CCR2011170-GASB 54 Fund Balance Policy
COMMON COUNCIL – CITY OF MUSKEGO
RESOLUTION #170-2011
FUND BALANCE AND
ANNUAL GENERAL FUND
BUDGETED CONTINGENCY POLICY
WHEREAS, the Governmental Accounting Standards Board (GASB) has issued
Statement No. 54 – Fund Balance Reporting and Governmental Fund Type Definitions,
which changes the terminology used for fund balance reporting on balance sheets of
Governmental Funds, and
WHEREAS, the City of Muskego Finance Committee has reviewed the new
terminology, and
WHEREAS, the City of Muskego Finance Committee recommends that the revenues
and other resources of the Special Revenue Funds be committed for the purposes
noted within this policy, and
WHEREAS, the City of Muskego Finance Committee recommends that the Common
Council authorize the City of Muskego Finance and Administration Director to
periodically assign resources to specific projects/purposed within the General Fund,
Capital Projects Fund and Special Revenue Funds, and
WHEREAS, the Common Council desires to establish guidelines and procedures for the
City General Fund reserve levels through a policy that works toward meeting cash flow
needs for the general operation of the City and defines appropriate reserve levels in the
best interest of the taxpayers.
NOW, THEREFORE, BE IT RESOLVED, that the Common Council, upon the
recommendation of the Finance Committee, hereby establishes the following fund
balance and annual general fund budgeted contingency policy.
Purpose
The objectives of this fund balance policy are as follows:
Preserve the credit rating of the City of Muskego for borrowing monies at
favorable interest rates.
Provide working capital for the City of Muskego to meet cash flow needs during
the year.
Provide a comfortable margin of safety to address unanticipated expenditures /
emergencies and unexpected declines in revenue due to economic downturns,
natural disasters, etc.
Provide a resource to stabilize fluctuations from year to year in the property taxes
paid by the City of Muskego taxpayers.
Resolution #170-2011
Policy
Currently, fund balance is divided into three basic classifications for accounting and
monitoring purposes: reserved, unreserved-designated and unreserved-undesignated.
Reserved fund balance is that portion of fund balance that is not available for the
subsequent year’s budget due to legal restrictions or resources which are not available
for current spending. Unreserved fund balance includes funds set aside by
management for specific uses, which are labeled “designated”. The balance of
unreserved fund balance is labeled “undesignated”, which indicates it is available for
appropriation.
Government Accounting Standards Board (GASB) has issued Statement No. 54, Fund
Balance Reporting and Governmental Fund Type Definitions. This Statement is
effective for financial statements with periods beginning after June 15, 2010. The
objective of this Statement is to improve the usefulness, including the understandability,
of governmental fund balance information. The Statement provides more clearly
defined categories to make the nature and extent of the constraints placed on a
government’s fund balance more transparent. The Statement impacts governmental
fund types.
The fund balance will be reported in five new categories: Nonspendable Fund Balance,
Restricted Fund Balance, Committed Fund Balance, Assigned Fund Balance and
Unassigned Fund Balance.
Nonspendable Fund Balance – Amounts cannot be spent because they are a) not in
spendable form or b) legally or contractually required to be maintained intact.
Restricted Fund Balance – Amounts are restricted by external parties (i.e. creditors,
grantors, contributors) or laws / regulations of other governments or restricted by law
through constitutional provisions or enabling legislation, such as an ordinance.
Committed Fund Balance – Amounts that can only be used for specific purpose
pursuant to constraints imposed by formal action of the government’s highest level of
decision making authority. The formal action must occur prior to the end of the
reporting period. The amount, which will be subject to the constraint, may be
determined in the subsequent period.
Assigned Fund Balance – Amounts constrained by the government’s intent to be used
for specific purposes that are neither restricted nor committed. The intent can be
expressed by a) the governing body itself or b) a body or official to which the governing
body has delegated the authority (i.e. Director of Finance and Administration, Clerk-
Treasurer, committee. . .). Monies set aside for carryover appropriations, compensated
absences, retirement obligations and contingencies are some of the examples to be
included in the assigned category.
Assigned fund balance can be used to eliminate the projected budgetary deficit in the
subsequent year’s budget.
Unassigned Fund Balance – Is a residual classification for the General Fund. The
total fund balance less amounts categorized as nonspendable, restricted, committed
and assigned equals unassigned fund balance. General Fund is only fund that should
Resolution #170-2011
report a positive unassigned fund balance amount. A negative unassigned fund
balance is possible in other governmental funds.
Flow of Funds
It is the policy of this government that in cases where multiple types of funds are
available to pay for expenditures in the various funds, restricted resources will be used
first, followed by committed, assigned, and finally unassigned (if applicable).
Procedures
In order to achieve the objectives of this policy, the following guidelines shall be
adhered to by the Common Council:
1. An unassigned general fund balance shall be maintained as of December 31 of
each year equal to a minimum of two months (or 17%) of the ensuing year’s
budgeted general fund expenditures, with a targeted maximum of four months of
the ensuing year’s budgeted expenditures.
2. A committed general fund balance shall be maintained as of December 31 of
each year equal to the unfunded portion of the City’s accrued compensated
absenses liability.
3. The City of Muskego will maintain appropriate commitments or assignments of
general fund, special revenue funds, debt service funds and capital projects
funds for specified purposes, including but not limited to contingencies,
compensated absences or similar items. Commitments and / or assignments of
fund balance shall be made pursuant per adoption of this resolution.
4. As part of the annual budget process, the Director of Finance and Administration
will estimate the surplus or deficit for the current year and prepare a projection of
the year-end unassigned general fund balance. Such projection will include an
analysis of trends in fund balance levels on an historical and future projection
basis. Any anticipated balance in excess of the minimum unassigned general
fund balance may be assigned to other purposes, or budgeted to reduce the
ensuing year’s property tax levy.
5. Funds in excess of the upper range of the unassigned fund balance target may
be considered to supplement “pay as you go” capital outlay expenditures
(including reduction of anticipated debt issues) or to prepay existing debt via
cash defeasance as allowable. Unassigned fund balance shall not be used to
support recurring operating expenditures.
6. Withdrawal of any amount of unassigned general fund balance in excess of the
targeted minimum of the amount budgeted under (3) above, for the sole purpose
of reducing the ensuing year’s property tax levy, may be made only upon a two-
thirds majority vote of the Common Council.
Resolution #170-2011
7. The Common Council, by two-thirds vote, can declare a fiscal emergency and
withdraw any amount of general fund balance for purposes of addressing the
fiscal emergency. Any such action must also provide for necessary
appropriations to restore the unassigned general fund balance to the minimum
balance within a three-year period.
8. It is the policy of this government that assignments of fund balances and
resources within a fund may be determined by Director of Finance and
Administration.
9. The City shall include in the General Fund operating budget annually, a
contingency account greater than or equal to 0.50% of the General Fund total
expenditures. This contingency will expire at the end of each fiscal year and
balances will not be brought forward.
In order to provide support for the proper determination of the reporting status of each
fund, the Common Council makes the following findings with respect to the resources
available in the listed funds.
Fund Title Resource Determination
Park Dedication/Improvement Grants/Fees Committed for park related
projects
Refuse/Recycling Grants/User Fees Committed for refuse/recycling
operating expenses
Revolving Loan State Funding Committed for loans to local
businesses
Landfill Standing Committees Landfill Host Fees Committed for costs to oversee
and monitor the landfills
Cable TV Franchise Fees Committed for cable operations
Landfill Landfill Host Fees Committed for costs associated
with landfill activities and as
allowed per the agreement
Well Testing Landfill Host Fees Committed for costs associated
with testing private wells
Land Open Space Conserv. Grants & Host Fees Committed for related operating
costs and land purchases
Stormwater Management Landfill Host Fees Committed for related operating
costs and related projects
Resolution #170-2011
Fund Title Resource Determination
Rescue Service Fees Committed for related
equipment costs and
contracted service costs
Capital Improvement TIF Residual/Grant Committed for loans to local
businesses and programs
Tax Increment District Tax Levy Committed for related debt
obligations and associated fees
Recreational Ticket Ticket Sales Committed for costs associated
with the sale of theme park
tickets
Community Development
Authority Land Sales Committed for costs associated
with redevelopment
Compensated Absenses Landfill Host Fees Committed for severance and
leave time payouts for
terminated and retired
employees
This policy shall take effect upon Common Council adoption.
BE IT FURTHER RESOLVED That the adoption of this policy will replace Resolution
#148-2007 adopted on July 24, 2007 and Resolution #149-2007 adopted on July 24,
2007.
TH
DATED THIS 13 DAY OF DECEMBER, 2011.
SPONSORED BY:
FINANCE COMMITTEE
Ald. Neome Schaumberg
Ald. Keith Werner
Ald. Noah Fiedler
This is to certify that this is a true and accurate copy of Resolution #170-2011 which
was adopted by the Common Council of the City of Muskego.
_________________________
Clerk Treasurer
12/11sem