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HomeMy WebLinkAbout2013-0917D Resolution Adopting Fund Balance Policy GASB 54RESOLUTION NO. 2013-0917 -D TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 A RESOLUTION OF THE BOARD OF DIRECTORS OF TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 ADOPTING A FUND BALANCE POLICY FOR THE DISTRICT IN ACCORDANCE WITH GOVERNMENT ACCOUNTING STANDARDS BOARD STATEMENT NO. 54 AS SET FORTH IN EXHIBIT "A"; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the Trophy Club Municipal Utility District No. 1, (the "District") 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 District Board of Directors finds and determines it to be in the best interests of the District to adopt the Fund Balance Policy set forth in Exhibit "A"; NOW, THEREFORE, BE IT RESOLVED BY THE MUD #1 BOARD OF DIRECTORS OF TROPHY CLUB MUNICIPAL UTILITY DISTRICT NO. 1 OF TROPHY CLUB, TEXAS: Section 1. That the Board of Directors has reviewed the attached Fund Balance Policy, which contains policies that the Board has determined to be beneficial to the District. Section 2. That the 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 District Manager is hereby designated as the District's 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, T hy Club, Texas, this the 171h day of September, 2013. Kevin R. Carr, Board Secretar)l Treasurer 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 Trophy Club Municipal Utility District No. 1 (the "District") by setting guidelines for fund balance. Unassigned fund balance is an important measure of economic stability. It is essential that the District 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 District'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: 1. 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 Trophy Club Municipal Utility District No. 1 Board of Directors is the highest level of decision-making authority. Formal action by resolution is required to establish, modify, or rescind a fund balance commitment. The resolution must be approved by the Board of Directors at the regular 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 Board of Directors has authorized the 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 Trophy Club Municipal Utility District No. 1 is to achieve and maintain an unassigned fund balance in the general fund equal to or greater than 35% of expenditures. The District considers a balance of less than 25% to be cause for concern, barring unusual or deliberate circumstances. If unassigned fund balance falls below the District's desired goal, the District will assess the severity of the issue and based on the Boards direction and will proceed with the following actions: Finance will review all assigned, committed, and reserved fund balances if feasible the Board or authorized official may convert these funds to unassigned. If this is not an option, the Board or authorized official will look to generate excess reserves to replenish these unassigned funds to maintain compliance with this policy. If this is unable to become compliant in the current year, the 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 District, and unassigned fund balance), the District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.