Management Report and Recommendations 12/31/1986

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City of Lino Lakes, Minnesota Management Report, Page 15 The City's minimum cash flow reserve requirement is measurable. For the City of Lino Lakes, the minimum required surplus is $590,250 computed as follows: 1987 Budgeted Levy (Includes Homestead Credit) 1987 Anticipated Local Government Aid $ 948,000 232,500 Total $1,180,500 Minimum Required Cash -Flow Reserve (One -Half of Total) $ 590,250 The City improved the financial position and undesignated reserve balance of the General Fund substantially in 1986. This increase (plus incremental increases over the past several years) will allow the City to better manage the impending State aid reduc- tions of 1987. The level of fund balance of the City's General Fund is one indicator of the finan- cial strength or independence of a city. This often becomes critical during periods of high inflation; decreasing State aids; and, poor economic growth. With adequate reser- ves, these external factors are more manageable by the City. We commend the City for the improvements made in recent years to the General Fund reserve balance. These impro- vements indicate a responsible approach to City government which will assure the con- tinued ability of the City to deliver basic required services on a timely basis. Special Revenue Funds The financial statements of the Special Revenue Funds are presented in Statements 8 and 9 of the 1986 Annual Financial Report. A special revenue fund is a classification of funds to account for revenues segregated by City ordinance or Federal or State Statutes for specific purposes. The City maintains the Federal Revenue Sharing Fund as the only Special Revenue Fund of the City. The fund balance of the Federal Revenue Sharing Fund of $2,377 at December 31, 1986 consists of the fourth quarter allotment receivable ($742) and accumulated interest earned over the past year. Federal legislation has eliminated the Revenue Sharing Program. We recommend that the City expend the remaining balance of this fund in 1987 to effectively close the fund.