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Home My WebLink About2011 049 CC RESO RESOLUTION NO. 2011-049 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BALDWIN PARK, CALIFORNIA,. RESCINDING RESOLUTION No. 96-46, AND °ESTABLISHING THE CITY OF BALDWIN PARK FUND BALANCE POLICY AND CLASSIFICATIONS" WHEREAS, the Governmental Accounting Standards Board (GASB) has issued Statement No. 54 (GASB 54), entitled "Fund Balance Reporting and Governmental Fund Type Definitions, " to improve financial reporting by specifically defining fund balance categories based on the nature and extent of the constraints placed on them; and WHEREAS, the City must comply with GASB 54 reporting standards for the current fiscal year ending June 30, 2011, which is the last day of the fiscal period; and WHEREAS, the City will categorize according to the following components: Nonspendable (including but not limited to inventory and prepaid), Restricted (external restrictions), Committed (imposed by resolution), Assigned (general intent for specific use) and Unassigned(residual); WHEREAS, the City previously adopted Resolution No. 96-46, which adopted a minimum General Fund Unrestricted Reserve of ten percent of the General Fund Operating Expenses at the adoption of the annual operating budget; and WHEREAS, the Director of Finance recommends that it is both prudent and in compliance with GASB 54 for the City Council to maintain its Ten Percent General Fund Balance to be based on the annual operating budget. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BALDWIN PARK DOES HEREBY FIND, DETERMINE, AND RESOLVE AS FOLLOWS: SECTION 1. The City Council in compliance with GASB 54 hereby establishes and defines the various components of fund balance as presented in Attachment A to this resolution for reporting City finances. SECTION 2 The City Council hereby designates the Director of Finance, as required by GASB 54, as the City official to determine and define the amounts of those components of fund balance classified as "Assigned Fund Balance." SECTION 3. The City Council further directs the Chief Executive Officer and Director of Finance to annually review the Assigned Fund Balance and if appropriate to make recommendations to the City Council for adjusting said fund balance. SECTION 4. That this Resolution shall be effective immediately. SECTION 5. The City Clerk, or her duly appointed Deputy, is directed to attest thereto. PASSED, APPROVED AND ADOPTED on this 14th day of December, 2011. flaw_ _ Manuel ozano yor ATTEST: STATE OF CALIFORNIA COUNTY OF LOS ANGELES SS. CITY OF BALDWIN PARK I, ALEJANDRA AVILA, City Clerk of the City of Baldwin Park, do hereby certify that the foregoing resolution was duly and regularly approved and adopted by the City Council of the City of Baldwin Park at a regular meeting thereof held on December 14, 2011, by the following vote: AYES: COUNCIL MEMBERS:Marlen Garcia, Monica Garcia, Mayor Manuel Lozano Ricardo Pacheco, Mayor Pro Tern Susan Rubio NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: ALEJANDRA AVILA CITY CLERK y4;4; Resolution No. 2011-049 —Attachment A CITY OF BALDWIN PARK FUND BALANCE POLICY FOR THE GENERAL FUND POLICY This Fund Balance Policy establishes the procedures for reporting fund balances in the financial statements. The policy authorizes and directs the Director of Finance to prepare financial reports which accurately categorize fund balance as per Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions (GASB 54). The new categories of Fund Balance as compared to the previous classifications are as follows: PAST PRACTICE NEWGASB54 ELIMINATED CLASSIFICATIONS CLASSIFICATIONS Non-Spendable (including but not limited to inventory and Reserved prepaid) Restricted (external restrictions) Committed (imposed by resolution or ordinance) Unreserved and Designated Assigned (general intent for specific use) Unreserved and Undesignated Unassigned(residual) PROCEDURES The term fund balance is used to describe the difference between assets (what is owned) and liabilities (what is owed) reported within a fund. In the past, fund balances have been classified into three separate components: Reserved, Designated, and Undesignated. There are almost always important limitations on the purpose for which all or a portion of the resources of a fund can be used. The force of these limitations can vary significantly, depending on their source. The various components of the new fund balance reporting standard are designed to indicate the extent to which the City is bound by these limitations placed upon the resources. GASB Statement No. 54 defines five new components of fund balance that will replace the current existing three components. The five new components are: IIPage Resolution No. 2011-049—Attachment A Non-spendable Fund Balance: That portion of a fund balance that includes amounts that cannot be spent because they are either (a) not in a spendable form, such as prepaid items, inventories of supplies, or loans receivable; or (b) legally or contractually required to be maintained intact, such as the principal portion of an endowment. This category was traditionally reported as a "reserved" fund balance under the old standard. Restricted Fund Balance That portion of a fund balance that reflects constraints placed on the use of resources (other than non-spendable items) that are either (a) externally imposed by creditors (such as through debt covenants, grantors, contributors, or laws or regulations of other governments); or (b) imposed by law through constitutional provisions or enabling legislation. This category was traditionally reported as a"reserved" fund balance under the old standard. Committed Fund Balance That portion of a fund balance that included amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision making authority, and remain binding unless removed in the same manner. This category was traditionally reported as "designated" fund balance under the old standard. The City has committed the fund balance of the Economic Development Fund for future development projects. In addition, in accordance with its previously adopted Resolution 96-46, which provided for General Fund Reserves at 10% of the annual operating budget, the City will continue to maintain 10% of General Fund Reserves based on its annual operating budget for emergency purposes or for fluctuations in the economy. The $1,000,000 minimum reserve (lockbox) that was approved on August 30, 2006 is included in the 10% General Fund Reserves. Assigned Fund Balance That portion of a fund balance that includes amounts that are constrained by the government's intent to be used for specific purposes, but that are neither restricted nor committed. Such intent needs to be established at either the highest level of decision making, or by an official designated for that purpose. This category was traditionally reported as "designated" fund balance under the old standard. Unassigned Fund Balance That portion of a fund balance that included amounts that do not fall into one of the above four categories. The General Fund is the only fund that should report this category of fund balance. This category was traditionally reported as "undesignated" fund balance under the old standard. The first two components listed above are not addressed in this policy due to the nature of their restrictions. This policy is focused on financial reporting of previously unrestricted fund balance, or the last three components listed above. FUND BALANCE CLASSIFICATION—ORDER OF USE The accounting policies of the City consider restricted fund balance to have been spent first when the expenditure incurred is for any purposes for which both restricted and unrestricted 2IPage Resolution No. 2011-049—Attachment A fund balance is available. When an expenditure is incurred for purposes for which any of the unrestricted classifications of fund balance could be used, the City considers unassigned funds to be used first, followed by assigned and then committed funds. This policy is in place to provide a measure of protection for the City against unforeseen circumstances and to comply with GASB No. 54. This policy and procedure supersedes the authority and provisions of any other adopted policy related to fund balance. FUND BALANCE CLASSIFICATION—SUMMARY The following table summarizes the information discussed above pertaining to GASB 54: F s 4......,..,r.,i , I *{ ' zfii T� "S"' "" I, i �� " g 3 ` i esw.jk��;:i... nm ,..3(,r6q ..a.:. :I s . ,s3vf SASH er7-1s �f _ M . Nonspendable Restricted Inherently inventory in stock,prepaid set-asides Nonspendable Restricted Restricted Externally Enforced grant/special funding regulated by Restrictions external agencies; debt imposed by creditors t-Q o (�,'` E]nr'est �WM,r»; i „Cpunc I*Irri oseil Estabh$hed b 'Counc3l;,,tS3 uhon far �.; '�y,'F S e'ti Y�^ ,°v {es Jts. �A �� k r x P a �'r ,x s �z W%c4 Nom.` o-t ?rM1 R �'e rr n "s deflned>'non routine use`(i e. "�'� + .� s � u��t 'C t Q s� u� e5tP16t10 Sx , rt«id ilitio' ;v, .,, ". ., ,.< `ti .",, emergencies budget,stabtihzaSn),. 4 7 ,1s i, edr I ` nrpstrtete124,4 -, sfr+,,,, , ,,I,as-,,,, computer replacement&9. i ' enU ¢ d. j �' ��": - 3p°3i&vE" "*�'k".`:oa i y nded n `Y ,a r , xw3„3• (y .;;; .wC't47 nee:' � '.otSc , t4de( Agcy` '1�,y4 r r.eplat&-a}�.�1'llld5 ya m" 4+'.gkc€"r4 e :::: �„. .w ti a.,, r:!� , . , '+diS'r` att:wittoriztogstaw i.` n.. _ : R;; sh ;4 4.o5 r�.rr`. at, alu+i.�iX.ga° q`- Y S t f'�5 �nassr ed*��x��',T�nrestneted�� Resiaual��TetRasources Remaining z>etresources not~defined m 'a 'u*�'mr� �'}ir `� F art .+ '' A any other'categ yl canbe y r + - ,.�;Y . f k �v >a •`,�'a w,., , >_ r,v : , ro atedl ent`as needed ' . .. aPP .PSG sP... , . 3 ' Page