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HomeMy WebLinkAboutRes 2021-05 Amending and Adopting the Fund Balance PolicyCity of West University Place Harris County, Texas RESOLUTION NO. 2021-05 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST UNIVERSITY PLACE, TEXAS, AMENDING AND ADOPTING THE CITY OF WEST UNIVERSITY PLACE'S FUND BALANCE POLICY; PROVIDING AN EFFECTIVE DATE AND CONTAINING FINDINGS AND PROVISIONS RELATED TO THE SUBJECT. WHEREAS, the City Council of the City of West University Place, Texas has previously established policies and procedures for fund balances (the "Fund Balance Policy"); and WHEREAS, the City Council of the City of West University Place, Texas has found a review of the Fund Balance Policy to be prudent and appropriate. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WEST UNIVERSITY PLACE, TEXAS THAT: Section 1. The City Council of the City of West University Place, Texas, has reviewed the City's Fund Balance Policy and its fund balance requirements and the policy and requirements adopted in Section 2 hereof records all changes made by the City Council to such document. Section 2. The City Council of the City of West University Place, Texas, hereby adopts the Fund Balance Policy, including the fund balance requirements, of the City of West University Place, which is attached hereto as "Exhibit A" and incorporated herein for all purposes. Section 3. This Resolution shall take effect immediately from and after its passage by the City Council of the City of West University Place, Texas. (00214795.docx ) PASSED, APPROVED AND ADOPTED, by thegiffirmativ e t of the ity Council of the City of West University Place, Texas, this the day of , 2021. 91, Secretary RECOMMENDED pe City Manager APPROVED AS TO LEGAL FORM City Attorney {00214795.docx } EXHIBIT "A" Fund Balance Policy 100214795.docx ) n L Fn l Fund Balance an ce Policy West University Revised February 8 2021 Place I a Ij R 11.x] The purpose of this policy is to censure financially -prudent guidelines and parameters are maintained, which is a key element of the City's financial stability_ef the Gly by setting guidelines fef adequate levels of unassigned f6nd balanee to mitigate finaneial risk that eafl Oe6kff f+@M tkftfeFe5eeH One part of the City's financial stability is maintaining adequate levels of unassigned fund balance to mitijzate financial risk that can occur from unforeseen revenue fluctuations unanticipated expenditures., and similar circumstances. This Policy will ensure that the City maintains adeauate fund balances for the nurnoses of: • Providing sufficient cash flow for daily ol2erations • Maintaining a high bond rating to secure low borrowing costs • Offsetting significant revenue constraints and shortfalls • Providing funds for unforeseen expenditures • Demonstrating a commitment to long-term financial planning DEFINITIONS Fund Equity .- A fund's equity is generally the difference between its assets and its liabilities. Fund Balance An accounting distinction is made between the portions of fund equity that spendable and non -spendable. These are classified pinta five categories: 1) Non -spendable fund balance — includes amounts that are not in a spendable form or are required to be maintained intact. Examples are inventory or permanent funds. 2) Restricted fund balance — includes amounts that can be spent only for the specific purposes stipulated by external resource providers either constitutionally or through enabling legislation. Examples include grants, court security, and child safety fees. 3) Committed fund balance — includes amounts that can be used only for the specific purposes determined by a formal action of the City Council. Commitments may be changed or lifted only by the City Council taking the same formal action that imposed the constraint originally. 4) Assigned fund balance — comprises amounts intended to be used by the City for specific purposes. Intent can be expressed by City Council or by an official or body to which the City Council has delegated the authority. In governmental funds other than the General Fund, assigned fund balance represents the amount that is not restricted or committed. This indicates City of West University Place Fund Balance Policy that resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund. 5) Unassigned fund balance - is the residual classification of the General Fund and includes all amounts not contained in other classifications. Unassigned amounts are technically available for any purpose. POLICY Committed Fund Balance The City Council is the City's highest Ievel of decision-making authority and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the City Council at the City's. The resolution must either be approved or rescinded, as applicable, prior to the last day of the fiscal year for which the commitment is made. The amount subject to the constraint may be determined in the subsequent period. Assigned Fund Balance The City Council has authorized the City's Finance Director to assign fund balance to a specific purpose as approved by this flind b.,1. nee ekyPolicy. Minimum Unassigned Fund Balance General Fund -- It is the policy of the City to achieve and maintain an unassigned fund balance in the General Fund equal to 20 ep rcent46 of estimated ooverating expenditures -for the current Annual Budget. Balances of less than the prescribed levels shall only be allowed with specific approval of City Council. Enterprise Funds .- All enterprise funds swill be -maintained working capital equal toat 10°--2p rcent_of the estimated expenditures for the current Annual Budget. Balances of less than the prescribed levels shall only be allowed with specific approval of City Council. Internal Service Funds - All internal service funds will maintain appropriate balances to support the operational needs of each respective fund; The fund balances will be reviewed during the Annual Bud et vrocess. If unassigned fund balance exceeds the target set by policy, the City mawill use surpluses for one-time expenditures. A surplus in the unassigned fund balance is considered a one-time revenue source and should not be used to fund recurring operational needs. Surplus unassigned fund balance in the General Fund may be transferred to the Capital Reserve Fund. -If unassigned fund balance falls below the target, the City will reduce recurring expenditures to eliminate any structural deficit for such period as necessary until the unassigned fund balance meets the minimum balance as required by this pelie-yPolicv. The City shall_ make_ reasonable efforts to fully replenish the fund balance within three years of a deficit onset. City of West University Place Fund Balance Policy Order of Expenditure of Funds When multiple categories of fund balance are available for expenditure , pr-ejeet is being funded panly by a gr -ant, funds set aside by the C -4y Gouneil, and unassigned ftifid fie), the City will start with the most restricted category and spend those funds first before moving down to the next category with available funds. As an example, a construction project is being funded partly -by a grant, funds set aside by the City Council, and unassigned fund balance. Monitoring and Reporting The Finance Director will be responsible for monitoring and reporting the City's fund balances. The City Manager is responsible for making recommendations to City Council on the use of fund balance surpluses during the Annual Budget process.