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

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Memo City Council Fund Balance Policy and the New GASB 54 Statement 3 thus eliminating the need to transfer General Fund monies to sustain this fund, and Risk Management will be moved to an Internal Service Fund. The second change is related to fund balance commitments. To meet the definition of committed fund balance, the Council is required to adopt a resolution "committing" specific revenues prior to the end of the year. This resolution will be presented to the City on November 281h. Attached is the anticipated fund balance classifications for each Governmental Fund with balances as of 2010. The commitments made by the Council cannot change without Council taking similar action to remove them. The final change is related to the City's Fund Balance Policies originally adopted on February, 25, 2008. The Fund Balance Policies need to be revised to authorize the Director of Finance and Administrative Services and/or City Administrator to assign fund balances to reflect the City's intended use of funds. This does not change the authority to actually spend resources, but to assign resources for a presentation standpoint only. The Fund Balance Policies also need to include how the City intends to use its resources when multiple categories of fund balance are available. The revised Fund Balance Policies are attached. There have been several minor changes made to reflect the new terminology used in GASB 54 and to reflect how funds are currently being used. Again, the revised policy does not change how the City conducts business or the General Fund reserve. Changes to the policies have been shown in the black-lines revision attached. One item that the Council might want to consider is to address how the General Fund reserve would be replenished in the event that the Fund Balance falls below 50%. This could be done by adding wording shown in this example: In the event the unassigned General fund balance will be calculated to be less than the minimum requirement at the completion of any fiscal year, the City shall plan to adjust budget resources in the subsequent fiscal years to bring the fund balance into compliance with this policy. DIRECTION REQUESTED: 1. Direction to staff regarding the revised Fund Balance Policy, reassignments of funds, and classifications of commitments.