HomeMy WebLinkAbout(0008) Consolidated FMPS clean copy.pdfFORT WORTH.
FINANCIAL MANAGEMENT SERVICES
200 Texas Street
FORT WORTH, TEXAS 76102
W W W.FORTWORTHTEXAS.GOV/FINANCE
Financial
Management
970
icy
Statements
I I P a g e
To establish and document a policy framework for fiscal decision -making, the City Manager will develop
and maintain a comprehensive set of Financial Management Policy Statements. The aim of these
policies is to ensure that financial resources are properly managed to meet the present and future needs
of the citizens of Fort Worth. Specifically this policy framework mandates the pursuit of the following
fiscal objectives:
I. Revenues: Design, maintain, and administer a revenue system that will assure a reliable,
equitable, diversified, and sufficient revenue stream to support desired City services.
II. Expenditures: Ensure fiscal stability and the effective and efficient delivery of services,
through the identification of necessary services, establishment of appropriate service levels,
and careful administration of the expenditures of available resource.
III. Fund Reserve Policies: Maintain the fund balance and net position of the various operating
funds at levels sufficient to protect the City's creditworthiness as well as its financial
position from emergencies.
IV. Capital Expenditures and Improvements: Review and monitor the state of the City's
capital assets, setting priorities for the addition, replacement, and renovation of such assets
based on needs, funding alternatives, and availability of resources.
V. Debt. Establish guidelines for debt financing that will provide needed capital equipment
and infrastructure improvements while minimizing the impact of debt payments on current
revenues.
VI. Interfund Loans: Establish guidelines for loans between funds.
VIL Cash and Investment Management. Invest the City's cash in such a manner so as to ensure
the safety of principal and interest, to meet the liquidity needs of the City, and to achieve the
highest reasonable market yield
VIII. Grants: Seek, apply for and effectively administer federal, state, and foundation
grants-in-aid, which address the City's current priorities and policy objectives.
IX. Fiscal Monitoring: Prepare and present regular reports that analyze, evaluate, and forecast
the City's financial performance and economic condition.
X. Accounting, Auditing and Financial Reporting. Comply with prevailing federal, state,
and local statutes and regulations, as well as current professional principles and practices.
XI. Retirement System and OPEB Health Care Trust: Ensure that the Employees' Retirement
Fund is adequately funded and operated for the exclusive benefit of the participants and their
beneficiaries.
2 1 P a g e
XII.Internal Controls: Establish and maintain an internal control structure designed to provide
reasonable assurance that City assets are safeguarded and that the possibilities for material
errors in the City's financial records are minimized.
X11L E-Commerce: To fully utilize available technologies to expedite cash payments and
receipts, enhance employee productivity, and provide customer satisfaction.
XIY. Donations: Establish guidelines for accepting gifts and donations in a responsible,
transparent, and accountable manner that is consistent with the City's strategic goals.
XV. Glossary: an alphabetical list of terms or words found in or relating to the Financial
Management Policies
3 1 P a g e
4 1 P a g e
Gas -Related Revenue &
FORTWORTH.
Expense/Expenditure
Policy
I. Authority
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 the 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 Finance. 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. Pu ose:
This policy is intended to establish guidelines for the management of certain City gas -
related revenue and associated expenditures/expenses in order to ensure reliable,
equitable, and diversified allocation and use of these funds. The goal for these funds
is to strike a balance between current and future needs that are funded from a non-
recurring and unpredictable resource.
III. Scope:
This policy addresses revenue derived from (i) ad valorem tax on mineral valuations;
(ii) leases for the development of natural gas from under City -owned property; (iii)
license or easement fees paid for the installation of gas gathering pipelines under City -
owned property; and (iv) income of the Fort Worth Permanent Fund (Trust).
IV. Glossary
See definitions related to this policy provided in the appendix.
V. Revenue Allocation:
A. Trust/Endowment Fund
The City has established a Trust Fund that will be structured and governed
in such a manner to achieve maximum investment flexibility, maximum
investment protection, and professional investment management. The Trust
will be managed to ensure the long-term preservation and growth of the trust
principal.
2. The Trust will be managed by a corporate trustee appointed by the City
Council in accordance with the City Charter and the State Local Government
Code. The City's Chief Financial Officer/Director of Finance
1IPage
Gas -Related Revenue &
FORTWORTH.
Expense/Expenditure
Policy
will be empowered to make fund management decisions and
recommendations consistent with an adopted investment policy of the City
Council. The Chief Financial Officer/Director of Finance shall serve as the
financial guardian of the Trust ensuring fiscal stability, overseeing the trustee
appointed by the City Council, monitoring fund performance and
recommending to the City Council the amount of funds available for
disbursement annually, in accordance with this policy and the trust documents.
The Chief Financial Officer/Director of Finance shall be precluded from
making specific expenditure decisions. Such decisions will be made by the
City Council upon recommendation by the City Manager.
3. The Trust instrument may be substantively amended upon the completion of
the process outlined within the trust documents.
4. To the extent not in conflict with common law or any other statutes applicable
to the Trust Fund, the trustee shall retain all powers granted to trustees by
the Texas Trust Code, and particularly is to have the power to invest and
reinvest the trust estate in accordance with the goals and stipulations of the
governing Trust instrument.
5. The determined percentage of bonus and royalty revenue from various sources
are to be held in a consolidated account which will be divided into different
sub -accounts including, but not limited to, the General Endowment Gas Lease
Fund, the Aviation Endowment Gas Lease Fund, the Park System Endowment
Gas Lease Fund, the Nature Center Endowment Gas Lease Fund, and the
Water and Sewer Endowment Gas Lease Fund. Other sub -accounts may be
created in order to account and track for funds as approved within this policy.
6. The goal of the Trust Fund is to produce income from investments and be
a long-term income source for the benefit of both present and future Fort
Worth citizens. The trustee, in close cooperation with the Chief Financial
Officer/Director of Finance, will recommend to the City Council distribution
procedures for the different funds of the Trust consistent with the goal to
preserve, as well as increase, the trust principal. The amount of income
available to be distributed each year from a particular fund of the Trust shall
be determined by the trustee and the Chief Financial Officer/Director of
Finance consistent with the Trust agreement approved by the Mayor and City
Council. In the event investment regulations prohibit the
2 1 P a g e
Gas -Related Revenue &
FORTWORTH.
Expense/Expenditure
Policy
intended growth and expansion of the Trust, a provision for dissolution of
the Trust will be incorporated into the initial Trust instrument. Dissolution of
the Trust will first require a determination and recommendation of the
corporate trustee and the Chief Financial Officer/ Director of Finance.
7. To facilitate prudent management and reasonable returns and growth for the
Trust Fund, during the 81 st Legislative Session, the Public Funds Investment
Act (Texas Local Government Code Chapter 2256) was amended. As amended
the Act allows the Trust Fund to be managed in a flexible manner consistent
with the Uniform Prudent Management of Institutional Funds Act (Texas
Property Code Chapter 163).
B. Revenue from Current Receipts
1. Ad Valorem Tax Revenue
The ad valorem receipts on mineral valuations will be allocated to the General F und.
2. Water and Sewer Fund
Bonus, royalty and other natural gas- related fee revenue derived from Water
and Sewer assets, including pipeline easements and license agreements, will
generally be allocated in the manner outlined below, provided, however that
no allocation may be made except in compliance with the Water and Sewer System's
Master Ordinance and applicable Supplemental Ordinances and bond covenants. To
the extent that gas -related revenues subject to this subsection are needed in order to
comply with covenants and duties for the System's Outstanding Obligations, they
shall be allocated first to such compliance.
Water and Sewer - Lake Worth Property
Funds from Water and Sewer property located in and around Lake Worth
(except the Nature Center and Refuge) shall be designated for qualified
expenditures in the development and execution of the 2007 Lake Worth Capital
Improvement Implementation Plan, until such time as the plan projects are
completed.
Water and Sewer — Other Property
All revenue derived from other Water and Sewer assets will be allocated as
follows:
a. Seventy-five percent (75%) to the Water and Sewer Gas Lease Capital Projects
Fund.
3 1 P a g e
Gas -Related Revenue &
FORTWORTH.
Expense/Expenditure
Policy
b. Twenty-five percent (25%) of the revenues will be allocated to the Water
and Sewer Endowment Gas Lease Fund.
3. Park land - Lake Worth
Funds from park land located in and around Lake Worth (except the Nature Center
and Refuge) shall be designated for qualified expenditures in the development and
execution of the 2007 Lake Worth Capital Improvement Implementation Plan, until
such time as the plan projects are completed.
4. Park land - Fort Worth Nature Center and Refuge
Allocation of Bonus
Bonus revenues from gas leases associated with the Nature Center will be
allocated first to establish the Nature Center Endowment Gas Lease Fund such that
a ten million dollar ($10,000,000.00) corpus will be established within the
Endowment Fund. Any remaining bonus funds will be allocated as follows:
a. Fifty percent (50%) to the Nature Center Gas Lease Capital Improvement
Program to implement the Nature Center Master Plan; and
b. Fifty percent (50%) to the Park Gas Lease Capital Project Fund.
Allocation of Royalties and Other Lease Revenues
Royalty and all other revenue from gas leases associated with the Nature Center will
be allocated in accordance with the paragraphs below. Allocation shall vary
depending on whether such allocation occurs before or after Full Funding of the
Master Plan as defined in the following paragraph.
In 2009, the City Council adopted Resolution 3765-07-2009, which endorsed the
allocation of $62 million, adjusted for inflation, to provide full funding of the Nature
Center Master Plan, which was incorporated into the City's Comprehensive Plan in
February 2004 (M&C G-14276). In accordance with that Resolution, the term "Full
Funding of the Master Plan" shall mean a total combined allocation to the Nature
Center Endowment Gas Lease Fund and the Nature Center Capital Improvement
Program of an amount that, as adjusted by the Consumer Price Index, represents the
equivalent of $62 million in 2009.
Until Full Funding of the Master Plan (as described above) has been achieved, all
royalties and other revenue received from gas leases associated with the Nature
Center will be allocated as follows:
4 1 P a g e
Gas -Related Revenue &
FORTWORTH.
Expense/Expenditure
Policy
a. Twenty-five percent (25%) to the Nature Center Gas Lease Capital
Improvement Program
b. Twenty-five percent (25%) to the Park Gas Lease Capital Project Fund; and
c. Fifty percent (50%) to the Park System Endowment Gas Lease Fund.
After Full Funding of the Master Plan (as described above) has been achieved, all
royalties and other revenues received from gas leases associated with the Nature
Center will be allocated as follows:
a. Fifty percent (50%) to the Park Gas Lease Capital Project Fund; and
b. Fifty percent (50%) to the Park System Endowment Gas Lease Fund.
5. Park land - Municipal Golf Courses
Bonus, royalty and other natural gas- related fee revenue derived from
designated golf course property, including pipeline easements and license
agreements, will be allocated solely to the Golf Gas Lease Capital Project Fund.
6. Park land - Bonuses
Unless otherwise specified in subsections 3-5 above, all bonus revenues from gas
leases associated with park land will be recorded in the Park Gas Lease Capital
Project Fund and will be designated for use for capital improvements within the
park system.
7. Park land - Royalties and Fees for Federal/State Restricted Parks
With the exception of the Nature Center, royalties and other fees received from gas
leases or license agreements associated with park land that has federal and/or state
restrictions requiring proceeds to be spent within the park system shall be allocated
as follows:
a. Fifty percent (50%) to the Park Gas Lease Capital Project Fund; and
b. Fifty percent (50%) to the Park System Endowment Gas Lease Fund.
This same allocation shall be used for all gas -related revenues generated from the
Fort Worth Nature Center and Refuge that are not otherwise allocated under
subsection 4 above.
5 1 P a g e
Gas -Related Revenue &
FORTWORTH.
Expense/Expenditure
Policy
8. Municipal Airports Fund
Bonus, royalty and other natural gas- related fee revenue derived from airport
property, including pipeline easements and license agreements, will be allocated
in the following manner:
1. Fifty percent (50%) to the Aviation Gas Lease Capital Project Fund for
aviation capital improvement projects; and
2. Fifty percent (50%) to the Aviation Endowment Gas Lease Fund.
9. Pipelines in Public Rights of Way
Revenue derived from pipeline easements and license agreements in the public
rights of way will be deposited to the General Fund to offset the staff costs
associated with reviewing and managing the pipeline locations in relation to
other utilities.
10. Property Owned by City -Affiliated Corporation
All gas -related revenues derived from property titled to any City -affiliated
corporation, such as local development corporations, Alliance Airport Authority,
or the Housing Finance Corporation, shall be provided to such City -affiliated
corporation to support its lawful activities per the policies and oversight of its
respective governing board.
11. All Other Revenue
Except as noted in prior sections, all other revenue from bonuses, royalties and fees
from gas leases, pipelines or related activities located on all other City property,
including unrestricted park land, will be allocated as follows:
1. Fifty percent (50%) of the revenue will be allocated to the General
Gas Lease Capital Projects Fund; and
2. Fifty percent (50%) of the revenue will be allocated to the General
Endowment Gas Lease Fund.
12. Minimum Payment Threshold
Notwithstanding anything in this policy to the contrary, if a gas -related revenue
payment is $500 or less, one hundred percent of the payment will be allocated
6 1 P a g e
Gas -Related Revenue &
FORTWORTH.
Expense/Expenditure
Policy
to the respective Gas Lease Capital Project Fund.
13. Interest Income
Interest earnings received from any Gas Lease Endowment Fund will be allocated
solely to the respective fund's Gas Lease Capital Project Fund.
VI. Expenditures/Expenses
Expenditures/Expenses of revenues derived from lease bonuses and royalties,
other gas -related revenue, and distributions from the Trust/Endowment Funds
shall be appropriated for one time program initiatives and capital projects which
meet one or more of the program and project criteria listed below:
1. Capital projects with a minimum ten (10) year useful life;
2. To provide matching grant funds to leverage funds for capital projects;
3. Technology with a minimum five (5) year useful life;
4. Acquisition of equipment and fleet assets including contributions to a
revolving replacement fund;
5. Capital equipment with a minimum ten (10) year useful life;
6. To fund one-time community -wide economic and neighborhood
development initiatives and projects;
7. To fund labor and materials associated with production, distribution
and establishment activities for trees on public property (including
school and county property);
8. To periodically transfer funds to the General Fund to offset budgeted
administrative costs associated with administering this policy and
managing the City's gas leases and pipeline agreements, with the
allocation of the cost being proportional among all gas revenue funds
according to each fund's relative percentage of the total revenue
collected in all funds (including the Trust/Endowment funds and City
affiliated corporation funds) during that reporting period;
7 1 P a g e
Gas -Related Revenue &
FORTWORTH.
Expense/Expenditure
Policy
9. To periodically transfer Park funds from gas lease and pipeline
revenues to the General Fund to offset program costs associated
with leases, conversions, and pipelines;
10. To replenish the Unassigned Fund Balance (for the General Fund),
Assigned Fund Balance (all other Governmental Funds except the
General Fund), or Net Position (for Enterprise Funds), if necessary,
in any designated City fund, to meet the minimum
reserve requirements established for that fund;
11. To make payments in support of arts organizations provided, however,
such payments may only be made using distributions from the
General Endowment Gas Lease Fund and not from bonus,
royalties, ad valorem tax revenues, or any other gas -related revenue.
8 1 P a g e
Revenue Receipting
Policy
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 the
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 Finance. This policy shall be administered on behalf of the
City Manager and the Assistant City Managers by the Chief Financial Officer/Director of
Finance ("CFO").
II. Purpose
This policy defines and provides the guiding principles with respect to Revenue
Receipting, including the handling of cash, reconciling payments received, and reporting
on receipting activity occurring within the City of Fort Worth ("the City"). The objectives
of this policy are to ensure consistent revenue receipting practices and to safeguard
against loss, unauthorized use, or misappropriation of assets. Controls are created to
establish, maintain, and enforce a sound system of operational procedures in accordance
with industry best practices and internal control objectives. These controls address the
decentralized nature of the processes associated with receipting and depositing revenue
while also providing standards and minimally acceptable practices for these activities.
III. Annlicability and Scope
All employees of the City, including uniformed employees having revenue receipting,
cash handling, and payment reconciliation responsibilities shall conduct all related
activities in compliance with rules and guidelines set forth by this policy, and by their
respective departmental cash handling and reconciliation procedures.
IV. Glossary
See definitions related to this policy provided in the Glossary for Financial Management
Policies.
1IPage
Revenue Receipting
Policy
V. General Policies
FORT WORTH.
A. Each department is required to maintain a listing of the locations and the employees
who perform revenue receipting activities. Each department shall provide this
listing to the Department of Financial Management Services ("FMS") on an annual
basis. This list must include the name, employee ID, login ID, and department
number of all staff that handle payments at each location.
B. The number of employees with access to a change drawer shall be limited to
staff that are required to handle payments as part of their job function.
Separation of duties must exist between those employees receiving and receipting
payments and those individuals who will perform the accounting and recordkeeping
functions pertaining to revenue intakes.
C. Where adequate separation of duties is precluded due to limited available personnel
or other operational constraints, the Department Supervisor shall perform specific
verification functions to discourage misappropriation and/or theft. The Supervisor
shall not be involved in the original transaction steps subject to verification.
Departments should confer with FMS to establish other mitigating controls where
separation of responsibility is precluded.
D. Generally, revenue receipted by all departments shall be deposited at the City's
banking institution within twenty-four ( 24) hours of receipt. Departments, in
conjunction with the CFO, shall assess the reasonableness, practicality, and
security in determining deposit timing into the City's banking institution.
Departmental receipts shall not be used to create or replenish other funds.
E. All revenue receipted should be accurately recorded into the City's software
systems real-time when such systems are available. Receipt of all payments should
be recorded within the general ledger within one business day. Management review
and approval of such recordings shall be completed within two business days of
deposit.
F. Employees performing payment receipting functions must use due diligence in
handling City assets to ensure that reasonable protection is provided to those assets
at all times. Employees must report to their department supervisor, who in turn
should submit the report to FMS and the Internal Audit Department, of any instance
where a City employee has knowledge or suspicion of a theft or dishonest act by
another City employee.
2 1 P a g e
Revenue Receipting
Policy
VI.
FORT WORTH.
G. Employees receipting payments shall not knowingly accept counterfeit bills,
foreign, or mutilated currency.
H. Employees receipting payments shall not make adjustments to invoices. The
departmental supervisor or designated authorized employee shall make any
necessary corrections, changes, or adjustments to amounts billed to a City
customer.
L Discrepancies between the amounts deposited at the City's financial institution,
written receipts, and/or cash register or computer system generated receipts, must
be recorded along with appropriate supporting documentation. The supervisor must
review, on a daily basis, such documentation and follow up with the appropriate
corrective action. Any cash overages/shortages must be recorded to the appropriate
account in the general ledger. Cash overages should be promptly deposited and
cash shortages should be promptly replenished. Department Directors have the
ultimate responsibility to ensure discrepancies are identified and corrective
measures are taken.
I Funds from Cash/Change Drawers or Imprest Funds, which are no longer
necessary for departmental operations must be deposited into a City owned bank
account within forty-eight (48) hours from the date the determination is made the
Cash/Change Drawer or Imprest Fund is no longer necessary for departmental
operations.
Cash/Change Drawer and Imprest Funds
A. Cash/Change Drawers
The following procedures will be maintained for all Cash/Change Drawers:
1. Each employee performing payment receipting functions and activities shall have
their own Cash/Change Drawer from which to work.
2. Employees performing payment receipting functions on any given business day
shall open their Cash/Change Drawer and reconcile to the pre -defined amount of
cash/change assigned to the drawer before beginning revenue receipting activity.
3. At the end of the business day, all employees performing payment receipting
functions will balance and close their Cash/Change Drawer through a review of
3 1 P a g e
Revenue Receipting
Policy
VII.
FORT WORTH.
the receipts and transactions recorded in an automated or manual point of sale
system. All receipts shall be prepared for bank deposit.
4. The supervisor of the employee performing payment receipting functions shall
verify the accuracy of the revenue received during the day through a review of the
receipts and transactions recorded in an automated or manual point of sale system.
5. The ending balance of the Cash Drawer shall be the same as the beginning balance,
and equal to the amount assigned to each respective drawer.
6. Completed daily deposits shall be kept in a locked combination vault or safe, or in
a locked room in a locked drawer or file cabinet until it can be transmitted to the
depository institution through an armored car service.
7. The amount of beginning cash within a Cash Drawer will be periodically evaluated
based upon the number of transactions, the volume of cash versus other payment
types, and the frequency change is forecasted to be needed in an average day.
8. Cash maintained for the purpose of making change must not be commingled with
operational cash amounts and should not be used for any other purpose.
B. Imprest Funds
Imprest Funds are designated amounts of cash held outside of the general treasury and the
use of such funds is subject to the City of Fort Worth Police Department's operating
procedures.
Requesting a New and/or Increase in a Cash/Change Drawer or Imprest Fund
Authority to establish or modify a Cash/Change Drawer or Imprest Fund must be initiated
by a request from a Department Director and receive approval from the CFO. The CFO
has the ability to delegate this function to appropriate staff within FMS. Departments shall
collaborate with the CFO, or his/her designee, to establish and maintain a system of
procedures, controls, and reporting activities associated with the receipting of payments
and depositing of funds for all areas of their revenue receipting operations. Each
Cash/Change Drawer and Imprest Fund shall be assigned an amount of cash as the
beginning/opening balance. This amount shall be determined based upon the
4 1 P a g e
Revenue Receipting
Policy
FORT WORTH.
activity level of the department and the associated business operational requirement and
should be maintained throughout the lifecycle of the Cash/Change Drawer or Imprest
Fund.
VIII. Petty Cash
The City of Fort Worth does not allow any department to own or operate Petty Cash
funds.
IX. Training
All new employees who have payment receipting responsibilities must successfully
complete the City's Cash Handling Policies and Procedures course within thirty (30) days
of employment. Existing employees must contact the FMS Department to register to take
the cash handling course upon obtaining the cash receipting responsibility. Employees
performing payment receipting activities are required to complete the cash handling
course annually, subsequent to the initial training. Successful completion of this course is
defined as achieving at least a seventy percent (70%) passing grade on the test
administered upon completion of the course.
It is the responsibility of the department to notify FMS when a new or transferred employee
becomes responsible for payment receipting activities and whenever an employee is no
longer responsible for payment processing. In addition, it is the responsibility of the
operating department to ensure all staff responsible for payment receipting activities
complete the City's Cash Handling training at least annually.
The FMS Department is responsible for providing all training related to Cash Handling
and payment processing and in conjunction with the IT Solutions Department, will notify
employees when they are due for their annual training. Notwithstanding, the operational
department(s) retain ultimate responsibility for ensuring all employees attend and
successfully complete the training outlined herein.
The IT Solutions Department maintains training records for Cash Handling. Employees
may access a list of courses completed in the system at any time.
5 1 P a g e
Revenue Receipting
Policy
X. Receipt of Payments
FORT WORTH.
A. Cash
1. The cash custodian should have complete control and responsibility when
collecting and securing the cash received from customers.
2. The cash drawer must be securely locked when the cashier is away from the
cash drawer.
3. To reduce the risk of error, all cash should be separated according to the
denomination, and should be sorted face up in the same direction.
4. The cash custodian should test each negotiable instrument used to make a
payment to the City of Fort Worth to ensure it is not counterfeit.
B. Checks
1. Checks, traveler's checks, money orders and other negotiable instruments must
be made payable to the "City of Fort Worth" and shall be promptly
endorsed upon being received.
2. All checks made payable to the City of Fort Worth shall be accepted only in
the amount of the transaction. Checks may not be written for more than the
amount due to the City.
3. When accepting a check for amounts due to the City, the cash custodian shall
capture the following payer's information and note same at the top of the
check:
(1) Driver's license number
(2) Physical home address
(3) Valid Telephone number
4. No temporary, post-dated, or third party checks are to be accepted by the City.
6 1 P a g e
Revenue Receipting
Policy
5. Check cashing is strictly prohibited by this policy.
C. Credit/Debit Cards
FORT WORTH.
Employees taking payments are required to follow the information security procedures
covered in the IT Security Administrative Regulations located on the City of Fort Worth
Intranet. Employees are to be aware of and adhere to Payment Card Industry Data
Security Standards ("PCI-DSS") practices at all times. Departments should exercise
care with regard to credit card terminal and receipts in compliance with PCI-DSS
requirements.
1. Employees should encourage customers to pay with a credit/debit card
whenever possible. Credit/debit card use promotes a stronger internal control
environment.
2. Employees should never write down or store a customer's credit card
information.
3. Employees should request customer identification (i.e. Government issued
Driver's License or Identification Card) to ensure the customer name matches
the credit card provided for payment.
XI. Transaction Receipts
Customers are entitled to, and should always be provided with, a receipt detailing
information about the payment made. All departments with revenue receipting operations
must maintain a permanent collection record such as a cash register tape or point of sale
system report detailing all payment related transactions including voids, refunds, or
cancellations. Receipts shall be sequentially numbered and unique to each transaction.
XI I. Refunds and Overpayments
Refunds from Cash/Change Drawers or Imprest Funds are prohibited unless the
overpayment/void occurs within the same day as the original receipt. There must be a
system to track and report any voided transaction(s) and the approval by the appropriate
7 1 P a g e
Revenue Receipting
Policy
FORT WORTH.
departmental supervisor. Refunds and voids relating to a prior day's activity may only be
made through Accounts Payable and must be properly approved by the appropriate
departmental supervisor. In situations where the department has a computerized system to
process refunds/voids, the operating department is responsible for ensuring the accurate
accounting and approval of refunds and voids through the computerized system.
XIII. Safeguarding
Access to the Cash Drawer should be limited to one person. The Cash Drawer shall be
counted and balanced before another person takes possession of the Cash Drawer. Both
parties involved in the Cash Drawer transfer shall be present when cash is counted, and a
receipt shall be signed by the person accepting custody of the CashDrawer.
A. All areas surrounding the cash handling sites shall be visible and without
obstruction.
B. Dual control over the processing and storage of all monetary intakes should be
utilized.
C. All funds shall be kept out of public view and shall be available for inspection by
authorized City personnel such as the FMS Department, the City Auditor, or other
authorized personnel as approved by the CFO.
D. Physical protection of payments through the use of bank facilities, armored
vehicles, vaults, locked cash boxes, tamper proof bags, or locked drawers shall be
utilized at all times. Only assigned personnel shall have access to keys and vault
combinations.
E. Armored car services should be utilized based on a mutually agreeable schedule
between the department and the CFO or his or her designee. The operating
department and the CFO shall agree upon a schedule that promotes timely deposit
of revenue, but does not create a cost for this service outweighing the benefit.
F. Cash should never be transported to the City's banking institution by any method
other than Armored Car service.
8 1 P a g e
Revenue Receipting
Policy
XIV. Liability for Loss
FORT WORTH.
Departments performing payment receipting activities retain the ultimate liability for
misappropriation and loss or theft of all funds on hand (including, but not limited to cash
and change drawers, daily receipts, imprest funds, equipment containing cash, etc.) until
such time as the custody is transferred to an armored car service or to the Department of
Financial Management Services through delivery of a deposit for processing.
Departments are required to notify the Assistant Director over Treasury, the City Auditor,
and the Risk Management Division, in writing, by the next business day, in the event any
funds are lost or stolen. This written notification must include the date and amount of the
loss in addition to an explanation and description of the sequence of events that lead to the
discovery of the loss, and a copy of the police report.
XV. Monitoring Performance
Departmental controls shall include a practical means for employees to report instances
where system controls, processes and/or procedures are overridden that could increase the
City's risk exposure. Department Directors, Assistant Directors, and
Managers/Supervisors shall monitor and annually assess any risk areas and adopt
appropriate strategies to manage these functions, thereby minimizing loss opportunities.
XVI. Audits
The FMS Department will perform Cash/Change Drawer audits to determine whether each
Cash/Change Drawer and Imprest Fund balance is in agreement with the associated
balance on the City's General Ledger.
The operational department(s) are responsible for auditing and validating all Cash/Change
Drawer and Imprest Fund balances on a quarterly basis and providing authorized FMS
Department personnel full access to all funds at all revenue collecting locations.
The FMS Department is responsible for notifying the operational department(s), within a
reasonable lead time, to ensure the person with authority is available during the audit. At
the conclusion of each Cash/Change Drawer and Imprest Fund audit, the FMS department
will provide a memo detailing the results of the audit which will include instruction
for how to handle identified discrepancies.
9 1 P a g e
Revenue Receipting
Policy
FORT WORTH.
For additional information or questions concerning this policy, please contact the FMS Treasury
Office at (817) 392-8500.
Revised Policy Approved by Council:
101Page
Payments from Water and Sewer
Fund to Other Funds
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 the
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 Water and Sewer Fund is an Enterprise Fund, with the Water and Sewer System operating
similar to a business in the private sector. However, as a tax-exempt governmental unit, the
Fund does not pay franchise fees or property taxes that would be required of a private utility.
The purpose of this policy is to outline the assessment of charges and fees to the Water and
Sewer Fund by the General Fund in order to provide revenue for general government services
comparable to what would be received from a private utility. In addition, this policy is also
intended to address contributions from the Fund in support of the City's Public Art Program.
III. In General:
Payments from funds within the Water and Sewer System must comply with the Master
Ordinance (Ordinance 10968), which establishes the revenue financing program that provides
for issuance of System revenue bonds to finance capital improvements. The rate covenant in
the Master Ordinance obligates the City to establish and collect rates "necessary to produce
Gross Revenues and other Pledged Revenues sufficient (1) to pay all current Operating
Expenses, (2) to produce Net Revenues for each Fiscal Year at least equal to the Annual Debt
Service Requirements during such Fiscal Year of the then Outstanding Parity Obligations, and
(3) to pay all other financial obligations of the System reasonably anticipated to be paid from
Gross Revenues." To fully implement this policy, in designing rates the Water and Sewer
System shall also take into account payments under this policy to the extent allowed by
applicable law and current contracts.
Under the Master Ordinance, payments such as those outlined in this policy can only be made
from Excess Pledged Revenues, which, generally speaking, consist of System revenues that
remain available after all Operating Costs have been paid and all debt -related obligations have
been met. The following paragraph describes in more detail the process for determining Excess
Pledged Revenues under the Master Ordinance.
In accordance with the Master Ordinance, Gross Revenues of the Water and Sewer System are
reduced by Operating Costs to determine Net Revenues, which, together with any other monies
pledged to the payment of Parity Obligations, constitute Pledged Revenues. The City also has
the right to pledge the Pledged Revenues in payment of, and as security for, debt obligations
1IPage
Payments from Water and Sewer
Fund to Other Funds
FORT WORTH::
that are subordinate to the Parity Obligations. Such subordinate lien obligations, which the
City has issued and may continue to issue, are also considered Outstanding Obligations under
the Master Ordinance. Under Section I I(b) of the Master Ordinance, provision must first be
made for funds from Pledged Revenues to be deposited to the debt service, reserve, and other
funds and accounts for ALL Outstanding Obligations as required by the Master Ordinance and
applicable Supplemental Ordinances and bond covenants. If System funds remain available
after these actions have occurred and provisions have been made for all Operating Expenses
and debt -related payments, remaining System funds constitute Excess Pledged Revenues that
can be used for other lawful purposes, including payments under this policy.
By adoption of this policy, the Mayor and City Council delegate to the Financial Management
Services Department responsibility for determining and certifying the availability of Excess
Pledged Revenues. The certification shall be provided to the Water Department, and a copy
shall be maintained in the records of the Financial Management Services Department.
An initial determination of Excess Pledged Revenues shall be made in connection with the
annual budget process to determine the extent to which revenues exist for budgeting purposes
and for making payments under this policy. If it is determined that Excess Pledged Revenues
are projected to exist but are not sufficient to make all three of the proposed payments in full,
the amount of Excess Pledged Revenues that is certified to be available shall be allocated
among the payments on a pro rata basis.
To ensure payments under this policy consist only of actual Excess Pledged Revenues, after
the close of each fiscal year, in connection with preparation of the annual audit, staff shall
conduct a "true up" process, recalculating Excess Pledged Revenues using actual, rather than
budgeted, figures for Gross Revenues, Operating Expenses, and debt -related payments. If it is
determined that actual Excess Pledged Revenues for the preceding fiscal year were not
sufficient for the full amount of the payments that were made under this policy, the General
Fund shall make a one-time payment to the Water and Sewer Fund in the amount of any
shortfall so that the Water and Sewer Fund's final audited figures for the year, as reported in
the Comprehensive Annual Financial Report, reflect payments made solely from Excess
Pledged Revenues.
In this context, gross service revenue is defined as (i) total revenues of the System excluding
(ii) non -service revenues. Non -service revenues consist of funds that are not generated in
connection with the provision of water or wastewater services; examples include Interest
Earnings, Gain/Loss on Assets, Transfers from Other Funds, Transfers from Impact Fees,
reimbursements for Water Main Capacity Charges and Sewer Per Acre Charges, Front Foot
Charges, Refunds from external service providers, and proceeds from Sale of Capital Assets or
Equipment.
IV. Payment for Street Rental Fee:
The Street Rental Fee payment to the General Fund is intended as an assessment in lieu of
franchise fees that the General Fund would receive in return for use of the City's streets and
rights -of -way if the Water and Sewer System were a private utility enterprise.
2 1 P a g e
Payments from Water and Sewer
Fund to Other Funds
FORT WORTH::
The Street Rental Fee shall be calculated as five percent (5%) of gross service revenue for
Water and Sewer customers, unless specified otherwise by applicable wholesale contract.
For the purposes of cost recovery, the Street Rental Fee shall be treated as revenue in the
General Fund and as an operating expense in the Water and Sewer Fund.
The amount of the Street Rental Fee assessed will be included in annual retail and wholesale
water and wastewater cost of service studies performed by the Water Department and included
in the annual operating budget. Street Rental fees will be assessed to Wholesale Water and
Sewer Revenues as specified in the contracts with wholesale customers.
Because this Fee is based on actual gross service revenue, after the close of each fiscal year
staff shall conduct a "true up" process in connection with preparation of the annual audit. If it
is determined that actual gross service revenue for the most -recent preceding fiscal year differs
from the budgeted amount, a one-time adjustment shall be made to offset such difference so
that the Water and Sewer Fund's final audited figures for the year, as reported in the
Comprehensive Annual Financial Report, reflect a total for street rental payments based on
actual gross service revenue.
V. Payment -in -Lieu -of -Taxes:
The Payment -In -Lieu -of -Taxes (PILOT) to the General Fund is intended to offset the ad
valorem taxes lost due to the tax-exempt status of the Water and Sewer System property.
The PILOT shall be calculated by applying the effective property tax rate to the net book value
of the applicable capital assets. Capital assets subject to PILOT shall be limited to those
classified as Plant and Property, including Construction Work in Progress, and shall exclude
Transmission, Distribution and Collection Pipes and Hydrants.
An example of the PILOT calculation:
(Plant Assets — Accumulated Depreciation + Construction Work in Progress) * Current Tax
Rate
For the purposes of cost recovery, PILOT shall be treated as revenue to the General Fund and
as an operating expense of the Water and Sewer System. In any given year, the payments shall
not exceed the PILOT calculation described above.
The amount of the PILOT assessed will be included in annual retail and wholesale water and
wastewater cost of service studies performed by the Water Department and included in the
annual operating budget. The PILOT will be assessed to Wholesale Water and Sewer Revenues
as specified in the contracts with wholesale customers.
VI. Contribution to Public Art:
Funding for the Fort Worth Public Art Program, which was established in 2001 with the
adoption of Ordinance Number 14794, will be provided by the Water and Sewer Fund.
3 1 P a g e
Payments from Water and Sewer
Fund to Other Funds
FORTWORTH.
Public Art funding shall be calculated in accordance with current City Code requirements and
developed through the City's annual budget process. Since Texas law restricts the use of bond
proceeds to those projects eligible to be funded with water and sewer revenue bond proceeds,
any Public Art funding generated with bond proceeds MUST be used to finance water and
sewer system related public art projects.
For the purposes of cost recovery, Public Art funding shall be treated as an operating expense
of the Water and Sewer System. In any given year, the payment shall not exceed the calculation
described above.
The amount of the Public Art funding will be included in annual retail water and wastewater
cost of service studies performed by the Water Department and included in the annual operating
budget.
4 1 P a g e
Revenue Policy
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 Finance. This policy shall be administered on behalf of the City Manager and Assistant
City Managers by the Chief Financial Officer / Director of Finance.
II. Purpose
This policy is intended to establish guidelines for the management of certain City of Fort
Worth revenues in order to design, maintain, and administer a revenue system that will assure
a reliable, equitable, diversified, and sufficient revenue stream to support desired City
services.
III. Applicability and Scope
This policy shall apply to all funds under the budgetary and fiscal control of the City Manager
and the Mayor and City Council.
IV. Glossary
See definitions related to this policy provided in the appendix.
V. Policy;
A. Balance and Diversification in Revenue Sources
The City shall strive to maintain a balanced and diversified revenue system to
protect the City from fluctuations in any one revenue source due to changes in
national or local economic conditions which adversely impact that source.
B. User Fees
For services that benefit specific users, the City shall establish and collect fees to
recover the costs of those services. The City Council shall determine the appropriate
cost recovery level and establish the fees. Where feasible and desirable, the City
shall seek to recover full direct and indirect costs. User fees shall be reviewed on a
regular basis to calculate their full cost recovery levels, to compare them to the current
fee structure, and to recommend adjustments where necessary.
Revenue Policy
C. Property Tax Revenues/Tax Burden
FORT WORTH.
The City shall endeavor to reduce its reliance on property tax revenues by revenue
diversification, implementation of user fees, and economic development. The City
shall also strive to minimize the property tax burden on Fort Worth citizens.
D. Enterprise Funds User Fees
It is the intention of the City that all utilities and enterprise funds be self-supporting.
As a result, utility rates and user fees shall be set at levels sufficient to cover operating
expenses, meet debt obligations, provide additional funding for capital
improvements, and provide adequate levels of working capital. The City shall seek
to eliminate all forms of subsidization to enterprise funds from the General Fund.
E. Administrative Services Charges
The City shall establish a method to annually determine the administrative services
charges due the General Fund from other funds for overhead and staff support.
Where appropriate, governmental and proprietary funds shall reimburse the General
Fund for direct services rendered.
F. Revenue Estimates for Budgeting
In order to maintain a stable level of services, the City shall use a conservative,
objective, and, analytical approach when preparing revenue estimates. The process
shall include analysis of probable economic changes and their impacts on revenues,
historical collection rates, and trends in revenues. This approach should reduce the
likelihood of actual revenues falling short of budget estimates during the year and
should avoid mid -year service reductions.
G. Revenue Collection and Administration
The City shall maintain high collection rates for all revenues by keeping the revenue
system as simple as possible in order to facilitate payment. In addition, since revenue
should exceed the cost of producing it, the City shall strive to control and reduce
administrative costs. The City shall pursue, to the full extent allowed by state law,
all delinquent taxpayers and others overdue in payments to the City.
H. Write -Off of Uncollectible Accounts
The City shall monitor payments due to the City (accounts receivable) and
periodically write-off accounts where collection efforts have been exhausted and/or
collection efforts are not feasible or cost-effective.
Revenue Policy
I. DFW Airport Car Rental Revenue Sharing
FORT WORTH.
All revenues derived from the DFW Airport car rental revenue sharing shall be
dedicated to facility improvements of the Fort Worth Convention Center and the Will
Rogers Memorial Center.
J. Use of One-time Revenues
The City shall discourage using one-time revenues to fund ongoing expenditures.
K. Use of Unpredictable Revenues
The City shall exercise caution when using unpredictable revenues to fund
ongoing expenditures.
Expenditure/Expense Policy
I. Authori
FORT WORTH,
t**
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 the
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:
This policy is intended to establish guidelines for the management of certain City
expenditures/expenses in order to ensure fiscal stability and the effective and efficient
delivery of services. Through the identification of necessary services and the
establishment of appropriate service levels, Departments are responsible for the careful
administration of the expenditure/expense of available resources.
III. Scope:
This policy shall apply to all funds under the budgetary and fiscal control of the City
Manager and the Mayor and City Council.
IV. Glossary
See definitions related to this policy provided in the appendix.
V. Policy:
A. Current Funding Basis
The City shall operate on a current funding basis. Expenditures/expenses shall be
budgeted and controlled so as not to exceed current revenues plus the planned
use of fund balance/net position accumulated through prior year savings. (The
Fund Balance/Net Position Policy Statements shall guide the use of reserves.)
B. Avoidance of Operating Deficits
The City shall take immediate corrective actions if at any time during the fiscal year
expenditure/expense and revenue re -estimates are such that an operating deficit
11Page
FORT WORTH.
Expenditure/Expense Policy
(i.e., projected expenditures/expenses in excess of projected revenues) is projected
at year-end. Corrective actions can include a hiring freeze, expenditure/expense
reductions, fee increases, or use of fund balance/net position within the Fund
Balance/Net
Position Policy Statements. Expenditure/expense deferrals into the following fiscal
year, short-term loans, or use of one-time revenue sources shall be avoided to
balance the budget.
C. Maintenance of Capital Assets
Within the resources available each fiscal year, the City shall strive to maintain
capital assets and infrastructure at a sufficient level to protect the City's
investment, to minimize future replacement and maintenance costs, and to continue
service levels.
D. Periodic Program Reviews
The City Manager shall strive to undertake periodic reviews of City programs for
both efficiency and effectiveness. As appropriate, the privatization and contracting
of services with other governmental agencies or private entities will be evaluated
as alternative approaches to service delivery. Programs that are determined to be
inefficient and/or ineffective shall be redesigned, reduced in scope, oreliminated.
E. Purchasing
The City shall conduct its purchasing and procurement functions efficiently and
effectively, fully complying with applicable State laws and City ordinances. Staff
shall make every effort to maximize discounts and capitalize on savings available
through competitive bidding and "best value" purchasing.
2 1 P A ,
FORT WORTH,
Governmental Funds
Reserve Policy
I. Authority:
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 that 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 creditworthiness
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 cash borrowing.
This policy establishes the amounts the City will strive to maintain in its General
Fund, Special Revenue Funds, and General Debt Service Funds Reserves, how the
Reserves will be funded, and the conditions under which the Reserves may be used.
III. Applicability and Scope:
This policy shall apply to the General Fund, all Special Revenue Funds, and the
General Debt Service Fund 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
D. Debt Management Policy
1 1 P a g e
FORT WORTH,
Governmental Funds
Reserve Policy
V. Policy:
CPnPrnl Fund
A. Reserve Levels - The City will maintain an Unassigned Fund Balance in the
General Fund equivalent to two months (16.67 %) of the next fiscal year budgeted
operating expenditures.
B. Committed Fund Balance - The City Council maintains the City's highest level of
decision -making authority and the formal action that is required to be taken to
establish, modify, or rescind a fund balance commitment is an item placed on the
City Council's agenda and approved at a City Council meeting. The action must
either approve or rescind, as applicable, prior to the last day of the fiscal year for
which the commitment is made. The amount subject to the constraint may be
determined in the subsequent period.
C. Assigned Fund Balance - The City Council, through adoption of this policy, has
authorized the City Manager or his/her designee and the Chief Financial
Officer/Director of Finance to jointly designate or commit assigned fund balances
without further City Council approval. It should be noted that this authority only
gives the ability to designate future "intended" uses of fund balance that are in
excess of nonspendable, restricted, and committed amounts, and the minimum
required reserve. It does not vest additional spending authority in the City
Manager or his/her designee or Chief Financial Officer/Director of Finance.
Subsequent appropriations of fund balance would continue to require City Council
approval.
Spending Priorities - When expenditures are incurred for the purposes for which
both restricted and unrestricted fund balance are available, the City will consider
restricted funds to be spent before unrestricted funds. Further, if there is an
expenditure incurred for purposes for which committed, assigned, or unassigned
fund balance classifications could be used, and the City will consider committed
funds to be spent before assigned funds, and will consider assigned funds to be spent
before unassigned funds.
2 1 P a g e
FORT WORTH,
Governmental Funds
Reserve Policy
ecial Revenue Funds
D. Reserve Levels - The City will maintain a combined Restricted and Assigned
Fund Balances in Special Revenue Funds equivalent to two months (16.67%) of
the next fiscal year budgeted operating expenditures.
General Debt Service Fund
E. Reserve Levels - The City will maintain a level of Restricted, Committed, and
Assigned Fund Balances in each governmental Debt Service Fund equivalent to
three months (25%) of the highest projected debt service (principal and interest)
over the succeeding debt service schedule. Amounts used in this calculation shall
not include any amounts allocated for other purposes by the City Council.
VI. 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 fiscal year-end financial
information becomes available. During the fiscal year, the Financial Management
Services and Planning & Data Analytics departments 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 Analytics departments 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 appropriate source for replenishing
fund balance.
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 subjectto.
3 1 P a g e
FORT WORTH,
Governmental Funds
Reserve Policy
VII. Conditions for Use of Reserves:
General Fund and Special Revenue Funds
It is the intent of the City 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-termplan.
Debt Service Funds
The City intends to limit the use of Debt Service Reserves to address the repayment of
any outstanding debt.
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:
General Fund and Special Revenue Funds
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. 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;
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 Financial
Management Services department.
4 1 P a g e
FORT WORTH,
Governmental Funds
Reserve Policy
5. The reserve requirement does not apply to special revenue funds that were
created under Federal and State Law and/or Texas Local Government Code
for managing the revenue used to pay for costs associated with construction
and debt -financing activities.
General Debt Service Funds
1. Use to repay any outstanding debt or obligations.
IX. Authority over Reserves:
The City Council may authorize the use of Reserves. The Financial Management
Services and Planning & Data Analytics departments will regularly report both current
and projected Reserve levels to the City Manager and City Council.
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.
XI. Basis:
Budgetary basis is used for calculating the reserve level for Governmental Funds Reserve.
5 1 P a g e
6 1 P a g e
FORT WORTH.
Proprietary Fund
Reserve Policy
I. Authority:
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 that 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 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 expenses. In addition, this policy is intended to
document the appropriate Reserve level to protect the City's creditworthiness 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 borrowing.
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 Fund.
III. Applicability and Scope:
This policy shall apply to all Proprietary 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
1 1 Page
FORT WORTH.
Proprietary Fund
Reserve Policy
V. Policy:
Enterprise Funds
Reserve Levels - The City will maintain the following goal reserve levels in each
Enterprise Fund, consistent with State law and the terms of ordinances pursuant to
which obligations have been issued or incurred that are secured in whole or in part
by revenues held in or credited to an Enterprise Fund:
1. A goal of Working Capital in Enterprise Funds equivalent to
three months (25%) of the next fiscal year budgeted operating
expenses, excluding intrafund transfers out to funds within the
same reporting group (e.g. transfer out from Water and Sewer
Operating Fund to its Capital Projects Fund or Debt Service
Fund). This calculation shall be performed against the
operating fund only.
2. A Reserve of 100 Days cash on hand with a goal of 150 Days
Cash on Hand. This calculation shall be performed against the
operating fund only on Generally Accepted Accounting
Principles (GAAP - Full Accrual) basis.
3. The City's goal is that no Enterprise Fund shall have a negative
Unrestricted Net Position. This calculation shall be performed
by using all of the funds for the respective reporting group.
4. In addition, the City acknowledges that initially, not all funds
will meet the minimum requirement for Working Capital
and/or Days Cash on Hand 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.
2 1 Page
FORT WORTH.
Proprietary Fund
Reserve Policy
Internal Service Funds
Reserve Levels for Internal Service Insurance Funds - The City will maintain the
following minimum reserve levels in all Internal Service Insurance Funds:
1. A goal of Working Capital in Insurance Funds three months
(25%) of the next fiscal year budgeted operating expenses,
excluding intrafund transfers out to funds within the same
reporting group (e.g. transfer out from Water and Sewer
Operating Fund to its Capital Projects Fund or Debt Service
Fund). This calculation shall be performed using the operating
fund only.
2. No Insurance Fund shall have a negative Unrestricted Net
Position. This calculation shall be performed by using all of the
funds of the respective reporting group of the specific
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.
Reserve Levels for Non -Insurance Internal Service Funds - The City will maintain the
following minimum reserve levels in all Internal Service Insurance Funds:
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, excluding intrafund transfers
out to funds within the same reporting group (e.g. transfer out
from Water and Sewer Operating Fund to its Capital Projects
Fund or Debt Service Fund). This calculation shall be
performed using the 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.
3 1 Page
FORT WORTH.
Proprietary Fund
Reserve Policy
VI. Monitoring Performance:
A. For purposes of this calculation, Working Capital will include long-term
investments that can be liquidated within five business days. 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 fiscal year-end financial
information becomes available. During the fiscal year, the Financial
Management Services and Planning & Data Analytics departments 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 Financial Management Services and Planning & Data Analytics
departments 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 appropriate source
for replenishing fund balance.
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.
VII. Conditions for Use of Reserves:
The City intends to limit use of Proprietary Reserves to address unanticipated, non-
recurring 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 deliberately (as might be required in an economic downturn), but such
use will only take place in the context of an adopted long-term plan.
4 1 Page
FORT WORTH.
Proprietary Fund
Reserve Policy
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
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;
3. 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
4. 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.
IX. Authority over Reserves:
The City Council may authorize the use of Reserves. The Financial Management
Services and Planning & Data Analytics departments will regularly report both
current and projected Reserve levels to the City Manager and City Council.
X. Qualilyy 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. This policy will be reviewed at least annually and
updated on an as-neededbasis.
XI. Basis:
Generally Accepted Accounting Principles (GAAP - Full Accrual) basis is use for
calculating the reserve level for Proprietary Funds Reserve.
5 1 Page
5 1 Page
FORT WORTH.
Capital Expenditures and Improvements Policy
I. Authority
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 is 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 Finance. This policy shall be administered on behalf of the City Manager
by the Chief Financial Officer / Director of Finance.
II. Puruose:
This policy is intended to establish guidelines for the management of certain City
capital expenditures, to review and monitor the state of the City's capital assets, setting
priorities for the addition, replacement, and renovation of such assets based on needs,
funding alternatives, and availability of resources.
III. Scope:
This policy shall apply to all funds under the budgetary and fiscal control of the City
Manager and the Mayor and City Council.
IV. Glossary
See definitions related to this policy provided in the appendix.
V. Policy:
A. Capital Improvements Planning
The City shall annually review the needs for capital improvements and
equipment, the current status of the City's infrastructure, replacement and
renovation needs, and potential new projects. All projects, ongoing and
proposed, shall be prioritized based on an analysis of current needs and resource
availability. For every capital project, all operation, maintenance, and
replacement costs shall be fully costed.
B. Replacement of Capital Assets on a Regular Schedule
The City shall annually prepare a schedule for the replacement of its non -
infrastructure capital assets. Within the resources available each fiscal year, the
City shall replace these assets according to the aforementioned schedule.
FORT WORTH.
Capital Expenditures and Improvements Policy
C. Capital Expenditure Financing
The City recognizes that there are three basic methods of financing its capital
requirements. It can budget the funds from current revenues (pay -go funding);
it can take the funds from unassigned fund balance, assigned fund balance, or
Net Position as allowed by the Unassigned/Assigned Fund Balance or Net
Position Policy Statements; or it can borrow money through the issuance of
debt. Debt financing includes general obligation bonds, revenue bonds,
certificates of obligation, lease/purchase agreements, certificates of
participation, commercial paper, tax notes, and other obligations permitted to
be issued or incurred under Texas law. Guidelines for assuming debt are set
forth in the Debt Policy Statements.
D. Lake Worth Expenditures
Proceeds from the sale of Lake Worth leases shall be escrowed and designated
for water and wastewater improvements within the area of the City of Fort
Worth surrounding and adjoining Lake Worth.
E. Surplus Bond Funds (M&C G-14441, July 27, 2004)
A "Restricted Residual Account" shall be established to record and manage
surplus project funds. Surplus project funds may become available after the
completion of a specific, voter- approved bond project or may result when a
bond project is modified or eliminated without being simultaneously replaced
by another eligible project.
Funds in the Restricted Residual Account maybe used for projects consistent
with the voted purpose of the bonds to:
• Finance cost overruns on bond projects within the same bond
proposition;
• Reduce outstanding debt at the end of the bond program; and
• Fund newly identified projects within the voted purposes of an
approved bond proposition only after all voter -approved projects
/categories within the same proposition are substantially complete. A
project would be considered substantially complete when design has
been fully completed, construction is substantially underway, and staff
has prepared cost projections that include ample contingencies to
complete the project in the event unforeseen costs should arise.
FORT WORTH.
Capital Expenditures and Improvements Policy
F. Spending Priority of Capital Project Funding Sources (excluding grants)
Many capital projects that are administered by the City of Fort Worth have
multiple funding sources, which can include internal and external sources.
Spend funding in the following order: (e.g., Priority One, then Priority Two,
then Priority Three, and lastly Priority Four)
Priority One: Proceeds from any type of debt issuance, including tax notes,
bonds, loans, etc. Use proceeds from oldest to newest (i.e., 2002 GO Bond
proceeds before 2014 Bond proceeds, or 2014 before 2018 proceeds). Per IRS
regulations, 85% of all Bond proceeds must be spent within three years. Failure
to spend Bond proceeds timely could result in the bonds sold being deemed
taxable.
Priority Two: Source of funds that include projects where a source external to
the City is funding a portion or all of the project in the order listed below:
1. Intergovernmental Agreements (Once verified as Non -Grant)
2. Contribution from an outside source (e.g., cash donation)
3. Developer contributions
Priority Three: Internally committed funding sources. Internal commitments
exist due to an action taken by the Mayor and Council (M&C), such as the
adoption of the Financial Management Policy Statements which designate the
use of specific revenues for specific purposes, e.g., DFW Airport Sharing
Revenue to the Culture and Tourism activity, Gas Well Lease income for
specific purposes, or Transfers -In.
Priority Four: Other funding sources appropriated by Budget that do not fall
into the three above categories. These funds should always be spent last due to
the ability to re -program any remaining funds when a project is completed to
other identified needs within the City.
G. Spending Priority of Grant Related Capital Projects
The funding priority identified above for non -grant capital projects should
generally be followed for grant funded projects, as long as the priorities and
methodologies are consistent with the grant requirements. Where the grant
requirements differ from the above identified City priorities, the grant priorities
should prevail.
Capital Assets Policy
I.
II.
IV.
V.
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 is responsible for carrying out the policy directives of
the City Council and managing the day-to-day operations of the executive
departments, including the Financial Management Services Department (FMS).
This policy shall be administered on behalf of the City Manager by the Chief
Financial Officer/Director of Finance ("CFO").
Purpose
This policy defines and provides the guiding principles with respect to the
financial management of capital asset for the City of Fort Worth ("the City"). The
objectives of this policy are to ensure consistent capital asset practices in
accordance with Generally Accepted Accounting Principles (GAAP) and
applicable regulatory agencies and to safeguard against loss, unauthorized use, or
misappropriation of assets. Controls are created to establish, maintain, and enforce
a sound system of operational procedures in accordance with industry best
practices and internal control objectives. These controls address the decentralized
nature of the processes associated with capital assets while also providing
standards and minimally acceptable practices for these activities.
Applicability and Scope
All employees of the City, including uniformed employees in positions who are
responsible for performing fiscal operations described herein, shall apply the
principles of this policy. This may include, but not be limited to, staff who
purchase, receive, monitor or dispose of capital assets. Further, this policy shall
cover all funds and capital assets under the control of the Mayor and City Council.
Glossary
See definitions related to this policy provided in the Glossary for Financial
Management Policies.
General Information
The Governmental Accounting Standards Board (GASB) provides the following
authoritative definition of capital assets for state and local governments:
* S 11Page
Capital Assets Policy
VI.
FORT WORTH.
The term capital assets includes land, improvements to land, easements,
buildings, building improvements, vehicles, machinery, equipment, works
of art and historical treasures, infrastructure, and all other tangible or
intangible assets that are used in operations and that have initial useful
lives extending beyond a single reporting period.
Capital assets should be recorded at original cost or, if the cost is not readily
determined, at estimated original cost. Cost shall include applicable ancillary costs
necessary to place the asset in its intended location and condition for use. All costs
should be documented, including methods and sources used to establish any
estimated costs.
The City acquires capital assets in one of the following ways:
1. Purchased assets — The recording of purchased assets should be made on
the basis of actual costs, excluding some ancillary costs*, based on
vendor invoice or other supporting documentation. *See Section VII-A
for further explanation.
2. Constructed assets — Direct costs (including labor) associated with the
construction project should be included in determining the asset
valuation. For Community Facilities Agreements, City of Fort Worth
inspection costs are no longer capitalized as part of the project effective
06-01-2019 associated with fund 30114 (CFA Developer).
3. Donated assets — Capital assets acquired by donation should be valued
based on the acquisition value at the time of receipt and capitalize in
accordance with the threshold value for each asset category Please refer
to the City of Fort Worth's Donations Policy for guidance on acceptance
of donations.
Responsibility / Authority
City-wide Department responsibilities:
A. Serve as custodians of capital assets including land, land improvements,
vehicles, machinery and equipment (including rolling stock), that are assigned
to their departments.
* S 2 1 P a g e
Capital Assets Policy
FORT WORTH.
B. Ensure full departmental compliance with the established capital asset policy
in order to maintain adequate records of the City's capital assets.
C. Each department head must appoint a Capital Assets Coordinator that has
knowledge and experience in capital purchasing and management of project
expenditures. Department Capital Assets Coordinator responsibilities include
but are not limited to:
• Attend the required AM 100 training provided by the City of Fort
Worth.
• Perform a monthly review of the department's purchased, donated,
and constructed assets added into PeopleSoft Asset Management
(PSAM) and communicate with the Capital Assets Team regarding
any discrepancies.
• Identify capital asset transfers, impairments, and disposals, and
provide the Capital Assets Team documentation within 30 days of
the occurrence.
• Identify all constructed assets in use, and provide the Capital
Assets Team documentation within six months or before the
current fiscal year ends, whichever comes first for capitalization
(Refer to Section XIV).
• Review and update the department's non -financial asset
information in the PSAM system.
• Coordinate the department's review of the current capital asset
register and complete the Annual Physical Inventory for Capital
Assets.
FMS responsibilities:
A. The Capital Asset Team, Financial Services Manager, and Assistant
Finance Director over Accounting shall ensure that all capital assets
belonging to the City are properly identified and recorded in the
PeopleSoft General Ledger module and that the PSAM module is
reconciled, at least monthly, to general ledger balances.
* S 3 1 P a g e
Capital Assets Policy
VII.
FORT WORTH.
B. The Capital Asset Team is responsible for maintaining a current listing of
Capital Assets Coordinators from all City departments.
C. The Capital Asset Team must oversee the review of all transactions related
to capital assets at least monthly and update the PSAM system, as required,
upon validation of the transactions or corrections.
D. The Capital Asset Team, Financial Services Manager, and Assistant
Finance Director over Accounting are responsible for ensuring that journal
entries and monthly depreciation expense are properly recorded in the
general ledger and financial changes noted by the Capital Assets
Coordinators are recorded in the PSAM system.
E. FMS is responsible to provide department representatives with the
necessary support in capital asset management to effectively fulfill their
duties and responsibilities under this policy.
Asset Classification
The City categorizes capital assets into the following:
A. Land
Land includes all land parcels purchased or otherwise acquired by the City
for building sites, streets, right of way, permanent easement, recreation,
future use, etc. This does not include land held for resale, which is
accounted for as inventory.
Land is frequently associated with some other asset (e.g., land under a
building or road). Land should always be treated and accounted for
separately. The cost of the land should include not only the acquisition
price, but also the cost of initially preparing land for its intended purpose,
provided these preparations have an indefinite useful life, like the land
itself. The recorded cost of land includes (1) the contract purchase price;
(2) the costs of closing the transaction and obtaining title, including
commissions, options, legal fees, title search, insurance, and past due or
current taxes; And (3) the cost of preparing the land for its particular use
such as clearing and grading. If the land is purchased for the purpose of
constructing a building, all costs incurred up to the excavation for the new
* S
4 1 P a g e
Capital Assets Policy
FORT WORTH.
building should be considered land costs. Removal of an old building,
clearing, grading and filling are considered land costs because they are
necessary to get the land in condition for its intended purpose. Any
proceeds obtained in the process of getting the land ready for its intended
use, such as salvage receipts on the demolition of the old building or the
sale of cleared timber, are treated as reductions in the price of the land.
Capitalization of land costs may include, but are not limited to, the
following:
• Original contract price
• Brokers' commissions
• Legal fees for examining and recording title
• Cost of title guarantee insurance policies
• Cost of excavation, grading or filling of land and razing of an old
building
• Payment of noncurrent taxes accrued on the land at date of
purchase, if payable by purchaser
*Excluded costs may include payroll charges, advertising, process
services, appraisal fees, and surveys, as they typically are not able to be
accurately and timely associated with the land purchase at closing.
Improvements other than buildings (land improvements) are used for
permanent (i.e., non -moveable) improvements, other than buildings, that
add value to the land, but do not have an indefinite useful life. Examples
include, fences, retaining walls and parking lots.
B. Buildings
All permanent structures are included in the classification of buildings.
The costs of an improvement (or betterment) are normally added to the
cost of the related structure, rather than being treated as a separate asset.
The same is true of restoration costs following a capital asset impairment.
Capitalization of costs related to buildings include, but are not limited to,
the following:
* S 5 1 P a g e
Capital Assets Policy
FORT WORTH.
• Original contract price of the asset acquired or cost of design and
construction
• Expenses incurred in remodeling, reconditioning, or altering a
purchased building to make it available for the purpose for which
it was acquired.
• Expenses incurred for the preparation of plans, specifications,
blueprints, etc.
• Cost of building permits
• Payment of noncurrent taxes accrued on the building at date of
purchase, if payable by purchaser
• Architects' and engineers' fees for design and supervision
• Costs of temporary facilities used during the construction period
C. Infrastructure
Infrastructure assets are long-lived capital assets that normally are
stationary in nature and normally can be preserved for a significantly
greater number of years than most capital assets. Examples include roads,
bridges, tunnels, drainage systems, water and sewer systems, dams and
lighting systems.
D. Machinery and equipment
This classification includes construction and maintenance equipment,
office equipment and furnishings, etc. above the capitalization threshold.
Capitalization of equipment costs may include, but are not limited to, the
following:
• Original contract or invoice cost
• Freight, acquisition fees, import duties, handling and storage costs
• Specific in -transit insurance charges
• Installation charges
* S 6 1 P a g e
Capital Assets Policy
VIII.
E. Vehicles
FORT WORTH.
A motor vehicle is a self-propelled road vehicle that is used for the
transportation of passengers, or passengers and property. The
capitalization amount includes the total purchase price less any applicable
discounts and any ancillary payments required to place the asset in its
intended state of operation.
F. Intangible Assets
Intangible assets are those that lack physical substance, are non -financial
in nature and have an initial useful life extending beyond a single reporting
period. Intangible assets must be identifiable, meaning they are either
capable of being separated by means of sale, transfer, license or rent, or
that they arise from contractual or other legal rights.
Intangible assets acquired or developed by the City could include
customized software, internally generated software, works of art and
historical treasures. Other examples of intangible assets the City may own
include water rights, timber rights, patents and trademarks.
G. Construction Work in Progress (CWIP)
Construction work in progress represents capitalized costs related to a
capital asset that is not yet substantially ready to be placed in service. For
construction work in progress assets, no depreciation is recorded until the
asset is placed in service. When the asset is placed in service, the asset is
reclassified to the correct category and depreciation begins.
Capitalization
A. Capitalization Thresholds
1. Land must be capitalized regardless of the value or cost.
2. Buildings must be capitalized regardless of the cost.
3. Infrastructure must be capitalized when the useful life is 3 years or
greater and the cost is $100,000 or more.
* S
7 1 P a g e
Capital Assets Policy
FORT WORTH.
4. Betterments and Improvements qualifying as a capital asset is defined
as a single item with a useful life of 2 years or greater with an
acquisition cost of
a. Building Improvements at $100,000 or more
b. Infrastructure Improvements at $100,000 or more
C. Machinery and Equipment Improvements at $25,000 or
more
5. Machinery and Equipment qualifying as a capital asset is defined as a
single item with an acquisition cost of $25,000 or more and has a
useful life of 2 years or greater. This includes items designed for off
road.
6. Vehicles must be capitalized when the useful life is 4 years or greater,
the cost is $5,000 or greater and it meets both of the following criteria:
a. Self-propelled
b. Primary use is on public streets and the unit is street legal
7. Intangible assets must be capitalized when the useful life is 3 years or
greater and the cost is $100,000 or more with the exception of works
of art and historical treasures, which are capitalized regardless of life
or cost.
B. Contributed or Donated Assets
Contributed or donated assets must be recorded at acquisition value. Refer
to the Donations Policy for capitalization thresholds per category.
Acquisition value is the price that would be paid to acquire an asset with
equivalent service potential in an orderly market transaction at the
acquisition date, or the amount at which a liability could be liquidated with
the counterparty at the acquisition date. With regard to donated land, an
appraisal must be no older than five (5) years in order to be used to
determine a value for the land. If an appraisal is greater than five (5) years
old or an appraisal does not exist, then appropriate effort must be made to
determine a reasonable per acre value of the land in question. Work with
Accounting to establish the appropriate value.
* S 8 1 P a g e
Capital Assets Policy
IX. Betterments, Improvements and Repair and Maintenance
A. Betterments
FORT WORTH.
A betterment materially renovates or enhances a previously capitalized asset
without introduction of a completely new unit. Alterations that change the
physical structure of assets (e.g., cutting new entry and exit openings or closing
old ones; erecting new walls, windows and partitions or removing old ones) but
neither materially add value to the asset nor prolong its useful expected life should
be charged to maintenance expense. Examples of betterments include:
• Enhancement of an old shingle roof through the addition of
modern, fireproof tiles
• "Major catch-up" repair to or rehabilitation of an existing
neglected asset that extends the useful life or substantially
increases the value of the asset.
A betterment that meets the capitalization threshold in Section VIII should be
capitalized.
B. Improvements
Improvements include additions of new components to previously capitalized
assets that either increase the assets' value, extend the useful life, increase the
normal rate of output, lower the operating cost, or increase the efficiency of the
existing asset. Replacements of components of existing capitalized assets with
improved or superior units, such that the value of the assets is increased, are also
classified as improvements.
Examples include:
• Installation of an air condition system where there previously was
none
• Installation of a crane on a truck that did not previously have one
• Removal of a major part or component of equipment and the
substitution of a new part or component that increases either the
value or useful life
* S 9 1 P a g e
Capital Assets Policy
X.
• Addition of a new wing on a building
FORT WORTH.
• An improvement that meets the capitalization threshold in Section
VIII should be capitalized.
C. Repair and Maintenance
Maintenance and repairs can be distinguished from betterments and improvements
in that maintenance and repairs are not intended to alter or change the asset or to
increase the useful life of the asset, but rather to sustain the asset in its present
condition. A cost will qualify as maintenance if any of the following are true:
• Recurs on an ongoing basis (scheduled maintenance) and keeps the
asset in a useable condition.
• Does not add substantially to the value of the asset (i.e., it does not
meet the requirements in Section VIII to be capitalized).
• Simply restores a capital asset to its former condition, addressing
normal wear and tear associated with the use of an asset.
• Facilitates asset utilization for its original useful life
Examples include:
• Painting and similar activities
• Engine overhaul in a vehicle
• Resurfacing a roof with similar materials
• Remodeling and rearrangement costs
Expenditures attributable to repair and maintenance after the asset has been placed
in service will not be capitalized and will instead be charged to maintenance
expense.
Depreciation
Depreciation is defined as a reduction in the value of an asset with the passage of
time, due in particular to wear and tear. Depreciation will be calculated and
recorded monthly for the City's depreciable assets in accordance with GAAP.
FMS is responsible to record depreciation on a monthly basis.
* S 101Page
Capital Assets Policy
FORT WORTH.
The City uses the straight-line method of depreciation and a full month of
depreciation is taken in the original month of acquisition or capitalization. To
calculate depreciation expense using the straight-line method:
Annual Depreciation = Cost — Salvage Value
Asset Useful life (in years)
Salvage value is an estimate of the amount that will be realized at the end of useful
life of a depreciable asset. The City may assume that salvage value will be
insignificant and therefore, will not use it in the depreciation calculation.
Asset must be depreciated according to the useful life guidelines established by
the City. These guidelines are summarized below:
• Buildings: 20 - 50 years
• Infrastructure: 20 - 60 years
• Machinery and Equipment: 2 - 20 years
• Vehicles; 4 —15 years
• Runways and Taxiways: 20 - 30 years
• Water and Sewer Equipment: 5 - 30 years
• Water and Sewer Infrastructure: 25 - 60 years
The following capital assets are not depreciated:
• Land
• Intangible assets with indefinite useful lives
• Construction Work in Progress
XI. Retirement
All capital assets that are sold, exchanged, traded in, donated, stolen, damaged
beyond repair or in any way removed from service and disposed of during the
current fiscal period should be recorded as retirements in the PSAM system.
When retiring an asset, the Department that had custody of the asset must
complete and submit an Asset Retirement Form to the Capital Assets Team. The
* S 111Page
Capital Assets Policy
XII.
FORT WORTH.
Asset Retirement Form should be properly approved by the Department with
signature and date on the form.
Impairment
A capital asset generally should be considered impaired if both (a) the decline in
service utility of the capital asset is large in magnitude and (b) the event or change
in circumstance is outside the normal life cycle of the capital asset. The
Department Capital Assets Coordinator is responsible for determining whether an
asset should be classified as impaired. The Capital Asset team in FMS is available
to assist in the determination.
In order to determine impairment, one or more of the following conditions must
apply:
• Evidence of physical damage (building damaged by fire or flood,
restoration efforts are needed to restore service utility)
• Enactment or approval of laws or regulations or other changes in
environmental factors
• Technological development resulting in a change of the expected
duration of use of a Capital Asset
• A change in the manner or expected duration of use of a Capital
Asset
• Construction stoppage (stoppage of construction of a building due
to lack of funding)
If the asset is not impaired, Department Capital Assets Coordinator should re-
evaluate the remaining useful life and salvage value (if any). All impairment
should be analyzed and estimated by the Department Capital Assets
Coordinator, and submit to the FMS Department Assistant Director or Director
for final review and approval.
XIII, Transfers
When an asset is exchanged between departments, the Capital Asset Team will
transfer the asset in the PSAM system. The Capital Asset Transfer Form shall be
used to identify an asset transfer between City departments. The transfer must be
* S
121Page
Capital Assets Policy
FORT WORTH.
approved by both the transferor and transferee departments before an asset is
transferred.
XIV. Placed In Service Assets
When a capital improvement project is substantially completed and an asset is
used for its intended purpose, the Capital Assets Coordinator will provide the
Capital Asset In -Service form to the Capital Asset Team within six months or
before the current fiscal year ends, whichever comes first. The Capital Asset Team
will transfer the cost of the asset from Construction Work in Progress (CWIP) to
the appropriate asset category in the PSAM system. When the capital
improvement project is closed, the Capital Assets Coordinator will provide the
Capital Asset Completion form to the Capital Asset Team, and the Capital Asset
Team will transfer any remaining costs to the previously created asset.
XV. Physical Inventory
Each department must perform an Annual Asset Physical Inventory. The Capital
Assets Coordinator is responsible for verifying the accuracy of the assets recorded
in PSAM based on their physical observation of the department's assets. Exclude
lands, buildings, and infrastructures.
XVI, Acquisition of Capital Assets
Capital assets shall be acquired by the City of Fort Worth, following all required
federal, state, and local purchasing requirements. Assets acquired by the City
shall be budgeted and purchased only in capital project funds. No assets are to
be acquired from operating funds.
For additional information or questions concerning this policy, please contact the FMS Capital Asset
team at (817) 392-2460.
* S 131Page
FORT WORTH.
Debt Policy
I. Authori
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:
This policy is intended to establish guidelines and principles associated with the
management of the City's issuance of debt transactions to finance the acquisition,
repair, or construction or capital assets.
III. Scope:
This policy shall apply to all debt issued by the City of Fort Worth and any revenue
pledged to debt payments which are under the budgetary and fiscal control of the
City Manager and the Mayor and City Council.
IV. Glossary
See definitions related to this policy provided in the appendix.
V. Policy:
A. Use of Debt Financing
Debt financing, to include general obligation bonds, revenue bonds,
certificates of obligation, certificates of participation, commercial paper,
tax notes, lease/purchase agreements, and other obligations permitted to be
issued or incurred under Texas law, shall only be used to purchase capital
assets and equipment that cannot be prudently acquired from either current
revenues, assigned fund balance, or Net Position, and to fund
infrastructure improvements and additions. The useful life of the asset
or project shall exceed the payout schedule of any debt the City
assumes.
1IPage
FORT WORTH.
Debt Policy
B. Assumption of Additional Debt
The City shall not issue more debt than it retires each year without first
conducting an objective analysis as to the City's ability to assume and
support additional debt service payments. When appropriate, self-
supporting revenue bonds shall be considered before general obligation
bonds. To the extent permitted by State law, commercial paper may be
utilized and/or issued in the City's tax -supported and revenue -supported
bond programs in order to: (1) provide appropriation authority for
executing contracts on bond -funded projects; (2) provide interim
construction financing; and (3) take advantage of lower interest rates
in the short-term market; all of which provide the City with flexibility in
timing its entry into the long-term fixed rate market.
C. Affordability Targets
1. General Obligation Bonds
The City shall use an objective analytical approach to determine
whether it can afford to issue new general purpose debt (General
Obligation bonds, tax notes, and Certificates of Obligation)
beyond what it retires each year. This process shall take into
consideration any potential impact to the City's credit ratings, the
growth in the City's taxable assessed value, and the targeted debt
service tax rate. The process shall also examine the direct costs
and benefits of the proposed expenditures. The decision on whether
or not to issue new debt shall be based on these costs and benefits,
the current conditions of the municipal bond market, and the City's
ability to "afford" new debt as determined by the aforementioned
standards.
2. Revenue Bonds
Revenue bonds are secured solely by the revenues of an operating
fund. As a result, the credit markets look at the type of revenue
securing the payment of debt service on the bonds to determine
the level of security necessary for the purchase of the bonds.
Whether revenue bonds can be secured with gross revenues of
the operating fund or net revenues (i.e., those revenues remaining
after paying costs of operation and maintenance) is often
2 1 P a g e
FORT WORTH.
Debt Policy
determined by state law. Coverage requirements, and the need
for and level of reserve funds to provide additional security in
support of revenue bonds, are subject to rating agency review and
market standards.
Generally, for the City to issue additional water and sewer revenue
bonds, net revenues, as defined in the ordinance authorizing the
revenue bonds, shall be a minimum of 125% of the average annual
debt service and 110% of the debt service for the year in which
requirements are scheduled to be the greatest, but should be at
least 150% of the annual debt service for financial planning
purposes. Annual adjustments to the City's rate structures will be
made as necessary to maintain a minimum 150% coverage factor.
Exceptions to these standards must be fully explained and justified.
Generally, for the City to issue additional stormwater revenue
bonds, gross revenues, as defined in the ordinance authorizing the
revenue bonds, shall be at least of 150% of the maximum annual
debt service, however net revenues (after operations and
maintenance expenses) should be at least 150% of the annual
debt service for financial planning purposes. Annual adjustments
to the City's rate structures will be made as necessary to maintain
a minimum 150% coverage factor using net revenues.
Revenue bonds that may be issued to finance improvements for
other activities (e.g., airports or convention center facilities) will
necessitate the consideration of coverage and reserve fund
requirements unique to the operating fund, such that the revenue
bonds will be creditworthy and marketable.
3. Certificates of Obligation
Certificates of Obligation may be issued without a public election
to finance any public work project or capital improvement, as
permitted by State law. However, it is the policy of the City to
utilize Certificates of Obligation to finance public improvements
only in special circumstances and only after determining the City's
ability to assume additional debt based on the standards identified
above. Those special circumstances in which Certificates might be
issued include, but are not limited to, situations where:
• Cost overruns on a general obligation bond -financed capital
improvement have occurred;
3 1 P a g e
Debt Policy
FORT WORTH.
• "Emergency" conditions require a capital improvement to be
funded rapidly;
• Financial opportunities unexpectedly arise to leverage funds
from other entities and reduce the City's capital cost for a
community improvement;
• A capital improvement is a revenue -producing facility, but
due to the nature of the project or the time it takes for the
facility to become operational and produce revenues, the
improvement may not generate sufficient revenues throughout
the life of the improvement to support the indebtedness secured
solely by the revenues to be produced by the improvement;
• It would be more economical to issue Certificates of
Obligation rather than issuing revenue bonds; and
• The timing of the construction of a capital improvement and the
expense of calling a bond election for a single proposition
would, in the opinion of staff and with the approval of the
Council, warrant the issuance of Certificates of Obligation to
finance the capital improvement.
4. Tax Notes
Tax notes may be issued without a public election to finance the
construction, acquisition, and expenses associated with placing a
capital asset into service. Under State law, the issuance of tax notes
must be approved as to legality by the State Attorney General, and
must mature no later than the seventh anniversary of the date that the
Attorney General approves the tax notes. Tax notes will be issued
taking into account the useful life of the capital asset to be financed,
and consideration of the economies that the City may achieve
through the issuance of obligations with a shorter term of maturity
than that typically associated with a bond amortization structure (see
D. Debt Structure, below). The issuance of tax notes may be
substituted for the issuance of Certificates of Obligations; however,
the same principles apply.
4 1 P a g e
FORT WORTH.
Debt Policy
D. Debt Structure
Generally, the City shall issue bonds with an average life of approximately
ten and one-half (10.5) years for general obligation bonds and
approximately seventeen to eighteen (17-18) years for revenue bonds. The
structure should approximate level principal on general obligation bonds
and level debt service for revenue bonds. With respect to the issuance of
revenue bonds for a stand-alone or self-supporting project, the term of the
debt and debt service structure shall be consistent with the useful life of
the project and the revenue -generating capability of the project.
There shall be no debt structures, which include increasing debt service
levels in subsequent years, with the exception of the first and second year
of a payment schedule. There shall be no "balloon" bond repayment
schedules, which consist of low annual payments and one large payment
of the balance due at the end of the term. There shall always be at least
interest paid in the first fiscal year after a bond sale and principal starting
generally no later than the second fiscal year after the bond issue. In the
case of a revenue generating project, principal repayment should begin no
later than the first full year after the project has been placed in service.
Normally, there shall be no capitalized interest included in the debt
structure unless there are no historical reserves upon which to draw.
E. Call Provisions
Call provisions for bond issues shall be made as short as possible consistent
with the lowest interest cost to the City. When possible, all bonds shall be
callable only at par.
F. Sale Process
The City shall use a competitive bidding process in the sale of debt unless
the nature of the issue warrants a negotiated sale. The City shall attempt
to award the bonds based on a true interest cost (TIC) basis. However,
the City may award bonds based on a net interest cost (NIC) basis when
the NIC basis can satisfactorily determine the lowest and best bid.
G. Timing of Sales
The City may use the cash received through the issuance of notes pursuant
to, or the appropriation authority that may be available in accordance with
the commercial paper programs, to begin capital projects approved under
those programs. The City may also use reimbursement resolutions and its
5 1 P a g e
FORT WORTH.
Debt Policy
own cash to initiate certain projects. Consideration should be given to any
lost interest earnings on the City's cash compared to the anticipated interest
expense associated with the issuance of obligations by the City. This
process will improve the City's ability to time its entry into the long-term
fixed rate market and to manage its debt issuances and debt payments in
order to minimize the impact on tax rates and utility rates.
H. Rating Agencies Presentations
Full disclosure of operations and open lines of communication shall be
made to the rating agencies. City staff shall prepare the necessary materials
and presentation to the rating agencies. Credit ratings will be sought from
one or more of the nationally recognized municipal bond rating agencies,
currently Moody's, Standard & Poor's, Fitch, and Kroll.
I. Continuing Disclosure
The City is committed to providing continuing disclosure of financial and
pertinent credit information relevant to the City's outstanding securities
and will abide by the provisions of Securities and Exchange Commission
(SEC) Rule 15c2-12 concerning primary and secondary market
disclosure. City staff will undertake to update financial and pertinent credit
information within six months of the end of the City's fiscal year and at
such other times as may be indicated by material changes in the City's
financial situation.
J. Debt Refunding
City staff shall monitor the municipal bond market for opportunities to
obtain interest savings by refunding outstanding debt. As a general rule,
the present value savings of a particular refunding should exceed 3.5%
of the par amount of the refunded maturities.
K. Interest Earnings
Interest earnings received on the investment of bond proceeds shall be
used to assist in paying the interest due on bonds issued, to the extent
permitted bylaw.
L. Lease/Purchase Agreements
Over the lifetime of a lease, the total cost to the City will generally be
higher than purchasing the asset outright. As a result, the use of
6 1 P a g e
FORT WORTH.
Debt Policy
lease/purchase agreements and certificates of participation in the
acquisition of vehicles, equipment, and other capital assets shall
generally be avoided, particularly if smaller quantities of the capital
asset(s) can be purchased on a "pay-as-you-go" basis.
M. Proposals from Investment Bankers
The City welcomes ideas and suggestions from investment bankers and
will seek to gain information and knowledge from those firms which
submit unique and innovative ideas.
N. Underwriting Syndicates
When a negotiated sale is deemed in the best interest of the City,
underwriters shall be selected from a procurement process designed to
yield the most qualified and experienced firms for the transaction. City
staff will recommend the structure of underwriting syndicates, which will
be effective for the type and amount of debt being issued. The City will
consider its M/WBE goals in structuring syndicates.
7 1 P a g e
FORT WORTH.
Debt Monitoring Policy
I. Authori
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 Managers by the Chief Financial
Officer/Director of Finance.
II. Purpose
As a municipal government, the City issues both tax-exempt and taxable
securities in the form of tax notes, certificates of obligations, general obligation
bonds, and revenue bonds in support of the City's Vision to be the most livable
and best managed city in the county. The proceeds from these debt transactions
are utilized to fund the City's comprehensive Capital Improvement Program for
multiple sectors of our operation. It is considered best practice for the City,
as part of the issuance of tax-exempt obligations, to adopt written procedures
outlining how the City will maintain compliance with federal guidelines. The
current version of such procedures was adopted on July 24, 2012, as Exhibit C -
Written Procedures Relating to Continuing Compliance with Federal Tax Covenants to
the City's 23rd Supplemental Ordinance authorizing the issuance and sale of
the City's Water and Sewer Revenue Refunding Bonds, Series 2012 (Ordinance
No. 201301-07- 2012). This policy is intended to supplement such Written
Procedures, as the same may be updated from time to time by action of the City
Council.
III. Applicability and Scope
This policy shall apply to all debt issuances under the fiscal control of the City
Manager and the City Council and issued by the City of Fort Worth (the "City"
or "Issuer"). Sections V through IX pertain only to tax-exempt debt issuances by
the City (the "Obligations").
IV. Glossary
See Definitions related to this policy provided in the appendix.
V. Arbitrage Compliance
Federal income tax laws generally restrict the ability to earn arbitrage in
1IPage
FORT WORTH.
Debt Monitoring Policy
connection with the Obligations. "Arbitrage," in this context, refers to any profit
earned from investing the proceeds from the issuance of any Obligations at a yield
that is higher than that on such Obligations.
Federal income tax laws restrict Arbitrage via two separate mechanisms: "yield
restriction" and the "rebate requirement." Yield restriction prohibits the investment
of bond proceeds at a rate higher than the yield on the related Obligations. The
rebate requirement requires an issuer to rebate to the federal government any
Arbitrage earned from the investment of Obligations.
Federal income tax laws provide exceptions to the yield restriction and rebate
requirement rules, the most common of which are applicable to bond proceeds
allocated to construction expenditures. Certain procedures related to these
exceptions are set forth in Section VII below (see procedures A and B, related to
exceptions from yield restriction, and procedure C, related to exceptions from the
rebate requirement). The exceptions must be evaluated independently, as the
applicability of an exception from yield restriction does not guarantee an
exception from the rebate requirement. Bond Counsel should be consulted in
determining the available exceptions and procedures with respect to Obligations
issued for construction projects involving timelines in excess of those described
below.
The Responsible Person will review the Closing Documents and Section VII below
periodically (at least once a fiscal year) to ascertain compliance with Arbitrage
restrictions and applicable exceptions.
VI. Review of Federal Tax Certificate for Each Issuance
The Issuer's Director of Finance/Chief Financial Officer (such officer, together
with other employees of the Issuer who report to such officer, are, collectively,
the "Responsible Person") will review and track the federal tax certificate prepared
in connection with each issuance of Obligations.
VII. Compliance Procedures Applicable to Obligations Issued for Construction and
Acquisition Purposes
With respect to the investment and expenditure of the proceeds of the Obligations
that are issued to finance public improvements or to acquire land or personal
property, the Responsible Person will:
A. Instruct the appropriate person who is primarily responsible for the
construction, renovation or acquisition of the facilities financed or refinanced
with the Obligations (the "Project") that (i) binding contracts for the
expenditure of at least 5% of the proceeds of the Obligations must be entered
into within six months of the date of closing of the Obligations (the "Issue
2 1 P a g e
FORT WORTH.
Debt Monitoring Policy
Date") and that (ii) the Project must proceed with due diligence.
B. Monitor progress to ensure that at least 85% of the proceeds of the
Obligations to be used for the construction, renovation or acquisition of the
Project are expended within three years of the Issue Date.
C. Monitor to ensure proceed expenditures from project Obligation issuances
comply with one of the following applicable schedules1.2.3:
a) Six -Month Expenditure Schedule. All proceeds must be spent
within six months.
b) Eighteen -Month Expenditure Schedule:
i. By six (6) months following receipt of the proceeds, fifteen
percent (15%) of the proceeds (together with any amounts
received from investments thereof) must have been spent
on the designated projects.
ii. By twelve (12) months following receipt of the proceeds,
sixty percent (60%) of the proceeds (together with any
amounts received from investments thereof) must have
been spent on the designated projects.
iii. By eighteen (18) months following receipt of the proceeds,
one hundred percent (100%) of the proceeds (together with
any amounts received from investments thereof) must
have been spent on the designated projects.
c) Two -Year Expenditure Schedule. The two-year expenditure schedule
is available only for proceeds used to fund construction projects. A
project will qualify as a construction project if at least 75% of the
proceeds will actually be used for actual construction (versus
acquisition) costs. The two-year expenditure exception requires
expenditure of the proceeds within the following schedule:
i. By six (6) months following receipt of the proceeds, ten
percent (10%) of the proceeds (together with any amounts
received from investments thereof) must have been spent
on the designated projects.
1 For more information regarding these expenditure schedules, please refer to McCall Parkhurst & Horton, L.L.P.'s Memorandum
entitled Arbitrage Rebate Regulations, attached to the Federal Tax Certificates for the Obligations at issue.
2 The spending requirements do not generally apply to amounts held in a reasonably required reserve fund, except
in certain cases related to the two-year exception period.
3 "Proceeds' as used in this Section VII(b) generally includes investment earnings, but excludes funds held in a bona fide debt
service fund.
3 1 P a g e
FORT WDRTH,,)
Debt Monitoring Policy
ii. By twelve (12) months following receipt of the
proceeds, forty-five percent (45%) of the proceeds
(together with any amounts received from
investments thereof) must have been spent on the
designated projects.
iii. By eighteen (18) months following receipt of the
proceeds, seventy-five percent (75%) of the proceeds
(together with any amounts received from
investments thereof) must have been spent on the
designated projects.
iv. By twenty-four (24) months following receipt of the
proceeds, one hundred percent (100%) of the
proceeds (together with any amounts received from
investments thereof) must have been spent on the
designated projects.
D. Monitor the yield on the investments purchased with proceeds of the
Obligations to ensure the yield of such investments is restricted to the yield
on the Obligations after three years of the Issue Date;
E. Monitor the investment of all amounts deposited into a sinking fund or
funds pledged (directly or indirectly) to the payment of the Obligations, such
as the interest and sinking fund or debt service fund, to assure that the
maximum amount invested within such applicable fund at a yield higher
than the yield on the Obligations does not exceed an amount equal to
the debt service on the Obligations in the succeeding twelve-month period
plus a carryover amount equal to one -twelfth of the principal and interest
payable on the Obligations for the immediately preceding twelve-month
period; and
F. The Responsible Person will ensure that funds transferred to a debt service
fund are expended within thirteen months from the date of transfer.
G. Ensure no more than 50% of the Obligation proceeds are invested in an
investment with a guaranteed yield for four years or more.
VIII. Procedures Applicable to Obligations with a Debt Service Reserve Fund
If the Issuer issues Obligations that are secured by a debt service reserve fund,
the Responsible Person will assure that the maximum amount of any reserve
fund for the Obligations invested at a yield higher than the yield on the
Obligations will not exceed the lesser of (1) 10% of the principal amount of the
Obligations, (2) 125% of the average annual debt service on the Obligations
measured as of the Issue Date, or (3)100% of the maximum annual debt service
4 1 P a g e
FORT WORTH.
Debt Monitoring Policy
on the Obligations as of the IssueDate.
IX. Procedures Applicable to Escrow Accounts for RefundingIssues
sues
In addition to the foregoing, if the Issuer issues Obligations and proceeds
are deposited to an escrow fund to be administered pursuant to the terms of an
escrow agreement, the Responsible Person will:
A. Monitor the actions of the escrow agent to ensure compliance with the
applicable provisions of the escrow agreement, including with respect to
reinvestment of cash balances;
B. Contact the escrow agent on the date of redemption of obligations being
refunded to ensure that they were redeemed; and
C. Monitor any unspent proceeds of the refunded obligations to ensure that
the yield on any investments applicable to such proceeds are invested at a
yield that does not exceed the yield on the refunding obligations or otherwise
applied.
X. Procedures Applicable to All Tax -Exempt Obligations
For all issuances of Obligations the Responsible Person will:
A. Maintain any official action of the Issuer (such as a reimbursement
resolution) stating the Issuer's intent to reimburse with the proceeds of
the Obligations any amount expended prior to the Issue Date for the
acquisition, renovation or construction of the facilities;
B. Ensure the applicable information return (e.g., Form 8038-G, 8038-GC, or
any successor forms) is filed timely with the Internal Revenue Service (the
"IRS"); and
C. Ensure, unless excepted from rebate and yield restriction under section
148(f) of the Code, excess investment earnings are computed and paid
to the U.S. government at such time and in such manner as directed by
the IRS (1) at least every five years after the Issue Date and (2) within 30
days after the date the Obligations are retired.
XI. Private BusinessUse:
Generally, to be tax-exempt, only an insignificant amount of the proceeds of
each issue of Obligations can benefit (directly or indirectly) private businesses.
The Responsible Person will review the Closing Documents periodically (at
least once a fiscal year) for the purpose of determining that the use of the
Project does not violate provisions of federal tax law that pertain to private
5 1 P a g e
FORT WORTH.
Debt Monitoring Policy
business use. In addition, the Responsible Personwill:
A. Develop procedures or a "tracking system" to identify all property
financed with tax-exempt debt;
B. Monitor and record the date on which the Project is substantially
complete and available to be used for the purpose intended;
C. Monitor and record whether, at any time the Obligations are
outstanding, any person, other than the Issuer, affiliates of the Issuer or
members of the general public, has any contractual right (such as a
lease, purchase, management or other service agreement) with respect to
any portion of the Project;
D. Monitor and record whether, at any time the Obligations are outstanding,
any person, other than the Issuer, affiliates of the Issuer or members of the
general public, has a right to use the output of the Project (e.g., water, gas,
electricity);
E. Monitor and record whether, at any time the Obligations are outstanding,
any person, other than the Issuer, affiliates of the Issuer or members of the
general public, has a right to use the Project to conduct or to direct the
conduct of research;
F. Monitor and record whether, at any time the Obligations are outstanding,
any person, other than the Issuer, has a naming right for the Project or any
other contractual right granting an intangible benefit;
G. Monitor and record whether, at any time the Obligations are outstanding,
the Project is leased, sold or otherwise disposed of; and
H. Take such action as is necessary to remediate any failure to maintain
compliance with the covenants contained in the Ordinance authorizing the
tax-exempt obligations used to finance the Project.
XII. Record Retention:
The Responsible Person will maintain or cause to be maintained all records
relating to the investment and expenditure of the proceeds of the Obligations
and the use of the facilities financed or refinanced thereby for a period ending
three years after the complete extinguishment of the Obligations. If any
portion of the Obligations is refunded with the proceeds of another series of
tax-exempt Obligations, such records shall be maintained until the three years
after the refunding Obligations are completely extinguished. Such records can
be maintained in paper or electronic format.
6 1 P a g e
FORT WDRTH,,)
Debt Monitoring Policy
XIII. Responsible Persons:
Each Responsible Person shall receive appropriate training regarding the
Issuer's accounting system, contract intake system, facilities management and
other systems necessary to track the investment and expenditure of the
proceeds and the use of the Project financed or refinanced with the proceeds
of the Obligations. The foregoing notwithstanding, each Responsible Person
shall report to the City Council whenever experienced advisors and agents
may be necessary to carry out the purposes of these instructions for the
purpose of seeking City Council approval to engage or utilize existing advisors
and agents for such purposes.
7 1 P a g e
FORT WORTH.
Interfund Loan Policy
I. Authority
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:
This policy is intended to establish guidelines for the management of interfund loans
between City funds. Interfund loans are amounts provided between funds and
component units of the City of Fort Worth with a requirement for re -payment.
III. Scope:
This policy shall apply to all funds under the budgetary and fiscal control of the City
Manager and the Mayor and City Council.
IV. Glossary
See definitions related to this policy provided in the appendix.
V. Policy:
A. Review and Approval
In accordance with the City of Fort Worth Charter, any movement of funds
from one fund to another requires the approval of City Council. Additionally,
all Interfund loan proposals must be reviewed and approved by the Chief
Financial Officer/Director of Finance and the City Manager or the designee
thereof (who shall not be the Chief Financial Officer/Director of Finance).
B. Funding Source for Loans
The funding source of all interfund loans must be idle cash on deposit in a
fund. During the term of the loan, the outstanding balance at any time must not
be needed to finance normal operations. Adequate documentation, i.e. cash
flow analysis, is required to support the requirement that loaned funds are idle.
1IPage
FORT WORTH.
Interfund Loan Policy
C. Use of Loan Proceeds
Interfund loans must only be made to finance short-term capital needs of the
borrowing fund. Short-term is defined as a period up to five (5) years. The
exception to this policy is loans from the General Fund to other funds.
D. Repayment Source
The borrowing fund must have an identified revenue stream for the
repayment of all principal and interest incurred from the loan. Management
must provide documentation of the ability to repay the obligation, and the
department/fund incurring the loan must execute an agreement described in
paragraph F, below. Loans will not be approved if the obligor fund cannot
substantiate the ability to finance current business and capital operations,
make agreed upon loan repayments, and maintain sufficient cash to meet
emergency cashneeds.
E. Repayment Term
All interfund loans must be repaid in no more than five (5) years from the
date loan documents are executed.
F. Legal Documentation
All interfund loans shall be approved by the City Council by official action,
and are consummated by loan agreements. Those agreements will stipulate
the loan purpose, the loan amount, the term, repayment source, interest rate,
and other information as required to fully document the transaction.
G. Repayment
Interfund loans are interest bearing except for advance funding for grants,
reimbursement resolutions, or when senior management finds it appropriate to
forego the payment of interest. The interest rate charged and paid must comply
with all applicable laws and regulation. At a minimum the rate charged will
equal the return earned on the City's short-term investment portfolio.
H. Water and Sewer Fund Loans
In accordance with the Water and Sewer System Master Ordinance, excess
pledged revenues can be used to make loans to other City
Departments/Funds. Before making that determination, the Water and Sewer
fund must cover all obligations for Operation and Maintenance Expenses,
2 1 P a g e
FORT WORTH.
Interfund Loan Policy
Debt Service Expenses, Debt Service Coverage, Transfers to the General Fund,
Transfers to the Debt Service Funds, and Operating Reserve Requirement
(from Net Position).
I. Year -End
Nothing contained within this policy is intended to require Mayor and Council
approval, or City Manager approval, for booking interf ind loans at the end of
the year in order to prevent a fund or fund group from reporting a deficit cash
position. Such entries shall be made under the guidance and approval of the
Chief Financial Officer / Director of Finance and shall be immediately reversed
in the subsequent fiscal year. If a fund has a recurring deficit cash position, it
shall be the responsibility of the Department of Financial Management
Services to coordinate discussion with the department responsible for the fiscal
administration of the fund in order to develop a plan to mitigate this deficit
cash position.
3 1 P a g e
Cash Management
Policy
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 the Assistant City
Managers by the Chief Financial Officer / Director of Finance.
II. Purpose:
This policy is intended to establish guidelines to manage the City's cash in such a manner so as to
ensure the safety of principal and interest, to meet the liquidity needs of the City, and to achieve the
highest reasonable market yield.
III. Scope:
This policy shall apply to all funds under the budgetary and fiscal control of the City Manager and
the Mayor and City Council.
IV. Glossary
See definitions related to this policy provided in the appendix.
V. Policy:
The Chief Financial Officer / Director of Finance shall administer the management of the City's cash
as required under the Public Funds Investment Act (Texas Local Government Code Chapter 2256)
and the Collateral for Public Funds Act (Texas Local Government Code 2257). Specifically, this
policy mandates the pursuit of the following overall goals and objectives for cash management:
1. All aspects of cash management operations shall be designed to ensure the safety and
integrity of the City's financial assets.
2. Cash management activities shall be conducted in full compliance with prevailing local,
state, and federal regulations. Furthermore, such activities shall be designed to adhere to
guidelines, standards, and practices promulgated by such professional organizations as the
American Institute of Certified Public Accountants (AICPA), the Governmental
Accounting Standards Board (GASB), and the Government Finance Officers Association
(GFOA), whenever practicable.
Operating within appropriately established administrative and procedural parameters, the
City shall aggressively pursue optimum financial rewards, while simultaneously controlling
its related expenditures. Therefore, cash management functions that engender interaction
with outside financial intermediaries shall be conducted in the best financial and
I
Cash Management
Policy
FORT WORTH,
administrative interests of the City. In pursuit of these interests, the City will utilize
competitive bidding practices wherever practicable, affording no special financial
advantage to any individual or corporate member of the financial or investment
community.
4. The City shall design and enforce written standards and guidelines relating to a variety
of cash management issues, such as the eligibility or selection of various financial
intermediaries and counterparties, documentation and safekeeping requirements;
philosophical and operational aspects of the cash management function; and such other
functional and administrative aspects of the cash management program which necessitate
standard setting in pursuit of appropriate prudence, enhanced protection of assets or
procedural improvements.
2 1 P a g e
FORTWORTH.
City of Fort Worth
Department of Finance
Investment Policy and Strategy
General Portfolio
I. Introduction
It is the policy of the City of Fort Worth, Texas (the "City") that the administration
of its funds and the investment of those funds shall be handled in a manner that
promotes the highest public trust. Investments shall be made in a manner which will
provide the maximum security of principal by setting guidelines for investment
diversification by both type and maturity while meeting the daily cash flow needs
of the City. The Investment Policy and Strategy is established to define the
parameters within which investments are to be managed and to implement
reasonable standards for the City's cash management and investment operations.
The purpose of this document is to establish overarching investment policy,
provide investment strategy and guidelines, and set specific rules and parameters
governing investment practices. This policy formalizes the framework for the
City's investment activities that must be exercised to ensure effective and judicious
fiscal and investment management of its funds. The guidelines are intended to be
broad enough to allow the Investment Officer(s) to function properly within the
parameters of responsibility and authority, yet specific enough to adequately
safeguard the investment assets.
II. Governing Authority
All investment and cash management activities shall be conducted in full
compliance with applicable City ordinances as well as state and federal rules and
regulations. Specific statutory regulations for the investment of public funds in
Texas are found in the Public Funds Investment Act, Chapter 2256, Texas
Government Code (the "Act"). All investments will be made in accordance with
this statute. Collateral requirements are established in Texas by the Public Funds
Collateral Act, Chapter 2257, Texas Government Code, for all public Texas funds
deposits.
Under the direction of the City Manager, the Chief Financial Officer/ Director of
Finance and the Investment Officers are authorized to promulgate reasonable
procedures to ensure effective and judicious management of City funds which align
Page 1 of 16
with this policy.
III. Scope
This policy applies to all public funds in the custody of the City that are not required
by law to be deposited in the state treasury and that the City has authority to invest.
These funds are reported in the City's Comprehensive Annual Financial Report
(CAFR).
Funds held by trustees or retirement funds are excluded from this policy; however,
all funds are subject to regulations established by the State of Texas. These excluded
funds may also be reported in the City's Comprehensive Annual Financial Report
(CAFR) based upon standards promulgated by the Governmental Accounting
Standards Board (GASB).
IV. Objectives
The City shall manage and invest its assets with the following four major
objectives, listed in order of priority:
1. Safety
Consistent with the requirements of the Act, safety of principal is the
foremost objective of the City's investment program. All aspects of cash
and investment management operations shall be designed to ensure the
safety and integrity of the City's financial assets. Investments shall be
undertaken in a manner that seeks to ensure the preservation of principal
in the overall portfolios, mitigating credit and interest rate risk. Each
investment transaction shall be conducted in a manner to minimize
principal losses. All cash and investment management activities shall be done
in a manner that promotes and is reflective of public trust.
2. Liquidity
The investment portfolios shall be structured to timely meet expected
cash flow needs and associated obligations in a manner that results in the
lowest cost to the City. This objective shall be achieved by matching
investment maturities with forecasted cash outflows and maintaining an
additional liquidity buffer for unexpected liabilities.
3. Diversification
The portfolios shall be diversified by market sector and maturity in order to
Page 2 of 16
manage market risk.
4. Yield
The investment portfolios shall be designed with the objective of attaining a
reasonable market rate of return throughout economic cycles, taking into
account the investment risk constraints of safety and liquidity needs. The
benchmarks for the portfolios shall be designed for their comparability to the
expected average cash flow patterns of the portfolios. The investment
program shall seek to augment returns above the applicable benchmark
consistent with risk limitations identified herein and prudent investment
policies and practices.
V. Strategies
To the extent feasible under prevailing market conditions, the City will strive to
maintain and manage two portfolios in which funds are pooled for investment
purposes: a Short -Term Portfolio and a Long -Term Portfolio. The Short -Term
Portfolio would be used to manage that portion of the City's assets that, based
on analysis of historic cash flow patterns, is projected to be needed within the
five year planning and forecast horizon to meet the City's cash flow needs. The
Long -Term Portfolio would be used to manage that portion of the City's assets that,
based on analysis of historic cash flow patterns and current projections, is not
needed to meet the City's cash flow needs within the five-year planning and
forecast horizon and is therefore available and suitable for longer term investment.
In general, the Investment Officers shall manage investments to ensure that if an
unexpected cash need arises, the City will be able to liquidate sufficient investments
to meet its needs without incurring adverse consequences. When prevailing market
conditions do not offer adequate returns on long-term investments to compensate
for the corresponding interest -rate risk and loss of liquidity, the Investment Officers,
in consultation with the Investment Advisor, are authorized to focus investments in
the Short -Term Portfolio and forgo adding to the Long -Term Portfolio.
Operating within appropriately established administrative and procedural
parameters outlined in this Investment Policy and Strategy, the City should pursue
optimum financial rewards in both portfolios, while simultaneously controlling
related expenditures. Cash management functions shall be conducted in a manner
that promotes the best financial and administrative interests of the City. Except
for money in certain restricted and special funds, the City commingles its
available cash and investments across all funds to maximize investment earnings
and to increase investment efficiencies with regard to pricing, safekeeping and
administration. The strategies used are intended to ensure compliance with the
statutes and address suitability of the investments, preservation of principal,
Page 3 of 16
liquidity, marketability of securities, diversification controls and reasonably
attainable yield. The strategies will utilize competitive bidding practices and other
controls as established by this policy for all transactions.
The investment strategy for each portfolio incorporates the specific considerations
and the unique characteristics of the fund groups represented in that portfolio. Both
portfolios shall be invested in high credit quality investments. For the Short -Term
Portfolio the City shall pursue a strategy which fully utilizes its cash assets to obtain
a competitive yield while also allowing the City to meet projected cash flow
needs, to minimize the cost of liquidity, and to maintain the objectives set forth in
this policy. The investment strategy for the Long -Term Portfolio will be focused
on appreciation while also meeting the objectives set forth in this policy.
At all times the City shall maintain a cash buffer to meet daily anticipated liquidity
requirements by structuring the Short -Term Portfolio to maintain approximately
10% in liquid investments. Based upon the analysis of historic cash flow patterns,
the Short -Term Portfolio shall not exceed a weighted average maturity (WAM) of
two and one-half (2.5) years, and no security in this portfolio shall exceed a
maximum stated maturity of five (5) years. In the Long -Term Portfolio the
maximum WAM shall not exceed seven and one half (7.5) years, and no security
shall exceed a maximum stated maturity of ten (10) years. Notwithstanding the
foregoing, if state law and/or this policy provides for a lower maximum stated
maturity for a particular type of investment, that more restrictive requirement shall
control.
Investment earnings from both portfolios shall be allocated to the various
participating funds based on each fund's pro rata ownership in the portfolio and in
accordance with generally accepted accounting principles. Investment earnings will
be allocated to the participating funds or their corresponding debt service funds as
determined in the City's annual budget process.
Securities may be sold before they mature if market conditions present an
opportunity for the City to benefit from the sale. The Investment Officer(s)
and/or Investment Advisor will continuously monitor the contents of each portfolio,
the available markets, and the relative value of competing instruments to adjust
each portfolio in response to market conditions.
Securities lending, as more fully described in Authorized Investments (Section IX),
may be used to add incremental income to both portfolios when it proves to be
beneficial to the City.
VI. Standard of Care
The standard of prudence to be used for all City investments shall be the
Page 4 of 16
"prudent person" standard as established by the Act and shall be applied in the
context of managing the overall portfolios. The "prudent person" standard states
that:
"Investments shall be made with judgment and care, under
prevailing circumstances, that a person of prudence, discretion,
and intelligence would exercise in the management of the
person's own affairs, not for speculation, but for investment,
considering the probable safety of their capital and the probable
income to be derived."
Investment Officer(s) acting in accordance with promulgated procedures and this
Investment Policy and Strategy and exercising due diligence shall be held
accountable for any individual security's credit risk or market price changes but
shall not be personally liable for deviations from expectations so long as deviations
from expectations are reported in a timely fashion and appropriate action is taken
to control adverse developments.
VII. Responsibility and Delegation of Authority
A. City Council
By law, the City Council retains ultimate fiduciary responsibility for the portfolios.
The Council is to receive quarterly reports and annually review and adopt the
Investment Policy and Strategy. In addition, the Council is responsible for
designating one or more individuals to serve as Investment Officer(s). In
accordance with the Act, the Council may retain responsibility for reviewing and
approving authorized broker/ dealers and investment training sources or designate
those two responsibilities to the Investment Committee.
B. Investment Officer(s)
In accordance with the Act, by adoption of this policy, the City Council designates
and appoints the individuals holding the following positions to serve as Investment
Officers to serve in accordance with state law and be responsible for the
investment of City funds consistent with this Investment Policy and Strategy: the
City's Chief Financial Officer/ Director of Finance, the Finance Department
Assistant Director for Treasury Services, and the Treasury Supervisor.
The City may contract with a registered Investment Advisor to provide guidance in
the management of the portfolios; however, the Investment Officer(s) will be
responsible for investment decisions and activities. The Investment Officer(s) and
Advisor shall seek to act responsibly as custodians of the public trust. No
Investment Officer may engage in an investment transaction except as provided
under the terms of this policy and procedures adopted in accordance with this
Page 5 of 16
Investment Policy and Strategy.
The Investment Officer(s) and Investment Advisor are responsible for creating and
maintaining the portfolios in accordance with this policy, providing timely
quarterly reporting to the City Council, and establishing procedures and controls for
the process and financial counter -parties (brokers, banks, pools). The Investment
Officer(s) and Investment Advisor shall act in accordance with established written
procedures and internal controls for the operation of the investment program
consistent with this Investment Policy and Strategy.
Training
In accordance with the Act, all Investment Officer(s) shall attend ten hours
of training within twelve (12) months after assuming investment duties and
shall attend eight hours of training every two years thereafter, with the first
such two-year period beginning on the first day of the City's fiscal year after
the year in which the Investment Officer takes the initial training. Training
shall be provided by professional organizations authorized in accordance
with state law and designated by the Investment Committee.
Ethics and Disclosures
Officer(s) and employees involved in the investment process shall refrain
from any personal activity that could conflict with the proper execution and
management of the investment program, or that could impair their ability to
make impartial investment decisions. Investment Officer(s) shall refrain
from undertaking any personal investment transactions with the same
individual with whom business is conducted on behalf of the City.
The City Code requires the Chief Financial Officer to complete and file a
financial disclosure statement with the City Secretary.
In addition, all Investment Officer(s) shall file disclosure statements with the
Texas Ethics Commission and the City Council if:
a. the officer has a personal business relationship with a business
organization offering to engage in an investment transaction with the City
(as defined in Section 2256.005 (i)(1-3) of the Act); or
b. the officer is related within the second degree by affinity or
consanguinity, as determined under Chapter 573 of the Texas Government
Code, to an individual seeking to transact investment business with the
entity.
C. Investment Committee
In adopting this policy, the City Council authorizes the creation of an Investment
Committee to provide guidance to the Investment Officer(s) and Investment
Page 6 of 16
Advisor. In accordance with the Act, the City Council hereby delegates to the
Committee the authority to approve the annual broker/ dealer list and to authorize
organizations to provide the training required under state law. No other decision -
making authority is transferred to the Committee. The Committee will meet
periodically to review the investment portfolio performance, to provide feedback
on the portfolios, and to discuss investment strategies. This Committee will
periodically review this Investment Policy and Strategy and recommend possible
changes to the City Council.
The Committee will be comprised of the Chief Financial Officer/ Director of
Finance, the Finance Department Assistant Directors for Treasury and Accounting,
a representative of the Water Department, the Investment Officer(s), the Investment
Advisor (as applicable), a representative of the Law Department, and other
appropriate persons chosen by the Committee.
D. Investment Advisor
The City may engage the services of a Securities and Exchange Commission (SEC)
registered Investment Advisor (registered under the Investment Advisors Act of
1940) to assist in the management of the investment portfolios in a manner
consistent with the City's objectives and policies. All security transactions will be
approved by the City prior to the Investment Advisor taking action. Approval may
be in the form of a phone call, email, facsimile or other written communication.
The Investment Advisor may not be granted total discretion in the management of
funds.
The Investment Advisor shall make recommendations to the Investment
Committee which support and align the investment vehicles with this policy and
ensure that its support activities are consistent with the City's established policies,
rules and regulations.
VIII. Authorized Financial Institutions, Depositories, and Broker/Dealers
A list of financial institutions, broker/ dealers, and depositories authorized to
provide investment services will be maintained by the Investment Officer(s). All
counter -parties will be selected through a process of due diligence. Due diligence
requires competitive transactions and delivery versus payment settlement.
The City will furnish counter -parties with the City action authorizing the
Investment Officer(s) or Investment Advisor to establish and maintain accounts for
the purpose of purchasing and selling securities authorized under Texas law and
this policy.
Certification
Pagc 7 of 16
Section 2256.005(1) of the Act requires that any business organization offering to
engage in an investment transaction with the City must be provided with a copy of
this Investment Policy and Strategy with "business organization" defined as "an
investment pool or investment management firm under contract with an investing
entity to invest or manage the entity's investment portfolio that has accepted
authority granted by the entity under the contract to exercise investment
discretion in regard to the investing entity's funds." That provision also requires
the business organization must provide the City with a written instrument (in a
form acceptable to both parties) executed by a representative of the business
organization that substantially acknowledges that the business organization has:
a. Received and reviewed the City's Investment Policy and Strategy; and
b. Implemented reasonable procedures and controls in an effort to preclude
investment transactions with the City that are not authorized by the City's
Investment Policy and Strategy.
Any material changes to the Investment Policy and Strategy will require re-
certification by all authorized firms.
Security Broker/Dealers
In accordance with the authority delegated by the City Council, the Investment
Committee will at least annually review and adopt a list of broker/dealers who are
authorized to engage in investment transactions with the City. If the City engages
a firm to act as an investment advisor or as an investment manager, the firm
will have the responsibility to ensure all broker/dealers comply with the provisions
of this policy.
Authorized broker/dealers may include "primary" or regional dealers as well as
brokers. No broker/dealer may hold City securities because all transactions must
be settled delivery versus payment (DVP). An entity is disqualified and will not be
authorized to serve as a broker/dealer if the entity is (a) a banking services
depository that acts as safe keeper of City securities in order to perfect the DVP
process or (b) a brokerage subsidiary of a depository identified in (a).
Each broker/dealer must supply the following documents which will be maintained
by the Investment Officer(s) or Investment Advisor.
• annual audited financial reports
• Financial Industry Regulatory Authority (FINRA) registration
• Central Registration Depository Number (CRD)
• proof of Texas State Securities registration
• City broker/dealer questionnaire
• Investment Policy and Strategy review certification
Page 8 of 16
Banks acting in a brokerage capacity must supply the following documents to be
maintained by the Investment Officer(s) or Investment Advisor.
• annual audited financial reports
• proof of Texas State Securities registration
• City broker/dealer questionnaire
• Investment Policy and Strategy review certification
At a minimum the Investment Officer(s) or Investment Advisor shall review the
performance, financial condition and registration of all qualified financial
institutions and broker/dealers annually. Results are to be provided to the
Investment Committee for review and consideration in the annual approval of the
broker/dealer list.
IX. Existing Investments
Except as provided by Texas Government Code Chapter 2270, the City is not
required to liquidate investments that were authorized investments at the time of
purchase.
X. Authorized Investments
The Act lists all possible authorized investments available to Texas public entities.
The City shall invest only in those investments authorized below as such
investments are further defined by the Act. If this policy provides for a lower stated
maximum maturity or other more restrictive condition on an authorized
investment, the more restrictive requirement controls. If changes are made to the
Act to allow for additional possible authorized investments, such investments will
not be authorized by the City until this policy is modified and adopted by the City
Council. All investment transactions will be made on a competitive basis.
1. Direct obligations of the United States Treasury.
2. Obligations of United States government agencies and instrumentalities,
including mortgage -backed securities and collateralized mortgage obligations
(CMO) which pass the Federal Reserve's bank test.
3. FDIC -insured and/or collateralized certificates of deposit as allowed by
law.
4. Commercial paper rated Al/PI or equivalent by two nationally recognized
rating agencies, with a maximum stated maturity of three -hundred sixty five
(365) days.
Page 9 of 16
5. AAA or equivalent rated, constant dollar, Texas local government
investment pools as defined by the Act.
6. AAA -rated, SEC -registered money market mutual funds which strive to
maintain a $1net asset value.
7. FDIC -insured brokered certificates of deposit securities from a bank in any
US state, delivered versus payment to the City's safekeeping agent. Before
purchase, the Investment Officer(s) or Investment Advisor must verify the
FDIC status of the bank to ensure that the bank is FDIC insured.
8. General debt obligations of any state or political subdivision of any US
state, rated AA or higher.
9. Fully collateralized, direct repurchase agreements executed through a
primary government securities dealer. A Bond Market Association Master
Repurchase Agreement and independent third parry safekeeping are required.
A flex repurchase agreement used for bond funds must match the expected
expenditure schedule of the bonds.
10. Banker's acceptances with a maximum stated maturity of one -hundred
twenty (120) days accepted by a US registered bank rated not less than Al/ PI
by two nationally recognized rating agencies.
11. Reverse repurchase agreements executed for investment purposes with a
primary securities dealer. The proceeds may not be invested in any security
with a maturity date longer than the maturity date of the reverse repurchase
agreement.
12. Securities Lending Transactions under a written agreement with a
primary securities dealer lending the City's investment securities with the
collateralization/ substitution of securities with a minimum 102% margin and
safe kept by an approved custodial bank in an account in the City's name.
Transaction documentation and collateral reports are to be provided to the
City daily.
13. Investment Pools as allowed by law which must also be continuously
rated no lower than AAA or AAA-m or at an equivalent rating by at least one
(1) nationally recognized rating service. A public funds investment pool that
uses amortized cost or fair value accounting must mark its portfolio to market
daily, and, to the extent reasonably possible, stabilize at $1.00 net asset value,
when rounded and expressed to two decimal places.
Page 10 of 16
XI. Collateralization
Time and Demand Pledged Collateral
All time and demand deposits shall be secured above FDIC coverage by pledged
collateral. In order to anticipate market changes and provide a level of security for
all funds, collateral will be maintained and monitored by the pledging depository
at 102% of market value of principal and accrued interest on the deposits. The bank
shall monitor and maintain the margins on a daily basis. All collateral shall be
subject to inspection and audit by the City or its auditors. To allow for compliance
verification by the City, monthly reports of pledged collateral shall include, at a
minimum, information for each security that identifies its (i) type, (ii) CUSIP
number, and (iii) face value.
Collateral pledged to secure deposits shall be held by an independent financial
institution outside the holding company of the depository, approved by the
Investment Officer(s), in accordance with a safekeeping agreement executed under
the terms of the Financial Institutions Resource and Recover Enforcement Act
(FIRREA).
City Owned Collateral
Each counter party to a repurchase transaction is required to execute the Bond Market
Master Repurchase Agreement and to provide collateral, at a 102% margin, that must
be held by an independent third party custodian approved by the Investment Officer(s).
The Master Agreement must be fully executed before any transaction is initiated.
Collateral will be evidenced by safekeeping reports/receipts clearly denoting City
ownership from the safekeeping agent and include information as to each position
(security type, CUSIP number, face and market value).
Authorized Collateral
As authorized by the Public Funds Collateral Act and further restricted by this
policy, acceptable collateral for time and demand deposits and repurchase
agreements shall include only:
Obligations of the U.S. Government, its agencies and instrumentalities,
including mortgage -backed securities and CMO that pass the bank test,
and Obligations of any U.S. state, city, county or authority rated at least
A by two nationally recognized statistical rating organizations.
XII. Diversification
The City recognizes that investment risks can result from issuer defaults, market
price changes, or various technical complications leading to temporary illiquidity.
Risk is controlled through portfolio diversification. The strategies for
diversification are dependent upon market conditions and cash flow needs and
Page 11 of 16
targeted diversification may change in accordance with these conditions.
Guidelines for target investment diversification for the combined Short -Term and
Long -Term Portfolios are as follows:
US Obligations
80 %
US Agencies/Instrumentalities
80 %
Any one issuer
35 %
Depository Certificates ofDeposit
30 %
Any one bank
10%
Commercial Paper
20 %
Any one issuer
5 %
Local Government InvestmentPools
80 %
Money Market Mutual Funds
80 %
Brokered Certificate of Deposit Securities
10%
Municipal Obligations
35 %
Any one issuer
5 %
Repurchase Agreements
50 %
Flex in one specific bond fund (100 %)
Bankers Acceptances
15%
Fluctuations in cash flows may cause the portfolios to vary. Comparison to these
diversification targets will be reported as part of all regular monthly and quarterly
investment reports. Securities need not be liquidated to realign the portfolios.
The following table provides a guideline for targets in laddering maturities in the
Short -Term Portfolio. Market calls and advantageous trades prior to maturity
swaps may cause the portfolio to deviate from these guidelines. Securities need not
be liquidated to realign the portfolios so long as the weighted average maturity for
the overall portfolio remains at or below the maximum two and one half (2.5) year
limitation.
Maturity Range
Liquidity
10%
1 month
— 1 year
30%
1 year —
2 year
15%
2 year —
3 year
15%
3 year —
4 year
15%
4 year —
5 year
15%
XIII. Internal Controls
The Investment Officer(s) have the responsibility of establishing and maintaining
an internal control structure designed to provide reasonable assurance that assets
Page 12 of 16
are protected from loss, theft, or misuse. The concept of reasonable assurance
recognizes that the cost of a control should not exceed the benefits likely to be
derived, and, the valuation of costs and benefits requires ongoing estimates and
judgments by management.
The internal controls shall address the following points at a minimum:
• Control of collusion;
• Separation of transaction authority from accounting and record keeping;
• Custodial safekeeping;
• Clear delegation of authority;
• Written documentation on all transactions; and
• Review, maintenance, and monitoring of security procedures.
In accordance with the Act, a compliance audit of management controls on
investments and adherence to this policy shall be conducted in conjunction with the
City's annual external financial audit.
The Investment Officer(s) will develop and maintain internal procedures,
describing use of bank balances, calculation of the City's liquidity needs, daily
investment procedures, investment transaction documentation, and distribution of
reports, at a minimum.
Competitive Transactions
The Investment Officer(s) or Investment Advisor shall obtain competitive bid
information on all transactions and maintain documentation thereof. A competitive
bid/ offer must involve at least three separate brokers/institutions or use of a
nationally recognized electronic trading platform with three bids/offers.
For transactions involving new issue agencies or securities for which there is no
readily available competitive offering on the same specific issue, then the
Investment Officer(s) or Investment Advisor shall document quotations for
comparable or alternative securities.
Delivery vs. Payment
The Act requires that all trades of marketable securities be executed (cleared and
settled) on a delivery vs. payment (DVP) basis to ensure that securities are deposited
in the City's safekeeping institution prior to the release of funds.
Cash Flow Forecasting
Cash flow forecasting is designed to protect and sustain the City's ability to meet
its cash flow requirements. Supplemental to the financial and budgetary systems,
the Investment Officer(s) will maintain a cash flow forecasting process designed to
monitor and forecast cash positions to assist in determining appropriate laddering
Page 13 of 16
of investment maturities to meet projected liquidity needs.
Monitoring Credit Ratings
The Investment Officer(s) or Investment Advisor shall monitor, on no less than a
weekly basis, the credit rating on all authorized investments in the portfolios
based upon independent information from a nationally recognized rating agency. If
any security falls below the minimum rating required by the Act or by policy, the
Investment Officer(s) or Investment Advisor shall notify the Investment
Committee within two business days of the loss of rating, conditions affecting the
rating and possible loss of principal with liquidation options available.
Monitoring FDIC Status for Mergers and Acquisitions
The Investment Officer(s) or Investment Advisor shall monitor, on no less than a
weekly basis, the status and ownership of all banks issuing brokered CD
securities owned by the City based upon information from the FDIC. If any bank
has been acquired or merged with another bank in which brokered CDs are owned,
the Investment Officer(s) or Investment Advisor shall immediately liquidate any
brokered CD securities which places the City above the insured FDIC insurance
level.
External Audits
An annual review of the quarterly investment reports will be made by the City's
external auditors. Such audit will include tests deemed appropriate by the
auditor to ensure compliance with the Act and this policy.
XIV. Safekeeping
All security transactions will be settled on a delivery versus payment basis.
Securities owned by the City will be held by the City's depository or other City
contracted safekeeping institution independent from any security transactions. All
safekeeping contracts will be executed in writing. The safekeeping agent shall
provide documentation of all securities and evidenced by safekeeping
receipts/reports indicating ownership by the City.
XV. Reporting
Quarterly Reporting
In accordance with the Act, no less than quarterly the Investment Officer(s) or
Investment Advisor will prepare and submit a report to the City Council. The
report will comply with the Act and will contain, at a minimum, the following
information for eachportfolio (Short -Term and Long -Term):
Page 14 of 16
a. a detailed description of each investment position as of the date of the
report, including book and market values and purchase yield;
b. individual transactions (buy/sell, maturities, calls) during the period;
c. summary statements for the total portfolios including:
(1) beginning and ending book value for the reporting period,
(2) beginning and ending market value for the reporting period,
(3) change in market value (volatility measure) for the reporting
period,
(4) total earnings for the reporting period,
(5) WAM at the beginning and end of the period, and
(6) portfolio yield and benchmark yield for the reporting period.
d. securities lending income stated as a separate amount and also expressed
as a part of the overall portfolio -yield calculation, with overall yield shown
in comparison to benchmark.
e. asset allocation by maturity and market sector with comparison to policy
guidelines, and
f. compensating balances maintained at depositories at its earned credit rate
(ECR) stated as a separate amount and also expressed as a part of the overall
portfolio -yield calculation, with overall yield shown in comparison to
benchmark.
g. overall blended yield (taking into account both securities lending and
ECR revenues) in comparison to benchmark.
The quarterly report shall include a statement of compliance for each portfolio
as it relates to the City's Investment Policy and Strategy and shall be signed by each
Investment Officer and Investment Advisor. In order to maintain the transparency
of the program, the reports shall be made easily available and clear and concise for
the reader.
Prices used for calculation of market values will be obtained from an independent
source.
Benchmarks
The benchmarks for the performance of the City's investment portfolios will be (a)
for the Short -Term Portfolio the comparable period average of the yield of the
portfolio and the ICE BoAML 0-5 year US Treasury Index and (b) on the Long -
Term Portfolio the comparable period average yield of the portfolio and the ICE
BoAML 0-10 year US Treasury Index. The City's objective is to match or exceed
the benchmarks through active portfolio management.
XVI. Investment Policy Adoption
The Investment Policy and Strategy shall be reviewed and adopted by the City
Page 15 of 16
Council at least annually. The adopting instrument shall identify any changes made
to the policy.
Restated and Revised Policy Adopted: February 5, 2013 (M&C G-17801)
Policy Reviewed and Approved:
• December 3, 2013 (M&C G-18067)
o No change
• May 5, 2015 (M&C G-18466)
o No change
• September 15,2015 (M&C G-18552)
o Training requirements revised to reflect amended state law
• April 19, 2016 (M&C G-18720)
o Short -Term / Long -Term; WAM; investment duration; defining yield
• January 24, 2017 (M&C G-18922)
o Amended investment types and minor technical corrections
• September 26, 2017 (M&C G-19116)
o Amended Section VIII, subsection Security Broker/Dealers
• September 11, 2018 (M&C G-19361)
o Training requirements revised to reflect amended state law; Ethics and Disclosures
by Investments Officers revised to clarify and strengthen policy; added new
Section IX. Existing Investments; Authorized Investments subsection 13.
Investment Pools revised to clarify policy; Re -numbered existing Sections IX to
XVI due to addition of new Section IX. Existing Investments
• September 10, 2019 (M&C 19-0144)
o Amended Authorized Investments, Subsection 4, Commercial Paper maximum
maturity changed from 270 days to 365 days
• September 22, 2020 (M&C 20-0686)
o Amended Section V. Strategies, first and second papagraphs
o Amended Section VII. Responsibility and Delegation of Authority, Subsection B.
Investment Officer(s), second paragraph updated wording
o Amended Section XV. Reporting, Benchmarks; Changed Short -Term Portfolio
benchmark from the two-year Treasury Note to ICE BoAML 0-5 year US Treasury
Index and changed the Long -Term Portfolio benchmark from seven-year Treasury
Note to ICE BoAML 0-10 year US Treasury Index.
o Corrected typos and spelling errors
Page 16 of 16
City of Fort Worth
Department of Finance
Investment Policy and Strategy
Fort Worth Permanent Fund
I. INTRODUCTION AND SCOPE
FORT WORTH,
It is the policy of the City of Fort Worth, Texas (the "City") that the administration and
investment of all City funds shall be handled in a manner that promotes the highest
public trust. The City Council has designated that certain funds obtained from mineral
rights owned by the City be placed in a trust for benefit of the City, with such trust to be
known as the Fort Worth Permanent Fund (the "Permanent Fund") and to be invested in
accordance with this Policy. Those funds that have been obtained from mineral rights but
not designated as part of the Permanent Fund will be managed as part of the City
portfolio under the City's General Portfolio Investment Policy and Strategy.
This Fort Worth Permanent Fund Investment Policy and Strategy (the "Policy") sets
specific investment and strategy guidelines for funds placed in the Permanent Fund and
establishes controls to ensure effective and judicious fiscal and investment management.
The guidelines are intended to be broad enough to allow active investment within the
Policy parameters yet specific enough to adequately safeguard the assets.
II. GOVERNING AUTHORITY
All Permanent Fund investment activities shall be conducted in full compliance with
applicable City ordinances as well as state and federal regulations. Statutory regulations
generally applicable to the investment of public funds in Texas are found in the Public
Funds Investment Act, Chapter 2256, Texas Government Code (the "Act"), with a specific
provision applicable solely to municipal funds for the management and development of
mineral rights found in Sec. 2256.0202 of the Act, which incorporates by reference The
Texas Trust Code (Subtitle B, Title 9, Property Code). All investments of monies in the
Permanent Fund will be made in accordance with these statutes and this more restrictive
Policy. Collateral requirements are established in Texas by the Public Funds Collateral
Act, Chapter 2257, Texas Government Code.
III. OBJECTIVES
11Page
The Permanent Fund, some portion of which may be maintained as permanent funds as
determined by the City, is to be managed and invested in general accordance with the
Act and follow four major investment objectives: safety, liquidity, diversification and
yield.
Safety of principal is the foremost objective of the City's overall investment program, and
safety of principal shall be an objective with respect to the investment of the Permanent
Fund as well. Investment transactions and strategies shall address and consider the
preservation of capital and minimization of capital loss as well as growth. Liquidity is
not critical in the Permanent Fund because these funds are not to be used for ongoing
operational expenses, expenditures, or liabilities. Diversification in portfolio structure is
intended to further protect the Permanent Fund from over- concentration. Growth and
income will be the primary objectives for the Permanent Fund after all other objectives
have been achieved.
IV. STRATEGY
The Permanent Fund is to be invested in designated sub -accounts as per the Gas -Related
Revenue & Expense/Expenditure Policy. Operating within appropriately established
administrative and procedural parameters, the Trustee shall pursue growth and returns
within Policy parameters. Withdrawals from the Permanent Fund may be made annually
pursuant to the terms of the Trust and will require coordination and planning to
minimize having to recognize unrealized losses. No cash buffer is required on the
portfolio.
The Permanent Fund shall be managed proactively in high credit quality investments.
Securities lending may be used to add incremental income. Strategies shall utilize
competitive bidding where appropriate and other controls as established by this Policy
for all transactions pursuant to the terms of the Trust.
Securities may be sold or swapped if an opportunity exists to benefit from the trade. All
transactions, including swaps must be documented. The Trustee will continuously
monitor the contents of the portfolio, the available markets, and the relative value of
competing instruments to adjust the portfolio in response to market conditions.
V. STANDARD OF CARE
The standard of care to be used shall be the "prudent person' standard as established by
the Act and shall be applied in the context of managing the overall Permanent Fund. The
"prudent person" standard states that:
2 1 P a g e
"Investments shall be made with judgment and care, under prevailing
circumstances, that a person of prudence, discretion and intelligence would
exercise in the management of the persons own affairs, not for speculation, but
for investment, considering the probable safety of capital and the probable income
to be derived."
In determining whether a Trustee has exercised prudence with respect to an investment
decision, the determination shall be made taking into consideration: (1) the investment of
all funds, or funds under the Trustee's control, over which the Trustee had responsibility
rather than a consideration as to the prudence of a single investment; and (2) whether the
investment decision was consistent with this written investment Policy.
VI. DELEGATION OF AUTHORITY AND RESPONSIBILTY
City Council
By law, the City Council retains ultimate fiduciary responsibility for the Permanent Fund
regardless of management assignment. The Council shall receive quarterly reports and
annually review and adopt this Policy. The Investment Committee designated by the City
Council is responsible for reviewing and authorizing all broker/dealers.
Chief Financial Officer
The Chief Financial Officer/Director of Finance (the "CFO") is responsible for monitoring
the portfolio and reports submitted by the Trustee.
Trustee
The Trustee (the "Trustee") will be responsible for monitoring and controlling the
portfolio in accordance with the terms of the Trust Agreement for the Fort Worth
Permanent Fund, as amended. The Trustee, with approval of the City, may engage the
services of a Securities and Exchange Commission (SEC) registered Investment Adviser
(registered under the Investment Advisers Act of 1940) or a National Bank exempt from
registration to provide the investment management of the Permanent Fund in a manner
consistent with the Policy. The Trustee and the selected Investment Adviser or National
Bank may be affiliated.
The Trustee shall provide timely monthly and quarterly reports to the CFO and
Investment Committee in accordance with the Act and establish internal procedures and
controls for the investment process and financial counter -parties.
In managing the Permanent Fund, the Trustee's use and acceptance of soft dollars shall
be limited by the terms of this paragraph. For purposes of this paragraph "soft dollar"
shall refer to non -monetary credit offered by an executing broker/dealer in connection
31Page
with a purchase or sale. Soft dollar credits may only be used and accepted by Trustee or
a sub -advisor to acquire research for use in the investment decision -making process for
the benefit of the Permanent Fund. As set out in Section 28(e) of the Securities Exchange
Act of 1934, prior to accepting or utilizing any soft dollars the Trustee or sub -advisor
receiving the soft dollar credit must have first determined in good faith that the
commissions to be paid on the securities transaction are reasonable in relation to the value
to the Permanent Fund of the brokerage and research provided. If the trade is executed
through Trustee's selected broker/ dealer, Trustee will receive the soft dollar credit. The
Permanent Fund may, as a result, pay somewhat higher commissions for the securities
transaction than what might have been obtainable on a non -soft dollar basis. Trustee may
not utilize or accept soft dollars except in strict compliance with the foregoing terms.
The Trustee shall refrain from activity that could conflict with the proper execution and
management of the Permanent Fund or that could impair their ability to make impartial
investment decisions. Any business or personal relationships with investment counter -
parties shall be disclosed to the CFO and the Texas Ethics Commission.
Investment Committee
The City's Investment Committee will perform a strategy and performance review at
least semi-annually. The Committee will review and act on any potential need for
refinement or revision of the Permanent Fund's policies or strategies. Annually the
Committee will approve all broker/ dealers in accordance with the Act.
VII. AUTHORIZED COUNTER PARTIES
Certification
The Act requires
(1) that a written copy of the investment policy be presented to a business organization
offering to engage in an investment transaction with the Permanent Fund with
"business organization" defined as "an investment pool or investment management
firm under contract with an investing entity to invest or manage the entity's investment
portfolio that has accepted authority granted by the entity under the contract to exercise
investment discretion in regard to the investing entity's funds."
and
(2) that the person or business organization receiving the policy provide a written
Policy Certification, acceptable to both the investing entity and the business
organization and executed by a representative of the business firm, substantially
acknowledging that the business organization has:
41Page
a. received and reviewed the Fort Worth Permanent Fund Investment Policy
and Strategy; and
b. implemented reasonable procedures and controls in an effort to preclude
investment transactions conducted between the Permanent Fund and the
organization that are not authorized by the Policy.
If the City retains self -management of the Permanent Fund, copies of this Policy will be
provided to all business organizations offering to engage in an investment transaction
with the Permanent Fund on an annual basis, and a Policy Certification from each such
business organization must be received by the City. If the City engages a corporate
Trustee to serve as an investment management firm under contract, a copy of this
Policy shall be provided to the corporate Trustee, and a Policy Certification will be
obtained from a qualified representative of the Trustee.
No transaction (other than mutual funds) may be completed except in compliance with
this section.
Security Broker/Dealers
The Council appointed Investment Committee will at least annually review and adopt a
list of broker/dealers which will then be authorized to engage in investment
transactions concerning the Permanent Fund. If the City engages a corporate Trustee to
serve as an investment management firm under contract, the investment management
firm will have the responsibility to ensure all broker/dealers comply with the
provisions of this policy.
No broker/ dealer or independent Adviser may safe -keep Permanent Fund securities or
funds. All security transactions shall be settled delivery versus payment (DVP) to the
Permanent Fund account. In order to perfect the DVP process, neither the Trustee nor
the safekeeping depository (nor their brokerage subsidiaries) will be approved as a
broker/ dealer.
The Trustee will perform due diligence and maintain information on each
broker/ dealer, including a process to ensure best execution. The Trustee shall review
the performance, financial condition and registration of all qualified counter -parties on
an ongoing basis. Results will be provided to the Investment Committee for review
upon request.
VIII. AUTHORIZED INVESTMENTS
The Permanent Fund shall be invested only in the investments authorized below and
further defined by the Act and Trust Code. If additional types of potential authorized
investments are created by changes made to the controlling statutes, they will not be
51Page
authorized until this Policy is amended and adopted by the City Council. All
investment transactions will be placed in an effort to achieve a fair and reasonable
return under all circumstances and in light of other investment alternatives available.
1. Obligations of the United States Government, its agencies and instrumentalities
including mortgage backed securities and collateralized mortgage obligations
(CMO) which pass the Federal Reserve's bank test, with a maximum stated
maturity of twenty (20) years.
2. FDIC insured and/or collateralized depository certificates of deposit from banks
in the United Sates, with a maximum maturity of three (3) years.
3. Commercial paper rated A1/P1 or equivalent by two nationally recognized
rating agencies, with a maximum maturity of 365 days.
4. AAA or equivalent rated constant dollar, Texas local government investment
pools as defined by the Act.
5. AAA -rated United States Institutional government money market mutual funds.
6. Debt obligations of any state or political subdivision of any US state, rated A or
better with a stated maturity not to exceed ten (10) years.
7. Fully collateralized, direct repurchase agreements executed through a primary
government securities dealer, with a maximum maturity of one (1) year. A Bond
Market Association Master Repurchase Agreement,102% margin, and
independent third party safekeeping are required. (See section IX)
8. Banker's acceptances with a maximum maturity of 120 days accepted by a US
registered bank with a short term rating of not less than A1/P1 by two nationally
recognized rating agencies.
9. Domestic bond mutual funds with a maximum weighted average maturity of ten
(10) years with a Morningstar rating of at least two stars if available. If a fund is
less than three years old and lacks a Morningstar rating, that fund may be
selected only if it has been recommended by an investment management firm
under contract as Trustee of the Permanent Fund.
10. International bond mutual funds with a maximum weighted average maturity of
fifteen (15) years with a Morningstar rating of at least two stars if available. If a
fund is less than three years old and lacks a Morningstar rating, that fund may be
selected only if it has been recommended by an investment management firm
under contract as Trustee of the Permanent Fund.
61Page
11. Domestic or international equity and preferred stock mutual funds with a
Morningstar rating of at least two stars if available. If a fund is less than three
years old and lacks a Morningstar rating, that fund may be selected only if it has
been recommended by an investment management firm under contract as
Trustee of the Permanent Fund.
12. US or international stocks.
13. Real assets, including real estate, commodities and real estate investment trusts
(REITS).
14. Alternative Investments to include hedge funds.
15. Corporate and asset backed securities rated A, or better with a stated maturity
not to exceed ten (10) years.
Securities Lending
If the City has an active securities lending agreement, the Permanent Fund securities
may also be lent by Trustee utilizing the City's agreement as determined by the City
under their written agreement and conditions only.
IX. COLLATERALIZATION
Time and Demand Pledged Collateral
All time and demand deposits placed by the Permanent Fund that exceed the limits of
coverage provided by Federal Deposit Insurance Corporation (FDIC) shall be
transferred to a money market fund or otherwise collateralized in accordance with the
Texas Public Funds Collateral Act with collateral pledged to the Permanent Fund. In
order to anticipate market changes and provide a level of security for all funds,
collateral shall be maintained and monitored by the pledging depository at 102% of
market value of principal and accrued interest on the deposits. The pledging bank shall
monitor and maintain the margins on a daily basis. All collateral shall be subject to
inspection and audit by the City or its internal and external auditors.
Collateral pledged to secure deposits of the Trust Fund assets shall be held by an
independent financial institution outside the holding company of the depository, as
approved by the Trustee, and in accordance with a safekeeping agreement executed
under the terms of the Financial Institutions Resource and Recover Enforcement Act
(FIRREA).
Permanent Fund Owned Collateral Under Repurchase Agreements
7 1 P a g e
Each counter party to a repurchase transaction is required to execute the Bond Market
Master Repurchase Agreement and to provide collateral at a 102% margin and held by
an independent third party custodian approved by the Trustee. The Master Repurchase
Agreement must be fully executed before any transaction is initiated. Collateral will be
evidenced by safekeeping reports/receipts clearly denoting Permanent Fund ownership
from the independent safekeeping agent.
Authorized Collateral
As authorized by the Public Funds Collateral Act and further restricted by this Policy,
acceptable collateral for time and demand deposits and repurchase agreements shall
include only:
obligations of the U.S. Government, its agencies and instrumentalities
including mortgage backed securities and CMO that pass the bank test,
and
- obligations of any US state, city, county or authority rated at least A by
two nationally recognized statistical rating organizations.
Collateral will be monitored at least monthly by the Trustee, and each month Trustee
will send City a document listing any current collateral and its market value.
X. DIVERSIFICATION
The City as beneficial owner of the Permanent Fund recognizes that investment risks
can result from issuer defaults, market price changes, or various technical complications
leading to temporary illiquidity. Risk is controlled through portfolio diversification. The
strategy for diversification will be guided by the circumstances then prevailing but will
generally be:
Range Target
Cash, Cash Equivalents, and Fixed Income 29-49% 39%
US Obligations
US Agencies/Instrumentalities
Depository Certificates of Deposit
Commercial Paper
Local Government Investment Pools
Money Market Mutual Funds Municipal Obligations
Corporate Obligations (Max. 20.00%)
Asset Backed Securities (Max 10.00%)
Repurchase Agreements
81Page
Bankers Acceptances
Domestic Bond Mutual Funds (Max.10.00%)
International Bond Mutual Funds (Max.10.00%)
Preferred Stock Mutual Funds
Equities 27-47% 37%
Real Assets
U.S. Large Cap 14.00%
U.S. Mid Cap 5.00%
U.S. Small Cap 3.00%
Int'1 Developed Markets Equity Mutual Funds 9.00%
Int'1 Emerging Markets Equity 6.00%
Global Public REITS
Private Real Estate
Commodities
Alternative Investment
Hedge Funds - Relative Value
Hedge Funds - Macro
Hedge Funds - Event Driven
Hedge Fund - Equity Hedge
Private Equity
2-12% 12%
8.00 %
2.00%
2.00%
2-22% 12%
3.00%
3.00%
2.00%
2.00%
2.00%
The diversification percentage guidelines will be measured based on market value.
Fluctuations in cash flows may cause the portfolio to exceed these maximum
percentages for a particular asset class subsequent to the purchase. Securities need not
be liquidated to realign to match the portfolio diversification guidelines.
Because of its tax-exempt nature, the Permanent Fund shall not be invested based on tax
optimized strategies with the goal of improving after-tax returns through active tax loss
harvesting.
XI. INTERNAL CONTROLS
The CFO and Trustee are responsible for mutually establishing and maintaining an
internal and external control structure designed so that assets are reasonably protected
from loss, theft, or misuse.
9 1 P a g e
Competitive Transactions
All investments will be made in an effort to achieve a fair and reasonable return under
market circumstances and in light of other investment alternatives available and shall
utilize market competition where appropriate.
In general, in buying or selling equity or fixed income securities, Trustee shall utilize
electronic communications networks, exchanges, and market makers using the National
Best Bid/Offer consolidated quote system pricing to solicit terms from multiple
industry -recognized third party registered broker/ dealers that are included on the
then- current list of approved broker/dealers. The Trustee shall evaluate all transactions
and brokers for best execution, taking into account a variety of factors including price,
execution and commission costs, size of the order and other unique trading
characteristics, value of research provided, financial responsibility, and the
responsiveness of the brokers.
All bids and offers for fixed income shall be completed using at least three
broker/dealers whenever possible to make certain of fair and competitive pricing in the
market. In the event three bids cannot be obtained, Trustee shall use market variables to
determine best price, including but not limited to: competitive pricing, market
condition, sector, liquidity, and credit conditions. The Trustee shall not use margin
accounts.
Delivery vs. Payment
All trades of marketable securities shall be executed (cleared and settled) on a delivery
vs. payment (DVP) basis to ensure that securities are deposited in the Permanent Fund
safekeeping institution prior to the release of funds.
Monitoring Credit Ratings
The Trustee shall monitor, on no less than a weekly basis, the credit rating on all
authorized investments in the portfolio based upon independent information from a
nationally recognized rating agency. If any security falls below the minimum rating
required by this Policy, the Trustee shall (i), within two business days of downgrade,
notify the CFO of the loss of rating within two business days of the occurrence and (ii),
within four business days of downgrade, notify the CFO of conditions affecting the
rating and available liquidation options, including associated loss of principal, before
any action is taken, provided however, that in extreme situations where the Trustee
determines in the exercise of its reasonable discretion that immediate liquidation is
prudent, Trustee shall be authorized to liquidate immediately but shall be required to
provide the City with notice of such liquidation by the close of the following business
day.
10 1 Page
XII. SAFEKEEPING
All security transactions will be settled on a delivery versus payment basis and held in
the Permanent Fund by the Trustee, the City's depository or other Trustee -contracted
safekeeping institution independent from any security transactions or trade counter -
parties. All safekeeping functions will be performed by the Trustee. The Trustee as
safekeeping agent shall provide monthly statements on all security positions held by
the Permanent Fund.
XIII. REPORTING
Monthly Reporting
No less than monthly, the Trustee will submit a report to the CFO and Investment
Committee. The report will, at a minimum, comply with the statutory requirements for
quarterly reporting below.
Quarterly Reporting
No less than quarterly, the Trustee will prepare and submit a report to the Investment
Committee. The report will comply with provisions of the Act governing Internal
Management Reports and will contain, at a minimum, the following:
a. detailed description of each investment position as of the date of the
report including market values, market yield and earnings;
b. summary statements for the Permanent Fund including:
(1) amortized book value for individual fixed income securities, market
values, market yield, and earned income,
2) beginning and ending market value for the reporting period,
(3) change in market value (volatility measure) for the reporting period,
(4) yield for the fixed income portion of the portfolio for the reporting
period,
(5) total return for the entire portfolio for the reporting period,
(6) weighted average maturity, as applicable, and
(7) asset class returns and benchmark returns for the reporting period.
The quarterly report shall include a statement of compliance for the portfolio as it
relates to the Fort Worth Permanent Fund Investment Policy and Strategy and be signed
by the CFO and Trustee.
Prices used for calculation of market values will be obtained from an independent
source.
Benchmark: Risk Measurement
111 Page
The benchmarks for risk measurement and performance of the Permanent Fund
portfolio will be divided among the asset classes as outlined below.
- The benchmark for the fixed income portion shall be the Barclays' 1-5 Year
Government/Credit Index for the comparable period.
- The benchmark for the equity portion shall be a total return equal to a
composite of the total return of S&P 500 for stocks and the EAFE for
international investments comparable to the then -current makeup of the
portfolio for the comparable period.
- The benchmark for the real assets portion shall be the FTSE NAREIT All
Equity REIT Index for the comparable period.
- The benchmark for the commodities portion shall be the Dow Jones UBS
Commodities Index for the comparable period.
- The benchmark for the alternative investment portion shall be the HFRX
Global Hedge Fund Index for the comparable period.
XIV. ADOPTION
The Fort Worth Permanent Fund Investment Policy and Strategy shall be reviewed by
the Investment Committee and adopted by the City Council at least annually. The
adopting resolution shall include any changes made to the Policy.
Policy Adopted:
April 16, 2013 (M&C G-17857)
Policy Reviewed and Approved:
July 15, 2014 (M&C G-18244)
May 5, 2015 (M&C G-18466)
September 15, 2015 (M&C G-18552)
September 26, 2017 (M&C G-19117) (Amended Authorized Investments and
diversification requirements and guidelines)
September 11, 2018 (M&C G-19359)
September 10, 2019 (M&C 19-0142) (Amended Section III. Objectives and Section VIII.
Authorized Investments, item 3 Commercial Paper maximum maturity changed from
90 days to 365 days)
September 22, 2020 (M&C 20-0685)
12 1 Page
City of Fort Worth
Department of Finance
Investment Policy and Strategy
OPEB Trust
I. OVERVIEW AND PURPOSE
FORT WORTH,
This investment policy and strategy applies to all accumulated assets for the City of
Fort Worth Other Post -Employment Benefits Trust ("Trust") created by the Fort Worth
City Council by Resolution No. 3779-08-2009, and its consultants, agents, investment
managers, advisory boards, Trustees, Trust Administrator and assigned staff.
All investment activities shall be conducted in full compliance with applicable City
ordinances as well as state and federal rules and regulations.
The purpose of this document is to provide the Trustee and its Sub Advisors with a set
of objectives, parameters and guidelines to assist in the administration of the Trust; to
guide investment managers in structuring portfolios consistent with desired performance
result and acceptable risk levels; to assure the assets are managed in a prudent fashion
and to serve as the framework for all investment activities related to the Trust.
II. INVESTMENT POLICY AND OBJECTIVES
The primary obligations of the City's governing body in investing assets are to do so for
the exclusive benefit of the beneficiaries. Emphasis must be placed upon the consistent
protection of the Trust's assets and growth performance, i.e., the achievement of adequate
investment growth must not be at the expense of the protection of the assets over the
investment horizon. Specific objectives of investment activities carried out by the Trustee
and its Sub Advisors include the following:
A. The expected annual rate of return for the portfolio will be equal to
the actuarial assumption, until amended by the City Council
("Council").
B. Individual investment managers will not be measured against the
aggregate fund objective stated in section II. A., but will be compared
to appropriate market indices and a blended Plan Target Benchmark
outlined in Section III, subsection 7 of the Policy.
11Page
1. AUTHORITY AND OVERSIGHT PROCEDURES
A. By law, the City Council retains ultimate fiduciary responsibility for
the OPEB Trust Fund regardless of management assignment. The Council
shall receive quarterly reports and annually review and adopt this Policy.
The Investment Committee designated by the City Council is responsible
for reviewing and authorizing all broker/ dealers. The City Council has
delegated the responsibility for conducting investment transactions with
the Trustee and its Sub Advisors. The Trustee and its Sub Advisors will
provide investment information to the Council concerning investment
decisions, including rebalancing asset allocation, and portfolio
performance on a quarterly basis.
B. The Chief Financial Officer/Director of Financial Management
Services is responsible for monitoring the portfolio and reports submitted
by the Trustee and its Sub Advisor.
C. The Trustee and its Sub Advisor shall maintain responsibility for
investing the assets in the Trust. All assets will be held by the Trustee. The
advisor will provide performance analysis that will include, but not be
limited to, a strategic analysis including a report on asset allocation, risk
analysis, and appropriate, if any, changes to the percentages therein. This
study will be used to assist the Chief Financial Officer/Director of Financial
Management Services and Investment Committee in the determination of
the appropriate investment Policy.
D. Any business organization offering to engage in an investment
transaction with the Trust must be provided with a copy of this Investment
Policy and Strategy, with "business organization' defined as "an
investment pool or investment management firm under contract with an
investing entity to invest or manage the entity's investment portfolio that
has accepted authority granted by the entity under the contract to exercise
investment discretion in regard to the investing entity's funds." The
business organization must provide the City with a written instrument (in
a form acceptable to both parties) executed by a representative of the
business organization that substantially acknowledges that the business
organization has: (a) received and reviewed this Investment Policy and
Strategy; and (b) implemented reasonable procedures and controls in an
effort to preclude investment transactions with the Trust that are not
authorized by this Investment Policy and Strategy. Any material changes
2 1 P a g e
to this Investment Policy and Strategy will require re -certification by each
business organization.
E. The City's Investment Committee will perform a strategy and
performance review at least semi-annually. The Committee will review and
act on any potential need for refinement or revision of the OPEB Trust's
policies or strategies.
2. STANDARDS OF CARE
The standard of care to be used shall be the "prudent person' standard as
established by the Act and shall be applied in the context of managing the overall
OPEB Trust Fund. The "prudent person" standard states that,
"Investments shall be made with judgment and care, under prevailing
circumstances, that a person of prudence, discretion and intelligence would
exercise in the management of the persons own affairs, not for speculation,
but for investment, considering the probable safety of capital and the
probable income to be derived."
In determining whether a Trustee has exercised prudence with respect to an
investment decision, the determination shall be made taking into consideration:
(1) the investment of all funds, or funds under the Trustee's control, over which
the Trustee had responsibility rather than a consideration as to the prudence of a
single investment; and (2) whether the investment decision was consistent with
this written investment Policy.
3. ETHICS AND CONFLICTS OF INTEREST
Employees of the City of Fort Worth, the Trustee or its Sub Advisors involved in
the investment process shall refrain from personal business activity that could
conflict with proper execution of the investment program, or which could impair
their ability to make impartial investment decisions. Also, employees of the City
of Forth Worth involved in the investment process shall disclose any material
financial interests in financial institutions that conduct business with the City, and
they shall further disclose any material personal financial/investment positions
that could be related to the performance of the City's investment program.
III. INVESTMENT GUIDELINES
1. EXISTING INVESTMENTS
31Page
Except as provided by Texas Government Code Chapter 2270, the City is not
required to liquidate investments that were authorized investments at the time of
purchase.
2. AUTHORIZED INVESTMENTS
Investments consistent with the objectives contained in Section II, herein, other
than those specifically prohibited shall be authorized. Equities will comprise a
diversified portfolio of domestic small, mid and large cap equity, Real Estate
Investment Trusts ("REITs"), and international equity investments.
Permitted Asset Classes and Security Types
Equity Securities
o Domestic listed securities
o Equity and equity -related securities of non -US corporations, in the
form of American Depository Receipts ("ADRs")
o Equity Mutual Funds and Exchange Traded Funds (ETFs)
o Large Cap
o Mid Cap
o Small Cap
o International
o Emerging Markets
o REITs
Fixed Income Securities
o Fixed Income Mutual Funds and Exchange Traded Funds (ETFs)
o Corporate
o Government
o High Yield
o International
o Bank Loan
If individual fixed income securities are purchased, the following parameters will
be followed:
Eligible Securities:
o Debt obligations of the U.S. Government, its agencies, and Government
Sponsored Enterprises
o Mortgage -Backed Securities (MBS)
41Page
o Asset Backed Securities (ABS)
o Collateralized Mortgage Obligations (CMO)
o Commercial Mortgage -Backed Securities (CMBS)
o Corporate debt securities issued by U.S. or foreign entities including, but
not limited to, limited partnerships, equipment trust certificates and
enhanced equipment trust certificates
o Securities issued under SEC Rule 144A
o Municipal Bonds
uali
The portfolio will maintain a minimum weighted average quality of A- at
all times. Individual securities shall have a minimum quality rating of Baa3
by Moody's or BBB- by Standard & Poor's (S&P). Note, high yield fixed
income can be purchased only in a diversified mutual fund or exchange
traded fund.
Duration
The manager will maintain the portfolio duration within +/- 25% of the
benchmark duration at all times.
Diversification
No more than 5% of the portfolio assets may be invested in any individual
issuer with the exception of securities issued or guaranteed by the U.S.
Government, its agencies, and Government Sponsored Enterprises.
No more than 10% of the portfolio may be invested in securities issued
under Rule 144A.
3. MATURITY AND LIQUIDITY
The OPEB trust assets shall provide sufficient liquidity, if necessary, for payment
of direct medical benefits and expenses.
4. PORTFOLIO COMPOSITION, RISK AND DIVERSIFICATION
Assets of the OPEB Trust Fund shall be invested in a broadly diversified portfolio
consisting of equity, debt, and cash equivalent securities. The portfolio shall also
be structured in a manner to provide diversification within each asset class and be
allocated within the ranges specified below:
Range Target
Equities 20 %-40 % 30 %
Fixed Income 50%-80% 65%
Cash and Cash Equivalents 0%-20% <5%
51Page
The Trustee and its Sub Advisor is authorized by this policy to make asset
allocation decisions to reallocate or redirect either contributions or investments
held by the OPEB Trust Fund in order to take advantage of changing market
conditions. Any move that will cause the allocation of the investment classes to
vary from the above allocation percentages of any asset class requires approval by
the City Council.
The following are prohibited purchases/transactions:
1. More than 5 % of the total equity allocation invested in individual
equity securities of any one company at market value
2. More than 5 % of the total debt allocation invested in debt
instruments in any single issuer with the exception of US Treasuries
and agencies
3. Short sales
4. Margin or leveraged purchases
5. Commodities
6. Real estate (with the exception of REITs)
7. Art objects or collectables
8. Options
9. Warrants
10. Derivative investments
11. Oil and Gas Leases
12. Hedge Funds
13. Private Equity Funds
14. Precious Metals
15. Privately negotiated investment agreements with financial
institutions
16. Other investments classified as 'alternative'
5. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS
Purchases and sales of authorized investments will only be made through financial
institutions that are qualified as public depositories by the State of Texas or are
"primary dealers" as designated by the Federal Reserve Bank of New York or are
broker/ dealers that qualify under Securities and Exchange Commission, or by
direct purchases of an approved open-ended mutual fund family.
The Trustee will perform due diligence and maintain information on each
broker/ dealer, including a process to ensure best execution. The Trustee shall
review the performance, financial condition and registration of all qualified
61Page
counter -parties on an ongoing basis. Results will be provided to the Investment
Committee for review upon request.
SAFEKEEPING AND CUSTODY
All securities purchased by the Trustee or its Sub Advisors shall be properly
designated as an asset of the OPEB Trust Fund and held by the Trustee,
chartered by the United States Government or the State of Texas, and/or a
financial institution approved by the National Association of Security
Dealers. No withdrawal of such securities, in whole or in part, shall be made
from safekeeping except by the City Council or Trust Administrator.
The City Council or the Trustee will execute third party custodial
agreements with banks or financial institutions. Such agreements will
include details as to the responsibilities of each party, the costs to be
borne by each party, notification of security purchases, sales, delivery,
repurchase agreements and wire transfers, safekeeping and transaction
costs, and procedures in case of unforeseen circumstances.
6. BID REQUIREMENTS FOR DEBT INSTRUMENTS
After the Trust Administrator and/or the investment manager has selected one or
more optimal types of investments based on maturity date(s) to meet cash flow
needs and market conditions, a minimum of three qualified brokers and/or
dealers will be contacted and asked to provide bids on the securities to be
purchased.
In most situations the competitive bid process shall be utilized, except when
securities are purchased as an initial offering. The investment manager will choose
the appropriate brokers or dealers from among those on the approved
broker/ dealer list based on expertise, competitiveness and the ability to execute
the transaction and deliver the securities on a timely basis. A minimum of three
(3) bids will be obtained.
A. Bids will be held in confidence until the best bid is determined and
awarded,
B. Documentation will be retained for all bids, with the winning bid
clearly identified,
C. If for any reason the highest bid (on sales of investments) or the
lowest bid (on purchases of investments) is not selected, then the
reasons leading to that decision will be clearly documented.
7 1 P a g e
7. PERFORMANCE MEASURES
The Investment Committee will meet with the Trustee or its Sub Advisor at least
annually to review portfolio performance. The Trustee or its Sub Advisor will
review results quarterly to confirm adherence to the policy guidelines; compare
the investment results with funds using similar policies and benchmarks; and
identify risks and opportunities occurring in the equity and debt markets.
The following events indicate risk to the safety and performance of the Trust.
Failure to appropriately address risk may result in termination of the Trustee or
its Sub Advisor.
A. Consistent under -performance of the stated target index for three
consecutive quarters.
B. Material changes in the managers' organization including personnel,
ownership, acquisitions or losses of major accounts.
C. Substantial changes in basic investment philosophy.
D. Failure to observe any guidelines as stated in this policy.
The City of Fort Worth blended benchmark will be defined as the target portfolio
return, based on the following allocation targets:
Portfolio Blended Benchmark
15.50% S&P500 Index
3.00% Russell Mid -Cap Index
4.50% Russell 2000 Index
2.00% MSCI Emerging Market Index
4.00% MSCI EAFE Index
1.00% Wilshire REIT Index
51.00% Bloomberg Barclays Capital US Aggregate Index
14.00% ML 1-3 Year US Corp/Gov't
5.00% Citi 1Mth T-Bill.
IV. INTERNAL CONTROLS
The Chief Financial Officer/Director of Financial Management Services and
Trustee are responsible for mutually establishing and maintaining an internal and
external control structure designed so that assets are reasonably protected from
loss, theft, or misuse. Such internal controls shall consist, at a minimum, of the
following:
A. All securities purchased or sold will be transferred only under
the "delivery versus payment" (DVP) method to ensure that
8 1 P a g e
funds or securities are not released until all criteria relating to
the specific transaction are met,
B. The Trustee is authorized to accept, on behalf of and in the
name of the City of Fort Worth OPEB Trust Fund, securities
in return for investment of funds,
C. Securities transaction confirmations shall fully describe the
various securities held. The receipt or confirmation shall state
that the investment is held in the name of Trustee, or its
depository nominee name, for the benefit of the City of Fort
Worth OPEB Trust, and
D. The written system of internal controls and operational
procedures shall be subject to review by the City's internal
and external auditors as part of the annual financial audit.
V. REPORTING
Quarterly reports concerning the investment activities, investment portfolio and
performance will be submitted to the Investment Committee and placed on the agenda
of the City Council. Other information may include recent market conditions, economic
developments, and anticipated investment conditions.
VII. POLICY REVIEW
The Fort Worth OPEB Trust Investment Policy shall be reviewed by the Investment
Committee and adopted by the City Council at least annually. The adopting resolution
shall include any changes made to the Policy. Any modification to the Investment
Policy shall be provided to the Trustee and its Sub Advisor and acknowledged in
writing via Appendix A.
Policy Adopted: October 10, 2017 (M&C G-19127)
Policy Adopted: September 11, 2018 (M&C G-19362) (No change)
Policy Adopted: September 10, 2019 (M&C 19-0116) (Section II. Investment Policy and
Objectives, item B updated and Section III. Investment Guidelines added new section
"Existing Investments")
Policy Adopted: September 22, 2020 (M&C 20-0687) (No change)
91Page
Appendix A
Trustee, Sub Advisor or Investment Manager's Acknowledgment
I, the undersigned, acknowledge that I have received the investment policy for City of Fort Worth
OPEB Trust Fund, dated I affirm that I have read
and understand said Policy, and do hereby agree to abide to the guidelines expressed in the Policy.
Name of Trustee
Signed
Name of Sub Advisor
Signed
Date
Date
10 1 Page
City of Fort Worth FORT WORTH.
Department of Finance
Grants Management Policy
I. Authority
The Fort Worth City Council is responsible for legislating, formulating policy, and
setting the overall direction of City government. This includes the approval of financial
policies which establish and direct the operations of the City of Fort Worth ("the City").
The City Manager is 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 Finance. This policy shall be administered on behalf of
the City Manager by the Chief Financial Officer/Director of Financial Management
Services ("CFO").
II. Purpose
The purpose of this policy is to:
A. Define practices and provide the guiding principles for grant management, including
the application, approval, set up, management, accounting, and reporting of grant
activity performed by the City.
B. Ensure that City personnel seek and apply for federal, state and other grants-in-aid that
address the City's current priorities and policy objectives, and administer them in
accordance with applicable federal and state laws and regulations, City policies, and
contractual obligations.
C. Establish controls to maintain, and enforce a sound system of operational procedures
in accordance with industry best practices and internal control objectives. These
controls address the operational nature of the processes associated with grant
management.
D. Require procedures related to the grant management process be in conformance with
this policy.
III. Applicability and Scope
All employees of the City, including uniformed employees, having grant management
or accounting responsibilities shall conduct all related activities in compliance with
rules and guidelines set forth by this policy and by their respective departmental grants
procedures.
1 1 P a g e
City of Fort Worth FORT WORTH.
Department of Finance
Grants Management Policy
IV. Glossary
Definitions related to this policy will be incorporated into the Glossary for Financial
Management Policies.
Administering Department — The City of Fort Worth Department responsible for
applying for and overseeing the activities of a grant -funded program.
Indirect Costs — Expenditures the City will incur for managing the grant program. Any
eligible indirect costs shall be calculated and included in each grant application and
shall be specified in the Mayor and Council Communication (M&C) seeking approval
to proceed with a grant application or award. If a waiver of indirect costs is sought by
the Administering Department, such waiver must quantify the estimated amount,
explain the reasoning behind the request, and be approved by the Mayor and Council.
V. Policy
A. Grant Identification, Application, Acceptance
1. Each respective department of the City of Fort Worth may research and identify
grant opportunities that facilitate the City's overall goals, mission, and
initiatives and provide supplemental or alternative funding sources for either
capital expenses/expenditures or operating programs.
2. If grant opportunities are identified, departments are responsible for obtaining
approval from the corresponding Assistant City Manager.
3. Potential grant opportunities shall be evaluated for administrative burden and
compliance costs prior to application. Where the amount likely to be received
does not exceed the cost of applying for and administering the grant, the City
should not seek the grant. Where the amount awarded does not exceed the cost
of administering the grant, the City should not accept the grant.
4. Prior to application, the Administering Department shall:
a. Complete an agenda item on a regularly scheduled City Council meeting
wherein approval to apply and accept, if awarded, the grant is requested.
b. The M&C requesting application and acceptance approval shall include
the following components:
a. Name of grant,
b. Grantor,
2 1 P a g e
City of Fort Worth
Department of Finance
Grants Management Policy
FORT WORTH.
c. Dollar award of grant along with the identification of required
matching funds, including the source of such matching funds,
d. Overview of the grant program, including how the City will use
the funds in support of City goals and priorities,
e. Required appropriation ordinances and language for the full
amount of the grant, including match costs and program income,
if any, and
f. Dollar value of indirect costs being applied for in the grant,
calculated based on the indirect cost study in effect at the time.
Where reimbursing the general fund for the indirect cost burden
would impact program services, the department should weigh
the City's priorities in deciding whether to allocate additional
resources to the program from other sources.
g. Statements regarding responsibilities for collecting revenue and
ensuring that funds are available prior to obligation.
5. The M&C shall be routed through the Grant Accounting Team of the Financial
Management Services Department (FMS) for review prior to being placed on a
City Council Agenda for consideration. This is accomplished by checking the
"Includes Any Federal, State, Interlocal or Grant Funding" box on the
"General" tab of a draft M&C.
6. After City Council approval, the Administering Department, in coordination
with FMS Grant Accounting, shall prepare all documents required in the
application process and submit the same to the granting agency.
7. Applications shall include a budget for all indirect costs allowable under the
grant.
8. It is acknowledged that grant application deadlines may not allow for approval
by the Mayor and Council prior to being due. In these instances, ratifying
Mayor and Council Communications shall be completed utilizing the same
process as non -ratifying M&Cs.
9. Once a grant is awarded, the Administering Department is responsible for
accepting the award and, in concert with the City Attorney's Office, seeing that
the corresponding contract is correct and fully executed, including all
provisions required under 2 CFR 200 of the Code of Federal Regulations.
10. In instances where the City needs to further evaluate whether a grant meets the
City's objectives, mission, goals, and initiatives, it is acceptable to submit a
Mayor and Council Communication for approval to apply for the grant only. In
these instances, a supplemental Mayor and Council Communication is required
in order to accept the grant and appropriate funds.
3 1 P a g e
City of Fort Worth FORT WORTH.
Department of Finance
Grants Management Policy
B. Grant Set -Up
1. Upon award of a grant by a granting entity, FMS Grant Accounting shall
schedule a Grant Kick -Off meeting with the Administering Department. The
Grant Kick -Off meeting is to clarify grant management and accounting roles
and responsibilities specific to that particular grant, and should be attended by
management representatives of the Administering Department and FMS Grant
Accounting (and, where applicable, FMS Capital Assets).
2. The Administering Department is then responsible for completing and/or
collecting the following documents, with assistance and support from FMS
Grant Accounting, and submitting them to FMS Grant Accounting to be entered
into PeopleSoft (the City's system of record for all financial data):
a. The Grant Information Form (GIF),
b. A balanced Grant Project Budget,
c. The approved M&C,
d. The fully executed award agreement,
e. The funding location (FID) for any required matching expenditures, and
f. Any Combo Codes necessary to process expenditures.
3. FMS Grant Accounting is responsible for setting up the award in PeopleSoft,
including entry of operating and financial reporting schedules. Grant
Accounting shall then provide the Administering Department with the
PeopleSoft project (grant) number.
4. The Administering Department and FMS Grant Accounting are responsible for
understanding grant conditions, including allowable costs for each grant. This
includes personnel expenditures and whether salaries, overtime and/or fringe
benefits are allowable. The Administering Department, with the support and
assistance of FMS Grant Accounting, is responsible for determining and using
the appropriate vehicle to ensure personnel charges are distributed to the grant
as accurately as possible. This may entail the use of ePARs, tasks groups/task
profiles and/or Combo Codes. The Administering Department should ensure
that grant -funded personnel understand how to code their time for accurate
accounting.
5. The Administering Department, with assistance and support from FMS Grant
Accounting, submits any Combo Code requests, which are reviewed by FMS
Grant Accounting and set up by FMS Financial Systems Management. Any
Task Groups/Task Profiles are submitted through ITSM Self-service at http://
itsm.cfwnet.org.
4 1 P a g e
City of Fort Worth FORT WORTH.
Department of Finance
Grants Management Policy
C. Grant Management
1. The Administering Department shall manage awards in accordance with 2 CFR
200, Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards, applicable State laws and/or regulations, and
corresponding contractual agreements. FMS Grant Accounting shall provide
assistance and serve as a resource for clarification of any questions regarding 2
CFR 200.
2. If the grant has subrecipients:
a. The Administering Department, with assistance and support from FMS
Grant Accounting, shall perform a risk assessment for each subrecipient
before passing along awarded funds, in accordance with 2 Code of
Federal Regulations ("CFR") §200.331, "Requirements for pass -
through entities," and formulate a risk mitigation plan based on
identified risk factors.
b. The Administering Department, with assistance and support from FMS
Grant Accounting, shall perform subrecipient monitoring in accordance
with §200.330, "Subrecipient and Contractor Determinations," and
§200.331, "Requirements for Pass -Through Entities," and document
such monitoring.
3. The Administering Department shall monitoring contractors to ensure
compliance with all contract provisions.
4. All grant -related procurement activities must be conducted in accordance with
all applicable City policies and State and federal laws and regulations (e.g.,
Davis -Bacon Act).
a. If a capital asset is purchased or created with grant funds, FMS Grant
Accounting and FMS Capital Assets should be notified.
b. For federal grants, no local purchasing preference can be given.
c. For federal grants, cost plus a percentage of cost and percentage of
construction cost methods are prohibited.
d. The City is responsible for full compliance with the procurement
regulations contained in 2 CFR 200 (200.317-200.326).
e. Vendors shall be checked against the list of debarred/suspended vendors
on SAM.gov prior to awarding any contract and annually thereafter, at
a minimum.
5 1 P a g e
City of Fort Worth FORT WORTH.
Department of Finance
Grants Management Policy
5. The Administering Department shall submit project status reports in accordance
with the award agreement, and provide copies of such reports to FMS Grant
Accounting to be attached in PeopleSoft.
6. Where financial reports —including financial status reports (FSRs), requests for
reimbursement (RFRs) or drawdowns, or close-out reports —are filed by the
Administering Department, the Administering Department should submit a
draft of the submission to FMS Grant Accounting five (5) business days prior
to the due date for review and concurrence. Where such financial reports are
filed by FMS Grant Accounting, they should be submitted to the Administering
Department five (5) business days prior to the due date for review and
concurrence.
7. The Administering Department shall create and maintain adequate
documentation for all program operations and expenditures (activity reports,
invoices, purchase orders, receipt documentation, etc.).
8. The Administering Department shall ensure all staff charging worked time to a
grant provide general details of grant activities performed in the comment fields
of the employee's timecard. This requirement will be in addition to any work -
effort documentation required by the Grantor.
9. The Administering Department and FMS Grant Accounting shall create and
maintain all pertinent award -related documentation in accordance with
§200.333 Retention Requirements for Records and applicable State law as
specified in City records management policies and supply it as requested to
authorized grant monitors.
10. FMS Grant Accounting shall ensure awards are accounted for in accordance
with 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards, applicable State regulations, and City
policies and procedures.
11. The Administering Department and FMS Grant Accounting shall, at a
minimum, review and analyze grant financials monthly. This review will
include a process to verify that all costs are allowable and appropriate and that
all revenues earned have been recognized.
12. As determined and documented in the Grant Kick-off Meeting, either the
Administering Department or FMS Grant Accounting will submit financial
reports in accordance with the award agreement.
13. Grant funds shall not be used to purchase gift cards or other cash -equivalent
items for distribution to recipients. All disbursements of funds and/or assets
shall follow standard City procedures to ensure accountability and compliance.
14. Other roles and responsibilities for the Administering Department:
6 1 P a g e
City of Fort Worth
Department of Finance
Grants Management Policy
FORT WORTH.
a. Ensure funding is managed according to the terms and conditions of the
award,
b. Request award extension and/or agreement amendments, if necessary,
c. Prepare M&Cs for grant amendments, if necessary,
d. Submit budget transfers requests and correcting journal entries to FMS
Grant Accounting in a timely manner, and
e. Monitor grant terms and conditions for any changes throughout the
performance period (with support from FMS Grant Accounting).
15. Other roles and responsibilities for FMS Grant Accounting:
a. Ensure that all appropriate grant documentation is attached to
PeopleSoft Project Definitions and/or journal or budget entries,
b. Maintain all other appropriate grant -related documentation in the City's
physical or virtual storage,
c. Review grant amendment -related M&Cs for completeness and
correctness,
d. Serve as point of contact for financial matters and grant questions,
e. Attach and maintain copies of operating and financial reports in
PeopleSoft, and
f. Enter and approve budget transfers.
D. Grant Accounting
1. All grant -related financial activity must be accounted for in the City's primary
accounting system of record (PeopleSoft).
2. Direct and indirect costs should be clearly identified and separated.
3. City contributions (matching) and grantor funds should be clearly identified and
separated.
4. The Administering Departments and/or FMS Grant Accounting are responsible
for submitting all financial reports required by grantor agencies, as determined
and documented in the Grant Kick-off Meeting.
5. The Administering Departments and FMS Grant Accounting must ensure that
grant budgets set up in PeopleSoft are correct, appropriate, and allowable. FMS
Grant Accounting shall review submitted budgets for balance and correctness.
Multi -year grants pose special challenges, and, in conjunction with FMS Grant
Accounting, Administering Departments should decide how various time
periods and activities are to be handled before the grant is initially set up. This
should be decided and documented as part of the Grant Kick-off Meeting.
7 1 P a g e
City of Fort Worth FORT WORTH.
Department of Finance
Grants Management Policy
6. The Administering Departments and FMS Grant Accounting must be aware of
the particular requirements of reimbursement, advance payment, or fee -for -
service grants as they apply to each award.
7. The Administering Departments, with support from FMS Grant Accounting,
must be familiar with, comply with, and document compliance with all
contractual requirements for applicable grants.
8. FMS Grant Accounting shall review PeopleSoft financials for each grant each
month and communicate any issues encountered to appropriate grant staff.
9. Expenditures/Expenses:
a. The Administering Departments, in conjunction with the Purchasing
Division of the Financial Management Services Department, shall
ensure that all grant -related procurement is handled in accordance with
Financial Management Policy Statements, City purchasing standard
operating procedures (SOPS), and all applicable state and/or federal
grant regulations and contractual requirements.
b. The Administering Departments are responsible for ensuring that grant -
related funds are only obligated/expended when there is budgetary
authority to do so.
c. The Administering Departments are responsible for monitoring grant
budget status to ensure that necessary budget modifications are made
before expenditures are needed.
d. The Administering Department, with support and assistance from FMS
Grant Accounting, is responsible for ensuring that all expenditures are
necessary, reasonable, allowable, and appropriately allocated.
e. The Administering Departments and FMS are responsible for ensuring
that all disbursements are correct, and that any required retainage or
cash held by other entities is accounted for properly.
10. Revenues:
a. The Administering Departments must provide FMS Grant Accounting
with copies of any request for reimbursement (RFR) or drawdown
request each time they are submitted.
b. FMS Grant Accounting is responsible for making any journal entries to
recognize the revenue and create a receivable.
c. FMS Grant Accounting is responsible for monitoring bank account
activity, and, when ACH deposits hit the appropriate bank account,
making entries (eRDDs) to reflect the sums received.
d. FMS Grant Accounting is responsible for reconciling receivables and
payments received.
8 1 P a g e
City of Fort Worth FORT WORTH.
Department of Finance
Grants Management Policy
11. Journal Entries:
a. The Administering Departments are responsible for making all grant -
related journal entries corresponding to a particular accounting period
(month) no later than the deadline specified in each month's published
close schedule. Nothing herein shall prohibit FMS Grant Accounting
from identifying entries that need to be made and making them on behalf
of departments when necessary to ensure compliance with City policy,
grant requirements, or Generally Accepted Accounting Principles
(GAAP).
b. FMS Grant Accounting is responsible for reviewing and posting any
such journal entries.
c. For large journal entries better handled by uploading, the Administering
Department shall provide FMS Grant Accounting with the necessary
data and back-up, and FMS Grant Accounting will upload, review, and
post the journal entries.
d. FMS Grant Accounting is responsible for City fiscal year-end entries
such as accruals, adjusting entries, etc.
e. At the close of each grant, the Administering Department, with support
and assistance from FMS Grant Accounting, is responsible for ensuring
that all applicable revenues, expenditures, and transfers are reflected in
PeopleSoft.
12. FMS Grant Accounting will serve as the point of contact for the annual Single
Audit and coordinate and provide responses to the City's external auditors.
13. FMS Grant Accounting will prepare the annual Schedule of Expenditures of
Federal Awards (SEFA) and Schedule of Expenditures of State Awards
(SESA), and will coordinate with the City's external auditors to file the results
with the Federal Audit Clearinghouse (FAC).
E. Grant Closeout
1. After completion of all required performance period activities, the
Administering Department and FMS Grant Accounting shall perform grant
closeout tasks in accordance with §200.343 Closeout or corresponding State
regulations, City policies, and contractual requirements.
2. The Administering Department and FMS Capital Assets shall ensure property
purchased, donated, or constructed in relation with grant funding is accounted
for in accordance with §200.310 - §200.316 and §200.329.
9 1 P a g e
City of Fort Worth FORT WORTH.
Department of Finance
Grants Management Policy
3. The Administering Department is responsible for final performance reports
required by the terms and conditions of the award and shall provide copies to
FMS Grant Accounting for attachment in PeopleSoft.
4. The Administering Department and FMS Grant Accounting are responsible for
preparing final financial reports required by the terms and conditions of the
award. The Administering Department and FMS Grant Accounting are
responsible for collecting and maintaining all appropriate back up
documentation for financial reports.
5. The Administering Department shall notify FMS Grant Accounting to close the
grant in City's financial system and provide all required closeout
documentation:
a. Project Closeout Checklist,
b. Request to inactivate Combo Codes (where applicable), and
c. Request to inactivate or redirect Payroll Task Profiles (where
applicable).
6. The Administering Department or FMS Grant Accounting (per the signed Grant
Kick-off Checklist) shall ensure final reimbursement request is submitted.
FMS Grant Accounting shall verify that final reimbursement has been received.
7. The Administering Department and FMS Grant Accounting shall ensure that all
financial activities are recorded, that revenues balance to expenditures, and that
revenues and expenditures balance to budget figures.
8. FMS Grant Accounting shall complete the grant -closeout process in
PeopleSoft.
F. Post -Close
1. The Administering Departments and FMS Grant Accounting are responsible
for ensuring that their records are maintained in accordance with applicable City
policy, State law, and federal regulations.
2. The Administering Departments are responsible for any programmatic
reporting required by the grant, regardless of performance period.
3. The Administering Department and FMS Grant Accounting are responsible for
responding to and cooperating with auditors, monitors, and other grantor
personnel, as well as the City's independent or internal auditors.
101Page
FORT WORTH,:,
Fiscal Monitoring Policy
Authority
The 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 fiscal monitoring policy is intended to serve as a tool, providing Council,
management, and the public with the insight required to address issues impacting the
City's financial condition. Furthermore, this policy is intended to describe particular
elements or aspects of fiscal monitoring such long-term planning programs within the
City and to memorialize this financial practice into a formal policy. The outcome of
this policy is to prepare and present regular reports that analyze, evaluate, and
forecast the City's financial performance and economic condition.
III. Applicability and Scope:
This policy shall apply to all funds under the budgetary and fiscal control of the City
Manager and the Mayor and City Council.
IV. Policy
A. Financial Management Reports
The Department of Financial Management Services shall make
available through the City's PeopleSoft Enterprise Resource Planning
System a series of on -demand reports that facilitate access to financial
data which allows departments to analyze financial performance.
B. Status Reports on Capital Projects
The Department of Financial Management Services shall make
available through the City's PeopleSoft Enterprise Resource Planning
System a series of on -demand reports that facilitate access to financial
11Page
FORT WORTH,:,
Fiscal Monitoring Policy
data which allows departments to analyze financial performance.
C. Commitment to Long -Term Financial Planning
The LTFP process evaluates known internal and external issues impacting the
City's financial condition. Such issues are identified, presented, and mitigated
when and where possible. The process begins by identifying critical areas which
have, or are expected to have, an impact on the financial condition of the City over
the next five years. Once the issues are identified, specific goals and objectives are
developed for each structural deficiency. The LTFP is a constantly changing and
evolving plan, which will be routinely updated and presented on an ongoing five-
year rolling basis. The LTFP will be incorporated into the City's Business Planning
Process and presented to the City Council and staff throughout the formulation of
the annual financial plan and budget. The LTFP is intended to help the City
achieve the following:
1. Ensure the City can attain and maintain financial sustainability;
2. Ensure the City has sufficient long-term information to guide financial
decisions;
3. Ensure the City has sufficient resources to provide programs and services
for the stakeholders;
4. Ensure potential risks to on -going operations are identified in the long-
term financial planning process and communicated on a regular basis;
5. Establish mechanisms to identify early warning indicators; and
6. Identify changes in expenditure/expense or revenue structures needed to
deliver services or to meet the goals adopted by the City Council.
D. Scope of the Plan
1. Time Horizon- The LTFP will forecast revenues, expenses or expenditures (as
applicable), and financial position including Reserves for at least five years into
the future or longer where specific issues call for a longer time horizon.
2. Comprehensive Analysis- The LTFP will provide meaningful analysis of key
trends and conditions, including but not limited to;
2 1 P a g e
FORT WORTH,:,
Fiscal Monitoring Policy
a. Analysis of the affordability of current services, projects , and
obligations:
An analysis of the City's environment in order to
anticipate changes that could impact the City's service
and/or financial objectives.
ii. Revenue and expense or expenditure projections (as
applicable), including the financial sustainability of
current service levels over a multi -year period.
iii. The affordability of current debt relative to affordability
ratios prescribed by City policy and/or State law.
iv. The affordability of maintaining and replacing the
City's current capital assets.
v. The ability to maintain Reserves within the target ranges
prescribed by City policy over a multi -year period.
vi. The impact of non -current liabilities on the city's
financial position.
b. Analysis of the affordability of anticipated service expansions or
investments in new assets:
i. The operating costs of any new initiatives, projects, or
expansion of services where funding has been identified
through alternative sources (CIP, grants, debt issuance,
etc.) or adopted or approved by the City Council
through other actions. Service delivery of
administrative services and functions shall be included
to the extent needed proportionately with the expansion
of other services.
ii. The affordability of the City's long-term CIP, including
operating and maintenance costs for new assets.
iii. The affordability of other master plans that call for
significant financial investment by the City.
3 1 P a g e
FORT WORTH,:,
Fiscal Monitoring Policy
c. Synthesis of the above to present the City's financial position:
A clear presentation of the resources needed to
accomplish the capital improvements identified in the
City's CIP and to maintain the existing capital assets.
ii. A clear presentation of the resources needed to maintain
services at their present level in addition to the
expansion of services as may have been identified
through the analysis described above.
iii. Identification of imbalances between the City's current
direction and the conditions needed for continued
financial health.
3. Solution -Oriented- The LTFP will identify issues that may challenge the
continued financial health of the City, and the plan will identify possible
solutions to those challenges. Planning decisions shall be made primarily from
a long-term perspective and structural balance is the goal of the planning
process. For the purpose of this policy, structural balance means that annual
revenues equal expenses / expenditures and year end reserves meet the
minimum levels prescribed by City Reserves policies.
E. Continuous Improvement- City staff will regularly look for and implement
opportunities to improve the quality of the forecasting, analysis, and strategy
development that is part of the planning process. These improvements will
primarily be identified through the comparison of projected performance with
actual results.
F. Structural Balance- A Long-term structural balance is the goal from long-term
financial planning. Should the long-term forecasting and analysis show that the
City is not structurally balanced over the five-year projection period, staff would
make recommendations during the annual budget process, on how the plan can
be brought into alignment.
G. Non -Current Liabilities- The LTFP will address strategies for ensuring that the
City's long-term liabilities remain affordable. The City Council supports efforts to
ensure that critical long-term liabilities like debt service, asset maintenance,
pensions, and other post -employment benefits remain affordable.
4 1 P a g e
Accounting, Auditing, and
FART WORTH.
Financial Reporting Policy
I. Authority
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:
This policy is intended to establish guidelines to manage and direct the City's accounting, auditing,
and financial reporting activities. Specifically, under this policy, the City shall comply with
prevailing federal, state, and local statues and regulations, as well as current professional standards,
principles, and practices.
III. Scope:
This policy shall apply to all funds under the budgetary and fiscal control of the City Manager and the
Mayor and City Council.
IV. Glossary
See definitions related to this policy provided in the appendix.
V. Policy:
A. Conformance to Accounting Principles and Recommended Practices
The City's accounting practices and financial reporting shall conform to Generally Accepted
Accounting Principles (GAAP) as promulgated by the Governmental Accounting Standards Board
(GASB), the American Institute of Certified Public Accountants (AICPA), and the Government
Finance Officers Association(GFOA).
B. Popular Reporting
In addition to issuing a Comprehensive Annual Financial Report (CAFR) in conformity with
GAAP, the City may supplement its CAFR with a simpler, "popular" report designed to assist
those citizens who need or desire a less detailed overview of the City's financial activities. This
report should be issued no later than six months after the close of the fiscal year.
C. Selection of Auditors
Every five years, the City shall request proposals from qualified firms, including the current
11Page
Accounting, Auditing, and
FART WORTH.
Financial Reporting Policy
auditors if their past performance has been satisfactory, and the Council shall approve the
selection of an independent firm of certified public accountants to perform an annual audit of the
books of account, records and transactions, opining of the Comprehensive Annual Financial Report
and Single Audit Report and reporting the results and recommendations to the Council.
D. Audit Completion
The City seeks to have its CAFR and Single Audit Report audited and available within 180 days
after the close of its previous fiscal year, which ends September 30. In the event the presentation
of the CAFR and Single Audit is delayed beyond the first Council meeting in April, the City
Manager or his/her designee, shall provide a report on the status of the audit and the expected
completion date of the CAFR and Single Audit to the City Council at its first meeting in April.
E. Certificate of Achievement for Excellence in Financial Reporting
The Government Finance Officers Association (GFOA) established the Certificate of Achievement for
Excellence in Financial Reporting (CAFR program) to encourage state and local governments to go
beyond the minimum requirements of generally accepted accounting principles by preparing
comprehensive annual financial reports that evidence the spirit of transparency and full disclosure. The
City will participate in the program yearly by submitting it's CAFR for review and implement
recommended changes, as appropriate.
2 1 P a g e
Retirement System and
OPEB Health Care Trust
I. Authority
FORTWORTH.
lro"�
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
Managers by the Chief Financial Officer / Director of Finance.
II. Purpose:
This policy is intended to establish guidelines to ensure that the Employees' Retirement Fund is
adequately funded and operated for the exclusive benefit of the participants.
III. Scope:
This policy shall apply to all funds under the budgetary and fiscal control of the City Manager and
the Mayor and City Council.
IV. Glossary
See definitions related to this policy provided in the appendix.
V. Policy:
Retirement System:
Benefit Improvements and Reductions
The City will complete an actuarial impact study of any proposed benefit improvements
or reductions, including changes in contribution levels before they are implemented.
2. Qualified Plan
The City and the Retirement Fund will maintain the qualified status of the Retirement
System. As deemed necessary from time to time, the City and/or the Retirement Fund
will request a "determination letter" from the IRS relative to whether or not the City's
retirement system conforms to the Internal Revenue Code in order to assure the tax-
exempt status of the income earned on the Retirement Fund's investments, the retiree pension
payments, and the accrued benefits for active employees.
3. Funding Level
The City shall progressively monitor contribution levels of both the City andemployees,
1IPage
Retirement System and
OPEB Health Care Trust
FORTWORTH.
lro"�
along with retirement benefits, to ensure that the Retirement Fund is sufficiently funded and
benefits can be paid as they become due. If funding levels are insufficient, staff will update
the City Council of the deficiency and make recommendations for corrective action.
Health Care Trust:
4. Benefit Improvements
Staff shall routinely present to the City Council the actuarial impact of any proposed
benefit improvements, reductions, or changes. The City will also obtain an independent
actuary who will certify the actuarial impact of any proposed benefit improvements or
changes.
5. Funding Level
The City shall continue to monitor retiree healthcare benefits, to ensure that the Health
Fund is sufficiently funded and City Council -approved benefits can be paid according
to the approved benefit program. If funding levels are insufficient, staff will update the
City Council of the deficiency and make recommendations for corrective action.
2 1 P a g e
FORT WORTH.
Internal Controls
L Authority
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
Managers by the Chief Financial Officer / Director of Finance.
II. Purpose:
This policy is intended to establish guidelines to maintain an internal control structure designed
to provide reasonable assurance that City assets are safeguarded and that the possibilities for
material errors in the City's financial records are minimized.
III. Scope:
This policy shall apply to all funds under the budgetary and fiscal control of the City Manager and the
Mayor and City Council.
IV. Glossary
See definitions related to this policy provided in the appendix.
V. Policy:
A. Proper Authorizations
Procedures shall be designed, implemented and maintained to ensure that financial
transactions and activities are properly reviewed and authorized.
B. Separation of Duties
Job duties will be adequately separated to reduce, to an acceptable level, the opportunities
for any person to be in a position to both perpetrate and conceal errors or irregularities
in the normal course of assigned duties.
C. Proper Recording
Procedures shall be developed and maintained that will ensure financial transactions and
events are properly recorded, and that all financial reports may be relied upon as accurate,
complete and up-to-date.
11Page
FORT WORTH.
Internal Controls
D. Access to Assets and Records
Procedures shall be designed and maintained to ensure that adequate safeguards exist
over the access to and use of financial assets and records.
E. Independent Checks
Independent checks and audits will be made on staff performance to ensure compliance with
established procedures and proper valuation of recorded amounts.
F. Costs and Benefits
Internal control systems and procedures must have an apparent benefit in terms of reducing
and/or preventing losses. The cost of implementing and maintaining any control system should
be evaluated against the expected benefits to be derived from that system.
2 1 P a g e
E-Commerce
Policy
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
Managers by the Chief Financial Officer / Director of Finance.
II. Purpose:
To fully utilize available technologies to expedite cash payments and receipts, enhance employee
productivity, and provide customer satisfaction.
A. Fully Integrated Financial Systems
All E-Commerce systems and procedures must fully and transparently integrate with the City's
financial and accounting systems, its depository bank systems, and any other City information
system which interfaces with an E-Commerce system.
B. Emerging Technologies
The City will work closely with its depository bank and other financial partners to evaluate
and implement the standard industry accepted technologies that prove to be efficient and
effective in pursuit of the City's E-Commerce goals.
C. Vendor E-Payments
The City will actively migrate vendor payments from paper checks to other forms of payment,
including but not limited to: 1) Automated Clearing House (ACH) payments; 2) Wire transfers;
and 3) Procurement Cardpayments.
D. Direct Deposits
The City will actively migrate payroll payments from paper checks, to electronic formats,
including but not limited to: 1) Direct deposits and 2) Electronic pay cards.
E. Internet Payment Options
Working with its depository bank and other financial partners, the City will seek to develop
and implement internet payment options of best practices which will allow customers and
citizens to pay bills due the City conveniently and securely.
11 Page
F. Information Security
The City will employ security measures consistent with best practice and the City's information
security policy to ensure the integrity and confidentiality of customer and citizen data that is
stored or is a component of transactions utilizing the City's information technology infrastructure or
that of its service providers.
2 1 P a g e
FORT WORTH
Donations Policy
I. Authorit
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 Managers by the Chief Financial Officer / Director of Finance.
II. Purpose:
This policy is intended to provide guidelines for accepting gifts and donations in a responsible,
transparent, and accountable manner that is consistent with the City's strategic goals. Donations
of every type are offered to the City of Fort Worth (City) for general or specific purposes. Uniform
criteria and procedures guide the review and acceptance of such donations, confirm that the City
has relevant and adequate resources to administer such donations, and ensure that the City
appropriately acknowledges the generosity of the donor.
III. Scone:
This policy shall apply to all funds under the budgetary and fiscal control of the City Manager
and the Mayor and City Council.
IV. Glossar
Definitions (to be incorporated into the glossary)
Beneficiary Department Head: shall mean the Director of the City department, or his/her
designee, for which a donation is designated or intended. The Chief Financial Officer /Director
of Finance shall act as the Beneficiary Department Head if no department is designated or
intended.
Donation or Gift: shall mean a monetary (cash) contribution, endowment, personal property,
real property, financial securities, equipment, in -kind goods or services, or any other asset that
the City has accepted and for which the donor has not received any goods, services, or any
other form of tangible compensation in return. For purposes of this policy, "donation" or "gift"
shall be synonymous.
Donor: shall mean a person or other legal entity that proposes or provides a donation or gift to
the City.
Endowment: shall mean donations that are restricted to the extent that only earnings and not
principal may be used for a particular purpose, City department, or location.
Restricted Donation: shall mean donations or gifts designated by the donor for a specific or
particular City department, location, or purpose. The receiving department shall have the
responsibility to ensure the restrictions placed upon the donation are fulfilled. Fundsremaining
1 IPag
FORT WORTH
Donations Policy
at the conclusion of the project and/or activity shall be available for use by the department
for purposes similar to the original restriction.
Unrestricted Donation: shall mean a donation to the City without any limitations being placed
upon its use.
V. Pol6cv:
Specific Objectives
1. To establish and guide relationships with donors who share the City's commitment to
provide a high quality civic environment;
2. To enrich our community by responsibly and efficiently managing donations; and
3. To generate revenue to fund new and existing facilities, projects, programs, and activities
for the benefit of the residents of the City.
General Principles
1. This Policy is intended to guide the manner in which City staff accepts donations or gifts on
behalf of the City.
2. Donations do not become the property of the City until accepted by the City consistent with
this Policy.
3. Only City officials authorized by this Council Policy may accept donations.
4. The City has no obligation to accept any donation proposed by a donor.
5. All donations will be evaluated by the City prior to acceptance to determine whether the
donation is in the City's best interest and is consistent with the applicable City laws,
policies, ordinances, and resolutions.
6. The City does not provide legal, accounting, tax or other such advice to donors. Each donor
is ultimately responsible for ensuring the donor's proposed donation meets and furthers the
donor's charitable, financial, and estate planning goals. As such, each donor isencouraged
to meet with a professional advisor before making any donation to the City.
7. The City must determine whether an expenditure of City funds, either a direct outlay of
City funds or the use of City staff and/or materials, is associated or required with the
acceptance of the donation prior to acceptance.
8. The donation must be used for official City business.
9. A donor may restrict a donation for a particular City department, location, or purpose, but
not designate the City official who may use the donation.
10. After all obligations associated with donation restrictions have been met, the City shall
have the ability to use any remaining funds for purposes similar in nature to the restriction.
11. The Beneficiary Department Head is responsible for acknowledging receipt of and
2 IPag
FORT WORTH
Donations Policy
thanking, on behalf of the City, all donors.
12. The City shall comply with all applicable laws and regulations of the Internal Revenue
Service regarding the acceptance of donations.
13. Donations or gifts received or accepted by the Mayor, City Council Members, or appointed
officials from representatives of foreign or domestic governments, business leaders, Sister
Cities and their affiliates, or other parties intending to express appreciation or foster
diplomatic exchange and goodwill and/or symbolize a significant event or relationship
with the City shall be exempt from this policy.
Policy
Types of donations
Donations or gifts may be received in the form of cash, financial securities, or real or personal
property. Donations may be Restricted or Unrestricted.
The procedure for accepting donations or gifts shall be as follows:
Cash donations shall be accepted as follows:
o Amounts equal to or less than $5,000.00 may be received by each Department Director
and shall be deposited by the participating department into the Special DonationsFund;
o Amounts equal to or less than $100,000.00 may be received by each Assistant City
Manager and shall be deposited by the participating department into the Special
Donations Fund;
o Amounts greater than $100,000.00 must be accepted by the Mayor and City Council
through an agenda item considered at a regularly scheduled City Councilmeeting.
• Any and all non -cash donations resulting in a capital asset as outlined within the City's Capital
Asset Policy shall be accepted through an agenda item adopted by the Mayor and Council at a
regularly scheduled City Council meeting.
• Donations of non -cash items not meeting the capitalization thresholds within the City's Capital
Asset Policy shall be accepted under the same terms and thresholds identified above for cash
donations.
• Any donations requiring the City to sign an agreement for acceptance should be reviewed by
the participating department head and the City Attorney's Office prior to execution.
• Donations of Trust and Perpetuity Funds: Donations of trust and perpetuity funds shall be
administered by the Department of Financial Management Services on behalf of the receiving
department pursuant to the terms of the donation placed upon the trust by the donor.
• Donations of Publicly Traded Equity and Debt Securities: Once accepted and received by the
City, the Department of Financial Management Services will immediately liquidate the
donation of a publicly traded equity or debt security. Sale proceeds will then be made available
to the receiving department.
3 IPag
FORT WORTH
Donations Policy
• Donations of Cash and Real Goods: Donations of cash and real goods may be accepted upon
completion of the following processes:
1. The Beneficiary Department Head shall evaluate whether the donation:
a. Is in the City's best interest and is consistent with applicable City laws, policies,
and resolutions;
b. Has any special restrictions and if so, if those restrictions are acceptable to the City;
c. Obligates the City to make an immediate or initial City expenditure which has not
been included in the approved budget for the appropriate fiscal year; and
d. Creates a new, one-time or an on -going general maintenance obligation of the City.
2. The City will maintain the following fund structure on the general ledger:
a. One special donation fund will be maintained for each type offund:
i. Governmental Special Donations Fund
ii. Proprietary Special Donations Fund
3. The funds will be treated as operating funds, i.e. annual budgeted funds and have a
commitment control ledger applied consistent with other operating funds.
4. The funds will be administered under the following appropriation structure:
• Each year in the annual budget ordinance, appropriations will be made to a
programmable account. This appropriation will be intended to be in an amount
sufficient to cover the donations anticipated for the upcoming year.
• When an actual donation is received, funds from the programmable account will be
moved to a specific account for use by the receiving department. When this occurs, the
actual revenue will be recorded against the project and the department is then free to
spend funds for the intended purpose of the donation.
• As the special donations funds will be annual operating funds, delegated authority
within the annual appropriation ordinance will exist to re-establish the budget from
year to year until the donation is spent. Appropriations that are completed under the
delegated authority provisions will be reconciled on an annual basis.
• Any donations remaining unencumbered and unspent three (3) years after acceptance
will be removed from the donation fund and deposited to the department's operating
fund (General Fund or respective annual operating fund).
• Donations of real property: Donations of real property may be accepted upon completion of the
following process:
1. The receiving department shall work with the Property Management Department to
determine the approximate value of the donation and to ensure that the donation is in the
City's best interest. Acceptance shall be consistent with applicable City laws, policies,
ordinances, and resolutions.
Formatted: Left, Indent: Left: 0.82", Hanging: 0.25",
Right: 0", No bullets or numbering, Allow hanging
punctuation, Tab stops: Not at 1.38"
2.
Formatted: Indent: Left: 0.82", Hanging: 0.25", Right:
0", No bullets or numbering, Allow hanging
punctuation, Tab stops: Not at 1.13"
4 IPag
FORT WORTH
Donations Policy
When seeking City Council approval for a donation of real property, the associated agenda
item shall report:
a.
a: The appraised value of the donation; Formatted: Indent: Left: 1.13", No bullets or
b. Any expenditures or maintenance obligations for the City associated with the short-term numbering
and long-term ownership of the donation;
c. Potential liabilities associated with the donation, such as hazardous conditions or
5 IPag
FORT WORTH
Donations Policy
environmental concerns;
Whether the donation has any special restrictions, and if so, if those restrictions are
acceptable to the City; and
Any recommendations for conditions of acceptance.
• Any and all Restricted Donations received by the City shall be accompanied by a document
indicating the nature and purpose of the restriction.
This policy is not intended to govern donations made to the City under the followingprograms:
Water / Garbage Fee Assistance and Plumbing Repair Programs
Developer Contributions of Infrastructure under a Community FacilitiesAgreement,
Development Agreement, Platting Process, or Annexation
City Ethics Policy with respect to food and meals
Receipts for these programs will be administered by the documents governing their existence.
6 IPag
Financial Management Policies
Glossary
FORT WORTH.
441,
a. Accrual Basis of Accounting - A basis of accounting under which transactions
are recognized when they occur, regardless of the timing of related cash flows.
For example, in accrual accounting, revenue that was earned on April 1, but for
which payment was not received until July 10, is recorded as revenue on April 1st
regardless of the timing of when the payment is received.
b. Annually Completed Actuarial Report - An Actuarial Report includes a type of
appraisal which requires making economic and demographic assumptions in
order to estimate future liabilities.
c. Business Plan- A department -level plan. In this plan, departments outline each
division's Service Areas and associated key performance indicators, and priority
initiatives for each. This document is meant to serve as a high-level annual
performance plan, in which measures are periodically updated to facilitate
continuous observation, trend analysis, and improvement of department activities
and services.
d. Capital Improvement Plan (CIP) - A plan that describes the capital projects and
associated funding sources the City intends to undertake in the current fiscal
year plus four successive fiscal years, including the acquisition or construction of
capital facilities and assets, and the maintenance thereof.
e. Capital Projects Fund - A governmental fund established to account for resources
used for the acquisition of large capital improvements and non- reoccurring
expense other than those acquisitions accounted for in proprietary or trust funds.
f. Cash Flow - The net cash balance at any given point. The Chief Financial
Officer/Director of Finance shall prepare a cash flow analysis which projects the
inflow, outflow, and net balance of cash reserves on a daily/weekly/monthly /
annual basis.
g. Days Cash on Hand - A measure of cash saved that is not earmarked or designated
for any purpose (unrestricted cash) which calculates the number of days a system
can pay expenses associated with daily operations and maintenance before
complete depletion of unrestricted cash occurs. Days Cash on Hand is calculated
by dividing unrestricted cash by the system's average daily cost of operations
(annual operating expenses, excluding depreciation, divided by 365).
I I P a g e
Financial Management Policies
Glossary
FORT WORTH.
441,
h. Debt Service - The cash that is required for a particular time period to cover the
repayment of interest and principal on a debt. Debt Service is projected on an
annual basis.
i. Debt Service Fund - a fund established to accumulate resources and to account
for revenues and expenditures used to repay the principal and interest on debt.
j. Deferred Inflows of Resources - resources that flow into a fund during the fiscal
year, but are related to a future period. Deferred Inflows have a negative effect
on net position, similar to liabilities. (Examples include: property taxes levied in
the current year to finance the subsequent years budget.
k. Deferred Outflows of Resources - resources that flow out of a fund during the
fiscal year, but are related to a future period. Deferred Outflows have a positive
effect on net position, similar to assets. (Examples include: resources provided to
a grantee before the grantee has met related time requirements, but after all other
eligibility criteria have been met).
1. Department of Finance - includes the references in the City Charter to the
Department of Finance and the Department of Financial Management Services. For
purposes of this policy, the Department of Finance is the department responsible
for the corporate financial operations of the City.
m. Enterprise Fund - Proprietary fund type used to report an activity for which a fee
is charged to external users for goods or services.
n. Expenditure - refers to the value of goods and services received during a period
of time, regardless of when they are used (accrual basis of accounting) or paid for
(cash basis of accounting).
o. Expense - refers to the value of goods and services used during a period of time,
regardless of when they were received (modified accrual basis of accounting) or
paid for (cash basis of accounting).
p. Fiduciary Fund - A fund that accounts for resources that governments hold in
trust for other entities.
q. Fund Balance - Fund balance is the difference between (a) assets and deferred
outflows of resources and (b) liabilities and deferred inflows of resources. Fund
Balance is broken up into five categories:
2 1 P a g e
Financial Management Policies
Glossary
FORT WORTH.
441,
1. Non -spendable Fund Balance - Includes amounts that are not in a
spendable form or are required to be maintained intact. Examples are
consumable inventories.
2. Restricted Fund Balance - Includes amounts that can be spent only for
the specific purposes stipulated by external resource providers either
constitutionally or through enabling legislation. Examples include grants
and donations.
3. Committed Fund Balance - Includes amounts that can be used only for
the specific purposes determined by a formal action (for example,
legislation, resolution, and ordinance) of the City Council. Those
committed amounts cannot be used for any other purpose unless the
government removes or changes the specified use by taking the same type
of action it employed to previously commit those amounts.
4. Assigned Fund Balance - Comprises amounts intended to be used by
the City of Fort Worth for specific purposes. Intent should be expressed
by the City Manager. In governmental funds other than the General Fund,
assigned fund balance represents the amount that is not restricted or
committed. This indicates that resources in other governmental funds are,
at minimum, intended to be used for the purpose of that fund.
5. Unassigned Fund Balance - Represents fund balance that has not been
assigned to other funds and that has not been restricted, committed, or
assigned to a specific purpose within the General Fund. Unassigned
amounts are technically available for any purpose.
r. General Fund - One of five governmental fund types. The General Fund
typically serves as the chief operating fund of a government. The General Fund is
used to account for all financial resources not accounted for or restricted to
another fund.
s. Governmental Fund - funds generally used to account for tax -supported activities.
There are five different types of governmental funds including: General Fund,
Special Revenue Funds, General Debt Service Fund, Capital Project Funds, and
Permanent Funds.
t. Incurred but not Reported Claims - Claims/and or events that have transpired,
but have not yet been reported.
3 1 P a g e
Financial Management Policies
Glossary
FORT WORTH.
441,
u. Internal Service Fund- Proprietary fund type used to report any activity that
provides goods or services to other funds, departments, or agencies of the
primary government and its component units, or to other governments, on a
cost -reimbursement basis.
v. Long -Term Financial plan (LTFP) - A Long -Term Financial Plan includes an
analysis of the financial and economic environment, long-term forecasts, debt
analysis, and financial strategies.
w. Modified Accrual Basis of Accounting - The accrual basis of accounting adapted
to the governmental fund type spending measurement focus. Under this basis of
accounting, revenues are recognized when they become both "measurable' and
"available" to finance expenditures in the current period. For example, revenue
that is earned and measurable on April 1, is billed on April 30th, and paid on May
1st would not be recorded as revenue until payment is received on May 1st.
x. Net Position - Net Position is the difference between (a) assets and deferred
outflows of resources and (b) liabilities and deferred inflows of resources in a
proprietary fund.
y. Non -Recurring Item - An expenditure that has not occurred in the previous two
years and is not expected to occur in the following year.
z. Operating Expenditures (Governmental Funds) - An expenditure incurred in
carrying out the City's day-to-day activities. Operating Expenditures include such
things as payroll, employee benefits and pension contributions, transportation
and travel.
aa. Operating Expenses (Proprietary Funds) - An expense incurred in carrying out
the City's day-to-day activities. Operating Expenses include such things as
payroll, employee benefits and pension contributions, transportation and travel,
amortization and depreciation. Notwithstanding the foregoing, with respect to a
City Enterprise for which obligations, secured in whole or in part by the revenues
of such Enterprise (such as the City's Water and Sewer System), have been issued
or incurred, Operating Expenses shall be determined in accordance with State law
and terms of the ordinances pursuant to which such obligations were issued or
incurred.
bb. Pay As You Go Financing - The use of currently available cash resources to pay
for capital investment. It is an alternative to debt financing.
4 1 P a g e
Financial Management Policies
Glossary
lroo�
FORT WORTH.
cc. Pooled Cash - The sum of unrestricted cash and investments of several accounting
funds that are consolidated for cash management and investment purposes.
Investment income or expenditure is allocated to the various funds based on their
respective participation and in accordance with generally accepted accounting
principles.
dd. Program - A set of activities, operations, or organizational units designed and
directed to accomplish specific service outcomes or objectives for a defined
customer.
ee. Proprietary Fund - A class of fund types that account for a local government's
businesslike activities. Proprietary funds are of two types: enterprise funds and
internal service funds. Both use the accrual basis of accounting and receive their
revenues from charges to users. (Enterprise Fund examples: Water and Sewer
Fund, Stormwater Utility Fund, Municipal Parking Fund; Internal Service Fund
examples: Equipment Services, Information Systems Fund).
ff. Reserve (Governmental Funds) - Reserve refers only to the portion of Fund Balance
that is intended to provide stability and respond to unplanned events or
opportunities. See associated Reserve Policy for specific details.
gg. Reserve (Proprietary Funds) - Reserve refers only to the portion of Working
Capital that is intended to provide stability and respond to unplanned events or
opportunities. See associated Reserve Policy for specific details.
hh. Special Revenue Fund- Governmental fund type used to account for the proceeds
of specific revenue sources that are restricted or committed to expenditures for
specified purpose other than debt service or capital projects and exclusive of
resources held in trust for individuals, private organizations, or other
governments.
ii. Unrestricted Net Position - The portion of a fund's net position that is not restricted
for a specific purpose.
jj. Working Capital - An accounting term defined as current assets less current
liabilities in a proprietary fund. Working Capital is used to express the Reserves
available in proprietary funds for use.
5 1 P a g e