Loading...
HomeMy WebLinkAboutM1 - Resolution No. 2012-0918-D MUD 1 GASB Fund Balance Policy for FY 2012-2013TROPHY CLUB MUD No. 1 RESOLUTION NO. 2012-0918-D A RESOLUTION OF THE BOARD OF DIRECTORS OF TROPHY CLUB MUD No. 1, IN TROPHY CLUB, TEXAS ADOPTING A FUND BALANCE POLICY FOR THE MUD IN ACCORDANCE WITH GOVERNMENT ACCOUNTING STANDARDS BOARD STATEMENT NO. 54 AS SET FORTH IN EXHIBIT "A"; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the MUD No. 1 Board of Directors has reviewed the Fund Balance Policy for compliance with the Government Accounting Standards Board (GASB) Statement No. 54, a copy of which is attached hereto as Exhibit "A"; and WHEREAS, upon consideration, the MUD No. 1 Board of Directors finds and determines it to be in the best interests of the MUD to adopt the Fund Balance Policy set forth in Exhibit "A"; NOW, THEREFORE, BE IT RESOLVED BY THE MUD No.1 BOARD OF DIRECTORS OF TROPHY CLUB MUD No. 1 OF TROPHY CLUB, TEXAS: Section 1. That the MUD No. 1 Board of Directors has reviewed the attached Fund Balance Policy, which contains policies that the MUD No. 1 Board of Directors has determined to be beneficial to the MUD. Section 2. That the MUD No. 1 Board of Directors hereby adopts the Fund Balance Policy set forth in Exhibit "A', a copy of which is attached hereto and incorporated herein in its entirety. Section 3. That the MUD District Manager is hereby designated as the Districts primary officer to perform the functions required by the attached Fund Balance Policy and is hereby authorized to do so. Section 4. That this Resolution shall take effect immediately upon its passage and approval. PASSED AND APPROVED by the Board of Directors of the Trophy Club Municipal Utility District No.1, Trophy Club, Texas, this the 18 1h day of September, 2012. ~vs~ C. Nick Sanders, President Purpose Exhibit A Trophy Club Municipal Utility District No. 1 Fund Balance Policy The purpose of this policy is to establish a key element of the financial stability of the MUD by setting guidelines for fund balance. Unassigned fund balance is an important measure of economic stability. It is essential that the MUD maintain adequate levels of unassigned fund balance to mitigate financial risk that can occur from unforeseen revenue fluctuations, unanticipated expenditures, and similar circumstances. The fund balance also provides cash flow liquidity for the MUD's general operations. Definitions Fund Equity-A fund's equity is generally the difference between its assets and its liabilities. Fund Balance-An accounting distinction is made between the portions of fund equity that spendable and non-spendable. These are broken up into five categories: I. Nonspendable fund balance -includes amounts that are not in a spendable form or are required to be maintained intact. Examples are inventory or permanent funds. 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 child safety fees. 3. Committed fund balance -includes amounts that can be used only for the specific purposes determined by a formal action of the government's highest level of decision- making authority. Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally. 4. Assigned fund balance -comprises amounts intended to be used by the government for specific purposes. Intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority. 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 a minimum, intended to be used for the purpose of that fund. 5. Unassigned fund balance-is the residual classification of the general fund and includes all amounts not contained in other classifications. Unassigned amounts are technically available for any purpose. Policy Committed Fund Balance The MUD No. I Board of Directors is the MUD'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 a resolution approved by the MUD Board of Directors at the MUD's monthly meeting. The resolution must either be approved or rescinded, 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. Assigned Fund Balance The MUD Board of Directors has authorized the MUD District Manager as the official authorized to assign fund balance to a specific purpose as approved by this fund balance policy. Minimum Unassigned Fund Balance It is the goal of the MUD to achieve and maintain an unassigned fund balance in the general fund equal to or greater than 35% of expenditures. The MUD considers a balance of less than 25% to be cause for concern, barring unusual or deliberate circumstances. If unassigned fund balance falls below the MUD's desired goal, the MUD will assess the severity of the issue and based on MUD Board direction will proceed with the following actions. Finance will review all assigned, committed, and reserved fund balances if feasible MUD Board/authorized official may convert these funds to unassigned. Ifthis is not an option, MUD Board/authorized official will look to generate excess reserves to replenish these unassigned funds to maintain compliance with this policy. If the MUD is unable to become compliant in the current year, the MUD will look to replenish unreserved fund balance in the next budget cycle. Order of Expenditure of Funds When multiple categories of fund balance are available for expenditure (for example, a construction project is being funded partly by a grant, funds set aside by the MUD, and unassigned fund balance), the MUD will start with the most restricted category and spend those funds first before moving down to the next category with available funds.