HomeMy WebLinkAboutORDINANCE NO 12 01 127ORDINANCE NO. 12-01-127
STATE OF GEORGIA
COUNTY OF FULTON
AN ORDINANCE OF THE MAYOR AND CITY COUNCIL OF THE CITY OF
MILTON, GEORGIA TO AMEND CHAPTER 2 — ADMINISTRATION,
ARTICLE VI — FINANCIAL MANAGEMENT PROGRAM, OF THE CITY OF
MILTON CODE OF ORDINANCES TO ADD DIVISION 13 — FUND BALANCE
POLICY
WHEREAS, the Governmental Accounting Standards Board (GASB) issued Statement
No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, changing
how fund balance is reported; and
WHEREAS, Statement No. 54 also clarified the definitions of governmental fund types.
BE IT ORDAINED by the City Council of the City of Milton, Georgia while in a
Regular called Council meeting on the 23`d day of January, 2012 at 6:00 p.m. as follows:
SECTION 1. That Chapter 2, Article 6, Division 13, Section 2-678 of the City of
Milton Code of Ordinances, is hereby adopted and approved; and is attached
hereto as if fully set forth herein; and,
SECTION 2. All Ordinances, parts of ordinances, or regulations in conflict
herewith are hereby repealed,
SECTION 3. That this Ordinance shall become effective upon its adoption.
ORDAINED this the 23`d day of January, 2012.
Attest:
Sudie AM Gordon, Oity Clerk
(Seal)
Approved:
Mayor Joe L cl wood
City of Milton Financia/ Management Program
City
of
FINANCIAL MANAGEMENT PROGRAM
FUND BALANCE POLICY
(IN ACCORDANCE WITH GASB 54)
Developed under the Authority
of the City Council by the
Department of Finance, and
approved by ordinance
on January 23, 2012.
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City of Milton Financial Management Program
FUND BALANCE POLICY IN ACCORDANCE WITH GASB 54
Purpose: The following policy has been adopted by the City Council in order to address the
implications of the Governmental Accounting Standards Board (GASB) Statement No. 54, Fund
Balance Reporting and Governmental Fund Definitions. The policy is created in consideration of
unanticipated events that could adversely affect the financial condition of the City and jeopardize
the continuation of necessary public services. This policy will ensure that the City maintains
adequate fund balances and reserves in order to:
a.) Provide sufficient cash flow for daily financial needs,
b.) Secure and maintain investment grade bond ratings,
c.) Offset significant economic downturns or revenue shortfalls, and
d.) Provide funds for unforeseen expenditures related to emergencies.
This policy and the procedures promulgated under it supersede all previous regulations regarding
the City's fund balance and reserve policies.
Fund Type Definitions: The following definitions will be used in reporting activity in
governmental funds across the City. The City may or may not report all fund types in any given
reporting period, based on actual circumstances and activity.
The general fund is used to account for all financial resources accounted for and
reported in another fund.
Special revenue funds are used to account and report the proceeds of specific revenue
sources that are restricted or committed to expenditure for specific purposes other than
debt services or capital projects.
Debt service funds are used to account for all financial resources restricted, committed
or assigned to expenditure for principal and interest.
Capital project funds are used to account for all financial resources restricted,
committed or assigned to expenditure for the acquisition or construction of capital assets.
Permanent funds are used to account for resources restricted to the extent that only
earnings, and not principal, may be used for purposes that support the City's purposes.
Fund balance reporting in governmental funds. Fund balance will be reported in
governmental funds under the following categories using the definitions provided by GASB
Statement No. 54:
Non -spendable fund balance — Includes amounts that cannot be spent because they
are either a.) not in spendable form or b.) legally or contractually required to be
maintained intact. Non -spendable amounts will be determined before all other
classifications and consist of the following items (as applicable in any given fiscal year):
The City will maintain a fund balance equal to the balance of any long-term
outstanding balances due from others (including other funds of the City)
The City will maintain a fund balance equal to the value of inventory balances
and prepaid items (to the extent that such balances are not offset with liabilities
and actually result in fund balance)
The City will maintain a fund balance equal to the corpus (principal) of any
permanent funds that are legally or contractually required to be maintained intact.
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City of Milton Financial Management Program
The City will maintain a fund balance equal to the balance of any land or other
non-financial assets held for sale.
Restricted fund balance — Includes amounts that can be spent only for the specific
purposes stipulated by the constitution, external resource providers, or through enabling
legislation.
Committed fund balance — Includes amounts that can be used only for the specific
purposes determined by a formal action of the City Council. Commitments will only be
used for specific purposes pursuant to a formal action of the City Council. A majority vote
is required to approve or remove a commitment.
Assigned fund balance — Includes amounts intended to be used by the City for specific
purposes but do not meet the criteria to be classified as restricted or committed. In
governmental funds other than the general fund, assigned fund balance represents the
remaining amount that is not restricted or committed. The City Council delegates the
Finance Director the authority to assign amounts to be used for specific purposes. Such
assignments cannot exceed the available (spendable, unrestricted, uncommitted) fund
balance in any particular fund.
Unassigned fund balance — Includes the residual classification for the City's general
fund and includes all spendable amounts not contained in the other classifications. In
other funds, the unassigned classification should be used only to report a deficit balance
from overspending for specific purposes for which amounts had been restricted,
committed, or assigned.
Operational guidelines. The following guidelines address the classification and use of fund
balance in governmental funds:
Classifying fund balance amounts — Fund balance classifications depict the nature of the
net resources that are reported in a governmental fund. An individual governmental fund
may include non -spendable resources and amounts that are restricted, committed, or
assigned, or any combination of those classifications. The general fund may also include
an unassigned amount.
Encumbrance reporting — Encumbering amounts for specific purposes for which
resources have already been restricted, committed or assigned should not result in
separate display of encumbered amounts. Encumbered amounts for specific purposes
for which amounts have not been previously restricted, committed or assigned, will be
classified as committed or assigned, as appropriate, based on the definitions and criteria
set forth in GASB Statement No. 54.
Prioritization of fund balance use — When an expenditure is incurred for purposes for
which both restricted and unrestricted (committed, assigned, or unassigned) amounts are
available, it shall be the policy of the City to consider restricted amounts to have been
reduced first. When an expenditure is incurred for purposes for which amounts in any of
the unrestricted fund balance classifications could be used, it shall be the policy of the
City that the committed amounts would be reduced first, followed by assigned amounts
and then unassigned amounts.
Minimum unassigned fund balance — The City will maintain a minimum unassigned fund
balance in its General Fund of 16% of the subsequent year's budgeted expenditures and
outgoing transfers. This minimum fund balance is to protect against cash flow shortfalls
related to timing of projected revenue receipts and to maintain a budget stabilization
commitment.
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City of Milton Financia/ Management Program
Replenishing deficiencies — When fund balance falls below the minimum 16%,
the City will replenish shortages/deficiencies using the budget strategies and
timeframes described below.
• The City will reduce recurring expenditures to eliminate any structural
deficit or,
• The City will increase revenues or pursue other fund sources, or,
• A combination of the two options above.
Minimum fund balance deficiencies shall be replenished within the following time
periods:
A deficiency resulting in a minimum fund balance between 16% and 11 %
of the subsequent year's budgeted expenditures and outgoing transfers
shall be replenished over a period not to exceed one year.
A deficiency resulting in a minimum fund balance between 11 % and 6%
of the subsequent year's budgeted expenditures and outgoing transfers
shall be replenished over a period not to exceed three years.
Surplus fund balance — Fund balance will be considered a surplus if over 21 % of
the subsequent year's budgeted expenditures and outgoing transfers. Should
unassigned fund balance of the General Fund ever exceed 21 %, the City will
consider such fund balance surpluses for one-time expenditures that are non-
recurring in nature and which will not require additional future expense outlays for
maintenance, additional staffing or other recurring expenditures.
Implementation and review. Upon adoption of this policy the City Council authorizes the
Finance Department to establish any standards and procedures which may be necessary for its
implementation. When the need arises, the Finance Department shall make any necessary
recommendation to the City Council for changes to this policy.
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