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MEMORANDUM DATE: May 14, 1992 TO: Thomas D. Burt, City Manager FROM: Roger Larson, Finance Director ITEM: UNAPPROPRIATED FUND BALANCES During the 1989 Special Session, the 1990, and 1991 regular sessions, many legislators focused attention on cities' fund balances. Discussions centered on what some legislators call "excessive" reserves. In light of the increased attention to these dollars, it is critical for St. Anthony to designate or earmark these funds prior to completing its annual State Auditors Report. Many cities like St. Anthony, have developed Unappropriated Fund Balances over a period. of years. These reserves come from fiscal years where revenues exceeded expenditures and now represent a significant amount of money. To assist local governments, the League of • Minnesota Cities developed recommendations on how the fund balances should be designated. They are as follows: 1) Cities designated part or all of their undesignated reserve fund balances prior -to submitting its annual Financial Profile to the State Auditors Office. 2) Cities should plan carefully in the designation of these, funds and indicate to their auditors they would like these designations included in their Financial Statements. 3) Designations may.be established to indicate tentative plans for financial resource utilization in a future period. Such designations reflect managerial plans or intent, however, are not permanent and Council-may choose to re-direct or redesignate these funds at any time. 4) Because revenue's are received twice per year, cities should maintain adequate working capital reserves to prevent short term borrowing (the interest paid expenses can be significant). To comply with the League's recommendations, St. Anthony designates its reserves annually during the acceptance of the auditors.report to Council. For Councils reviewal, I attached a spreadsheet which indicates the designation of the 1990 reserves, the increase/decrease in the fund balance for 1991 and the 12/31/91 audited cash balances.