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HomeMy WebLinkAboutResolution #3982 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 : r-+~ Kevin R. Meade, Mayor ATTES . / , Diana Pavley, City Cl 1 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. z 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. 3 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.