HomeMy WebLinkAboutPD Financial Policy - 03/27/08X C�
Approved by:
CITY OF PALM DESERT
FINANCE DEPARTMENT
STAFF REPORT
REQUEST: ADOPT THE CITY OF PALM DESERT FINANCIAL POLICY AS
PRESENTED
SUBMITTED BY: PAUL S. GIBSON, FINANCE DIRECTOR
DATE: MARCH 27, 2008
CONTENTS: PALM DESERT FINANCIAL POLICY
Recommendation:
That the City Council adopt the City of Palm Desert Financial Policy as
presented.
Background:
The City of Palm Desert follows certain procedures with regard to its reserves in order
to maintain a healthy fiscal state. Adoption of those procedures in the form of a
financial policy ensures that those procedures are in place and followed appropriately,
and that the City remains in compliance with associated auditing standards.
The Financial Policy was presented to the Audit, Investment and Finance Committee for
review at its meeting of March 25 2008 and recommends that the City Council adopt
the policy as presented. CITY COUNCIL ACTION
APPROVED '4 V DENIED
Submitted by: RECEIVED OTHER
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Paul S. Gibson, Finance Director ABSENT: 6v�
ABSTAIN: NIoat_
VERIFIED BY: jQ nit«
Original on File with -City Clerk's Office
*Removed for separate consideration, then APPROVED as
amended to reflect maintaining a designated General
Fund working capital reserve equivalent to 100% of the
Carlos L. Ortega,(ty Manager General Fund's Operating Budget cumulatively. 5-0
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G:\Finance\Niamh Ortega\Staff Reports\SR - Financial Policy Adoption 032508.Doc
City of Palm Desert Financial Policy Fiscal Year 2007-2008
1.0 Policy Statement:
It is the Financial Policy of the City of Palm Desert, Palm Desert Redevelopment
Agency, Palm Desert Housing Authority, Palm Desert Financing Authority, and Palm
Desert Recreational Facilities Corporation (hereafter referred to collectively as the
"City") to:
(1) Minimum Fund and Working Capital Balances. We will maintain a
designated General Fund working capital reserve equivalent to 20% of the
General Fund's operating budget and a designated emergency reserve
equivalent to 5% of the General Fund's operating budget. This is considered
the minimum level necessary to maintain the City's credit worthiness and to
adequately provide for:
a. Economic uncertainties, local disasters, and other financial hardships
or downturns in the local or national economy.
b. Federal/State Budget cuts (such as the State issuing IOUs,
Educational Revenue Augmentation Fund (ERAF) transfers, etc.
c. Contingencies for unseen operating or capital needs.
d. Maintaining this minimum will also allow the City to continue to earn a
certain level of investment earnings and provide sufficient cash flow
reserves (July to January).
e. The emergency reserve would be available only as a temporary
revenue source to be used while an orderly financial plan for cost -
reduction or revenue enhancement is developed.
(2) Balance Budget. We will maintain a balanced operating budget for all
governmental funds with recurring revenues equal to or greater than recurring
expenditures. Budget will be submitted to City Council on or before June 1
and approved by City Council on their last meeting in June. City Council
adopts the budget by department for General Fund and all other funds by the
total appropriations of said fund. City Manager has authority to transfer
budget between line item budgets. Undesignated fund balances shall be
appropriated for one-time expenditures, preferably only on capital
improvement items.
(3)
Equipment/Vehicle Replacement. We will require that each Internal Service
Fund that includes vehicles, equipment, and building maintenance have
revenues, (City user charges, interest income, and all other income) sufficient
to meet all cash operating expenses and depreciation expenses. The related
revenues should also be sufficient to maintain cash reserves that provide
sufficient cash to replace vehicles and equipment in accordance with
replacement polices. For General Fund assets, the City will establish and
maintain an Equipment Replacement Fund to provide for the timely
replacement of vehicles and capital equipment with an individual replacement
cost of $15,000 or more. The annual contribution to this fund will generally be
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City of Palm Desert Financial Policy Fiscal Year 2007-2008
based on the annual use allowance, which is determined based on the
estimated life of the vehicle or equipment and its original purchase cost.
Interest earnings and sales of surplus equipment as well as any related
damage and insurance recoveries will be credited to the Equipment
Replacement Fund.
(4) Adequate Liability Reserve. We will maintain for the purpose of setting
aside resources for costs not covered by the City's insurance programs, such
as claim costs within the City's deductibles, claims and judgments, self -
insured retentions and/or major costs associated with disasters and other
events which will not be reimbursable from insurance or from the Federal or
State government.
(5) Long -Range Financial Forecast. We will maintain a long-range fiscal
perspective through the use of an annual operating budget, a five-year capital
improvement plan, and a five-year financial forecast.
(6) Capital Improvement Plan. We will use Redevelopment Agency long-term
financing methods or cash accumulated in excess of policy requirements for
major capital improvements and acquisitions. These improvements will be
planned via the annual five-year capital improvement plan process.
(7) Accounting Principles. We will comply with all the requirements of
"Generally Accepted Accounting Principles".
(8) Enterprise Fund Standards. We will require that all Enterprise Funds (Golf
Operations and Office Complex) have revenues (customer charges, interest
income, and all other income) sufficient to meet all cash operating expenses,
depreciation expense, and prescribed cash reserve policies per financial
policies as recommended for each enterprise activity. Additionally, each
Enterprise Fund will maintain debt service coverage requirements set forth in
any related bond covenants.
(9) Future Capital Project Designations. The Council may designate specific
fund balance levels for future development of capital projects, which it has
determined to be in the best long-term interests of the City.
(10) Other Designations and Reserves. In addition to the designations noted
above, fund balance levels will be sufficient to meet funding requirements for
projects approved in prior years which are carried forward into the new year;
debt service reserve requirements; reserves for encumbrances and
Continuing Appropriations in the amount equal to the City's unpaid obligations
and unfinished projects at year-end; reserves designated for compensated
absences; and other reserves or designations required by contractual
obligations, state law, or generally accepted accounting principles.
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