HomeMy WebLinkAboutResolution #3982 - adopting a fund balance policy for reporting of governmental funds RESOLUTION NO. 3982
A RESOLUTION ADOPTING A FUND BALANCE POLICY FOR REPORTING OF
GOVERNMENTAL FUNDS OF THE CITY OF CANTON, ILLINOIS.
WHEREAS, the City of Canton, Illinois, is a non-home rule municipality pursuant to the
provisions of Article VII, Section 6, of the Illinois Constitution, 1970, and as such acts under express
statutory authority; and
WHEREAS, the City follows the budget system of financial planning and management
pursuant to 65 ILCS 5/8-2-9.1 et. seq.; and
WHEREAS, the City maintains accounting and financial records on all financial transactions;
and
WHEREAS, the City is required by State Statute to annually have a financial audit completed
and filed with the Illinois Comptroller's office; and
WHEREAS, the financial audit must be in compliance with generally accepted accounting
principles (GAAP); and
WHEREAS, GAAP are kept current and modified by the Governmental Accounting Standards
Board (GASB); and
WHEREAS, GASB Statement Number 54, Fund Balance Reporting and Governmental Fund
Type Def nitions, changes the financial reporting methodology for fund balance reserves of the Cities
governmental funds; and
WHEREAS, the City desires to maintain the highest level of accounting and financial reporting
regarding the Cities' finances in compliance with GAAP and the GASB.
NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND THE CITY COUNCIL OF THE
CITY OF CANTON, FULTON COtJNTY, ILLINOIS, that the Fund Balance Policy for reporting of
governmental funds is hereby adopted.
ADOPTED this 17 day of April, 2012, upon a roll call vote as follows:
AYES: Aldermen Schenck, Pasley, Fritz, West, Nelson, Ellis, Pickel, Hartford
NAYS: None
ABSENT: None
APPROVE :
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Kevin R. Meade, Mayor
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,
Diana Pavley, City Cl
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City of Canton
Fund Balance Policy
Introduction:
The purpose of this document is to provide a policy and procedure regarding the
classification of the City's fund balance. The Governmental Accounting Standards Board (GASB)
issued Statement No. 54 Fund Balance Reporting and Governmental Fund Type Definitions in an
effort to "enhance the usefulness of fund balance information by providing clearer fund
balance classifications that can be more consistently applied and by clarifying the existing
governmental fund type definitions." It also classifies fund balance based on the amount of
constraints placed on the resources reported in the governmental funds by other governing
bodies or the governing body itself.
Background:
Fund balance is the difference between assets and liabilities in a Governmental Fund.
Currently, the fund balance is classified between reserved and unreserved in the financial
statements. The reserved portion is defined as unavailable for use within the next budget
period. Reserved fund balance is legally separated for a specific future use. The unreserved
portion can be classified as either designated or undesignated. Designated fund balance has a
tentative plan for the monies in a future period. However, it is not legally binding and may
change as needs change. The undesignated portion of the fund balance may be used for any
purpose.
Due to a lack of consistency between among government entities and easily
misinterpreted financial documents, the GA56 felt the need to further segregate the fund
balance classifications and revise the terminology. They then issued Statement No 54 to
provide for a better understanding of the financial statements.
New Fund Balance Classifications:
1. Non-spendable fund balance
Amounts are not in a spendable form (i.e. inventory, prepaid assets, long-term loan and
notes receivable) or are legally and/or contractually required to remain intact (i.e. the
principal of an endowment fund).
2. Restricted fund balance
Amounts are subject to constraints imposed by external parties, constitutional provision
or enabling legislation.
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3. Committed fund balance
Amounts have constraints imposed by formal action of the government's highest level
of decision-making authority, the City Council. These constraints can only be changed or
removed by the same formal action.
Action to place constraints on funds must take place before year-end. However, the
amount to be constrained may be determined after year-end.
4. Assi~ned fund balance
Amounts are intended to be used for a specific purpose. These intentions are set by the
governmental entity itself or a body or individual within the entity that has been
delegated the authority to assign amounts by the governing body itself (i.e. the City
Administrator or the City Treasurer/City Comptroller). Assignments are not required to
be made by the highest level of authority, nor are they as difficult to modify as needs
change.
For the general fund, the amount assigned should not result in a negative unassigned
fund balance.
For all other governmental funds, any remaining positive amounts not classified as non-
spendable, restricted or committed may be assigned.
5. Unassi~ned fund balance
Amounts are available to be spent for any purpose. They are essentially the same as the
pre-GASB 54 unrestricted, undesignated funds.
This is the only classification that may have a negative fund balance, if necessary.
For the general fund, amounts not classified as non-spendable, restricted, committed or
assigned may be classified as unassigned. The general fund is the only fund that would
have positive unassigned fund balance.
For all other governmental funds, amount expended in excess of amounts that are non-
spendable, restricted, committed or assigned would be residual deficit. If a deficit
occurs, not amount should be reported as assigned.
Note Disclosures:
Disclosures regarding the initiation of specific fund balances, the order of spending, and
financial statement presentation will be made within the City's annual audited financial
statements.
• The City of Canton deems the following to be the authority and/or action to initiate the
reporting of certain fund balances:
o Committed fund balance will be determined by the Council with the approval of
a City Ordinance or Resolution.
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o Assigned fund balance will be determined by the City Administrator with the
assistance of the City Treasurer/City Comptroller. These funds will be noted as
assigned within the accounting system and tracked internally.
• The City will spend the most restricted dollars before the less restricted dollars, in the
following order, in order to ensure use of all restricted dollars:
o Restricted
o Committed
o Assigned
o Unassigned
• If there are a large number of balances within each classification, the fund balances will
be displayed in aggregate in the financial statements with the detail of each
classification disclosed in the notes to the basic financial statements.
• Governments must also disclose the purpose for each major special revenue fund and
the source of revenue for the fund.