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R23-111 1 RESOLUTION NO. R23-111 2 3 4 A RESOLUTION OF THE CITY OF BOYNTON BEACH, FLORIDA, 5 AMENDING THE FINANCIAL POLICY FOR IMPLEMENTING THE 6 GOVERNMENTAL ACCOUNTING STANDARDS AS ADOPTED 7 PURSUANT TO RESOLUTION R11-106 IN ORDER TO ALIGN WITH THE 8 FINANCIAL CONSULTANT'S RECOMMENDATION OF FISCAL 9 SUSTAINABILITY AND LONG TERM BUDGET SUSTAINABILITY; 10 PROVIDING AN EFFECTIVE DATE. 11 12 WHEREAS, the City hired a financial consultant, Davenport, to conduct a financial 13 sustainability review of the City's funds and based on that study, there is a recommendation 14 to build a stronger fund balance for the City's General Fund; and 15 WHEREAS, the Policy shall be reviewed and amended or re-affirmed via adopted 16 Resolution by the City Commission no less than every three years which will maintain long 17 term financial sustainability; and 18 WHEREAS, upon the recommendation of staff, the City Commission deems it to be 19 in the best interests of the citizens and residents of the City of Boynton Beach to approve 20 the amendment to the Financial Policy for Implementing the Governmental Accounting 21 Standards as adopted pursuant to Resolution R11-106 in order to align with the Financial 22 Consultant's recommendation of fiscal sustainability and long term budget sustainability. 23 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY 24 OF BOYNTON BEACH, FLORIDA, THAT: 25 Section 1. The foregoing "Whereas" clauses are true and correct and are hereby 26 ratified and confirmed by the City Commission. 27 Section 2. The City Commission of the City of Boynton Beach, Florida, hereby 28 approves the amendment to the Financial Policy for Implementing the Governmental S:\CA\RESO\Fiscal Sustainability-Reso.docx 29 Accounting Standards as adopted pursuant to Resolution R11-106 in order to align with the 30 Financial Consultant's recommendation of fiscal sustainability and long term budget 31 sustainability. A copy of the amendment is attached hereto and incorporated herein by 32 reference as Exhibit "A". 33 Section 3. This Resolution shall become effective October 1, 2023. 34 PASSED AND ADOPTED this 5th day of September, 2023. 35 36 CITY OF BOYNTON BEACH, FLORIDA 37 YES NO 38 39 Mayor—Ty Penserga 40 41 Vice-Mayor—Thomas Turkin -A49ser-k 42 43 Commissioner—Angela Cruz 44 tZ- 45 Commissioner—Woodrow L. Hay 46 47 Commissioner—Aimee Kelley 48 49 VOTE I—° 50 ATTEST: 51 52 53 0. /� II 54 Maylee D-• esus M'A, MMC Ty 'en/- 55 City Cler� May.' 56 57 =0WI'ON6N APPROVED AS TO FORM: 58 (Corporate Seal) k93' 0Ra'rf•.<9n 1% 59 f O:C s- 60 60 i —, �7 RPORPjE�. 61 �ifc� %.1NC° g2O ; David N. Tolces 62 �i 1 .•• : Interim City Attorney 63 FLOws 64 S:\CA\RESO\Fiscal Sustainability-Reso.docx CITY OF BOYNTON BEACH, FLORIDA FUND BALANCE POLICY PURPOSE To establish a fund balance policy tailored to the needs of the City of Boynton Beach(the "City")to establish a level of funding that protects against unanticipated events that would adversely affect the financial condition of the City and jeopardize the continuation of necessary public services. This policy will ensure the City maintains adequate fund balance and reserves in the City's governmental funds to provide 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, (4)provide funds for unforeseen expenditures related to emergencies. POLICY The City hereby established and will maintain reservations of Fund Balance, as defined herein, in accordance with Governmental Accounting and Financial Standards Board Statement No. 54 Fund Balance Reporting and Governmental Fund Type Definitions. This policy shall apply to the City's General Fund and all governmental funds. Fund Balance shall be composed of restricted, committed, assigned,non-spendable and unassigned amounts. Fund Balance information is used to identify the available resources to repay long-term debt,reduce property taxes, add new governmental programs, expand existing ones, or enhance the financial position of the City, in accordance with policies established by the City Commission. DEFINITIONS/GENERAL INFORMATION Fund Balance - The cumulative difference of all revenues and expenditures from the government's creation. It can also be considered to be the difference between fund assets and fund liabilities, and can be known as fund equity. Restricted Fund Balance-Amounts that have externally enforceable limitations on use. These amounts are constrained to specific purposes by their providers(such as grantors, bondholders, and higher levels of government). Restrictions may be changed or lifted only with the consent of the resource providers. Committed Fund Balance-Amounts that have self-imposed limitations, established through actions of the City Commission, the City's highest level of decision making authority, set in place prior to the end of the period. These amounts cannot be used for any other purpose unless the City Commission takes the same action to remove or change the constraint. Assigned Fund Balance- These are amounts that the City intends to use for a specific purpose; the intent shall be expressed by City Commission or by a City official or other Board to which the City Commission delegates that authority. Non-Spendable Fund Balance -Amounts that are inherently not spendable because of their form such as inventory or are required to be maintained intact principal of an endowment fund. Unassigned Fund Balance- The residual classification for the general fund and includes amounts that are not contained in the other classifications. Unassigned amounts are the portion of fund balance which is not obligated or specifically designated and are available for any purpose. MINIMUM LEVEL OF UNASSIGNED FUND BALANCE The City will maintain a diversified and stable revenue system that will equally allocate the burden of supporting all services and protect the City from short-term fluctuations in any one revenue source. The City will project revenues on a conservative basis so that actual revenues will consistently meet or exceed budgeted revenues. The General Fund Unassigned fund balance, at year-end, tom-percent shall not be less than 10%of the following year's budgeted expenditures. In any fiscal year where the City is unable to fund the minimum reservation of fund balance as required in this section, the City shall not budget any amount of unassigned fund balance for the purpose of balancing the budget, and will strive to replenish this balance to the minimum reservation over an eight-year period..- General Fund-Restricted Fund Balance There are no restricted fund balance reserves in the General Fund. General Fund- Committed Fund Balance The City hereby establishes the following committed fund balance reserves in the General Fund: a. Emergency Operating Reserve In order to provide the resources necessary to ensure continued operations of the City should a natural disaster or significant change in the weather pattern occur, the City shall establish and maintain an operating reserve fund within the general fund. The amount shall be 10% of the following year's projected budgeted expenditures as a result of the annual budget process. Should the City express intent to utilize the Emergency Operating Reserve, the City shall contemporaneously develop a plan via Adopted Resolution to restore the reserve to the policy level in no more than three years. The utilization of this reserve shall require a Super-majority vote of the Commission. b. Budget Stabilization Reserve The City shall establish and maintain a committed fund balance within the general fund equal to 5%of the following year's projected budgeted expenditures as a result of the annual budget process. This reserve is needed to prepare for events including,but not limited to: revenue declines whether anticipated or unforeseen, unanticipated expenditures., and unfunded mandates. The reserve should only be used in the event of such occurrences. Should the City express intent to utilize the Budget Stabilization Reserve, the City shall contemporaneously develop a plan via Adopted Resolution to restore the reserve to the policy level in no more than three years. The utilization of this reserve shall require a Simple-majority vote of the Commission. General Fund-Assigned Fund Balance The City hereby establishes the following assigned fund balance reserves in the General Fund. a. Assignment to Subsequent Year's Budget The subsequent year's budget fund balance reserve is assigned by City management as set forth in the annual budget (-and any amendments thereto) to appropriate a portion of existing unassigned fund balance to eliminate a projected deficit in the subsequent year's budget in an amount no greater than the projected excess of expected expenditures over expected revenues. General Fund-Non Spendable Fund Balance The City hereby establishes the following non spendable fund balance reserves in the General Fund. a. Inventory Reserve The inventory fund balance reserve is established to indicate those amounts relating to inventories that are not in spendable form. BUDGETING APPROPRIATION OF UNRESTRICTED FUND BALANCE The actual amount of unrestricted fund balance(total of committed fund balance, assigned fund balance and unassigned fund balance) is not known until the completion of the annual audit which takes place between three to six months after the end of the fiscal year being audited. However, an estimate of unrestricted fund balance(also called estimated beginning fund balance) must be made during the annual budget adoption process (July through September)which is prior to the end of the fiscal year, September 30th. ESTIMATED BEGINNING FUND BALANCE. In order to achieve the most accurate estimate possible,the City Manager or Finance Director shall project both Sources of Funds(revenues,prior years unrestricted fund balances carried forward and other financing sources) and Uses of Funds (-operating and non-operating expenditures), including accruals, through September 30th of the then current fiscal year. These projections will be shown in a separate column entitled "Estimated Actual". The difference between the estimated actual sources of funds and estimated actual uses of funds is the calculated estimated beginning fund balance for the subsequent fiscal year ESTIMATED ENDING FUND BALANCE For the year being budgeted, a calculation of estimated ending fund balance shall also be made. This calculation shall be the difference between the budgeted sources of funds and the budgeted uses of funds as described above. If, after the annual audit, the actual general fund unassigned fund balance is greater than two months of operating expenditures in the general fund, the excess may be used in one or a combination of the following ways: a) If any of the City's fund balance reserve levels are not currently in compliance with the stated policies levels, excess fund balance will be Lleft in the general fund_and applied to any reserve policies that are not in compliance with the stated level If all of the City's fund balance policy levels are met, the following uses of excess fund balance are allowable: b) Appropriated by resolution of City Commission for a one-time expenditure or opportunity that does not increase recurring operating costs; c) Committed to establish or increase a formal stabilization arrangement or reserve (including but not limited to economic stabilization, contingency reserves or disaster reserves); or d) Appropriated for start-up expenditures of new programs undertaken at mid-year. SPENDING ORDER OF FUND BALANCES This policy considers restricted amounts to be spent before unrestricted fund balance when an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed, assigned then unassigned amounts, in that order, will be spent when an expenditure is incurred for a purpose for which amounts in any of those unrestricted fund balance classifications could be used. The above spending order excludes expenditures from the"Emergency Operating Reserve" and "Budget Stabilization Reserve" as defined in this Policy. ANNUAL REVIEW AND DETERMINATION OF RESERVE AMOUNTS Compliance with the provisions of this policy shall be reviewed as a part of the annual budget adoption process, and the amounts of restricted, committed and unassigned fund balance shall be determined as part of the annual process. This Policy shall be reviewed and amended or re-affirmed via adopted Resolution by the City Commission no less than every three years. ADDITIONAL INFORMATION, REQUIREMENTS/RESPONSIBILITIES The Director of Financial Services is authorized to evaluate existing fund balance classifications (designations, reserves and unreserved/undesignated) and reclassify them in accordance with GASB Statement 54, for implementation effective the fiscal year ending September 30, 2011. It will be the responsibility of the Director of Financial Services to keep this policy current. EFFECTIVE DATE This Policy shall take effect immediately upon adoption and will be applied beginning with the preparation of the City's September 30, 204-1-23 Comprehensive Annual Financial Report and the City's Fiscal Year 201123-1-224 budget.