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.
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,.y Oscar Trevino, Mayor
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Patricia Hutson, City Secretary
APP - • ' •, TO ORM AND LEGALITY:
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George A. Staple, City Attorney
Resolution No. 2011 -028
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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
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• 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
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