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HomeMy WebLinkAboutResolution 2015 (01) Resolution No. 1 (2015) ST SRO RESOLUTION ADOPTING CHANGES TO THE FUND �'` CO "R"I' BALANCE POLICY 1 WHEREAS, on December 6, 2011 St. Croix County adopted a Fund Balance Policy that 2 became effective on December 15, 2011 and was added to the St. Croix County Operations 3 Policies; and 4 5 WHEREAS, the proposed Fund Balance Policy has been amended to reflect and clarify 6 language and fund reference additions and changes as attached; and 7 8 WHEREAS, the Administration Committee has reviewed the Fund Balance Policy 9 amendments and recommends approval by the St. Croix County Board of Supervisors. 10 11 THEREFORE, be it resolved by the St. Croix County Board of Supervisors that the St. 12 Croix County Fund Balance Policy, as attached, is hereby adopted by the County Board effective 13 upon adoption. Legal—Fiscal—Administrative Approvals: Legal Note: Fiscal Impact: There is no financial impact on the budget. c.ott .a, Cox, C or or t of ours l 12/ 2/2014 <ut a attseti, Finaric e 1 ir�eetor 12/11/2014 115 rtc ortton, f"or�nty c t�tit�is t �/2014 12/17/14 Adopted 12/17/14 Administration Committee APPROVED ........ ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... RESULT: APPROVED [UNANIMOUS] MOVER: Ron Kiesler, Vice Chair SECONDER: Jill Ann Berke, Supervisor AYES: Schachtner, Sjoberg, Berke, Kiesler, Achterhof Vote Confirmation. ITIVis �h wer, Supei- st;f�7 12/23/2014 St Croix County Board of Supervisors Action: Roll Call -Vote Requirement— .................................................................................................................................................................................................................................................................................................................................... RESULT: ADOPTED [UNANIMOUS] MOVER: Travis Schachtner, Supervisor SECONDER: Dave Ostness, Vice Chair AYES: Schachtner, Ring, Babbitt, Novotny, Sjoberg, Nielsen, Kilber, Nelson, Berke, Ostness, Larson, Hansen, Kiesler, Brinkman, Peterson, Anderson, Achterhof, Leibfried, Peavey This Resolution was Adopted by the St. Croix County Board of Supervisors on January 6, 2015 Cindy Campbell, County Clerk 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 was effective for the fiscal year ending December 31, 2011. This accounting standard is intended to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. 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 • 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 (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 1 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 GASB 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. Policy— Prior to the end of each fiscal year, the County will report "committed" fund balance for any purposes approved by the County Board through formal action. 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 2 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. 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 minimum 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. 3 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). It is the main operating fund of the government. The General Fund Group is listed as follows: 100 General Fund 101 Contingency 121 Parks 131 Land and Water Conservation 201 Sales Tax 270 Pesticide Training 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: 205 Aging Programs 209 Jail Assessment 225 Health and Human Services 230 Aging & Disability Resource Center 250 Land Records 260 CDBG Grant 625 St. Croix Industries (will be closed in 2014) 801 Dog License 802 Sanitary Grants) 809 Stop Drugs The majority of resources in these funds are from external sources. Some of these funds also include tax levy dollars. 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. The County will add additional funds in this group as bond issues are approved by the County Board. St. Croix County has the following debt service funds: 308 — 2008A bond issue 301 — 2010A bond issue 314 - 2014A bond issue 4 The net proceeds (selling price less fees and associated costs) from the sale of real estate shall be applied to the debt service fund unless otherwise directed by the County Board. 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 and a fund will be added to account for it. St. Croix County has the following capital project funds: Fund 400 — General Capital Projects Fund 409 — Land Sale Capital Project Fund 414 — 2014 Bond funded projects 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, Internal Service and Agency Funds which are not covered by GASB 54. 5 APPENDIX A— FUND SPECIFIC POLICIES 101 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. 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 Department 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. At the end of each calendar year a balance of$500,000 shall be classified as committed as a "Placement Risk Reserve Fund" until a future board resolution reverses this commitment. This fund will be reviewed annually. 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. 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 Home - 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 6 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 - Per the St. Croix County Self-Insured Employee Medical Plan Premium and Funding Policy the health insurance fund reserves an amount equal to 25% of Expected Claims. This amount is reserved for and anticipated to cover Contingent Costs, should any of these costs arise. The 25% represents a three month run-out period. 702 Worker's Compensation — This fund pays for worker's compensation insurance premium and claim costs, as well as employee injury prevention programs and a percentage of the Risk Manager and Safety Coordinator's salaries. It is funded by a percent charge to each department based on department payroll. Some departments also pay additional amounts based on their loss history and actual claim costs. The percent charged is assessed annually. The County is self-insured for the first $400,000 of every individual claim. The fund balance should equal or exceed the County's self- insured liability. 703 Liability Insurance— This fund pays for all other insurance premium and related claim costs (except Employee Health Insurance & Worker's Compensation Insurance), liability loss prevention programs and a percentage of the Risk Manager and Safety Coordinator's salaries. It is funded by an established allocation methodology to each department based on each department's potential exposure and loss history. As of 1/1/2014, the County is self-insured for the first $500,000 of every claim and the annual aggregate is $1,500,000. The fund balance should equal or exceed the County's self- insured annual liability. 710 Health Retirement Account (HRA) — This fund receives the County's contribution to employee's HRA and disburses payments for qualifying deductibles and co-pays incurred by employees. 720 Retirement Health Savings Account (RHS) — This fund is used to pay retirees for their unused accumulated long-term sick bank hours earned during their employment. 725 County Fleet — This fund accumulates lease and operating costs for fleet vehicles and offsets those costs against fees charged to department for use of the vehicles.