HomeMy WebLinkAboutResolution 2016 (58) Resolution No. 58 (2016)
S 001 `' � RESOLUTION AMENDING FUND 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, most recently on
6 January 5, 2016, to reflect and clarify language and fund reference additions and changes as
7 attached; and
8
9 WHEREAS, the Administration Committee has reviewed the Fund Balance Policy
10 amendments and recommends approval by the St. Croix County Board of Supervisors.
11
12 THEREFORE, be it resolved by the St. Croix County Board of Supervisors that the St.
13 Croix County Fund Balance Policy, as attached,is hereby adopted by the County Board effective
14 upon adoption.
Legal-Fiscal-Administrative Approvals:
Legal Note:
Fiscal Impact: None.
If
SI-C t . Coy, Corpora o� 'ouli el 11 P1/2016
Pa rick`i /11/10/20j6
11/16/16 Administration Committee APPROVED
......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ..........
RESULT: APPROVED [UNANIMOUS]
MOVER: Ron Kiesler, Supervisor
SECONDER: Shaela Leibfried, Supervisor
AYES: Sjoberg, Bergren, Berke, Kiesler, Leibfried
Vote Confirmation.
v�
Roy lobe';-g, UpCrvvs'or 1 I./17/`016
SL Croix County Board of Supervisors Action:
Roll Call -Vote Requirement— Majority of Supervisors Present
......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ..................
RESULT: ADOPTED [UNANIMOUS]
MOVER: Roy Sjoberg, Supervisor
SECONDER: Laurie Bergren, Supervisor
AYES: Sicard, Ring, Babbitt, Coulter, Sjoberg, Long, Bergren, 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 December 6, 2016
Cindy Campbell, County Clerk
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Introduction
Fund balance is an accounting term used to describe the difference between a
governmental fund's current assets (cash, short-term investments, inventories,
receivables, and other unrestricted assets) expected to be available to finance
operations in the immediate future—and its current liabilities. A positive difference of
current assets over current liabilities gives an indication of the resources immediately
available to finance ongoing operations.
Public officials have the difficult task of balancing the public's interest in minimizing the
perception of overtaxing with the County's interest in being prepared for the risks faced
every day by the County. These risks involve funding operations in an uneven revenue
cycle and the ability to weather economic downturns, catastrophic losses or natural
disasters. Other considerations include maintaining security for bondholders, the ability
to leverage funds to take advantage of future opportunities, difficulty in replenishing
funds due to levy limits, and meeting sustainability concerns.
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. Placement
Risk Reserve).
• 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.
2
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
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.
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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 oyena'Ir�'the County will maintain
35%aof the Genessigned rral Fundthe
operat operating Ip,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
expenditures.
In the event that amounts assigned for cash flow fall above or below the desired
target, 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 target, the County shall create a
plan to restore the appropriate levels. Should the actual amount assigned for
cash flow rise significantly above the desired target, 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). 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
4
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
315 — 2015A bond issue
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. Any amounts remaining upon final payment of the
bond issue will be transferred to other debt service funds.
Capital Project Funds
Capital project funds are used to record expenditures related to specific capital outlays
(capital asset purchases, buildings, or capital improvements) and to set aside resources
for future specified capital outlays. If bonds are issued to finance capital outlays, the
proceeds are spent in the dedicated capital project fund and a fund will be added to
account for it. Fund 400 is used to account for capital expenditures funded from non-
bond sources such as property tax levy. St. Croix County has the following capital
project funds:
400 — General Capital Projects
409 — Land Sale Capital Project
5
414 — 2014 Bond funded projects
415 — Health Center Construction and Remodel
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.
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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. Al—the—,:ad of eaGh
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irii tutq:.. yrecommendre.allllocaflon.
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205 Aging and 230 ADRC Funds (Special Revenue Fund Group)
The resources in these funds 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. "I" ese4 °mss-w4i -be
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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
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.
eursun o m e .u n d s In o I d tau, I us o muinus at o ex einses �o
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a ,,,,,,,,,,,,,,,,,,,,
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.
1f lie Hii Iowa Il uind slhoulld tau° e� lus ou° mlinus 31:/::P at `I01:YcP of ex einses to maliinaliin
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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
$4 ,--0Q, , Q..,, , 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.
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710 Health llf; ,iii,iir.I.b u„ir , ,IIrnei”
, -,t ,,,,,,,,,,"i,r,irain"9.21 .2.r'� Ill e�f�i' � .....
c (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.
Periodic contributions to this fund from tax levy pay for the fund's disbursements.
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.
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