2017.07.11 CC Agenda C - Laserfiche WebLink

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REQUEST FOR COUNCIL CONSIDERATION ITEM DESCRIPTION: Adopt Revised Fund Balance Policy & Strategic Priorities Fund Balance Key Performance Indicator DEPARTMENT HEAD’S APPROVAL: Brenda Davitt CITY MANAGER’S APPROVAL: No comments to supplement this report ___ Comments attached ___ Recommendation: Adopt the revised Fund Balance Policy and Strategic Priorities Fund Balance Key Performance Indicator. Legislative History: The City’s existing Fund Balance Policy was adopted on June 26, 2012. The Government Finance Officers Association (GFOA) recommends that governments establish a formal policy on the level of unrestricted fund balance that should be maintained in the general fund for Generally Accepted Accounting Principles (GAAP) and budgetary purposes. The appropriate fund balance level recommendation of the State of Minnesota Office of the State Auditor is for governments that rely significantly on property taxes to maintain at year-end, an unrestricted fund balance of approximately 35 to 50 percent of fund operating revenues or no less than five months of operating expenditures in their general fund and special revenue funds. In 2013, the Strategic Plan was implemented which includes a Fund Reserve Key Performance Indicator (KPI) for Financial Sustainability. This KPI states the General Fund reserves are to be equal or greater than 45% of the subsequent year’s operating expenses. Explanation: During the 1st Quarter 2017 Financial update, the General Fund’s fund balance measured 33% of the operating budget’s operating expenditures which did not meet the 35% minimum indicated in the Fund Balance Policy. It is general practice and the recommendation of the Office of the State Auditor to measure and retain this minimum at year-end to help with cash flow purposes during the first five months of the year until the first half of the property tax settlement is received. Thus it is my recommendation to change our current Fund Balance Policy to reflect the minimum balance of 35% be changed to reflect “year-end unassigned fund balance”. To be consistent with all fund balance measurements, the Strategic Priorities Fund Balance Key Performance Indicator (KPI) will also be updated to reflect a target minimum consistent with the Fund Balance Policy, but indicate it is desired to have between 40 to 45 percent of the subsequent year’s operating expenditures. Report Number: _____________ Agenda Section: _____________ Report Date July 6, 2017 Council Meeting Date July 11, 2017