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HomeMy WebLinkAboutIR 7828 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7828 To the Mayor and Members of the City Council may 17, 1994 0 :04 Z5 Subject: Transfer of Funds from the General Fund's Undesignated Fund ,a Balance to the Capital Projects Reserve Fund On January 25, 1994, the City Council adopted a set of Financial Management Policy Statements which included a requirement that after completion of the annual audit, if the General Fund undesignated fund balance exceeds 10 percent of the current year budgeted expenditures, the excess shall be transferred to the Capital Projects Reserve Fund (see attachment). On the basis of the recently completed audit and current re- estimates of revenues and expenditures, the unreserved, undesignated fund balance for the General Fund, as of September 30, 1994, is projected to be $29,273,014. With a current revised budget of $239,338,750, the Financial Management Policy Statement requires that $23,933,875 be maintained in the General Fund undesignated fund balance. Strict adherence to Council policy would require the transfer of $5,339,139 to the Capital Projects Reserve Fund. However, unanticipated changes in revenue and expenditure patterns could cause the General Fund balance to fall below the 10 percent target. Therefore, the City Manager recommends transferring only $2.5 million at this time. In accordance with Council policy, after transfer to the Capital Projects Reserve Fund, these funds could only be used to pay for capital improvements and equipment having an expected useful life in excess of 10 years. If the City Council concurs with this recommendation, an M&C will be prepared transferring $2.5 million from the General Fund to the Capital Projects Reserve Fund. Additional information can. be provided upon request. ORML RECORD Bob Terrell CIR SECRETARY City Manager Iftl. r1V WORTH, TM FT. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS x a f III. Fund Balance/Retained Earnings To maintain the fund balance and retained earnings of the various operating funds at levels sufficient to protect the City's creditworthiness as well as its financial positions from unforeseeable emergencies. A. General Fund Undesignated Fund Balance The City shall strive to maintain the General Fund undesignated fund balance at 10 percent of current year budget expenditures. After completion of the annual audit, if the undesignated fund balance exceeds 10 percent, the excess shall be transferred to the Capital Projects Reserve Fund. (The use of this Fund shall be guided by the Capital Expenditures and Improvements Policy Statements.) B. Retained Earnings of Other Operating Funds In other enterprise operating funds, the City shall strive to maintain positive retained earnings positions to provide sufficient reserves for emergencies and revenue shortfalls. Specifically, in the Water and Sewer Enterprise Fund, an operating reserve will be established and maintained at 20 percent of the current year's budget appropriation for operation and maintenance, which is defined as the total budget less debt service and capital project expenditures. C. Use of Fund Balance/Retained Earnings Fund Balance/Retained Earnings shall be used only for emergencies, non- recurring expenditures, or major capital purchases that can not be accommodated through current year savings. Should such use reduce the balance below the appropriate level set as the objective for that fund, recommendations will be made on how to restore it D. Retained.Earnings of Internal Service Funds The City shall not regularly maintain positive retained earnings in internal service funds. When an internal service fund builds up retained earnings, the City shall transfer it to other operating funds. OFFIM WORD CRY &CCREIARY FT. Mgt r 8