' or 'available cash' or `unrestricted reserves' — which basically means that this is the portion of fund balance that is available to be allocated and spent by the City Council. 768952,1 100 City of Palm Springs Fund Balance Designation Policy Page 3 Fund Balance Classification The accounting policies of the City consider restricted fund balance to have been spent first when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the City considers committed amounts to be reduced first, followed by assigned amounts and then unassigned amounts. 769952.1 101