2022-03 Fund Balance & Reserve PolicyRESOLUTION 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 adoption.
ADOPTED by the City Council of the City of Okeechobee, Florida on this
19t" day of April 2022, after introduced and postponed at the April 5,
2022, meeting.
ATTEST:
_ Dowling R. Watford, Jr:, Mayor
l _
Lane Gamiotea, CMC, City Clerk
REVIEWED FOR LEGAL SUFFICIENCY:
Jo umero, City Attorney
Resolution No. 2022-03, Page 1 of 4
RESOLUTION NO. 2022-03
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 sits
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.
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.
Resolution No. 2022-03, Page 2 of 4
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 shortfall;,
(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 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 Improvement Fund — All reserves in this fund are
classified as restricted based on Florida Statutes and current
ordinances.
Resolution No. 2022-03, Page 3 of 4
• Debt Service Fund — Debt Service Funds are typically subjected to ithe
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 GFOA recommendations the City shall strive to maintain ;an
Unassigned Reserve Fund Balance minimum at no less than two months of
budgeted general operating expenditures. The City should maintain an
additional four months of contingency funds necessary for the continuation
of public services to address unanticipated events that would adversely
affect the financial condition of the City.
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 equivalent of two months of total general
operating expenditures of the current fiscal year as remaining Funds
Unassigned. In the event the Unassigned Reserve Fund Balance drops
below 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 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