HomeMy WebLinkAbout11 21 11 City Council Work Session - Rename Fund Balance and Resident Survey
4646 Dakota Street SE
Prior Lake, MN 55372
CITY COUNCIL WORKSHOP AGENDA REPORT
MEETING DATE: NOVEMBER 7 , 2011
PREPARED BY : JERILYN ERICKSON, FINANCE DIRECTOR
PRESENTED JIM EICHTEN (PRINCIPAL) & ADRIENNE WARREN (MANAGER),
BY: MALLOY, MONTAGUE, KARNOWSKI & RADOSEVICH (MMKR)
TOPIC : FUND BALAN CE CLASSIFICATIONS
DISCUSSION: Introduction
The purpose of this agenda item is to present to the Council the new Governme n-
tal Accounting Standards Board (GASB) Statement No. 54 “Fund Balance R e-
por t ing and Governmental Fund Type Definitions.”
The audi t firm of Malloy, Montague, Karnowski & Radosevich (MMKR) was
awarded the professional auditing services contract for years ending D e cember
31, 2011, 2012 and 2013. As part of that Agreement, Mr. Eichten and Ms. Wa r-
ren will be presenting information relat ed to GASB No. 54 including the necessary
steps the Council must take before December 31, 2011.
History
On April 18, 2011, the Council adopted the Comprehensive Financial Manag e-
ment Policy which addresses Fund Balance Reserves. It was noted at that t ime
that the new GASB Statement No. 54 would require some changes to the Policy.
Current Circumstances
The objective of GASB Statement No. 54 is to enhance the usefulness of fund
balance information by providing clear fund balance classifications that can be
consistently applied and clarify existing governmental fund type definitions.
The following table identifies the n ew c omponents of Fund Balance and corre s-
ponding definitions:
Component Definition
Nonspendable Inherently no n spendable (i.e. invent ories and
prepaids)
Restricted Externally enforceable limitations on use
(generally called reserved)
Committed Self - imposed limitations set in place by the
highest level of decision making authority
Unrestricted
(Council) prior to the end if the fi s cal t o which
they apply
Assigned Limitation resulting from intended use set in
place by the delegated body or official
Una s signed Residual net resources
Some changes that will need to be incorporated into the Comprehensive F i na n-
cial Management Policy ar e as follows:
1) Order of resource use when expenditures qualify for more than one co m-
ponent of fund balance;
2) Stabilization arrangements for emergency situations;
3) Process for committing fund balance to a specific purpose; and
4) Delegation of authority to assign fund balance .
Committing Fund Balance requires the City Council to take formal action prior to
the end of the year . This action would limit the use of committed funds for sp e ci f-
ic purposes pursuant to constraints imposed by the formal action.
Concl usion
Updating the Comprehensive Financial Management Policy with the changes
noted above and committing fund balance requires formal action by the City
Council prior to the end of the year.
Staff will be bringing forth recommendations for both items at t he December 19,
2011 council meeting.
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