HomeMy WebLinkAbout(0012) 02 SRF Reserve Policy-redlined.PDFcrRevenue Governmental
Funds Reserve Policy
I. Authority:
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The Fort Worth City Council is responsible for legislation, policy formulation, and
overall direction setting of the government. This includes the approval of financial
policies which establish and direct the operations of the City of Fort Worth. The City
Manager and Assistant City Managers are responsible for carrying out the policy
directives of the City Council and managing the day-to-day operations of the
executive departments, including the Department of Financial Management Services.
This policy shall be administered on behalf of the City Manager and the Assistant City
Managers by the Chief Financial Officer/Director of Finance.
II. Purpose:
The City desires to maintain a prudent level of financial resources to guard its
stakeholders against service disruption in the event of unexpected temporary
revenue shortfalls or unpredicted one-time expenditures. In addition, this policy is
intended to document the appropriate Reserve level to protect the City's credit
worthiness and provide adequate cash flow based upon the traditional operating
cycle. The Government Finance Officers Association's (GFOA)best practice for
reserves recommend, at a minimum, regardless of size, maintain an unassigned
fund balance of no less than two months of regular operating revenues or operating
expenses. Reserves are accumulated and maintained to provide stability and
flexibility to respond to unexpected adversity and/or opportunities and to minimize
the costs associated with short-term cashborrowing.
This policy establishes the amounts the City will strive to maintain in its General
Fund, Special Revenue Funds, and General Debt Service Funds ReservesSpeeial
Revenue Funds as Reserves how the Reserves will be funded, and the conditions
under which Reserves may be -used.
III. Applicability and Scope:
This policy shall apply to all Special Revenue Funds under the budgetary and fiscal
control of the City Manager and the City Council except the Crime Control an
Ffevention District Fun .
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Funds Reserve Policy
HIV. Related Documents and References:
A. Operating and Capital Budget Policy
B. Long -Term Financial Planning Policy
C. Capital Asset Investment and Management Policy
D. Debt Management Policy
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V-]V. Policy:
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Reserve Levels - The City will maintain a combined Restricted and Assigned
Fund Balances in Special Revenue Funds equivalent to two months (16.67%) o
the next fiscal year budgeted operating expenditures.
total of the Assigned and Restricted Fund Balance classifications:
Balance amounts, Nvith Fund Balance for purposes of this policy being the combined
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V44-.VI. Monitoring Performance
A. The City will measure its compliance with this policy on an annual basis as of
September 30+h each year or as soon as practical after final fiscal year-end
financial information becomes available. During the course of the fiscal year the
Department of Financial Management Services and the Performance and
Budget Office shall closely monitor the City's revenues and expenditures to
ensure Reserves are not used beyond any planned usage.
B. If, based on staff's analysis and forecasting, the target level of Reserves is not met
at fiscal year-end or is not likely to be met at any point within a five-year time
horizon, then during the annual budget process a plan to replenish the Reserve
levels will be developed by collaboration among affected departments and
Financial Management Services and Planning & Data Analvtics
departments
Managefnent Ser-viEes and the Per-feFmanee and Budget Office based on the
requirements outlined in this policy.
C. Funding the Reserve - Funding of Reserve targets will generally come from
excess revenues over expenditures or one-time revenues, non -recurring
revenues, and budget surplus. Year-end surpluses are an especially
appropriate source for replenishing fund balanceFundig of Reserve targets
will generally eeme fr on; _- ---- _ _ - --__--- ever- expenditures or- one-time
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V44-.VI. Monitoring Performance
A. The City will measure its compliance with this policy on an annual basis as of
September 30+h each year or as soon as practical after final fiscal year-end
financial information becomes available. During the course of the fiscal year the
Department of Financial Management Services and the Performance and
Budget Office shall closely monitor the City's revenues and expenditures to
ensure Reserves are not used beyond any planned usage.
B. If, based on staff's analysis and forecasting, the target level of Reserves is not met
at fiscal year-end or is not likely to be met at any point within a five-year time
horizon, then during the annual budget process a plan to replenish the Reserve
levels will be developed by collaboration among affected departments and
Financial Management Services and Planning & Data Analvtics
departments
Managefnent Ser-viEes and the Per-feFmanee and Budget Office based on the
requirements outlined in this policy.
C. Funding the Reserve - Funding of Reserve targets will generally come from
excess revenues over expenditures or one-time revenues, non -recurring
revenues, and budget surplus. Year-end surpluses are an especially
appropriate source for replenishing fund balanceFundig of Reserve targets
will generally eeme fr on; _- ---- _ _ - --__--- ever- expenditures or- one-time
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r-eventies.
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D. Periodic Review of the Targets - At a minimum, during the annual financial
planning / budget process staff shall review the current and five-year projected
Reserves to ensure that they are appropriate given the economic and financial
risk factors the City is subject to.
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IX-.VII. Conditions for Use of Reserves
General Fund and Special Revenue Funds
It is the intent of the Citv to limit the use of General Fund and Special Revenue
Fund Reserves to address unanticipated, non -recurring needs. Reserves shall not be
applied to recurring annual operating expenditures. Reserves may, however, be
used to allow time for the City to restructure its operations deliberately manner (as
might be required in an economic downturn), but such use will only take place in
the context of an adopted long-term ri.1t is the intent of the City to limit use o 11
special revenue fund Reserves to address unanticipated, Non Recurring needs.
Reserves shall not normally be applied to recurring anftual oper-ating &Ependitur-es.
Reserves may, however-, be used to allow time for- the City to restructure its
but such use Nvill only take place in the context of an adopted long termp! .
X-.VIII. Excess of Reserves
In the event Reserves exceed the minimum balance requirements, at the end of
each fiscal year, any excess Reserves may be used in the following ways:
1. Fund accrued liabilities, including but not limited to debt
service, pension, and other post -employment benefits as
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directed and approved within the long-term financial plan and
the annual budget ordinance. Priority will be given to those
items that relieve budget or financial operating pressure in
future periods;
2. Appropriated to lower the amount of bonds or increase the pay-
as- you -go contributions needed to fund capital projects in the
City's Capital Improvement Plan;
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3. One-time expenditures that do not increase recurring operating
costs that cannot be funded through current revenues. Emphasis
will be placed on one-time uses that reduce future operating costs;
or
4. Start-up expenditures for new programs, provided that such action
is approved by the City Council and is considered in the context of
multi -year projections of revenue and expenditures as prepared by
the Department of Finance.
XLIX. Authority over Reserves
The City Council may authorize the use of Reserves. The Financial Management
Services and Planning & Data Analytics departments
Financial Management Services and the Performance and Budget 0 will
regularly report both current and projected Reserve levels to the City Manager
and City Council.
X44-.X. Quality Control and Quality Assurance:
It is the responsibility of the Chief Financial Officer/Director of Finance to
ensure the presence of procedures that provide sufficient guidance to affected
City personnel to fulfill the intent of this -policy.
These policies will be reviewed at least annually and updated on an as -needed
basis.
XLXI. r-iesBasis:
Budgetary basis is used for calculating the reserve level for Governmental Funds
ReserveTo be developed and managed aEeor-dingly.
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Not Applicable.
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