06-24-2008 - Laserfiche WebLink

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MEMO To: Dean Lotter, City Manager From: Dan Maiers, Finance Director Date: June 20, 2008 Re: Fund Balance Policy for General Fund This report has been prepared for the City Council's June 24b worksession Policy Docket item, Fund Balance Policy. Current Status of General Fund As of December 31, 2007, the General Fund's fund balance was higher than the targeted balance. The actual fund balance was $5,522,370, of which $5,515,202 is unreserved, designated. The targeted balance for the December 31, 2007, unreserved, designated portion was $4,389,400. The difference is $1,125,802. The calculation of the targeted amount according to the City's Fund Balance Policy, is as follows: Designated for Cash Flows $3,247,600 Designated for Contingencies 1,141,800 Total $4,389,400 The Office of the State Auditor's Statement of Position recommends an unreserved General Fund balance of 35% to 50% of the budgeted revenues and no less than five months of operating expenditures. The General Fund's balance (43.0%) is consistent with that recommendation. Policy Regarding Surpluses The policy's section # V. UNRESERVED, follows: UNDESIGNATED FUND BALANCE is as C. Surpluses may be utilized in subsequent years' budgets. Subsequent years' budgets may utilize up to 20% of the amount over the targeted balance. This will allow the balance to be in compliance with the intent of this policy gradually over five years, while allowing for future years' fluctuations. 20% of the surplus is $225,160 ($1,125,802 x .20). I've included a copy of the City's Fund Balance Policy for your reference. The last two years have ended with surpluses; however, in prior years there have been deficits as well. Additional attachments include my May 9, 2008 memo reporting the year-end results for