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2022-04-05 Ex 09Exhibit 9 4/5/2022 RESOLUTION NO.2022-03 A RESOLUTION OF THE CITY OF OKEECHOBEE, FLORIDA; ESTABLISHING A FUND BALANCE AND RESERVE POLICY FOR THE CITY OF OKEECHOBEE; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Okeechobee desires to establish a Fund Balance and Reserve Policy consistent with the Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Government Fund Type Definitions (GASB 54); and WHEREAS, such a policy has been prepared and a copy thereof is attached hereto. NOW, THEREFORE, be it resolved, before the City Council for the City of Okeechobee, Florida; presented at a duly advertised public meeting; and passed by majority vote of the City Council; and properly executed by the Mayor or designee, as Chief Presiding Officer for the City. SECTION 1. The City Council hereby adopts the "City of Okeechobee Fund Balance and Reserve Policy," attached hereto as "Exhibit A," and hereby directs the City Administrator to implement said policy. SECTION 2. If any section, subsection, sentence, clause, phrase or portion of this Resolution, or application hereof, is for any reason held invalid or unconstitutional by any court of competent jurisdiction, such portion or provision and such holding shall not affect the validity of the remaining portions or applications here. SECTION 3. Effective Date. This Resolution shall become effective immediately upon enactment. INTRODUCED AND ADOPTED by the City Council of the City of Okeechobee, Florida on this 5th day of ApIR 2022. Dowling R. Watford, Jr., Mayor ATTEST: Lane Gamiotea, CMC, City Clerk REVIEWED FOR LEGAL SUFFICIENCY: John J. Fumero, City Attorney RESOLUTION NO.2202.03 EXHIBIT A City of Okeechobee FUND BALANCE AND RESERVE POLICY PURPOSE -- To establish a policy to remain in compliance with standard Governmental Accounting and Financial :Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type 'Definitions (GASB 54). The City desires to maintain a prudent level of financial resources in its General Fund to guard against service disruption in the event of unexpected temporary revenue shortfalls or unpredicted one-time expenditures. The City also desires to maintain adequate working cash to support operating expenditures in its General Fund during the first quarter of each fiscal year prior to receipt of seasonal revenues. Fund Balance shall be composed of non -spendable, restricted, committed, assigned, and unassigned amounts as defined more fully below. DEFINITIONS-- 1. Fund Balance —As defined by the Governmental Accounting, Auditing and Financial Reporting of the Government Finance Officers Association, fund balance is'the difference between assets and liability reported in a governmental fund." The General Fund balances are accumulated primarily through budget surpluses, unanticipated non -recurring revenues, or both. In lay terms, the language of "fund balance" creates a set of classifications for financial reporting that describe the extent to which the City is bound to honor any constraints on the specific purposes for which amounts in the City's funding can be spent. The classifications create a hierarchy ranging from the amounts that cannot be spent, known as non -spendable fund balance, to amounts available for any purpose of the City, known as unassigned fund balance. The classifications are defined below include in order from most to least constrained: non -spendable, restricted, committed, assigned, and unassigned. 2. Non -Spendable Fund Balance — Amounts that are (a) not in spendable form or (b) legally or contractually required to be maintained intact. "Not in spendable form" includes items that are not expected to be converted to cash, such as inventories and prepaid amounts; items such as long-term amount of loans and notes receivables; and property acquired for resale. The corpus or principal of a permanent fund is an example of an amount that is legally or contractually required to be maintained intact. 3. Restricted Fund Balance — Amounts that can be spent only for specific purposes stipulated by (a) external resource providers such as creditors through debt covenants, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Specifically, the Public Facility Fund and Law Enforcement Special Fund are included in this category. 4. Committed Fund Balance — Amounts that can be used only for the specific purposes determined by a formal action or resolution of the City Council, the City Council's highest level of decision -making authority for multi -year projects. Commitments may be changed or lifted only by the City Council taking the same formal action or resolution that imposed the constraint originally. 5. Assigned Fund Balance— These amounts include spendable fund balance amounts established by the City Administrator or the City Council that are intended to be used for specific purposes that are considered neither restricted nor committed. Specifically, Other Grants, Subsequent Years Expenditures, and Future Capital Projects are included in this category. 6. Unassigned Fund Balance— Unassigned fund balance is the residual classification for the General Fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted committed or assigned for those specific purposes. Specifically, the General Fund, Capital Project Building and Improvements funding, and Capital Project Vehicles funding are included in this category. FUND BALANCE GOALS are based on existing and continuation of necessary public :services, to insure against unanticipated events that would adversely affect the financial condition of the City. The City should maintain an adequate reserve of unassigned fund balance in the City's various operating funds to provide the capacity to: (1) provide sufficient cash flow for daily financial needs, (2) secure and maintain investment grade bond ratings, (3) offset significant economic downturns or revenue shortfalls, (4) provide funds for unforeseen expenditures related to emergencies, and (5) provide for future capital projects, equipment replacement, and enhancements, including but not limited to, those established within the 5-year capital improvement plan • General Fund The General Fund is the main operating fund that pays for general services provided by the City, such as public safety, and parks services. The General Fund accounts for all general revenues of the City and for expenditures related to the rendering of the City's general services. The General Fund is considered to have a high level of risk to operations due to its dependence on revenue streams that are susceptible to economic downturns and revenue reduction impacts from outside agency actions. In addition, the General Fund is the main funding source when responding to unexpected events or emergencies. The Government Finance Officers Association ("GFOA") recommends no fewer than two months of General Fund reserve. The City desires to maintain a prudent level of reserves based on the revenue impacts described above and the City's desire to maintain strong bond ratings to minimize borrowing costs. This reserve policy sets the targeted minimum level at an additional four months of budgeted General Fund Total General Operating Expenses to provide stability and flexibility to respond to unexpected adversity and/or opportunities. • Special Revenue Funds — Special revenue funds are created to account for the proceeds of specific revenue sources such as grants that are legally assigned to expenditure(s) for specified purposes and specific future law enforcement needs. No specific reservation of Fund Balance is created by virtue of enactment of this policy. The amount of any reservation of Fund Balance shall be governed by the legal authority underlying the creation of the individual funds. • Public Facility Fund — All reserves in this fund are classified as restricted based on Florida Statutes and current ordinances. • Debt Service Fund — Debt service funds are typically subjected to the creation of very specific reserve amounts as part of the ordinance or resolution that authorizes the issuance of the bonds, specific loans, or both. This policy does not create any specific reservation of Fund Balance within any debt service fund. Reserve requirement for any outstanding bond issue will be consistent with the ordinance or resolution authorizing the issuance of the bonds. POLICY Based on the GOFA recommendation of two months of General Fund reserves and the City's desired four -month targeted minimum Total General Operating Expenses, the City shall maintain a minimum Assigned Fund Balance in the General Fund (which incorporates the Capital Projects Improvements) equivalent to 50% of Total General Operating Expenditures of the current fiscal year. This will provide 2 months operating expenses and 4 months of emergency expenses. For current and future capital projects, which may extend beyond the fiscal year, the city may assign up to 25% of the remaining unassigned reserves. This reserve shall be in addition to all other required reserves or designation of fund balance. The City shall keep a minimum of $1,000,000 of the remaining funds unassigned. In the event these funds drop to the minimum, they should be replenished to prepare for future events. The City will attempt to replenish this reserve over a five-year period beginning with the completion of recovery from the event for which the reserve funds were required. 'The classifications of fund balance between Non -Spendable, Restricted, Committed, Assigned, and Unassigned shall be reviewed annually during the preparation of the annual financial statement (based on definitions above. The Finance Director will make recommendation to the City ,Administrator and City Council for classification of funds for assigned fund balance and committed fund balance, respectively. Funds to be classified as Committed require a formal action or resolution to be approved by the Council to commit and un-commit the funds to the classification. Funds to be classified as Assigned require City Administrator approval. RESOLUTION NO. 2022-03 A RESOLUTION OF THE CITY OF OKEECHOBEE, FLORIDA; ESTABLISHING A FUND BALANCE AND F:ESERVE POLICY FOR THE CITY OF OKEECHOBEE; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Okeechobee desires to establish a Fund Balance and Reserve Policy consistent with the Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Government Fund Type Definitions (GASB 54); and WHEREAS, such a Policy has been prepared and a copy thereof is attached hereto. NOW, THEREFORE, be it resolved, before the City Council for the City of Okeechobee, Florida; presented at a duly advertised public meeting; and passed by majority vote of the City Council; and properly executed by the Mayor or designee, as Chief Presiding Officer for the City. SECTION 1. The City Council hereby adopts the "City of Okeechobee Fund Balance and Reserve Policy," attached hereto as "Exhibit A," and hereby directs the City Administrator to implement said Policy. SECTION 2. If any section, subsection, sentence, clause, phrase or portion of this Resolution, or application hereof, is for any reason held invalid or unconstitutional by any court of competent jurisdiction, such portion or provision and such holding shall not affect the validity of the remaining portions or applications here. SECTION 3. Effective Date. This Resolution shall become effective immediately upon enactment. INTRODUCED AND ADOPTED by the City Council of the City of Okeechobee, Florida on this 5t" day of April 2022. Dowling R. Watford, Jr., Mayor ATTEST; Lane Garniotea, CMC, City Clerk REVIEWED FOR LEGAL SUFFICIENCY: John J. Fumero, City Attorney Resolution No. 2022-03, Page 1 of 4 RESOLUTION NO. 2202-03 "EXHIBIT A" CITY OF OKEECHOBEE FUND BALANCE AND RESERVE POLICY PURPOSE: To establish a Policy to remain in compliance with standard Governmental Accounting and Financial Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions (GASB 54). The City desires to maintain a prudent level of financial resources in its General Fund to guard against service disruption in the event of unexpected temporary revenue shortfalls or unpredicted one-time expenditures. The City also desires to maintain adequate working cash to support operating expenditures in its General Fund during the first quarter of each fiscal year prior to receipt of seasonal revenues. Fund Balance shall be composed of Non -Spendable, Restricted, Committed, Assigned, and Unassigned amounts as defined more fully below. DEFINITIONS: 1. Fund Balance — As defined by the Governmental Accounting, Auditing and Financial Reporting of the Government Finance Officers Association ("GFOA"), Fund Balance is `the difference between assets and liability reported in a governmental fund." The General Fund Balances are accumulated primarily through budget surpluses, unanticipated non -recurring revenues, or both. In lay terms, the language of "Fund Balance" creates a set of classifications for financial reporting that describe the extent to which the City is bound to honor any constraints on the specific purposes for which amounts in the City's funding can be spent. The classifications create a hierarchy ranging from the amounts that cannot be spent, known as Non -Spendable Fund Balance, to amounts available for any purpose of the City, known as Unassigned Fund Balance. The classifications are defined below include in order from most to least constrained: Non -Spendable, Restricted, Committed, Assigned, and Unassigned. 2. Non -Spendable Fund Balance — Amounts that are (a) not in spendable form; or (b) legally or contractually required to be maintained intact. "Not in spendable form" includes items that are not expected to be converted to cash, such as inventories and prepaid amounts; items such as long-term amount of loans and notes receivables; and property acquired for resale. The corpus or principal of a permanent fund is an example of an amount that is legally or contractually required to be maintained intact. 3. Restricted Fund Balance — Amounts that can be spent only for specific purposes stipulated by (a) external resource providers such as creditors through debt covenants, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Specifically, the Public Facility Improvement Fund and Law Enforcement Special Fund are included in this category. Resolution No. 2022-03, Page 2 of 4 4. Committed Fund Balance — Amounts that can be used only for the specific purposes determined by a formal action or resolution of the City Council, the City Council's highest level of decision - making authority for multi -year projects. Commitments may be changed or lifted only by the City Council taking the same formal action or resolution that imposed the constraint originally. 5. Assigned Fund Balance — These amounts include spendable Fund Balance amounts established by the City Administrator or the City Council that are intended to be used for specific purposes that are considered neither Restricted nor Committed. Specifically, other grants, subsequent years expenditures, and future capital improvement projects are included in this category. 6,. Unassigned Fund Balance — Unassigned Fund Balance is the residual classification for the General Fund. This classification represents Fund Balance that has not been assigned to other funds and that has not been Restricted, Committed, or Assigned to specific purposes within the General Fund. Unassigned Fund Balance may also include negative balances for any governmental fund if expenditures exceed amounts Restricted, Committed, or Assigned for those specific purposes. Specifically, the General Fund, Capital Improvement Projects building and improvements funding, and Capital Improvement Projects vehicles funding are included in this category. FUND BALANCE GOALS are based on existing and continuation of necessary public services, to insure against unanticipated events that would adversely affect the financial condition of the City. The City should maintain an adequate reserve of Unassigned Fund Balance in the City's various operating funds to provide the capacity to: (1) provide sufficient cash flow for daily financial needs, (2) secure and maintain investment grade bond ratings, (3) offset significant economic downturns or revenue shortfalls, (4) provide funds for unforeseen expenditures related to emergencies, and (5) provide for future capital projects, equipment replacement, and enhancements, including but not limited to, those established within the five-year Capital Improvement Plan • General Fund The General Fund is the main operating fund that pays for general services provided by the City, such as public safety, and parks services. The General Fund accounts for all general revenues of the City and for expenditures related to the rendering of the City's general services. The General Fund is considered to have a high level of risk to operations due to its dependence on revenue streams that are susceptible to economic downturns and revenue reduction impacts from outside agency actions. In addition, the General Fund is the main funding source when responding to unexpected events or emergencies. The Government Finance Officers Association ("GFOA") recommends no fewer than two months of General Fund reserve. The City desires to maintain a prudent level of reserves based on the revenue impacts described above and the City's desire to maintain strong bond ratings to minimize borrowing costs. This reserve policy sets the targeted minimum level at an additional four months of budgeted General Fund Total General Operating Expenses to provide stability and flexibility to respond to unexpected adversity and/or opportunities. Resolution No. 2022-03, Page 3 of 4 • Special Revenue Funds — Special revenue funds are created to account for the proceeds of specific revenue sources such as grants that are legally assigned to expenditure(s) for specified purposes and specific future law enforcement needs. No specific reservation of Fund Balance is created by virtue of enactment of this policy. The amount of any reservation of Fund Balance shall be governed by the legal authority underlying the creation of the individual funds. • Public Facility Improvement Fund — All reserves in this fund are classified as restricted based on Florida Statutes and current ordinances. • Debt Service Fund — Debt Service Funds are typically subjected to the creation of very specific reserve amounts as part of the ordinance or resolution that authorizes the issuance of the bonds, specific loans, or both. This Policy does not create any specific reservation of Fund Balance within any Debt Service Fund. Reserve requirement for any outstanding bond issue will be consistent with the ordinance or resolution authorizing the issuancE! of the bonds. POLICY: Based on the GOFA recommendation of two months of General Fund reserves and the City's desired four -month targeted minimum Total General Operating Expenses, the City shall maintain a minimum Assigned Fund Balance in the General Fund (which incorporates the capital improvements projects) equivalent to 50 Percent of Total General Operating Expenditures of the current fiscal year. This will provide two -months operating expenses and four months of emergency expenses. For current and future capital projects, which may extend beyond the fiscal year, the City may assign up to 25 percent of the remaining unassigned reserves. This reserve shall be in addition to all other required reserves or designation of Fund Balance. The City shall keep a minimum of $1,000,000 of the remaining Funds Unassigned. In the event these funds drop to the minimum, they should be replenished to prepare for future events. The City will attempt to replenish this reserve over a five-year period beginning with the completion of recovery from the event for which the reserve funds were required. The classifications of Fund Balance between Non -Spendable, RE,'stricted, Committed, Assigned, and Unassigned shall be reviewed annually during the preparation of the Annual Financial Statement based on definitions above. The Finance Director will make recommendations to the City Administrator and City Council for classification of funds for Assigned Fund Balance and Committed Fund Balance, respectively. Funds to be classified as Committed require a formal action or resolution to be approved by the City Council to Commit and Un-commit the funds to the classification. Funds to be classified as Assigned require City Administrator approval. Resolution No. 2022-03, Page 4 of 4 Fund Balance and R serve Policy CITY OF OKEECHOBEE Revenues/Expenses and Monthly Operating $7,452,214.00 = Revenues and Subsequent Expenses $ 621,017.83 = Monthly Operating Expenses Comb ned General Fund and Capital Fund: Reser es $8,027,562 = Combined General Fund and Capital Fund $6,804,028 = Combined General Fund Left: Unassigned Contingency Fund Based on Policy Contingency Fund = 6 months or 50% of $7,452,214.00 budgeted operating expenses. • $ 621,017.83 x 6 = $3.726,106.98 = Six months operating expenses Subtracting six months operating expenses from $6,804,028, our General Fund = $3,077,921.02 left in unassigned General Fund Reserves. _ $769,480.25 = 257. of General Fund Reserves for future capital projects. $2,308,440.77= Unassigned General Fund Reserves Policy for Unassigned Reserves $1,000,000 = Minimum level of unassigned reserves before reserve account will need to be replenished over a 3-to-5-year period. $2,308,440.77 - $1,000,000 Unassigned General fund Reserves $1,308,440.75 = Available as unassigned for infrastructure and aesthetics