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Regular-General Government # 37.
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| Board of Supervisors |
Financial Services |
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| Subject |
Conduct first reading of ordinance establishing a policy on fund balances and reserves, and accept public comments. (No general fund impact) (Newens)
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| Recommended Action |
| Introduce by title only, waive first reading of the attached ordinance (Attachment A), receive public comment, adopt revisions to the existing policy on fund balances and reserves (Attachment B), and place the ordinance on the next regularly scheduled Board meeting of October 9, 2018 for final adoption. |
| Strategic Plan Goal(s) |
| Operational Excellence |
| Reason for Recommended Action/Background |
The County adopted the existing policy on fund balances and reserves on June 7, 2011, and since then has accumulated approximately $11 million in the County's general reserve. In accordance with Governmental Accounting Standards Board (GASB) Statement Number 54, Fund Balance Reporting and Governmental Fund Type Definitions, the County's general reserve balance has been reported in the county's Comprehensive Annual Financial Report as "unassigned fund balance." GASB Statement No. 54 defines unassigned fund balance as "the residual classification for the general fund," which "represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund" (GASB 54 paragraph 17).
Reporting the County's general reserve as "unassigned fund balance" does not adequately reflect the Board's intention to commit this balance for its intended purpose. Reporting the general reserve as "committed fund balance" better portrays the steps taken to help ensure financial sustainability of the County. Per GASB Statement No. 54, "amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision-making authority should be reported as committed fund balance" (GASB 54 paragraph 10).
Per the Government Finance Officers Association's, Governmental Accounting, Auditing and Financial Reporting Manual, "a government at its highest level of decision-making authority may formally place a constraint on the use of its own resources that remains legally binding unless removed in the same manner. Limitations on spending imposed by the annual (or biennial) operating budget naturally lapse with the passage of time and thus do not remain binding indefinitely. Consequently, the passage of the annual operating budget is not sufficient to commit fund balance" (page 190-191).
Because the County Board's highest level of decision-making is the adoption of an ordinance, and because the passage of the annual operating budget is not sufficient to commit fund balance, adoption of the attached ordinance is necessary to adequately reflect the Board's past intention to demonstrate the commitment of this general reserve in the Comprehensive Annual Financial Report (CAFR). This was the original intent when the Policy on Fund Balances and Reserves was adopted in 2011, however over time additional clarification and guidance has been received from the GASB and the County's external auditors leading to the recommendation for this action. |
| Collaborations (including Board advisory groups and external partner agencies) |
| The attached ordinance and policy have been reviewed by the Department of Financial Services management team, County fiscal officers, County department heads, the County Administrator's Office, County Counsel, and the County's external auditor. The results of the review and corresponding suggestions have been incorporated into the attached ordinance and policy. |
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| Fiscal Impact |
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| Source of Funds for this Expenditure |
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Explanation (Expenditure and/or Revenue) |
| Further explanation as needed: |
| There is no fiscal impact related to this action. This action would allow the Department of Financial Services to classify the County's General Reserve as a "committed" fund balance in the CAFR rather than the current classification of "unassigned". This matches the original intent of the 2011 Policy on Fund Balances and Reserves. |
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