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�t s <br /> City of Centerville <br /> April 16, 1998 <br /> Page Three <br /> Il I <br /> Financial Position and Results of Operations <br /> General Fund <br /> Overall, the fund balance increased $159,693 during 1997. The total fund balance is $621,746 and this is <br /> approximately 72.14% of current year expenditures and transfers out. We recommend fund balance be <br /> maintained at a minimum of 40% of planned expenditures and transfers out, so the current fund balance is <br /> adequate to meet working capital needs. From discussions with management it appears there are plans for the <br /> fund balance in excess of the recommended working capital minimum of 40 %. This excess could be <br /> designated to a purpose by council resolution. This would give clear indication of intended use. Fund balance <br /> should be maintained for the following reasons: <br /> Purposes and Benefits <br /> Expenditures are incurred somewhat evenly throughout the year. However, property tax and state aid <br /> revenues are not received until the second half of the year, An adequate fund balance will provide the <br /> cash flow required to finance the General Fund expenditures. Your fund balance appears to be sufficient <br /> to provide this working capital. <br /> The City is vulnerable to legislative actions at the State and Federal level. Recent years have seen the <br /> State continually adjusting the local government aid and property tax credit formulas along with <br /> implementing levy limits for some cities. An adequate fund balance will provide a temporary buffer <br /> against those aid adjustments and possible levy limits. <br /> Expenditures not anticipated at the time the annual budget was adopted may need immediate Council <br /> action. These would include capital outlav replacement, lawsuits and other items. An adequate fund <br /> balance will provide the financing needed for such expenditures. <br /> A strong fund balance will assist the City in maintaining or improving its bond rating. <br /> A summary of the 1997 operations is as follows: <br /> Variance - <br /> Favorable <br /> Budget Actual (Unfavorable) <br /> Revenue $ 795,863 $ 1,004,208 S 208,345 <br /> Expenditures 759,720 826,815 (67,095) <br /> Excess (Deficiency) of Revenue Over <br /> Expenditures 36,143 177,393 141,250 <br /> Operating transfers in 17,300 17,300 - <br /> Operating transfers out (35,000) (35,000 <br /> Excess (Deficiency) of Revenue and <br /> Other Financing Sources Over <br /> Expenditures and Other Financing <br /> Uses $ 19,443 159,693 $ 141.250 <br /> Fund Balance, January 1 462,053 <br /> Fund Balance, December 31 $ 621,746 <br />