12-21-11 Council Workshop A Minues

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MINUTES CITY COUNCIL DECEMBER 21, 2011 without the Council taking action to remove them. The Director noted that the current management practice has been to use the funds' revenue sources for specific purposes; therefore, there will be no change in the day -to -day practice. The only additional requirement is the need for Council action to change established practices. The Director then reviewed the proposed Fund Balance Policy which is based on the GASB 54 requirements separating fund balances into five new categories. Under the old standards there were three categories: Reserved, Designated, and Undesignated. The new categories are Nonspendable Fund Balance, Restricted Fund Balance, Committed Fund Balance, Assigned Fund Balance, and Unassigned Fund Balance. These new categories are more descriptive and focus on how the City plans to use its resources. The Finance Director and the Council discussed each of these categories in detail. Below is a brief description of each: Nonspendable Fund Balance — amounts that are not in a spendable form or are required to be maintained intact. An example of nonspendable fund balance is property held for resale. Property held for resale cannot be spent without being converted to cash first. Restricted Fund Balance — amounts subject to externally enforceable legal restrictions. An example of restricted fund balance is 10% Gambling proceeds required to be spent for lawful purposes under MS 349.12. Committed Fund Balance — amounts that can be used only for the specific purposes determined by a formal action of the government's highest level of decision - making authority. (City Council). Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally. An example of committed fund balance would be the City Council committing cable franchise fees for cable TV programming. Assigned Fund Balance — amounts a government intends to use for a specific purpose; intent can be expressed by the government body or by an official or body to which the governing body delegates the authority (City Administrator and /or Finance Director). An example of assigned fund balance would be the City's portion of a construction project where other funding was received with the requirement of a match. Unassigned Fund Balance — residual amounts that are available for any purpose in the General Fund. This category can only be found in the 2