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HomeMy WebLinkAbout2011-613-06/27/2011This Resolution prepared by Carol Failor, Deputy City Clerk, 715 Mulberry Street, Waterloo, Iowa. RESOLUTION NO. 2011-613 RESOLUTION APPROVING CITY OF WATERLOO FUND BALANCE AND RESERVE POLICY. WHEREAS, the Fund Balance and Reserve Policy officially recognizes the policy decision that some City funds are legally or otherwise obligated for specific or general purposes, and WHEREAS, establishing a formal fund balance and reserve policy will allow the City to comply with Government Accounting Standard No. 54, which is effective for the June 30, 2011 financial statements. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF WATERLOO, IOWA, that the City of Waterloo Fund Balance and Reserve Policy, as attached, is hereby approved. PASSED AND ADOPTED this 27th day of June, 2011. a'41 Erst G. Clark, Mayor ATTEST: Suzy Sch Ares, CMC City Clerk CITY OF WATERLOO FUND BALANCE AND RESERVE POLICY, 2011 OVERVIEW Purpose The fund balance and reserve policy officially recognizes the policy decision that some City funds are legally or otherwise obligated for specific or general purposes. Objective Establishing a formal fund balance and reserve policy provides guidelines for how fund balances must be maintained and will also allow the City to comply with the financial reporting requirements under Government Accounting Standard No. 54. Background The Governmental Accounting Standards Board (GASB), the rulemaking authority for governmental accounting, has issued a pronouncement relating to how cities report fund balance. Up to now, terms such as Restricted and Unrestricted, Reserved and Unreserved and Designated and undesignated have been used. The GASB felt that these terms were not very clear to most readers of city financial statements. Therefore, the GASB issued a new pronouncement, GASB Statement No. 54, with the objective to provide reporting that is more meaningful. The hope is that the new terms will present a more logical and more easily understood framework for presenting the city's fund balance. Definitions - The new fund balance definitions as required by GASB No. 54 are presented below in hierarchy order from most constrained to least constrained. Fund Balance - the difference between assets and liabilities in a Governmental Fund. 1. Nonspendable Fund Balance - The portion of a Governmental Fund's net assets that are not available to be spent, either short term or long term, either because of their form or through legal restrictions. Typical examples are items such as inventory and prepaid expenses. City of Waterloo Fund Balance and Reserve Policy, 2011 Page 2 2. Restricted Fund Balance - The portion of a Governmental Fund's net assets that are subject to external enforceable legal restrictions. Typical examples are grant funds received from federal and state governments, as well as donations made for specified purposes. 3. Committed Fund Balance - The portion of a Governmental Fund's net assets with constraints or limitations imposed by the City Council at the highest level of decision making. 4. Assigned Fund Balance - The portion of a Governmental Fund's net assets used to denote an intended use of resources. 5. Unassigned Fund Balance - Available expendable financial resources in a Governmental Fund that are not subject to any of the constraints listed above. The three less constrained levels (committed, assigned and unassigned) are locally controlled. Any amounts that the City wishes to identify as committed fund balance must be identified and approved by the City Council prior to year-end. POLICY A. The City will spend the most restricted dollars before less restricted, in the following order: 1. Nonspendable (if funds become spendable), 2. Restricted (if a project or expense requires that both restricted and other funds be spent, the restricted portion shall be spent in accordance with the governing agreement), 3. Committed, 4. Assigned, 5. Unassigned. City of Waterloo Fund Balance and Reserve Policy, 2011 Page 3 B. This policy may be amended from time to time according to the wishes of the Waterloo City Council. C. The Chief Financial Officer will determine if any portions of fund balance should be assigned, including in non-governmental funds. Fri'iA This policy is intended to provide guidelines for how fund balance is reported in the City's comprehensive annual financial report.