Title
Approving the Fund Balance Policy of the City of Pflugerville, Texas.
Summary
The Government Finance Officers Association (GFOA) recommends cities have a policy to establish the guidelines for fund balance. The policy should include the level of unassigned fund balance to be maintained to mitigate financial risk from unforeseen events and the procedure for replenishment of those funds if necessary. Further, the Governmental Accounting Standards Board (GASB) issued a standard, GASB 54, recommending such policies outline the government's flow of resources and specify the governing body or position that is responsible for designating other fund balance categories.
The proposed policy (attached) stipulates a minimum unassigned fund balance of 25% of operating expenditures be maintained for both the general and utility funds. The charter outlines the 25% (3 months) fund balance requirement for the general fund. In the utility fund, staff recommends an increase in fund balance from 10% to 25%, based on guidance from the rate study consultant and the City's Financial Advisor. This policy will ensure the City maintains adequate fund balances in the operating fund with the capacity to:
1. Provide sufficient cash flow for daily financial needs,
2. Secure and maintain investment grade bond ratings,
3. Offset significant economic downturns or revenue shortfalls, and
4. Provide funds for unforeseen expenditures related to emergencies.
The Finance and Budget Committee reviewed this policy at its August 21, 2014 meeting and recommended approval.
Deadline for City Council Action
None.
Fiscal Impact
None.
Staff Recommendation
Approve the Fund Balance Policy.
Drafter
Lauri Gillam
Assistant City Manager