HomeMy WebLinkAboutRes2009-131 Sponsored by: Oates
CITY OF SEWARD, ALASKA
RESOLUTION 2009 -131
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, AUTHORIZING EARLY ADOPTION OF GOVERNMENTAL
ACCOUNTING STANDARDS BOARD STATEMENT NO. 54,
ESTABLISHING NEW FUND BALANCE CLASSIFICATIONS, TO BE
CONSISTENT WITH THE 2010/2011 BIENNIAL BUDGET
WHEREAS, the Governmental Accounting Standards Board (GASB) issued Statement
No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, which substantially
alters the focus, categories, and terminology used for fund balance reporting, while leaving
unchanged the total amount reported as fund balance; and
WHEREAS, the intent of the new Statement is to focus not on financial resources
available for appropriation, but to focus instead on "the extent to which the government is bound
to honor constraints on the specific purposes for which amounts in the fund can be spent"; and
WHEREAS, GASB Statement No. 54 is effective for periods ending after June 30, 2011,
which requires compliance by the City for its calendar year beginning January 1, 2011 and
WI.. ending December 31, 2011, and since the City's new biennial budget will include this calendar
year period, it is prudent to implement the new reporting classifications in time for inclusion in
the 2010/2011 Biennial Budget document; and
WHEREAS, GASB Statement No. 54 will affect the City's general fund, special revenue
funds, capital project funds, and debt service funds, three total funds of which are included in the
2010/2011 Biennial Budget (General Fund, Hospital Debt Service, Seward Mountain Haven
Debt Service); and
WHEREAS, the new Statement No. 54 replaces the former fund balance classifications
(reserved fund balance, unreserved fund balance, designated fund balance, and undesignatcd fund
balance) with new classifications (nonspendable, restricted, committed, assigned, and
unassigned).
NOW, TIIEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF SEWARD, ALASKA, that:
Section 1. The Seward City Council hereby authorizes the early adoption of
Governmental Accounting Standards Board Statement No. 54 in order to include the new
required classifications in the 2010/2011 Biennial Budget.
CITY OF SEWARD, ALASKA
RESOLUTION 2009 -131
Section 2. The new components of fund balance will consist of nonspendable fund
balance (inherently nonspendable), restricted fund balance (externally enforceable limitations on
use), committed fund balance (self - imposed limitations established by the City Council prior to
the cnd of the period), assigned fund balance (limitations resulting from intended use, to be
established by the City Council, the city manager or his designee), and unassigned fund balance.
Section 3. The nonspendable fund balance reflects resources that are inherently
nonspendable. The restricted fund balance represents externally enforceable limitations on use
of resources. The committed fund balance category requires action by the City Council to
impose, remove or modify an clement of committed fund balance. The assigned fund balance
category describes the portion of fund balance that reflects the government's intended use of
resources and may be delegated to the city manager or his designee. The City Council hereby
authorizes the city manager or finance director to classify fund balance as assigned, as
appropriate. The unassigned fund balance reflects any remaining net resources which are not
properly classified in any one of the other classifications.
Section 4. This resolution shall take effect immediately upon its adoption.
PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this
23rd day of November, 2009.
THE CITY OF SEWARD, ALASKA
illard E. Dunham, Mayor
AYES: Valdatta, Bardarson, Smith, Keil, Shafer, Amberg, Dunham
NOES: None
ABSENT: None
ABSTAIN: None
ATTEST: ss' 4 &'dr 7.5i,
Jean Lewis, CMC
City Clerk x { '
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COUNCIL AGENDA STATEMENT
Meeting Date: November 23, 2009
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Through: Phillip Oates, City Manager j
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From Kristin Erchinger, Finance Director �.71CS t!
Agenda Item: Approval of New Fund Balance Designations as part of the 2010/2011 Biennial
Budget
BACKGROUND & JUSTIFICATION:
The Governmental Accounting Standards Board has issued Statement No. 54, Fund Balance Reporting
and Governmental Fund 'Type Definitions. This Standard is effective for periods ending after June 30,
2011, which means that it must be implemented by the City of Seward for its calendar year beginning
January 1, 2011. Since that calendar year is included in the City's first -ever Biennial Budget for the
period January 1, 2010 through December 31, 2011 which is currently being finalized, it is prudent to
implement the new reporting classifications within the Biennial Budget document.
The primary intent of this new standard is a modification in both terminology and focus, as it relates to
fund balance in governmental funds. The GASB intends for the new terminology to be more useful for
citizens and legislative bodies, who are interested in resource allocation and legal compliance (e.g.
budgeting) issues. The new classifications of fund balance focus not on the financial resources available
for appropriation, but instead attempts to focus on the "extent to which the government is bound to honor
constraints on the specific purposes for which amounts in the fund can he spent." Therefore, the new
classifications break down fund balance into the various limitations on its use. Some classifications are
limited by external entities (creditors, grantors, contributors, or laws and regulations of other
governments), or by the City Council (self - imposed limitations on use of fund balance), or by intended
uses which are not binding, down to the classification of unassigned fund balance, which is available for
any purpose. In the five- tiered hierarchy listed below, the hierarchy begins with the most limited use of
fund balance, down to the least limited use of fund balance.
Nonspendable fund balance (inherently non - spendable). This is defined as a portion of
net resources not spendable because of form (for example, inventories, prepaid items, unrealized gains,
Tong -term portion of notes receivable). In other words, assets that will either never convert to cash or
that will not convert to cash soon enough to effect the current period. It also includes resources which
cannot be spent because they must remain intact due to legal or contractual constraints (e.g., the principal
of an endowment or capital of a revolving loan fund). In this category, the City will record items such as
inventory and prepaid expenses, notes receivable from PSMC, etc.
Restricted fund balance. This portion of fund balance reflects resources which are
subject to externally enforceable legal restrictions such as creditors, grantors, contributors, and other
governments. Restrictions can also arise when specific revenues are raised requiring the revenue to be
used for a particular purpose, pursuant to enabling legislation. In this category, the City will record items
such as: debt service reserves; federal, state or local grants for capital projects, restricted in capital
project funds; etc.
Committed fund balance. This portion of fund balance describes resources whose use is
constrained by limitations imposed by the City Council. These committed resources remain binding
unless removed by the City Council no later than the close of a reporting period. Stabilization funds or
contingency funds can sometimes be reported in this category. In this category, the City will record
items such as: working capital, insurance reserves, lines of credit, etc.
CITY OF SEWARD
RESOLUTION 2009 -
Assigned fund balance. This portion of fund balance reflects a government's intended
use of resources. Such intent would have to be established by the City Council or an official designated
for that purpose. In this case, we are asking for authorization to designate the city manager and finance
director to be given the ability to assign fund balance. The primary difference between committed fund
balance and assigned fund balance is that committed fund balance requires action by the City Council
and a formal action is necessary to impose, remove, or modify a constraint. In assigned fund balance,
there is less formality. Some examples of when resources could be considered assigned, include at year-
end when a portion of the existing fund balance would be set aside to cover a projected deficit in the
subsequent year's budget, the need to report encumbrances at the end of a reporting period, and other
such accounting - related items.
Unassigned fund balance. The general fund, as the principal operating fund of the
government, often will have net resources in excess of what can properly be classified in one of the four
categories above. If so, that surplus is presented as unassigned fund balance.
CONSISTENCY CHECKLIST:
Where applicable, this agenda statement is consistent with the Seward City Code, Charter,
Comprehensive Plans, Land Use Plans, Strategic Plan, and City Council Rules of Procedures.
FISCAL NOTE:
There is no financial impact to implement GASB Statement No. 54.
Approved by Finance Department: 16.4614,4
RECOMMENDATION:
Council approve Resolution 2009- , authorizing the early implementation of Governmental Accounting
Standards Board Statement No. 54, establishing new fund balance classifications in order to coincide
with the implementation of the 2010/2011 Biennial Budget.