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R-12-09RESOLUTION NO. R -12 -09 A RESOLUTION ADOPTING A FUND BALANCE POLICY WHEREAS, the Government Accounting Standards Board (GASB) has issued Statement #54 which requires governmental entities to identify and classify fund balances in their comprehensive annual financial reports; and WHEREAS, that Statement requires that the Village of Deerfield should begin to comply with their comprehensive annual financial report for the fiscal year ending April 30, 2012, and WHEREAS, Village staff has prepared a fund balance policy that incorporates the classification and minimum levels necessary to comply with Statement #54; and WHEREAS, The Village of Deerfield has determined that the Fund Balance Policy, attached, is in the best interest of the Village and its citizens. NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND BOARD OF TRUSTEES OF THE VILLAGE OF DEERFIELD, LAKE AND COOK COUNTIES, ILLINOIS, in the exercise of its home rule powers, that the Village of Deerfield Fund Balance Policy, attached, is hereby approved; and This Resolution shall be in full force and effect upon its passage and approval in the manner provided by law. ADOPTED this 16th day of April , 2012. AYES: Benton, Farkas, Jester, Oppenheim, Seiden, Struthers (6) NAYS: None ABSENT: None ABSTAIN: None APPROVED this 16th day of April 2012. t"". 6iz-�a- Mayor ATTEST: oql- Vill6ge Clerk Village of Deerfield Fund Balance Policy The purpose of this policy is to establish guidelines by which the Village will classify fund balance in its Comprehensive Annual Financial Report in order to comply with Government Accounting Standards Board Statement No. 54. Fund balance shall be reported in accordance with governmental accounting standards as promulgated by the Government Accounting Standards Board (GASB), and shall be defined as the gross difference between governmental fund assets and liabilities reflected on the balance sheet. The governmental funds include the General Fund, Special Revenue Funds, Debt Service Funds and Capital Projects Fund. Fund balance shall be reported in up to five (5) ways, as described in GASB Statement No. 54. The five (5) classifications are defined as follows: 1. Non - Spendable Fund Balance: That portion of a governmental fund's fund balance that cannot be spent or is legally or contractually required to remain intact. Examples include inventories and prepaid items. 2. Restricted Fund Balance: That portion of a governmental fund's fund balance that is constrained to a specific purpose by external parties, such as grantors, bond holders and higher levels of government through enabling legislation. Examples include Motor Fuel Tax funds that per State Statute must be spent on maintenance of roadways, Enhanced 911 funds restricted for public safety purposes, Debt Service funds restricted for debt service expenditures, and Capital Projects funds restricted for capital projects. 3. Committed Fund Balance: That portion of a governmental fund's fund balance that is constrained to a specific purpose by the Village Board itself, using its highest level of decision making authority. Committed fund balance cannot be used for any other purpose, unless the Village Board itself removes the constraint. Examples include funds committed by ordinance for construction. 4. Assigned Fund Balance: That portion of a governmental fund's fund balance that is spendable or available for appropriation and not subject to the above classifications 1 -4 in any fund other than the General Fund, or has been tentatively earmarked for some specific purpose by the Finance Director. An example is the funds held by the Illinois Personnel Benefit Cooperative (IPBC) for health insurance benefit purposes. 5. Unassigned Fund Balance: That portion of a governmental fund's fund balance that is available for any legal purpose in the General Fund. The unassigned fund balance shall be defined as the difference between the total fund balance, and the total of the non - spendable fund balance, restricted fund balance, committed fund balance and assigned fund balance. Positive unassigned fund balance can only occur in the General Fund. It shall be the Village's policy to spend the most restricted dollars before less restricted dollars in the following order: 1. Non - spendable (if funds become spendable) 2. Restricted 3. Committed 4. Assigned 5. Unassigned. The Finance Director shall have the authority to assign fund balance as he or she deems appropriate. Fund Balance Reserve Policy As a home rule municipality, the Village has substantial flexibility in the movement of assets between funds. Other than funds with certain legal restrictions, for instance, the Motor Fuel Tax Fund, Deposit Fund, and Police Pension Fund, the Village Board may approve transfers of funds between any of the operating or capital project funds of the Village. In addition, the Village has varied sources of revenue that, except for property tax, are generated monthly and therefore are not subject to irregular receipt during the year. Adequate levels of fund balance can help ensure stable tax rates, minimize the risk of cash flow shortages and generate investment income. The following minimums are necessary to accomplish these objectives. The combined fund balance /net assets in the operating funds (General, Water, Sewer and Garage) should equal at least 40% of their annual budgeted recurring expenditures. The minimum combined balance of unassigned fund balance in the General Fund and unrestricted net assets in the proprietary funds shall not fall below 30% of their annual budgeted recurring expenditures. The Enhanced 911 Fund's restricted fund balance shall equal at least 25% of the Fund's annual operating expenditures. The Refuse Fund's unrestricted net assets shall equal at least 25% of the Fund's annual operating expenses. The Parking Lot Fund's unrestricted net assets shall equal at least 25% of the Fund's annual operating expenses. The balance may be higher than 25% to pay for anticipated capital expenses in the Fund. The remaining funds shall maintain a sufficient balance to achieve the budget on a yearly basis.