3D, Fund Balance Policy and the New GASB 54 Statement

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reconstruction or system upgrades, may need to be funded from enterprise revenue bonds. Annual utility rate reviews will be made in regard to projected operating expenses and capital improvements. The Council will, on an annual basis, establish rates in accordance to operating cost recovery and the projected capital improvement. 9. Internal Service Funds were established to account for operations which are designed to be self- supporting from "internal" user charges. a. Risk Management Fund This fund was established to pool dividends received the City's insurance providers for positive claims experience. This funds tracks dividend revenues and deductible costs for claims. The goal of this fund is to build a fund balance that would allow the City to increase deductible limits in order to reduce premium costs. Dividends from the City's health insurance provider are also used to provide wellness programs. Funds received from the League of Minnesota Cities Insurance Trust are committed while funds received from the City's health insurance carrier are assigned. b. Engineering This fund is used to account for the provision of engineering services to development projects, infrastructure projects, and the City in generaL This fund is fnanced predominantly through user charges both internally and externally to developers and is normally not expected to carry a fund balance at year-end. c. Central Garage and Equipment This fund is used to account for the materials, supplies, and expenses of the Central Garage and equipment of Public Works which is comprised of the following departments; Streets, Parks, Water, Sanitary Sewer, and Surface Water Management. This fund is financed predominantly through user charges internally to the public works deparhnents. Fund balance is assigned for the purchase, replacement, and repair of equipment and vehicles used. by public works. 10. Fund balances will be assigned according to the above guidelines up to the amount available after restrictions and other commitments. This policy is not intended to require the reporting of deficit unassigned fund balances. Nonspendable Fund Balances — consists of amounts that are not in spendable form. The City has several amounts unavailable for appropriation such as: prepaid items, inventories, etc. Restricted Fund Balance and Restricted Net Assets — consists of amounts related to externally imposed constraints established by creditors, grantors or contributors; or constraints imposed by state statutory provisions. It is the portion of fund balance that is not appropriable for expenditure or is legally segregated (restricted net assets) for specifc future uses. The City has several items that are legally restricted to a certain use such as: police forfeiture iunds, federal and state economic development revolving loans, park dedication fees, and bond proceeds. Committed Fund Balance - consists of internally imposed constraints. These constraints are established by Resolution of the City Council. Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally. P:\Finance\Policies and Procedures\Policies\Fund Balance Policy-2011.doc Adopted 11/28/2011