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2016-33 RESOLUTION NO. 2016-33 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GRAND TERRACE, CALIFORNIA, ADOPTING THE REVISED RESERVES POLICY, POLICY NO. 3.06 WHEREAS, the Governmental Accounting Standards Board (GASB) issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions; and WHEREAS, for financial statement reporting purposes, GASB Statement No. 54 defines Nonspendable amounts as those that are not in a spendable form or are required to be maintained intact; and WHEREAS, for financial statement reporting purposes, GASB Statement No. 54 defines Restricted amounts as those that are constrained to specific purposes by their providers through constitutional provisions or enabling legislation; and, WHEREAS, for financial statement reporting purposes, GASB Statement No. 54 defines Committed amounts'as those constrained to specific purposes by the government itself; and WHEREAS, for financial statement reporting purposes, GASB Statement No. 54 defines Assigned amounts as those the government intends to use for a specific purpose; and _ WHEREAS, the City Council's Fiscal Policy No. 3.06, Reserves, has been modified, for financial statement reporting purposes, to include: a) GASB Statement No. 54 classifications of fund balances; b) General Fund contingency; c) Authorization and Action to Commit fund balances; and d) Authorization and Action to Assign fund balances. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GRAND TERRACE VALLEY, CALIFORNIA, DOES HEREBY RESOLVE AS FOLLOWS: 1. The Revised Reserves Fiscal Policy (No. 3.06), attached hereto as "Exhibit A", is hereby approved; and 2. The City Manager and/or the Finance Director are hereby authorized to assign fund balance for a specific purpose in accordance with and in relation to the City's Reserves policy, attached hereto. BE IT FURTHER RESOLVED that this Resolution shall take effect immediately upon the date of its adoption. RESOLUTION NO. 2016-33 PAGE 1 OF 6 SEPTEMBER 27, 2016 PASSED, APPROVED AND ADOPTED by the City Council of Grand Terrace at a regular meeting held on the 27th day of September, 2016: AYES: Council Members Hussey, Wilson, Mitchell, Mayor Pro Tern Robles, Mayor McNaboe NOES: None ABSENT: None ABSTAIN: None l � D c cNab ayor ATTEST: Pa *- ei ler \ J RESOLUTION NO. 2016-33 PAGE 2 OF 6 SEPTEMBER 27, 2016 EXHIBIT A City of Grand Terrace Policy No. 3.06 Fiscal Policy Subject: Reserves Revision Date: 9/27/16 Page 3 of 6 I. PURPOSE AND SCOPE To define the policy for establishing and maintaining cash reserves needed for prudent financial management of the City. II. POLICY A. Introduction The City will maintain cash balances to preserve the City's credit worthiness and to adequately provide for: 1. Economic uncertainties, local disasters or catastrophic events, and other financial hardships or downturns in the local or national economy. 2. Contingencies for unforeseen operating needs. 3. Future debt service requirements. 4. Fixed asset replacements. 5. Cash flow requirements. 6. Legal requirements. B. Budgetary Reserves 1. A contingency account will be budgeted each fiscal year in the Non- Departmental cost center to provide for unanticipated expenditures of a nonrecurring nature. Authorization to expend funds from this account will require approval of the City Manager. 2. A General Fund Contingency Reserve account will be established and maintained at the level recommended by the Government Finance Officers Association of the United States & Canada (GFOA), which is a minimum of two months of regular General Fund operating revenues or expenditures (whichever is considered most predictable), to serve as a buffer against unexpected local disasters or catastrophic events, and other financial hardships or downturns in the local or national economy. The City will use General Fund operating revenues as the basis for establishing the two- month reserve target. C. Fund Balance Reserves The City shall report fund balances in accordance with the Governmental Accounting Standards Board (GASB) Statement 54, which requires fund balance to be classified in one of five categories as follows: RESOLUTION NO. 2016-33 PAGE 3 OF 6 SEPTEMBER 27, 2016 City of Grand Terrace Fiscal Policy Policy No. 3.06 Subject: Reserves Revision Date: 9/27/16 Page 4 of 6 • Non-spendable fund balance includes amounts that are not in a spendable form (inventory, for example) or are required to be maintained intact (the principal of an endowment fund, for example). • Restricted fund balance includes amounts constrained to specific purposes by their providers (such as grant providers, bondholders, -and higher levels of government) through constitutional provisions or enabling legislation. • Committed fund balance includes amounts that can be used only for the specific purposes determined by a formal action of the City Council, the government's highest level of decision-making authority.These funds include:. ■ Fixed Asset Fund. - funds may only be used for equipment replacement of for the purchase of new equipment; ■ Community Benefits Fund - funds may only be used for City Council approved grants to benefit the community; ■ Public Safety Services Fund—funds may only be used for additional public safety services as determined by the City Manager and approved by City Council. !� * Commitments may be changed or lifted only by City Council, the government taking the same formal action that imposed the constraint originally. • Assigned fund balance comprises amounts intended to be used by the government for specific purposes. Intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority. In governmental funds other than the general fund, assigned fund balance represents . the amount that is not restricted or committed. This indicates that resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund. • Unassigned fund balance is the residual classification for the general fund and includes all' amounts not contained in the other .classifications. Unassigned amounts are technically available for any purpose. If another governmental fund has a fund balance deficit, then it will be reported as a negative amount in the unassigned classification in that fund. Positive unassigned amounts will be reported only in the general fund. RESOLUTION NO. 2016-33 PAGE 4 OF 6 SEPTEMBER 27, 2016 ti City of Grand.Terrace Policy No. 3.06 Fiscal Policy Revision Date: 9/27/16 Subject: Reserves Page 5 of 6 General Fund Contingency The City shall maintain a committed General Fund contingency reserve equal to two months of operating revenues. If the reserve level falls below the minimum level, the City- will seek to replenish fund balance within a reasonable timeframe. The reserves will be used to provide for temporary financing of unanticipated extraordinary needs of an emergency nature, such as economic uncertainties or a local disaster. Intended to act as a short-term solution to fiscal needs, the contingency reserve will be drawn down as the funding source of last resort. Authorization and Action to Commit Fund Balance The City. Council, as the government's highest level of decision-making authority, may commit fund balance for specific purposes pursuant to constraints imposed by formal actions taken such as an ordinance or resolution. These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the same type of formal action taken to establish the commitment. City Council action to commit fund balance needs to occur within the fiscal reporting period; however the amount can be determined subsequently. Authorization and-Action to Assign Fund Balance The City Council may assign fund balance to a specific purpose in relation to this fund balance policy. By resolution, the Council has also authorized the City Manager and/or Finance Director to assign fund balance. Assignments by the City Manager or Finance Director do not require formal action by the City Council; however, each assignment must be approved by either of the authorized officials before the, item can be presented in the financial statements. D. Use of and Replenishment of General Fund Contingency Reserve 1. The General Fund Contingency Reserve is intended to act as a buffer to protect service levels during difficult economic times or as a result of catastrophic events that require significant unanticipated expenditures. 2. During such times, or as a result of such events, the General Fund Contingency Reserve may decline below the target level (two months of operating revenues) with City Council authorization. Once the difficult fiscal times pass, the General Fund Contingency Reserve will be replenished to its target level as soon as funding permits, as determined - by the City Council through the annual budget process. RESOLUTION NO. 2016-33 PAGE 5 OF 6 SEPTEMBER 27, 2016 City of Grand Terrace Policy No. 3.06 Fiscal Policy Subject: Reserves Revision Date: 9127/16 Page 6 of 6 r 3. Appropriate sources for replenishment of the General Fund Contingency Reserve include one-time revenues and 'other sources not necessary to support ongoing services. E. Policy Versus Appropriation of Reserves This policy establishes target reserve levels for the prudent financial management of the City. However, specific appropriation of funds into the various reserve accounts will be subject to the annual budget adoption process or other City Council budgetary action. RESOLUTION NO. 2016-33 PAGE 6 OF 6 SEPTEMBER 27, 2016