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HomeMy WebLinkAboutNB 2 MO. FINC'L RPTS. 03-02-814 BATE: February 25, 1981 NEW BUSINESS NO. 2 3-2-81 Inter-eom TO: FROM: SUBJECT: Dan Blankenship, City Admi~t.r, ator Ron Nault, Finance Director Monthly Financial Reports The Council has requested a monthly report of the City's financial standing; budget vs actual, revenue, expenditures, and capital im- provements, on a departmental basis. I would like to maintain this schedule if possible, yet I feel very strongly that Council needs more information than they are accustomed to. Because of the almost constan~ requests for additional appropriations a current status re- port of unappropriated fund balance ~'ould be invaluable. It is also clear that they wish to know what effect their action will have on the City's spending limitation. I would like to provide Council with the in:formation that it needs for approving additional appropriations at .every Council meeting, as well as a more accurate report of operations on a quarterly basis. Recommended actions are: A cover memo from Finance, short and to the point, would accompany all requests for additional appropriations or transfer of ap- propriations. This would include unappropriated fund balance and effect of such action on Gann spending limitation. 2. Re-evaluate quarterly report to give better overview of financial status, to include capital improvements and fund balance. Beginning fiscal year 1981-82, a general fund balance designated for contingencies that cannot be appropriated from, with less than four affirmative votes of Council, based on 10% of the General Fund appropriations (less grant funds). Item 3 is a fairly common policy with many governmental organizations. The State labels this a "Reserve for Economic Uncertainties," which is very descriptive as to its purpose. We should be prepared for a catastrophic occurrence or severe economic down-turn that could greatly erode our ability ~o generate revenues as planned. The 10% figure is basically arbitrary, but I feel it is a reasonable percentage for a reserve of this nature. The following example il- lustrates the effect that such an action would have on the current years' budget. Taking the 1980-81 proposed budget for the General Fund, $7,982,612. subtract grant allocations of $500,000, leaving a Dan Blankenship February 25, 1981 Monthly Financial Reports page 2. net appropriation of $7,482,612. (See Exhibit I attached). 10% of net appropriations, $748,261, would be s,et aside as designated reserve for contingencies. Appropriations ~could only be made below this amount with four affirmative votes of Council. This policy could be carried one step further by setting a second level at 5% from which additional appropriations would require five affirmative votes from Council. The Gann limitation, the Governor's budget, Proposition 13, and who knows what to expect in the future, make it extremely difficult to build reserves. Unless our reserves are at such a level that we can afford to fund one time projects, we should be very careful in appropriating from reserves to fund on-going programs. The current situation in the Genera] Fund is illustrative of the proposed policy. When the 1980-81 budget was prepared, it was understood that about $1,000,000 of fund balance would be used to fund various General Fund programs, leaving a 6-30-81 fund balance of ($11,961.) One reason for this deficit is the $1,125,000 loan to the Redevelopment Agency. When we loan money to other funds these resources are no longer avai2able to the lending fund, thus causing a reduction in fund balance. As the year has progressed additional appropriations have increased the fund balance deficit to ($111,000). Fortunately, due to reserves exceeding budget estimates, and a savings in expendi- tures, I can project a positive fund balance at 6-30-81 of approxi- mately $300,000. But this is subject to change depending on what appropriations will he requested from now until 6-30-81 and if revenue and expenditur~ variances continue at their current level. The point is that I do not consider the General Fund to be in a very healthy fiscal position and recommend that we be very selective about reducing its reserves below what should be considered a ,prudent level. To summarize, I will be preparing a cover memo on all requests for additional appropriations or transfers of appropriations; the quarterly report of operations will be re-evaluated for utility of informatioon; it Js recommended that a Council policy be adopted relative to a minimum General Fund reserve in relation to fiscal appropriations. RN:mm attachment EXttIBIT I SOURCE: Fund Distribution Chart, page 2-3 of adopted budget. 10% level of designated reserve for contingencies General Fund Operating Budget Capital Improvement Budget $6,625,712 1,356,900 Total appropriations Less grant appropriations 10% reserve $7,982,612 500,000 $7,482,612 x .10 Designated reserve for con- tingencies $ 748,261 Requires 4 affirmative votes to appropriate below this level. 5% level of designated reserve for contingencies General Fund Operating Budget Capital Improvement Budget $6,625,712 1,356,612 Total appropriations Less grant appropriations $7,982,612 500,000 '$7,482,612 5% reserve x .05 Designated reserve for con- tingencies $ 374,130 Requires 5 affirmative votes to appropriate below this level.