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