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Sponsored by: Yoder
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CITY OF SEWARD, ALASKA
RESOLUTION 2007-018
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, AUTHORIZING A TRANSFER OF $51,904.89 TO THE
EMPLOYEE COMPENSATED ABSENCES FUND TO ACCUMULATE
CASH TO PAY ACCRUED LIABILITIES
WHEREAS, the 2003 implementation of the Governmental Accounting Standards Board
Statement No. 34 ("GASB34") resulted in a number of changes in how governments report certain
accounting transactions; and
WHEREAS, one such change results in liabilities for employee compensated absences not
appearing in the fund financial statements of the General Fund; and
WHEREAS, the practical impact of these accounting rules is that the financial resources
necessary to pay for employee compensated absences are not accumulated to pay liabilities as they
are incurred, and when employees either terminate from employment or cash-out annual leave, there
is an unanticipated increase in General Fund expenditures, which is difficult to anticipate when
projecting budgeted expenditures; and
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WHEREAS, in 2006 the City Council created the Employee Compensated Absences Internal
Service Fund to accumulate resources to pay accrued employee compensated absence liabilities, and
an additional transfer in the amount of $51,904.89 is needed to fully fund the value of employee
compensated absence liabilities at December 31, 2006.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF SEWARD, ALASKA, that:
Section 1. The amount of $51,904.89 is hereby transferred from the General Fund fund
balance account number 101-0000-3070-0104 to the Employee Compensated Absences account
number 104-0000-3070-0101.
Section 2. This resolution shall be retroactive to December 31, 2006.
PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 1 ih
day of February, 2006.
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CITY OF SEWARD, ALASKA
RESOLUTION 2007-018
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THE CITY OF SEWARD, ALASKA
At'<l/
Vanta Shafer, Mayo
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AYES:
NOES:
ABSENT:
ABST AIN:
Valdatta, Bardarson, Schafer, Thomas, Amberg, Shafer
None
Dunham
None
ATTEST:
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(City Seal)
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COUNCIL AGENDA STATEMENT
Meeting Date: February 12, 2007
Through: Marvin Yoder, Interim City Manager
From: Kristin Erchinger, Finance Director
Agenda Item: Annual Transfer to Employee Compensated Absences Fund
BACKGROUND & JUSTIFICATION:
The manner in which government entities report and book financial accounting transactions is
determined according to Generally Accepted Accounting Principles (GAAP). One primary source
of GAAP for governmental entities is Governmental Accounting Standards Board (GASB)
Statements. In 2003, the City of Seward implemented GASB Statement No. 34 which changed
the manner in which certain accounting transactions were reported.
One minor result of GASB34 is that the short-term portion of accrued annual leave -- which was
previously reflected as a liability in the General Fund financial statements -- is no longer shown as
a liability in the General Fund financial statements. Even prior to GASB34, the long-term portion
of accrued annual leave was not reported in the General Fund financial statements. The reason
for this is due to the unique focus of governmental funds --focusing on flows of current financial
resources-- certain liabilities related to the General Fund are only reported when they are
expected to be paid with resources already available in the General Fund at the end of the
current fiscal year. Long-term or non-current liabilities are intended to be paid with resources
not yet available in a governmental fund, and therefore, are not reflected on the financial
statements.
This method of accounting does not set aside cash necessary to pay for accrued leave time that is
owed to employees. The result is that when an employee terminates employment, cashes in
annual leave, or takes extended leave, there is generally a significant increase in a General Fund
department’s expenditures that was not anticipated, without appropriated funds to pay the
liability. Failure to set aside resources to pay this liability also overstates the amount of spendable
resources in the General Fund.
In order to fully fund annual leave (sick and vacation leave) as it is earned, the City annually
calculates the value of annual leave and transfers the cash necessary to pay this liability, to the
Employee Compensated Absences Fund. In 2006, the additional amount needed to fund this
liability is $51,904.89.
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.
Other: _______________________________________________________________________
Resolution 2007-
Employee Compensated Absences Internal Service Fund
Page Two
FISCAL NOTE:
This resolution has the effect of transferring cash out of the General Fund in the amount of
$51,904.89, to true-up the outstanding balance of accrued annual leave at December 31, 2006. It
has no budgetary impact, since the expenditures have already been booked in the General Fund.
Approved by Finance Department ___________________________
RECOMMENDATION:
Council approve Resolution 2007-____, transferring $51,904.89 from the General Fund to the
Employee Compensated Absences Fund to fully fund annual leave liabilities, retroactive to
December 31, 2006.