2016-12-31 Management Letter - Laserfiche WebLink

Home Browse Search

Financial Position and Results of Operations Our principal observations and recommendations are summarized on the following pages. These recommendations resulted from our observations made in connection with our audit of the City's financial statements for the year ended December 31, 2016. General Fund The General fund is used to account for resources traditionally associated with government, which are not required legally or by sound principal management to be accounted for in another fund. The General fund balance increased $141,243 from 2015. The fund balance of $1,310,308 is 56.0 percent of the 2017 budgeted expenditures. We recommend that the fund balance be maintained at a level sufficient to fund operations until the major revenue sources are received in June. The City's fund balance policy for the General fund identifies a minimum unassigned fund balance of 40 - 50 percent of the following year's budgeted expenditures. The City's ending fund balance is above this target level. The purposes and benefits of an adequate fund balance are as follows: • Expenditures are incurred somewhat evenly throughout the year. However, property tax and state aid revenues are not received until the second half of the year. An adequate fund balance will provide the cash flow required to finance the governmental fund expenditures. • Expenditures not anticipated at the time the annual budget was adopted may need immediate City Council action. These would include capital outlay replacement, lawsuits and other items. An adequate fund balance will provide the financing needed for such expenditures. • A strong fund balance will assist the City in obtaining, maintaining or improving its bond rating. The result will be better interest rates in future bond sales. -4- People + Process, I;(,N ol ] \[I IiII)cI-'s