HomeMy WebLinkAboutIR 7089 Revised INFORMAL REPORT TO CITY COUNCIL MEMBERS N07089(revised)
100 To the Mayor and Members of the City Council 1Se b r u a r y 11 , 1986
X Subject: RECORDING OF INTEREST EARNINGS
Prior to the 1984-85 fiscal year all interest earned from both cash
available in the General Debt Service Fund and from unexpended general
obligations bond funds was budgeted and recorded in the General Debt
Service Fund. A change was made in the 1984-85 annual budget whereby
this interest was budgeted as revenue in the General Fund with a like
amount being budgeted as an increase to the appropiation of the
General Fund Debt Service account (+or transfer to the General Debt
Service Fund) .
The issue of the recording of interest earnings was dealt with in
Informal Report No. 6904, "Bond Fund Financing (January 10, 1984) ".
That report expressed the City Attorney's opinion that interest
earnings of the Debt Service Fund must stay in that fund. The
question of the recording of interest earnings from unexpended bond
funds was not addressed. Consequently the 1984-85 annual financial
statements of the City reflect the interest earned on monies in the
Debt Service Fund as revenues of that fund in order to comply with the
City Attorney' s opinion but consistent with the 1984-85 adopted budget
the interest earned on unexpended general obligation bond funds is
reflected both as a revenue of the General Fund and as a transfer out
of the General Fund (to the Debt Service Fund) .
In the budget for fiscal year 1985-86, interest earnings from bond
funds are to be recorded in the Debt Service Fund rather than in the
General Fund. Additionally, an amount equal to these estimated
interest earnings was budgeted to come out of the Debt Service Fund
and be applied to the current year's debt service expenditure
requirement. The City staff and the City' s outside auditors concur
that this treatment is the more prudent and financially conservative
as it allows the Council the discretion to determine annually how much
of our debt service cost should be supported through the tax levy and
how much should be financed from interest earnings in the Debt Service
Fund. In this process, the City Council should, for safety reasons,.,
attempt to see that the fund balance in the Debt Service Fund remain
at a level appropriate for the City's outstanding indebtedness and
annual debt service requirements
The auditor' s have requested the City Council be informed of the
above-described current practice of recording interest earnings from.
the investment of unexpended general obligation bond funds.
t,jCDouqlas Harman
City Manager
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS