HomeMy WebLinkAboutResolution No. 2011-131 Amending Financial Management Policies I
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o e " RESOLUTION NO. 2011-131
RESOLUTION AMENDING THE FINANCIAL MANAGEMENT POLICIES
ity of Edina
WHEREAS, The Edina City Council adopted Financial Management Policies on
February 20, 2007; and
WHEREAS, Revisions were made to these policies March 20, 2007 and December 15,
2010; and
WHEREAS, Last year the City Council approved the inclusion of all funds in the budget
document, with changes to the Operating Budget Policies reflecting this change; and
WHEREAS, The Governmental Accounting Standards Board (GASB) Statement 54
changes the reporting for generally accepted accounting principles (GAAP) as pertaining to
Fund Balance reporting and requiring a change to the Fund Balance Policies.
NOW, THEREFORE, BE IT RESOLVED, the City Council does hereby amend the
Financial Management Policies by changing the Operating Budget Policies and the Fund
Balance Policies as stated below:
OPERATING BUDGET POLICIES
Scope. It is the City's policy to budget for all governmental and enterprise funds.
• Accounting. The governmental funds use the modified accrual basis of accounting for
budgeting and reporting purposes. Revenues are recognized as soon as they are both
measurable and available. Revenues are considered to be available when they are collectible
within the current period or soon enough thereafter to pay liabilities for the current period. The
City considers all revenues, except reimbursement grants, to be available if they are collected
within 60 days of the end of the current fiscal period. Expenditures generally are recorded when
a liability is incurred. However, debt service expenditures, as well as expenditures related to
compensated absences and claims and judgments are recorded only when payment is due.
The Enterprise Funds use the accrual basis of accounting for budgeting and reporting
purposes. Revenues are recorded when earned and expenses are recorded when a liability is
incurred, regardless of the timing of related cash flows. Property taxes are recognized as
revenue in the year for which they are levied. Grants and similar items are recognized as
revenue as soon as all eligibility requirements imposed by the provider have been met.
Stakeholder Input. The annual budget process is intended to weigh all competing requests for
City resources within expected fiscal constraints. Requests for new programs made outside the
annual budget process are discouraged. The City will provide ample time and opportunity for
public input into its budget process every year.
Balanced Budget Adoption. The operating budget for the General Fund will be balanced. The
City will not use internal or external short-term borrowing, asset sales, or one-time accounting
changes to balance the General Fund budget. The balanced budget will include a reasonable
• annual appropriation for contingencies.
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Budgetary Controls. The legal level of budgetary control is at the department level within the
General Fund even though budgetary data is presented at lower levels (personal services,
contractual services, commodities, and central services). Expenditures may not legally exceed
appropriations by department unless offset by increases in revenues. All unencumbered
appropriations lapse at year-end.
The City Manager may approve budgetary transfers. The City Council may approve
supplemental appropriations.
Monitoring. Department Directors are responsible for administration of their respective
department budgets. Such responsibility includes reviewing monthly financial reports to detect
errors and assess progress, staying within budget authorization, and submitting requests for
budget adjustments, when required
FUND BALANCE POLICIES
Definitions. The term fund balance describes the net assets of the City's governmental funds
calculated in accordance with generally accepted accounting principles (GAAP). GAAP further
divides fund balance into five categories; nonspendable fund balance, restricted fund balance,
committed fund balance, assigned fund balance, and unassigned fund balance.
• Nonspendable fund balance consists of amounts that cannot be spent because they are
not in spendable form, such as prepaid items.
• Restricted fund balance consists of amounts related to externally imposed constraints
established by creditors, grantors or contributors; or constraints imposed by state
statutory provisions.
• Committed fund balance consists of amounts that are constrained for specific purposes
that are internally imposed by formal action (resolution) of the City Council. Those
committed amounts cannot be used for any other purpose unless City Council removes
or changes the specified use by taking the same type of action it employed to previously
commit those amounts.
• Assigned fund balance consists of 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. In the general fund, assigned
amounts represent intended uses established by the City Council.
• Unassigned fund balance is the residual classification for the general fund and also
reflects negative residual amounts in other funds.
Policies. At the end of each fiscal year, the City will maintain nonspendable and restricted fund
balance equal to the amounts required by GAAP for a variety of purposes, including but not
limited to: prepaid expenditures, park dedication fees, E-911 funds, forfeiture funds, and other
assets restricted by grantors, contributors, creditors, or enabling legislation.
At the end of each fiscal year, the City will maintain committed fund balance constrained for
specific purposes by City Council.
At the end of each fiscal year, the City will maintain assigned fund balance in the General Fund
for investments as calculated by the difference between market value and amortized value of
investments held by the City at year-end.
•
At the end of each fiscal year, the City will also maintain assigned fund balance in the General
Fund for Compensated Absences of 40% of the actual full-accrual General Fund liability for
• compensated absences.
At the end of each fiscal year, the City's goal is to maintain unassigned fund balance for Cash
Flow in the General Fund in a range equal to 42-47% of the subsequent year's budgeted tax
revenue. In the event that unassigned fund balance falls above or below the desired range, the
Finance Director shall report such amounts to the City Council as soon as practicable after the
end of the fiscal year. Should the actual amount of unassigned fund balance fall below the
desired range, the City shall create a plan to restore the appropriate levels. Should the actual
amount of unassigned fund balance fall above the desired range, any excess funds will remain
unassigned pending the Council's final decision concerning transfer to another fund. It is the
policy of the City that, to the extent possible, such excess funds will be transferred to the
Construction Fund to support capital improvements and equipment.
Available fund balances shall not be used for ongoing operating expenditures.
When both restricted and unrestricted resources are available for use, it is the City's policy to
first use restricted resources, then use unrestricted resources as they are needed.
When committed, assigned, or unassigned resources are available for use, it is the City's policy
to use resources in the following order: 1) committed, 2) assigned, and 3) unassigned.
Passed and adopted by the City Council on December 20;2 11`.
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ATTEST:
Debra A. Mangen, ty CI k James B. Hovland, Mayor
STATE OF MINNESOTA )
COUNTY OF HENNEPIN )SS
CITY OF EDINA )
CERTIFICATE OF CITY CLERK
I, the undersigned duly appointed and acting City Clerk for the City of Edina do hereby certify
that the attached and foregoing Resolution was duly adopted by the Edina City Council at its
Regular Meeting of December 20, 2011, and as recorded in the Minutes of said Regular
Meeting.
WITNESS my hand and seal of said City this C,qday of , 20-1/
ity C1610
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