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HomeMy WebLinkAboutResolution 2011-028 RESOLUTION NO. 2011 -028 WHEREAS, the Governmental Accounting Standards Board ( "GASB ") has adopted Statement 54 ( "GASB 54 "), a new standard for governmental fund balance reporting and governmental fund type definitions that became effective in governmental fiscal years starting after June 15, 2010, WHEREAS, and the City of North Richland Hills, Texas ( "City ") elects to implement GASB 54 requirements, and to apply such requirements to its financial statements beginning with the current fiscal year (October 1, 2010 through September 30, 2011); BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF NORTH RICHLAND HILLS, TEXAS as follows: 1. The Council approves the "Fund Balance Policy" in Exhibit A to this resolution as defined by GASB No. 54. 2. The Council Approves and defines the various components of fund balance as reported in "Components of Fund Balance" as required by GASB No. 54 in Exhibit A. 3. The classification and reporting of fund balance components as required by GASB No. 54 will become effective beginning with the 2010/2011 fiscal year. 4. The City Council designates the City Manager as the City Official to determine and define the amounts of those components of fund balance that are classified as "Assigned Fund Balance." 5. The City Council commits certain special revenue resources to specific expenditure purposes as detailed and listed in Exhibit A. PASSED 'AR�ROVED this the 22nd day of August, 2011. RZ C H 440 h y ' CI L F N O T RIC • ND HILLS r B ,.y Oscar Trevino, Mayor • '4 ` l V im••••.. o ATTEm 07 41 liwl l% \` ,4a,eua. Patricia Hutson, City Secretary APP - • ' •, TO ORM AND LEGALITY: �!k 4I ►1,, , l / George A. Staple, City Attorney Resolution No. 2011 -028 Page 1 of 3 EXHIBIT A CITY OF NORTH RICHLAND HILLS, TEXAS FUND BALANCE POLICY In accordance with GASB Statement No. 54 Purpose. The following policy has been adopted by the City Council in order to address the implications of Governmental Accounting Standards Board ( "GASB ") Statement No. 54, Fund Balance Reporting and Governmental Fund Definitions. The policy is created in consideration of unanticipated events that could adversely affect the financial condition of the City and jeopardize the continuation of necessary public services. This policy will ensure that the City maintains adequate fund balances and reserves in order to: • Provide sufficient cash flow for daily financial needs, • Secure and maintain investment grade bond ratings, • Offset significant economic downturns or revenue shortfalls, and • Provide funds for unforeseen expenditures related to emergencies. This policy and the procedures promulgated under it supersede all previous regulations regarding the City's fund balance and reserve policies. Fund Balance Components. Fund balance is essentially the difference between assets and liabilities reported in a governmental fund. There are generally limitations on the purpose for which all or a portion of the resources of a governmental fund may be used. The force behind these limitations can vary significantly, depending upon their sources. Consequently, the fund balance reported in the annual financial statements is categorized into five components whereby each component identifies the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the fund can be spent. The five components of fund balance are as follows: • Nonspendable: Resources that are 1) not in spendable form, such as inventories, prepaids, Tong -term receivables, or non - financial assets held for resale, or 2) required to be maintained intact such as an endowment. • Restricted: Resources that are subject to externally enforceable legal restrictions; these restrictions would be either 1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or 2) imposed by law through constitutional provisions or enabling legislation. • Committed: Resources that are constrained to specific purposes by a formal action of the City Council such as an ordinance or resolution. The constraints remain binding unless removed in the same formal manner by the City Council. Council action to commit fund balance must occur within the fiscal reporting period, while the amount committed may be determined subsequentially. • Assigned: Resources that are constrained by the City's intent to be used for specific purposes, but that are neither restricted nor committed. Resolution No. 2011 -028 Page 2of3 • Unassigned: Within the General Fund, unassigned fund balance will be the residual resources, either positive or negative, in excess of what can be properly classified in one of the other fund balance categories. Within all other governmental funds unassigned fund balance will be the negative residual resources in excess of what can be properly classified as nonspendable, restricted, or committed. Operational Guidelines. The following guidelines address the classification and use of fund balance in governmental funds: • Prioritization of Fund Balance use — In circumstances where an expenditure is to be made for a purpose for which amounts are available in multiple fund balance classifications, the order in which resources will be expended is as follows: restricted fund balance, followed by committed fund balance, assigned fund balance, and lastly, unassigned fund balance. • General Fund Minimum Fund Balance Requirement — At the end of each fiscal year, the General Fund should maintain a minimum unassigned fund balance that is no less than 15% of the subsequent year's General Fund Appropriated Expenditure budget. This target amount has been established in order to provide a reasonable level of assurance that the City's day -to -day operations will be able to continue even if circumstances occur where revenues are insufficient to cover expenditures. The General Fund's minimum fund balance policy is reported in the Comprehensive Annual Financial Report (CAFR). Special Revenue Activities — Committed by Council - The City Council approves by adopting this policy that specific revenue sources listed below are restricted to specific expenditure usage. The table below describes sources of revenue and specific expenditures in which these revenue resources can be used toward and appropriated annually through the budget process. The Fund Balances for these special revenue sources shall be reported as a special revenue fund. Fund Name Revenue Source Expenditure Restriction Donations Donations / Contributions Donators /Contributors' Objectives and other restrictions within Resolution #2002 -004 Drainage Utility Drainage Utility Fees Debt Repayment and Direct Outflows for Drainage Infrastructure Acquisition and Upkeep (Ordinance #1727) Gas Development Mineral Rights Leases, Resolution #2006 -052 Bonuses, Right of Way Fees Resolution No. 2011 -028 Page 3 of 3