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Home My WebLink About(0016) 06 ISF Non-Insurance Reserve Policy-redlined.PDF-internal Seiw eeProprietary Fund Dr►cr►r�� D�Iin� I. Authority: FORT WORTH. 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 Assistant City Managersby 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 expenses. 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 unrestricted net position 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 cash borrowin T-he internal Service Fund Reserves (for non insurance funds) are aeeumulated—maintained to providestability and flexibility to respond to unexpeeted adversity and / of oppoftunities and to minimize the eosts associated with slAwt term eashbor-r- This policy establishes the amounts the City will strive to maintain in its Proprietary Fund Reserves, how the Reserve will be funded, and the conditions under which the Reserves may be used. This policy is intended to supplement, but not supersede, provisions of ordinances of the City governing the issuance or incurrence of bonds or other obligations secured in whole or in part by revenues or credited to a Proprietary FundThis poliey establishes the amounts the City will stfive to maintain in its Non insurance internal Service Fund Reserve, how the Reserve Nvill be funded, and the conditions under which the Reserves may be used. III. Applicability and Scope: I I P a g e FORT ��RTH�� Intern l SeFv ,�eProprietary Fund Dr►c�r►r�� D�Iin�� This policy shall apply to all Non insurance internal c,,,,t,ieeEroprieta Funds under the budgetary and fiscal control of the City Manager and the City Council. IV. Related Documents and References: A. Operating and Capital Budget Policy B. Long -Term Financial Planning Policy C. Capital Asset Investment and Management Policy V. Policy ON .a Reserve Levels for Non -Insurance Internal Service Funds - The City will maintain the following minimum reserve levels in all Internal Service Insurance FundsReser-ve Levels The City will maintain the folio am reserve levels in all Non insurance internal Service insurance Funds: 2 1 P a g e -internal Seiw eeProprietary Fund Dr►cr►r�� D��in� FORT WORTH. 1. A goal of Working Capital in Non -Insurance Internal Service Funds equivalent to ten percent (10%) of the next fiscal year budgeted operating expenses. This calculation shall be performed usingthe he operating fund only. 2. No Internal Service Fund shall have a negative Unrestricted Net Position. This calculation shall be performed by using all of the funds for the respective reporting_ group funds of the specific non -insurance related internal service fund. 3. In addition, the City acknowledges that initially, not all funds will meet the minimum requirement for Working Capital outlined in this policy. A fund will be considered compliant with this policy as long as the financial position shows continuous improvement each fiscal year. Y. VILVI. Monitoring Performance A. The City will measure its compliance with this policy on an annual basis as of September 30th each year or as soon as practical after final year-end account information becomes available. During the course of the fiscal year the Department of Financial Management Services and the Performance and Budget 3 1 3 a g e -internal SeFv eeProprietary Fund FORT WORTH... Dr►cr►r�� D��in�� Office shall closely monitor the City's revenues and expenses 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 the Department of Financial Management Services and the Performance 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 balance -Funding of internal ser-viee Reserve tar -gets will generally Eome ffem exEess revenues over- expenses or- one fifne revenues. D. Periodic Review of the Targets — At a minimum, during the annual financial planningibudget 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. 4 1 P a g e -internal SeFv eeProprietary Fund FORT WORTH... Dr►cr►r�� D��in� IX. Conditions for Use of Reserves The City intends to limit use of Proprietary Reserves to address unanticipated, non- recurring needs. it isthe intent of the City zoli mit e of internal service Working Capital Reserves to address „nant eilg t a Isio n,,Eur-,-inn needs. Reserves shall not be applied to recurring annual operating expenses. Reserves may, however, be used to allow time for the City to restructure its operations in a deliberate manner (as might be required in an economic downturn), but such use will only take place in the context of an adopted long-termplan. X. 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 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. One-time expenses 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 3. Start-up expenses 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 expenses as prepared by the Department of Finance. 5 1 P a g e -internal Seiw eeProprietary Fund Dr►cr►r�� D��in� XI. Authority over Reserves FORT WORTH. The City Council may authorize the use of Reserves. The Financial Management Services and Planning & Data Analytics departmentaThe DepaAment of Financial will regularly report both current and projected Reserve levels to the City Manager and City Council. 6 1 P a g e Intern l Seiw eeProprietary Fund Dr►cr►r�� D�Iin�� XII. Quality Control and Quality Assurance: FORT WORTH. 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. XIII. Met£ifsBasis: Generally Accepted Accounting Principles (GAAP - Full Accrual) basis is use for calculating the reserve level for Proprietary Funds ReserveTe be developed and 7 1 P a g e nT eFna SeFVk-eProPrietary Fund Dec-�r� D��in FORTWORTH,,, 8 1 P a g e 5 1 P a g e