HomeMy WebLinkAboutCouncil Resolution 1438 1./RESOLUTION NO. / ._W
A RESOLUTION AMENDING THE FINANCIAL MANAGEMENT POLICY
FOR THE CITY OF CENTRAL POINT
RECITALS:
A. Whereas the Mayor and City Council are committed to the highest standards of
financial management, periodic updating of financial policies is necessary to assure
consistent and rational financial management.
B. The Mayor and Council have reviewed the attached Financial Management Policy
and wish to clarify and enact the updated financial procedures that govern the
operations of the City of Central Point.
THE CITY OF CENTRAL POINT RESOLVES:
Section 1: To adopt the amended Financial Management Policy for the City of Central Point.
Passed by the Council and signed by me in authentication of its passage this December 10,
2015.
//1)4(--L- ' /
Hank Williams, Mayor
ATTEST
Deanna Casey, City Recorder
City of Central Point
Financial Management Policy
Scope
This financial management policy applies to all fiscal activities of the City of Central Point.
Objectives
The objective of this financial policy is as follows:
• To ensure the legal use of all City funds through efficient systems of financial security
and internal control.
• To carry out the City Council's goals and policies through the budget process.
• To provide and maintain essential public programs,services,facilities,utilities,
infrastructure,and capital equipment.
• To employ revenue policies that prevent undue or unbalanced reliance on any one
source,distribute the cost of municipal services fairly,and provide adequate funds to
operate desired programs.
• To protect and enhance the City's credit rating.
Cash Management
• The Finance Director will forecast the City's cash inflows and outflows that will allow
the City to keep its debt service to a minimum and to maximize the yield on temporary
investments.
• Revenue and expenditure projections will be reviewed by the Finance Director on a
monthly basis to determine the validity of assumptions, new information,and accuracy
of seasonal or periodic fluctuations.
• The City's cash flow shall be managed with the goal of maximizing the total return on
investments:
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Investments,
• All City funds shall be invested to provide safety of principal,a sufficient level of
liquidity to meet cash flow needs,and to provide the maximum yield possible.Apart
from petty cash and allowance for normal movement and transfer of cash as needed,
one hundred percent of all idle cash will be invested.
• Cash may only be investment as authorized by ORS.294.o35 to 294.046,and 294.135
to 294.1
The City will not invest in stocks nor shall it speculate or
deal in futures or options.
• The City will conduct business only with financial institutions such as the Local
Government Investment Pool,banks,investments brokers,investment bankers,
trustees,paying agents and registrants that are deemed credit worthy.
• Management responsibility for the investment program shall rest with the City's
Finance Director or delegate who shall adhere to ORS. 294.145 in managing the
investment program for the City.
• Objectives:
a. Safety: Safety of principal is the foremost objective of the City. Each
investment transaction shall be undertaken in a manner which seeks to
ensure preservation of capital and avoidance of capital losses through
securities defaults,erosion of market value or other risks.
b. Liauidity: The City's Finance Director shall match the investment portfolio
., , with cash flow requirements.,:Due,to the changing requirements of cash
flow caused by factors not totally within the control of the City's Finance
Director,the ability to convert a security into cash must be considered.
c. Yield: Investments of the City shall be acquired in a manner designed to
attain the maximum rate of return through all budget and economic cycles
while taking into account restraints on investment instruments,:cash flow
characteristics of transactions and safety of principal.
d. Reoortina: The Finance Director shall maintain detail records of each
investment in a form that allows for periodic reporting. On a quarterly
:basis,the City's outstanding investments and fiscal year to date-investment
income will be presented to City Council. •
Accounting
• The City will maintain a fund accounting and financial reporting system that conforms
with Generally Accepted Accounting Principles(GAAP)and Oregon Local Budget Law,
and will issue a Comprehensive Annual Financial Report(Audit report)each fiscal year.
The Comprehensive Annual Financial Report.will show fund expenditures and revenues
on both a GAAP and budget basis for comparison purposes.
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• Pursuant.to state law,the City shall have an annual financial and compliance audit,and
prepare financial statements based on the audited financial information. The audit
shall be performed by certified public accounting(CPA)firm, licensed to practice as
Municipal Auditors in the State of Oregon. This report,including the auditor's opinion
and specific reports as required by Oregon state regulations,shall be filed no later than
six(6)months following the end of the fiscal year. The Finance Director shall be
responsible for establishing a process to ensure timely resolution of audit
recommendations,if any.
• Full disclosure will be provided in financial statements and bond representations.
• The accounting system will be maintained to monitor expenditures and revenues with
thorough analysis by the City Manager and Finance Director.
• Monthly financial reports will be provided to management containing department
revenues and expenditures actual to date with comparison to the budget.
• Quarterly summary financial reports will be provided to City Council and management
with revenues and expenditures in summary form for each operating fund with
explanations of significant financial variations to budget.
• Fund balances and reserves will be maintained in accordance with GASB 54,the
Governmental Accounting Standards Board ruling for reporting dedicated resources.
Categories for reporting fund balances are:
a) Non-spendable—these are nonliquid assets(i.e.inventory, prepayments)and liquid
assets that have legal constraints preventing their use(i.e.principal of an
endowment)
b) Restricted—assets which are constrained by an external entity(i.e.covenants in
bond contracts)
(As it is the City's policy to fully comply with bond documents,covenants,inter-
agency agreements,or contracted service agreements,amounts specified in any of
these documents shall be included as restricted fund balance.)
c) Committed—constraints created by the City Council. Constraints are enacted by
resolution and must be in place prior to the end of the fiscal year.
d) Assigned—similar to committed except constraint is not legally binding. May be
created by the City Council or staff and can be created after the end of a fiscal
period.
e) Unassigned—only the General Fund has an unassigned category. This represents
any excess of total fund balance after the,prior four categories are deducted.
General Fund:
The General Fund balance may contain committed resources beyond those stipulated
in this financial policy for contingency and fund carryover purposes. The City Council
shall adopt by resolution the commitment specifying the purpose,dollar amount and
duration of the committed amount. •t
General Fund cash reserves may be set aside for purposes that create a sound financial m
operating environment,and may be assigned by the City Council,City Manager,or the0.0
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December io,2015
Finance Director. Assignments generally are to build cash reserves for a one-time or
limited duration purchase
Special Revenue Funds:
StreetFunditiWaiig restricted balances for
those resources received and dedicated to be used for a specific purpose.
Under this financial policy,`th c tfraiT i re`.k.F 1n;d; ids shall maintain a committed
€ate balance for contingency and ending fund balance in the amount's sj%ec .i;#
eat° ' Assigned balances may also be created as necessary under the same policy
as for the General Fund.
Enterprise Funds:
Water, Stormwater,and Building Funds must retain any debt service reserve
obligations as restricted. Terms of the reserves are generally specified in the associated
bond documents,covenants,or agreements.
Under this financial policy,these funds shall maintain a committed fund balance for
contingency and ending fund balance in the amount stated for each fund.
Assigned balances may also be created as necessary under the same policy as for the
General Fund
Debt and Caoital Project Funds
General obligation debt service balances are restricted by state statue and are always
categorized as restricted.
Capital project fund balances(whether general government or enterprise)should be
nominal and sufficient to cover any short term liabilities. Larger balances may occur if
the City receives cash for restricted purposes to be expended in future years,such as
proceeds received from debt issuance or receipts from developers in lieu of current
construction of infrastructure.
•
The order inwhich categories are expended can affect future financial flexibility.
Generally,more restricted resources shall be expended prior to less restricted resources
• Annually,the City may submit documentation to obtain the Certificate of Achievement
for Excellence in financial reporting from the Government Finance Officers Association
(GFOA)..(Determination to participate will be based on the cost not outweighing the
benefit.) •
•
Operating Budgetary Policy
• A Budget Committee will be appointed in conformance with ORS 294.43.4. The Budget
Committee's chief purpose is to review the city's proposed budget and to approve a
budget and maximum tax levy for City Council consideration. The Budget Committee
may consider and develop recommendations on other financial issues as delegated by
the CityCouncil.
• In addition to a line-item budget that focuses on items to be purchased(such as
supplies and equipment),departments will provide the Budget Committee information '711
on programs being funded;what each program is committed to accomplish in long
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term goals and in short-term objectives,and provide performance measures that will
demonstrate the achievement of program objectives.
• The City will finance current expenditures with current revenues;and will avoid
budgetary practices that obligate future resources to cover current expenditures.
• The City budget will support City Council goals and priorities and the long-range needs
of the community.
• The City Council shall delegate authority to the City Manager in managing the budget
after it is formally adopted by the City Council. The City Manager may further delegate
levels of authority for the daily operations of the budget to department directors as
deemed appropriate.
• Adjustments to the""`mal Eiennia budget will be made when needed with changes
approved and adopted by the City Council in accordance with ORS 294.471-473.
• To maintain fund integrity,the City will manage each fund as an independent entity in
accordance with applicable statutes and with generally accepted accounting principles.
• The City may allocate direct and administrative costs to each fund based upon the cost
of providing these services;and will recalculate the cost of these services at least bi-
annually to identify the impact of inflation and other cost increases.
• The City's designation for capital outlay items that are considered fixed assets are
expected to last more than one year and cost over$5,000.
•
• Annually,the City may submit documentation to obtain the Award for Distinguished
Budget Presentation from the Government Finance Officers Association. (GFOA)
(Determination to participate will be based on the cost not outweighing the}benefit.)
•
Fund Structure and Fund Balance
General Fund . •
•
The General Fund will be used to account for all financial resources and expenditures except
those to be accounted for:in another fund. Resources include working capital,carryover,taxes,
licenses and permits,intergovernmental revenue,fines and forfeitures,charges for services,
miscellaneous revenues,and inter-fund transfers. Expenditures are for Administration, Mayor
and Council,Finance, Parks and Recreation,Community Development,Police,and.
Interdepartmental departments. The General Fund uses the modified accrual method of
accounting.
Minimum Fund Balance ,. .
•
• The General Fund will maintain a fund balance carryover of 15 to 25 percent of total
annual revenues, not including grant or loan monies. This is the minimum determined
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to be needed to maintain the City's credit worthiness and to adequately provide for
economic uncertainties and cash flow needs. .
• The City will budget a contingency appropriation to provide for unanticipated
expenditures of a non-recurring nature or shortfalls in projected revenues. The
minimum contingency will be maintained at not less than 2 percent of annual revenues
less budgeted prior year carryover.
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The Street Fund revenues are from state and local fuel tax,grants,franchise fees,charges for
services and miscellaneous sources. Expenditures are for the maintenance,repair,surfacing
and construction of city streets and associated infrastructure.
• The Street Fund will maintain a fund balance carryover of at least 25 percent of total
annual revenues,.not including grant or loan monies. This is the minimum determined
to be needed to maintain the City's credit worthiness and to adequately provide for
economic:uncertainties and cash flow needs:4, .- ":1.i'a+i :.4t/i,<•
• System development charges for transportation are included in the Street Fund
balance. This portion of the fund balance is restricted and shall not be used in
determining the minimum fund balance.. .. . • I:1•::
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• The City will budget a contingency appropriation to provide for unanticipated
expenditures of a non-recurring nature or shortfalls in projected revenues. The
minimum contingency will be maintained at not less than 5 percent of annual revenues
less budgeted prior year carryover.
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Capital Improvement Fund
The Capital Improvement Fund was established to account for resources used for the
acquisition-br'' onstruction of major capital projects. This fund uses the modified accrual
method of accounting.
This fund accounts for revenues from un-bonded assessment payments, construction grants,
parks system'development fees, and other resources. Expenditures are for construction,
property and equipment acquisition and replacement,improvements and related purposes,and
the repayment of short term debt principal and interest incurred in financing improvements.
• The purposeof the Capital Improvement Fund is to accumulate funds prior to a large
construction project;therefore,there is'no set minimum fund balance. '
• System Development Charges(SDCs)for parks are included in this fund balance. This
portion.of the furid balance is legally restricted and shall be accounted for separately
from the'unrestricted portion of the fund balance.
• The City may budget a contingency appropriation to provide for unanticipated
expenditures of a non-recurring nature or shortfalls in projected revenues. There is no
required:minimum contingency for this fund.
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Debt Service Fund
The Debt Service Fund accounts for the accumulation of resources for the payment of general
long-term debt principal and interest. Expenditures and revenues are accounted for on the
modified accrual method of accounting.
• All of the monies within the Debt Service Fund are restricted for debt service until the
specific debt is repaid in full. Oregon State Statutes prohibit cities from using this
money for any other purpose.
• The Debt Service Fund will maintain a balance of annual revenue as required by the
specific debt instrument. This is the minimum needed to maintain the City's credit
worthiness and to adequately provide for economic uncertainties and cash flow needs.
• No contingency is required for this fund.
Reserve Fund
The Reserve Fund accounts for the accumulation of resources to pay for any service, project,
property, or equipment that the City can legally perform or acquire, Specific projects or
services must be specified and reserves can only be spent for those purposes and directly from
the fund. Money cannot be transferred out of the reserve fund into another fund. Expenditures
and revenues are accounted for on the modified accrual method of accounting.
• The purpose, of the Reserve Fund is to accumulate funds for future needs; therefore,
there is no set minimum fund balance.
• No contingency is required for this fund.
Enterprise Funds
Enterprise funds account for operations: (a)that are financed and operated in a manner similar
to private business enterprise, where costs (expenses, including depreciation) of providing
goods and services are financed primarily through user charges; or (b) where the governing
body has determined that periodic determination of revenues earned, expenses incurred,
and/or net income is appropriated for capital maintenance, public policy, management control,
accountability,or other purposes.
•
Enterprise funds use full accrual basis of accounting for annual financial statement purposes.
However, the enterprise activities use a modified accrual basis of accounting.for budgetary
purposes. This assures budgetary compliance with such expenditures as capital construction
and acquisition,as well as debt principal transactions.
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Buildina Fund
The Building Fund accounts for building safety operations. Revenues are from the issuances of
building permits. Expenditures are for the operations of the building division. The city provides
structural,plumbing,electrical and mechanical inspections.
• The Building Fund will maintain a carryover balance of at least 25 percent of total
annual revenues,not including grant or loan monies. This is the minimum determined
to be needed to maintain the City's credit worthiness and to adequately provide for
economic uncertainties and cash flow needs.
• The City will budget a contingency appropriation to provide for unanticipated
expenditures of a non-recurring nature or shortfalls in projected revenues. The
minimum contingency will be maintained at not less than 2 percent of annual revenues
less budgeted prior year carryover.
Water Fund
The Water Fund accounts for water distribution operations.Revenues are from sales of water,
charges for services,and miscellaneous sources. Expenditures are for operations,capital
construction,and retirement of debt. ,
• The Water Fund will maintain a carryover balance of at least 25 percent of total annual
revenues, not including grant or loan monies. This is the minimum determined to be
needed to maintain the City's credit worthiness and to adequately provide for economic
uncertainties and cash flow needs.
• System Development Charges are included in the Water fund balance. This portion of
the fund balance is restricted and shall not be used in determining the minimum fund
balance. ,
• The City will budget a contingency appropriation to provide for unanticipated
expenditures of a non-recurring nature or shortfalls in projected revenues. The
minimum contingency will be maintained at not less than 5 percent of annual revenues
less budgeted prior year carryover.
Stormwater Fund
.
The Stormwater Fund accounts for storm drain maintenance operations. Revenues are from
charges for services. Expenditures are for operations,capital construction,and retirement of
debt.
• The Stormwater Fund will maintain a carryover balance of at least 25 percent of total
CYN
annual revenues, not including grant or loan monies. This is the minimum determined
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to be needed to maintain the City's credit worthiness and to adequately provide for
economic uncertainties and cash flow needs.
• System Development Charges are included in the Stormwater fund balance. This
portion of the fund balance is restricted and shall not be used in determining the
minimum fund balance.
• The City will budget a contingency appropriation to provide for unanticipated
expenditures of a non-recurring nature or shortfalls in projected revenues. The
minimum contingency will be maintained at not less than 5 percent of annual revenues
less budgeted prior year carryover.
Internal Services Fund
The Internal Services Fund is used for the accounting of goods or services provided to other
internal departments and supported on a cost reimbursement basis. Internal service funds use
full accrual accounting methods for annual financial statement purposes; however,for
budgetary purposes accounting is on a modified accrual basis.This assures budgetary
compliance with such expenditures as capital construction and acquisition as well as debt
principal transactions.
The fund is divided into Facilities Maintenance,Administration,and Fleet Maintenance
divisions. Expenditures are for personnel, materials and services and capital outlay. These
functions are supported by charges for services to other direct service departments and
divisions throughout the city.
•
• The Public Works Services Fund is an internal service fund and is supported by other
funds on a cost reimbursement basis for services provided;therefore,there is no set
minimum fund balance.
• No contingency is required for this fund
Revenues • •
• The City will estimate its annual revenues by an objective,analytical process. Because
most revenues are sensitive to conditions outside the City's control,estimates will be
conservative. •
• The City will make every effort to maintain a diversified and stable revenue base to
protect its operations from short-term fluctuations in any one revenue source.
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• The City will establish charges for enterprise funds that fully support the total cost of
the enterprise. Utility rates will be reviewed annually and will be adjusted as needed to
account for major changes in consumption and cost increases.
• The City will charge user fees to the direct beneficiaries of city services in an attempt to
recover all or part of the cost of providing that service. User fees will be reviewed bi-
annually to insure that direct and overhead costs are being recovered.
• To the extent practicable, new development shall pay necessary fees to meet all
identified costs associated with that development.
• The City will aggressively pursue collection of all delinquent accounts receivable. When
necessary,collection procedures will include termination of service,submission to
collection agencies,foreclosure,and other available legal remedies.
Expenditures
• The City will provide employee compensation in accordance with collective bargaining
agreements,approved compensation strategies,and applicable state and federal law.
• Estimated wage increases and changes in employee benefits will be included in the
proposed budget under Personnel Services.
• The City is committed to maintaining and improving the productivity of its staff by
providing a proper working environment,adequate equipment and supplies,and
appropriate training and supervision.
• A"social service"appropriation will be included in the proposed budget;and will
Increase or decrease relative to the overall revenues available.
• A"tourism promotion"appropriation will be included in the proposed budget. This
appropriation will increase or decrease relative to the overall available hotel tax
revenues.
Purchasing .::.
• The City will purchase materials,supplies,and equipment through a competitive
process that provides the best product for the least cost.
• The City will implement, maintain and abide by an approved purchasing policy.The
policy shall clearly state approved purchasing limits for all staff members;and the
process and method by which purchases will be made.
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Capital
• The City will provide for adequate maintenance of equipment and capital assets by
making available contributions for future capital improvements to ensure that monies
will be available to replace City vehicles and facilities.
• The City will update its five-year capital improvements program bi-annually;identifying
capital needs and potential capital funding sources. The capital improvements
program will reflect the priorities of the City Council and the long-range needs of the
community.
• The City will determine and use the most appropriate method for financing all new
capital projects.
• Special accounts dedicated for capital improvements will be segregated in the
accounting system and used only for the intended capital purposes.
Debt
• The City shall not use long-term borrowing to finance current operations.
• Capital projects financed through bond proceeds will be financed for a period not to
exceed the useful life of the project.
• Whenever possible,enterprise debt will be self-supporting. Regardless of the type of
debt issued,the City will establish a one-year reserve for all self-supporting debt.
• The City will seek to maintain and improve its bond rating to minimize borrowing costs
and to ensure access to credit markets."
,. •
• The City will keep the final maturity of general obligation bonds at or below 20 years,
with the exception of water supply and land acquisition which will be limited to 3o
years.
• The City will maintain good communications with bond rating agencies about its
financial condition.
Risk Management
• The City will provide an active risk management program that protects City assets
through loss prevention as well as appropriate levels of insurance.
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• In the event that conditions are such that the City is unable to meet carryover limits as
set forth and approved by Council as stated within this policy;staff will then apprise
Council of the shortfall and immediately take action for remedy by initiating additional
revenue sources or by curtailment of expenses.
Glossary of Terms
Capital Expenditure
A capital expenditure is an item which generally has a useful life of one or more years,such as
machinery,land,furniture,equipment or buildings,and is valued at more than$5,000.
Capital Protect
A capital project is a major construction or purchase which often requires either an outside
revenue source such as a grant, bond, loan or other source of funding.
Depreciation
Depreciation is a system of accounting which distributes the cost of a capital asset over the
useful life of the asset. In accordance with Oregon Local Budget Law,depreciation is not
budgeted by the City.
Expenditure
An expenditure is a term for money spent by the City for the programs and projects included
within the annual budget.
Fund
A fund is an accounting based division within the budget for independent fiscal and accounting
requirements.
Infrastructure
Infrastructure refers to the large-scale system and services that are necessary for economic
activity;such as the City's streets,water lines,storm drains,etc.
Modified Accrual Accounting
Revenues are recorded within the accounting period in which they become available and
measurable;and expenditures are recorded in the accounting period in which the liability is
incurred.
•
Revenue
Revenues are monies received by the City from both tax and non-tax sources.
System Development Charges
System Development Charges are fees assessed on new construction to cover the demands
placed on city services;and typically cover water,streets,storm drains and park costs. M
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