9.g) Adopt GASB 54 Fund Balance Policy Meeting Date: 2/21/2012
Agenda Item: /�
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City Council Agenda Report
City of Scandia
14727 209`h St. North
Scandia, MN 55073 (651) 433-2274
Action Requested: Adopt a Fund Balance Policy and commit fund balances to specific
purposes, as required to implement GASB Statement 54.
Deadline/Timeline: Effective for Scandia's fiscal year ending December 31, 2011.
Background: • The Governmental Accounting Standard Board (GASB) released
Statement 54 "Fund Balance Reporting and Government Fund
Type Definitions"which requires more structured classifications
for reporting fund balances. GASB 54 does not change how the
City conducts business. The changes are strictly related to how
fund balance is presented in the annual financial statements.
• GASB 54 applies to fund balances reported in the General Fund,
2007 Road Improvement Debt Service Fund, 2000 Fire Hall Bond
Fund, Capital Improvement Fund, Park Improvement Fund, and
the Equipment Replacement Fund. It does not apply to the 201
Sewer Enterprise Fund.
• GASB 54 separates fund balance into five new categories. Under
the old standards there were three categories:Reserved,
Designated, and Undesignated. The new categories are more
descriptive and focus on how the City plans to use it resources. A
brief description of each new category is listed below:
➢ Non-Spendable Fund Balance includes amounts not
in spendable form (e.g. prepaids, inventory, or amounts
required to be maintained intact legally or
contractually).
➢ Restricted Fund Balance includes amounts
constrained for a specific purpose by external parties.
(previously Reserved fund balances)
➢ Committed Fund Balance includes amounts
constrained for a specific purpose by a government
using its highest level of decision-making authority
(e.g. major maintenance, capital project). (previously
Designated fund balance)
➢ Assigned Fund Balance includes amounts constrained
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02/16/12
for a specific purpose by a government board or by an
official that has been delegated authority to assign
amounts. (previously Designated fund balance)
➢ Unassigned Fund Balance is the residual
classification for the general fund. (previously
Unreserved)
• In addition, governments are required to disclose more
information in the notes to financial statements about amounts
reported in fund balance as follows:
➢ Description of authority and actions that lead to
committed or assigned fund balance.
➢ Government's policy regarding order in which
restricted, committed, assigned, and unassigned
amounts are spent.
➢ Descriptions of formally adopted minimum fund
balance policies.
➢ The purpose of each major special revenue fund.
➢ Encumbrances, if significant.
Recommendation: Staff recommends the Council adopted Resolution 02-21-12-04 to
establish a Fund Balance Policy as required by GASB 54. The
resolution also assigns January 1, 2011 fund balances in the funds not
already designated by law.
Attachments/ • Draft Resolution 02-21-12-04
Materials provided:
Contact(s):
Prepared by: Colleen Firkus, Treasurer
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02/16/12
CITY OF 5CANDIA
RESOLUTION NO. 02-21-12-04
A RESOLUTION ESTABLISHING FUND BALANCE POLICIES
AS REQUIRED BY GASB 54
WHEREAS, the Governmental Accounting Standards Board ("GASB") has adopted
Statement 54 ("GASB 54"), a new standard for governmental fund balance reporting and
governmental fund type definitions that became effective in governmental fiscal years starting
after June 15, 2010, and
WHEREAS, the City of Scandia elects to implement GASB 54 requirements, and to
apply such requirements to its financial statements beginning with the January 1, 2011 to
December 31, 2011 fiscal year; and
NOW, THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL
OF THE CITY OF SCANDIA, WASHINGTON COUNTY, MINNESOTA that it hereby
adopts the following policy:
FUND BALANCE POLICY
Fund balances measure the net financial resources available to finance
expenditures of future periods.
The City's fund balances will be maintained to provide the city with sufficient
working capital and a margin of safety to address emergencies without borrowing.
The fund balances may only be appropriated by approval of the City Council.
In circumstances where an expenditure is to be made for a purpose for which
amounts are available in multiple fund balance classifications, the order in which
resources will be expended is as follows: restricted fund balance, followed by
committed fund balance, assigned fund balance, and lastly, unassigned fund
balance.
FURTHER, BE IT RESOLVED that the Scandia City Council assigns its January 1, 2011
fund balance as follows:
• Capital Improvement Fund: The existing fund balance is assigned to various
infrastructure improvement projects within the City, except those projects paid from
business type activities (enterprise fund).
• Park Improvement Fund: The existing fund balance is assigned to acquisition and
development of city parks.
� Equipment Replacement Fund: The existing fund balance is assigned to purchasing motor
vehicles and heavy machinery.
Resolution No.: 02-21-12-04
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AND FURTHER, BE IT RESOLVED that the Scandia City Council establishes the
following fund balance goal:
• General Fund: Maintain fund balance of 35% to 50% of total annual General Operating
Fund expenditures.
Adopted by the Scandia City Council this 21 st day of February, 2012.
Randall Simonson, Mayor
ATTEST:
Anne Hurlburt, Administrator/Clerk