RES 2011-23TOWN OF TROPHY CLUB
RESOLUTION NO. 2011-23
A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF
TROPHY CLUB, TEXAS ADOPTING A FUND BALANCE POLICY FOR
THE TOWN IN ACCORDANCE WITH GOVERNMENT ACCOUNTING
STANDARDS BOARD STATEMENT NO. 54 AS SET FORTH IN
EXHIBIT "A"; AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, the Town Council 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 Town Council finds and determines it to be
in the best interests of the Town to adopt the Fund Balance Policy set forth in Exhibit
"A";
NOW, THEREFORE, BE IT RESOLVED BY THE TOWN COUNCIL OF THE
TOWN OF TROPHY CLUB, TEXAS:
Section 1. That the Town Council has reviewed the attached Fund Balance
Policy, which contains policies that the Council has determined to be beneficial to the
Town.
Section 2. That the Town Council 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 Director of Finance is hereby designated as the Town'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 this 1 ih day of September, 2011.
Mayor, Connie White
Town of Trophy Club, Texas
ATTEST:
[SEAL]
T n Secretary, annon DePrater
Town of Trophy Club, Texas
APPROVED TO AS FORM:
Town Attorney, Patricia A. Adams
Town of Trophy Club, Texas
RES 2011-23 Page 2 of 2
Town of Trophy Club, Texas
Fund Balance Policy
Purpose
The purpose of this policy is to establish a key element of the financial stability of the
Town by setting guidelines for fund balance. Unassigned fund balance is an important
measure of economic stability. It is essential that the Town 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 Town’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 nonspendable. 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
The Town Council is the Town’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 Council at the Town’s
Council meeting.
Town Council 75 of 144 Meeting Date: September 12, 2011
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 Town Council has authorized the Town’s Financial Director 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 Town to achieve and maintain an unassigned fund balance in
the general fund equal to 30% of expenditures. The Town considers a balance of
less than 15% to be cause for concern, barring unusual or deliberate
circumstances.
If unassigned fund balance falls below the Town’s desired goal, the Town will
access the severity of the issue and based on council direction will proceed with
the following actions. Finance will review all assigned, committed, and reserved
fund balances if feasible council/authorized official may convert these funds to
unassigned. If this is not an option, council/authorized official will look to
generate excess reserves to replenish these unassigned funds to maintain
compliance with this policy. If the Town is unable to become compliant in the
current year, the Town 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 Town Council, and unassigned fund balance), the Town will start with the
most restricted category and spend those funds first before moving down to the
next category with available funds.
Town Council 76 of 144 Meeting Date: September 12, 2011
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