1h. Amend Financial Policy to Conform to GASB0
CITY OF
CgANHASSEN
7700 Market Boulevard
PO Box 147
Chanhassen, MN 55317
Administration
Phone: 952.227.1100
Fax: 952.227.1110
Building Inspections
Phone: 952.227.1180
Fax: 952.227.1190
Engineering
Phone: 952.227.1160
Fax: 952.227.1170
Finance
Phone: 952.227.1140
Fax: 952.227.1110
Park & Recreation
Phone: 952.227.1120
Fax: 952.227.1110
Recreation Center
2310 Coulter Boulevard
Phone: 952.227.1400
Fax: 952.227.1404
Planning &
Natural Resources
Phone: 952.227.1130
Fax: 952.227.1110
Public Works
7901 Park Place
Phone: 952.227.1300
Fax: 952.227.1310
Senior Center
Phone: 952.227.1125
Fax: 952.227.1110
Web Site
www.ci.chanhassen.mn.us
MEMORANDUM
TO: Mayor & City Council
FROM: Greg Sticha, Finance Director ,f� `
DATE: February 13, 2012 Ok(o
SUBJ: Amend Financial Policy for Implementation of GASB 54
PROPOSED MOTION
"The City Council adopts the attached amendment to the city's financial
policy, in order to be in compliance and implement GASB pronouncement
No. 54 on Fund Balance."
Approval of this item requires a simple majority vote of the City Council.
BACKGROUND
In 2009 the Government Accounting Standards Board (GASB) issued statement
number 54, which requires local governments to classify the various types of
fund balances for accounting and financial reporting purposes. The objective of
this Statement is 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. This
Statement establishes fund balance classifications that comprise a hierarchy
based primarily on the extent to which a government is bound to observe
constraints imposed upon the use of the resources reported in governmental
funds.
The statement puts fund balance into one of four categories; committed,
restricted, assigned and unassigned. The statement recommends that each local
government establish a policy on how the various governmental funds will
classify each of the types based on their intended uses and how the resources
will be used and in which order. The attached amended financial policy
establishes the policy as recomended by GASB.
It should be noted that staff set up the policy in order to give the city council the
most flexibility when using resources within each of the governmental funds as
allowed per the GASB statement. It should also be noted that this statement
does not have any impact on transfers between funds, as always, all transfers
between funds are required to have prior council approval before the funds can
be transferred. The policy drafted by staff is similar to policies drafted by other
local governments in the metropolitan area.
Chanhassen is a Community for Life - Providing for Today and Planning for Tomorrow
1--k
Mayor & City Council
February 13, 2012
Page 2
RECOMMENDATION
Staff recommends that the city council adopt the attached amendment to the city's
financial policy, in order to be in compliance and implement GASB
pronouncement No. 54 on fund balance.
ATTACHMENTS:
Amendment to Financial Policy
f.\gregs \council\2012 \financial policy amend memo 2- 13- 12.docx
III. FINANCIAL MANAGEMENT POLICIES
Capital Improvement Budget Policies
The City shall adopt a five year capital budget associated with all capital and operating funds.
The City will project its capital needs for the next five years and will update this projection each
year. In addition, the City will maintain its capital assets to minimize future maintenance and
replacement costs.
The City will coordinate development of the capital improvement budget with the development of
the operating budget. Future operating costs associated with new capital improvements will be
projected and included in operating budget forecasts.
City staff will identify the estimated costs and potential funding sources, including possible joint
ventures with other governmental jurisdictions, for each capital project proposal before the capital
budget is submitted to the City Council for approval.
4. The City will utilize the most advantageous financing method for the acquisition of capital goods.
Revenue Policies
The City will estimate its annual revenue by a conservative analytical process taking into account
economic conditions, historical trends, and management estimates.
2. Whenever user charges and fees are determined to be appropriate and the direct benefits are
identifiable, the City will establish and revise annually, all user charges and fees at a level related
to the cost of providing the service (operating, direct, indirect and capital).
3. The City will set fees and user charges for each enterprise fund at a level which fully supports the
total direct costs and capital costs of the activity.
4. The City will consider the prior year's net property tax delinquencies and abatements in setting
the annual property tax levy.
General Fund Reserve Policies & Fund Balance Spend -Down Policies
The City shall not use tax anticipation borrowings to cover operating expenses.
The year end general fund balance shall maintain a minimum unassigned fund balance for
working capital in an amount adequate to cover 50% of the property taxes and related State Aids
(If Any) for the following year.
The City will utilize fund balances in the best long term financial interests of the City.
4. The City Council authorizes the City Manager or Finance Director to assign fund balances that
reflect the City's intended use of those funds. When both restricted and unrestricted resources
are available for use, it is the City's policy to use restricted resources, then unrestricted resources
in the following order; 1) committed 2) assigned 3) unassigned. The exception to this is the Park
Dedication Fund (410), where it is the City's policy to use resources in the following order; 1)
assigned 2) committed 3) restricted. These fund balance classifications apply only to
governmental funds, not proprietary funds.
Fixed Asset Policies
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