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2 0 City Council Regular Meeting Minutes November 22, 2011 Page 5 VI. GENERAL BUSINESS OF COUNCIL. A. Approve the Fund Balance Policy. Motion carried unanimously. 7 Peggy Moeller, CPA, HLB Tautges Redpath, Ltd., presented a summary of the new accounting 8 standards required to be implemented by December 31, 2011, under the Governmental 9 Accounting Standards Board (GASB) #54 related to fund balance reporting in the City's 10 financial statements. She reviewed the current standards which report fund balances as reserved 11 or unreserved and explained that GASB 454 will have five new classifications, namely 12 nonspendable, restricted, committed, assigned, and unassigned. She stated that the nonspendable 13 classification includes items not expected to be converted to cash and which are legally or 14 contractually required to be maintained intact. She also reviewed the restricted fund balance, 15 committed fund balance, assigned fund balance, and unassigned fund balance, providing 16 examples of funds in each of these categories. She discussed the City's General Fund cash flow 17 reserve and noted that the only way the City can show cash flow is in the unassigned fund 18 balance. She recommended that the City authorize a minimum fund balance policy which will 19 enable the City to have a footnote in its financial statements which explains its cash flow needs, 20 why it needs such a large unassigned fund balance in the General Fund, and that the fund balance 21 is necessary even though it is unassigned. She also recommended that the City formalize its cash 22 flow assumptions and adopt a Fund Balance Policy. She then reviewed the Special Revenue 23 Funds under GASB #54 and stated that the City currently has six Special Revenue Funds with 24 one fund affected by the requirements of GASB #54 related to its water filtration and purification 25 fund. She recommended that the City Council adopt a resolution to formalize its commitment of 26 the revenue sources that make up the five remaining special revenue funds and to reclassify its 27 water filtration and purification fund to an enterprise fund. 28 29 Councilmember Roth stated that the City has kept its fund balance at 30 -35% and asked if this 30 amount is adequate to cover the City's expenses. 31 32 Ms. Moeller replied that she felt the City's fund balance was adequate and added if the fund 33 balance were lowered, the City would have cash flow issues in the first six months of the year 34 due to the timing of real estate tax payments to Minnesota cities. She stated that she felt GASB 35 #54 will have a positive impact on cities and will make it easier for the public to compare cities 36 with one another. 37 38 Motion by Councilmember Roth, seconded by Councilmember Gray, to approve the Fund 39 Balance Policy as presented. 40 41 Motion carried unanimously. 42 43 B. Resolution 11 -074• Resolution Committing Specific Revenue Sources in Special 44 Revenue Funds for the City of St. Anthony. 45