CCP 05-19-2003 - Laserfiche WebLink

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. '. . City of Arden Hills April 10, 2003 Page Four Other Matters The following are areas that came to our attention during the audit that we feel should be reviewed: Financial Position and Results of Operations General Fuud The general fund is used to account for resources traditionally associated with government, which are not required legally or by souud priucipal managemenr to be accouuted for in another fund. The general fund fund balance increased $39,468 from 2001. The fund balance of $753, 172 is 23 percent of the 2003 budgeted expenditures. We recommend the fund balance be maintained at a level sufficient to fund operations until the major revenue sources are received in June. We feel a reserve of approximately 40 to 50 percent of planned expenditures and transfers out is adequate to meet working capital and small emergency needs. At the current level, the fund balance is below the range of what is geuerally recommended as a minimum, but the City has significant reserve funds in the capital projects fund to provide for working capital. In a press release on January 31, 2003, the Mimlcsota Office of the State Auditor classified cities' unreserved fund balance levels relative to expenditures as follows: Extremely low Low Acceptable Moderately high High Very high Extremely high Under 20% 21-34% 35 - 50% 51- 64% 65 - 100% 100 - 150% Above 150% The State Auditor elassified 21.2 percent of all Minnesota cities in the high category in 2001. They did group all general, special revenue and debt service ftmds of the city when making this calculation where our calculation is based only on the general funds. If the general and special revenue funds were grouped together, the unreserved fund balance would total $1,412,566 and this would represent 31 percent of the 2003 budgeted expenditures for the general and special revenue funds. Although there is no legislation regulating fund halance, it is a good policy to designate intended use of fund balance. This helps address citizen concerns as to the use of fund balance and tax levels.