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HomeMy WebLinkAboutResolution 2011 (82) I RESOLUTION ADOPTING PROVISIONS OF GOVERNMENTAL ACCOUNTING 2 STANDARDS BOAR (GASB) STATEMENT NO. 54, FUND BALANCE REPORTING 3 AND GOVERNMENTAL FUND TI'L'E DEFINITIONS 4 5 Resolution No. 6 7 St. Croix County, Wisconsin 8 9 WHEREAS, the Governmental Accounting Standards Board (GASB) has issued GASB 10 Statement No. 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type 11 Definitions, which is intended to improve the usefuhiess of the amount reported in fund balance 12 by providing more structured classification and clarify the definition of existing governmental 13 fund types: and 14 15 WHEREAS, the overall objective of fund balance reporting is to isolate that portion of 16 fund balance that is unavailable to support the following period's budget; and 17 18 WHEREAS, to improve the reporting of fund balance, GASB 54 creates a hierarchy of 19 fund balance classifications based primarily on the extent to which governments are bound by 20 constraints of resources reported in the funds, which approach is intended to provide users more 21 consistent and understandable information about a fund's net resources; and 22 23 WHEREAS, it is advisable that St. Croix County adopt the provisions of GASB 54, first 24 effective for the financial statements for the current fiscal year (January 1 - December 31, 2011); 25 and 26 27 WHEREAS, a policy implementing the provisions of GASB 54 is attached and utilizes 28 the following five classifications of fund balance: 29 30 1. Non-spendable Fund Balance - Amounts not in spendable form, such as inventory, 31 prepaid amounts or amounts that must be maintained intact legally or contractually. 32 2. Restricted Fund Balance - Amounts constrained for a specific purpose by external 33 parties, constitutional provision or enabling legislation. 34 3. Committed Fund Balance - Amounts constrained for a specific purpose by a government 35 using its highest level of decision-making authority and committed prior to year end. 36 4. Assigned Fund Balance - For all governmental funds other than the general fund, any 37 remaining positive amounts not classified as restricted or committed; for the general 38 fund, amounts constrained for the intent to be used for a specific purpose by a governing 39 board or a body or official that has been delegated authority to assign amounts. 40 5. Unassigned Fund Balance - For the general fund, amounts not classified as restricted, 41 committed or assigned; for all governmental funds other than the general fund, amount 42 expended in excess of resources that are restricted, committed or assigned. 43 ; and 44 45 WHEREAS, the County Administrator determines how amounts and classification are 46 reported in fund balance; and 47 48 WHEREAS, this policy does not alter the Board of Supervisors' responsibility or 49 authority under Wisconsin Statutes § 65.90 to formulate or change an annual budget. 50 RESOLUTION ADOPTING PROVISIONS OF GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB) STATEMENT NO. 54, FUND BALANCE REPORTING AND GOVERNMENTAL FUND TYPE DEFINITIONS - Continued 51 THEREFORE, BE IT RESOLVED by the St. Croix County Board of Supervisors that the 52 attached policy adopting the provisions of GASB Statement No. 54, Fund Balance Reporting 53 and Governmental Fund Type Definitions, is hereby adopted, effective December 15, 2011, and 54 shall be placed in the County Board Operations Policies Offered b Administration Committee Yes No Abstain Absent This resolution was adopted by the St. Croix County Sharon Norton-Bauman ® ❑ ❑ ❑ Esther Wentz ® ❑ ❑ ❑ Board of Supervisors on l)P_c'e.rr~F,ea' (n QC) I I Ryan Sicard ® ❑ ❑ Daryl Standafer ® ❑ ❑ ❑ Buck Malick ® ❑ ❑ ❑ Lorin Sather ® ❑ ❑ ❑ I-Y'`~~ Roger Rebholz ® ❑ ❑ ❑ Cindy Campb~_4II, County Clerk I verify that the vote shown abov is true and correct. Qo County Board Vote: Yes No Chair, Administration Committee Abstain P_ Absent ) 1rr t Ctcn e LEGAL REVIEW FISCAL REVIEW Reviewed as to form on November 9, 2011 ❑ There is a fiscal impact. Greg Timmerman ® There is no fiscal impact. Greg Timmerman, Corporation Counsel See attached Fiscal Impact Statement. LEGAL NOTE: None VOTE REQUIREMENT: Maori of supervisors resent 2 FISCAL IMPACT STATEMENT Submitted By: Michelle Pietrick Date: November 9, 2011 Department: Finance Department Committee: Administration Committee Resolution Title: Resolution Adopting Provisions of Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions ® There is no fiscal impact on expenses or revenues ❑ There is a fiscal impact on expenses or revenues Explanation: This resolution addresses a financial reporting policy. There is no financial impact. FINANCE DIRECTOR ACTION: ® Approved by Finance Director Signature: -'AlicheCCe Pietric( Date: 11/9/11 FISCAL IMPACT STATEMENT - REV. 09/12/2011 Page 1 FUND BALANCE POLICY Background The Governmental Accounting Standards Board (GASB) released Statement 54 - "Fund Balance Reporting and Governmental Fund Type Definitions" on March 11, 2009 which is effective for the fiscal year ending December 31, 2011. This new accounting standard is intended to improve the usefulness of the amount reported in fund balance by providing more structured classification. It applies to fund balance reported in the General Funds, Special Revenue Funds, Debt Service Funds, and Capital Project Funds. It does not apply to Enterprise Funds, Internal Service Funds, and extremely restricted reserves. Fund Balance Classifications under GASB 54 GASB 54 has changed how fund balance is reported and the new hierarchy of possible classifications is as follows: ® Non-spendable Fund balance includes amounts not in spendable form, such as inventory, or amounts required to be maintained intact legally or contractually (principal endowment). ® Restricted Fund Balance includes amounts constrained for a specific purpose by external parties (e.g. Debt Service, Capital Projects, State and Federal Grant Funds). • Committed Fund Balance includes amounts constrained for a specific purpose by a government using its highest level of decision making authority, and the commitment is formally approved prior to year end.(e.g. Major Maintenance, Capital Replacement Reserve, Land, Hail Reserve, and Campus Activity Funds). ® Assigned Fund Balance includes general fund amounts constrained for a specific purpose by a governing board or by an official that has been delegated authority to assign amounts. ® Unassigned Fund Balance is the residual classification for the general fund. Purpose To provide a stable financial environment for St. Croix County's operations that allows the County to provide quality services to its residents in a fiscally responsible manner designed to keep services and taxes as consistent as possible over time. This fund balance policy is meant to serve as the framework _ upon which consistent operations may be built and sustained. Definitions & Policies Fund Balance Fund Balance is the difference between assets and liabilities in governmental funds (i.e. general fund, special revenue funds, capital project funds, and debt service funds). Fund balance measures the net financial resources available to finance expenditures in future periods. Non-spendable Fund Balance Describes the amount of fund balance that cannot be spent because it is either not in spendable form or there is a legal or contractual requirement for the funds to remain intact. Policy - At the end of each fiscal year, the County will report the portion of the fund balance that is not in spendable form as Non-spendable Fund Balance on the financial statements. Spendable Fund Balance (Overview) - Describes the amount of fund balance that is available for appropriation based on the constraints that control how specific amounts can be spent. Typically, a significant portion of a government's spendable resources can be spent only for specified purposes. The following categories define the revenue source and the level of constraint on spending. Categories should be supported by actual plans approved by either the governing body, or appropriate officer, grant providers or enabling legislation. Restricted Fund Balance The restricted fund balance category includes the portion of the spendable fund balance that reflects constraints on spending because of legal restrictions stipulated by outside parties - generally those imposed by state statutes or grant agency requirements. Policy - At the end of each fiscal year, the County will report "restricted" fund balance for amounts that have applicable legal restrictions per GAS13 54. In addition, encumbrances or funds restricted by enabling legislation will be reported as "restricted". Committed Fund Balance The committed fund balance classification includes the portion of the spendable fund balance that reflects constraints that the county has imposed upon itself by a formal action of the county board (for example, an ordinance or resolution passed by the county Board). This constraint must be imposed prior to year end but the amount can be determined at a later date, as long as the method is approved before year end. Policy- Prior to the end of each fiscal year, the County will report: "committed" fund balance for long-term receivables such as advances to other funds and similar accounts. As part of the subsequent year budget, any application of fund balance approved in the budget may also be considered "committed" fund balance. Assigned Fund Balance The assigned fund balance is the portion of the spendable fund balance that reflects funds intended to be used by the government for specific purposes assigned by more informal operational plans (e.g. - capital goods replacement - the constraint on use is not imposed by external parties or by formal board action). In governmental funds other than the general fund (special revenue funds, capital project funds, and debt service funds), assigned fund balance represents the amount that is not restricted or limited. The authority to "assign" fund balance is delegated to the County Administrator. Policy - Prior to the end of each fiscal year, the County will report "Assigned" fund balance for equipment replacement according to the County's Capital Improvement Plan. Unassigned Fund Balance This is the residual classification for the /county's General Fund and includes all spendable amounts not contained in the other classifications and, therefore, is not subject to any constraints. Unassigned amounts are available for any purpose. These are the current resources available for which there are no government self-imposed limitations or set spending plan. Although there is generally no set spending plan for the unassigned portion, there is a need to maintain a certain funding level. Unassigned fund balance is commonly used for emergency expenditures not previously considered. In addition, the resources classified as unassigned can be used to cover expenditures for revenues not yet received. Policy- The County's Unassigned General Fund Balance will be maintained to provide the County with sufficient working capital and a margin of safety to address local and regional emergencies without borrowing. At the end of each fiscal year, the County will maintain Unassigned portions of the fund balance for Cash Flow in a range equal to 25 - 35% of the General Fund operating expenditures. In the event that amounts assigned for cash flow fall above or below the desired range, the County Administrator shall report such amounts to the County Board as soon as practical after the end of the fiscal year. Should the actual amount assigned for Cash Flow fall below the desired range, the County shall create a plan to restore the appropriate levels. Should the actual amount assigned for cash flow rise above the desired range, any excess funds will remain unassigned pending the Board's final decision concerning transfer to another fund. It is the policy of the County that such excess funds will, by board action, be reported in the spendable limited category of this policy. Spending Hierarchy In circumstances when an expenditure is to be made for a purpose for which amounts are available in multiple fund balance classifications, the order in which resources will be expended is as follows: restricted fund balance, followed by committed fund balance, assigned fund balance, and lastly, unassigned fund balance. General Fund Group The general fund records and reports all financial resources not recorded in another fund group (i.e. capital projects, special revenue, debt service). St. Croix County had five separate funds in 2010 that are part of the General Fund Group as follows: 100 General Fund, 101 Contingency Fund, 111 County Farm, 121 Parks, 131 Land and Water Conservation, Pesticide Training. After applying the GASB 54 requirements to the Special Revenue Funds, the Sales Tax Fund 201 will be reclassified to this fund group in 2011. Special Revenue Funds Special revenue funds must have one or more external revenue sources which are substantial in relation to the fund, excluding tax levy. Fund balance in a special revenue fund is classified as either restricted or committed based on the type of revenue. St. Croix County special revenue funds are as follows with notations for possible reclassification under GASB 54: 201 County Sales Tax Fund - Now classified as a General Fund 205 Aging Programs, 209 Jail Assessment Fund (may be reclassified at Audit time) 225 Health and Human Services 230 Aging & Disability Resource Center 250 Land Records Fund 260 CDBG Grant Fund 625 St. Croix Industries 801 Dog License Fund - Agency fund 802 Sanitary Grants Fund (may be reclassified at Audit time) 809 Stop Drugs Fund The majority of resources in these funds are from external sources. Some of these funds also have tax levy dollars in them. When an expenditure is made in the special revenue funds the order in which resources will be expended is as follows: restricted fund balance, followed by committed fund balance, and lastly, unassigned fund balance. As has been practice, external revenues are spent first and the tax levy dollar is spent last in the special revenue funds. Debt Service Funds Debt Service funds are used to account for the principal and interest payments related to any long term debt issued by the County and to accumulate resources to pay for the debt service. St. Croix County has the following debt service - funds: 300 - 2003A bond issue and the 2006 & 2007 State Trust Fund Loans, 310 - 2003B Prior Service Retirement bond issue, 320 - 2004A Lawsuit settlement bond issue (closes at 12/31/11) 308 - 2008A bond issue 301 - 201 0A bond issue The fund balance in the Debt service funds will be shown as restricted or committed in the financial statements at year end. Capital Project Funds Capital project funds are used to record expenditures related to current capital outlays (capital asset purchases, buildings, or capital improvements) and to set aside resources for future capital outlays. If bonds are issued to finance capital outlays, the proceeds are spent in the capital project fund. St. Croix County has three capital project funds. Fund 400 - General Capital Projects Fund 408 2008, Bond funded projects Fund 401 - 2010 Bond funded projects Generally there are only 3 categories of fund balance in the capital project funds - restricted, committed or assigned. The fund balances in fund 408 and fund 401 are considered restricted or committed as the bond proceeds have not been fully expended to date. Fund 400 has both committed and assigned fund balance, $750,000 was committed based on the 2012 County Board budget action. The remaining fund balance is assigned for future capital outlay based on past actions. Fund Specific Policies To ensure that all fund balance polices are contained in one document, appendix A has been added to address those policies or practices that St. Croix County has in place for certain specific funds, including the Enterprise and Internal Service Funds which are not covered by GASB 54. APPENDIX A - FUND SPECIFIC POLICIES 901 Contingency Fund (General Fund Group) The County Board annually budgets an amount in the Contingency fund as a part of the formal adoption of the budget. The County Board has delegated the responsibility to manage this fund to the Administration Committee. The St. Croix County Board adopts its annual budget based on total department expenditures and total levy by fund. If an unforeseen emergency or need arises in a department the Contingency Fund is a resource that can be used to fund this unforeseen situation. If the amount does not exceed 10% of the department's total budget it can be approved by the Administration Committee. If the amount requested exceeds 10% of the department's budget, then the County Board needs to take formal action as a budget amendment. Department Directors may be given tentative approval of Contingency Fund resources with the directive to try and absorb as much of the cost as they can in their department budget. This tentative approval is tracked separately by the Finance Director who will then bring the final list back to the Administration Committee in February or March when the books are closed out for their final approval of the amounts. Any remaining amount in the Contingency fund needs to be closed out at year end and the County Administrator's recommendation will be on this final list. 225 Health and Human Services (Special Revenue Fund Group) The resources in this fund are spent down in the following order - grant revenue, charges for services and program income, then tax levy. Special Revenue funds usually only have restricted and or committed fund balance. After the fund is analyzed at year end, there may be remaining unassigned fund balance, which represents any unspent tax levy. The general fund is the only fund that can have unassigned fund balance so the unassigned fund balance will be re-allocated or assigned based on the County Administrator's recommendation. 230 Aging & Disability Resource Center There are four different programs accounted for in this fund. The main ADRC program is fully funded by external resources. The other three programs have levy dollars allocated in addition to external grant resources. At year end each of the programs is analyzed and any remaining fund balance is reported as restricted (if related to the grant funded program) or unassigned (if a result of levy dollars unspent by year end). The general fund is the only fund that can have unassigned fund balance so the unassigned fund balance will be re-allocated or assigned based on the County Administrator's recommendation. GASB 54 does not apply to the following funds as they are Enterprise funds and Internal Service Funds as these fund types have "Net Assets" not fund balances. The following policies and practices have been established related to the Net Assets in these funds 600 Nursing Horne - The practice that we have established for this enterprise fund is to take the prior year audited net assets minus the net assets applied to the current year budget and if there is a positive remaining net assets, that is then applied to the subsequent year budget. This practice has been in place as the levy dollars are the last dollars spent, hence, any remaining net assets are considered levy dollars. If after subtracting the amount applied to the current year, there is a deficit net asset, then a plan needs to be developed to cover that deficit. At such time that the Nursing Home fund is off the levy, the fund will then retain any positive net assets for its operations. 700 Highway - The established practice for this enterprise fund has merely been to allow them to retain their net assets for operations and there has been no "application" of net assets to the budget. By the nature of the cost accounting procedures utilized in this fund, the net assets are used in the overall operations of the Highway Department. 701 Health Insurance - The health insurance fund is required to maintain an amount equal to 25% of the estimated claims as "reserved" net assets. The health insurance premium policy calls for any amounts in excess of the reserves to be applied to the premiums and any shortfall in reserves to be added to the premiums. Based on analysis of the fund which was done for the 2012 premiums, it became evident that the fund had a shortfall. The County Administrator recommended a transfer from the Health and Human Services fund, as a onetime occurrence, to get the reserves up to the 25% threshold. The health insurance premium policy and application of net assets towards the premiums will be re-evaluated during 2012 and will be coming back later in the year.