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i CITY OF ROSEMOUNT
POLICY TITLE:
EFFECTIVE DATE:
POLICY NUMBER:
PROPOSED BY:
DATE APPROVED
BY COUNCIL:
FUND BALANCE POLICY
December 16, 2003
F -7
FINANCE
December 16, 2003 (Amended February 17, 2004)
PURPOSE
The purpose of this policy is to set up guidelines and procedures for dealing with fund
balances of the General Fund, and indirectly, all other operating funds. This policy will
allow the City to provide a cushion against unexpected revenue shortfalls, to provide for
working capital to ensure sufficient cash flow to meet the City's needs throughout the
year, and to maintain and improve the City's credit rating.
POLICY
a. The City will attempt to maintain an undesignated General Fund reserve of at
least 55% of the next year's operating budget. This 55% reserve will be
considered "Designated for Working Capital" and will be the funds that will
enable the City to meet its daily operating needs. Fund balances that are
reserved for encumbrances and reserved for compensated absences will be
excluded from the calculation of the 55% as they are designated for a specific
purpose.
b. Any surplus exceeding 55 %, as of the completion of the previous year's audit,
will be transferred to one of the three Capital Improvement Program (CIP)
funds (Building CIP, Street CIP or Equipment CIP) at the discretion of the City
Council by formal action. If at all possible, as part of this action, the Council
should reserve these transferred funds for specific needs (building
improvements, street rehabilitation projects, squad cars, fire equipment, etc).
If the Council feels the necessity to use these funds for another purpose,
action will be taken accordingly at the same time that the normal transfer
authorization would take place with a special designation made for those funds
in excess of the 55 %.
c. To avoid interest expense charges that would reduce the amount of funds
available for current operations the City shall not use tax anticipation
borrowing to cover operating expenses. If it becomes apparent that the City
may need to do this, the policy shall be adjusted by Council action to raise the
fund balance percentage to a larger figure to prevent this from happening in
the future.
d. The City will also review and update the schedule of all other fund balances,
reserves, and working capital in all other operating funds of the City and
determine adequacy of those money balances in conjunction with the budgets
set annually.
Preliminary Figures as of 3/2/04
GENERAL FUND (FUND 101)
PROJECTED YEAR -END FUND BALANCE WORKSHEET
12/31/02 Balance - "Designated for Working Capital ":
4,567,231
Projected Revenues Thru 12/31/03: 7,583,740
Less Projected Expenditures Thru 12/31/03: 7,161,572
Surplus(Deficit) for Year:
422,168
Projected "Designated for Working Capital" as of 12/31/03:
4,989,399
Proposed 2004 General Fund Operating Budget:
7,409,400
Percentage of Fund Balance to Next Year's Budget:
67.34%
Compensated Absences Balance for Fund 101 as of 12/31/03: $476,573
n/a
(Is Separately Reserved Based on Fund Balance Policy) ------
-------------------
Revised "Designated for Working Capital" as of 12/31/03:
4,989,399
Revised Percentage of Fund Balance to Next Year's Budget:
67.34%
55% "Designated for Working Capital" Figure to 2004 Budget Figure:
4,075,170
Funds to be Reallocated to Adjust to 55% Fund Balance Figure:
914,229
Preliminary Figures as of 3/2/04