Loading...
HomeMy WebLinkAboutFINANCE BOARD Receive & File 2004 Annual Report describing w CITY OF HUNTINGTON BEAC MEETING DATE: MAY 3, 2004 DEPARTMENT ID NUMBER: AS-04-011 Council/Agency Meeting Held: - Deferred/Continued to: Approved ❑ Conditionally Approved ❑ Denied L Ity CI rk' ignat e Council Meeting Date: MAY 3, 2004 Departm Number: A54-4 1 CITY OF HUNTINGTON BEACH ' { _ r REQUEST FOR ACTION _' rr, SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS Y SUBMITTED BY: RAY SILVER, CITY ADMINISTRATOR,28 PREPARED BY: CLAY MARTIN, DIRECTOR OF ADMINISTRATIVE SERVICES SUBJECT: ADOPT REVISIONS TO THE CITY'S FINANCIAL POLICIES AS RECOMMENDED BY THE FINANCE BOARD [Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachments) Statement of Issue: Should the city's Financial Policies be changed, revised, and updated as recommended by the Finance Board and supported by staff? Funding Source: Not Applicable Recommended Action: Adopt changes, revisions, and updates to the City of Huntington Beach Financial Policies as submitted by staff and the Finance Board. Alternative Action(s): Do not approve proposed changes, revisions, and updates to the City of Huntington Beach Financial Policies and provide staff and the Finance Board with direction. Analysis: An ongoing responsibility of the Finance Board identified in section 2.109.040.b.1 of the Municipal Code is to review the city's Financial Policies. At the March 10, 2004 Finance Board meeting, the Finance Board approved the attached changes, revisions, and updates to the city's Financial Policies and requested that they be submitted to the City Council for adoption. Staff supports these changes, revisions and updates to the Financial Policies recommended by the Finance Board. 7 WRCA's\Revisions to Financial Policies.doc 4/20/2004 3:38 PM REQUEST FOR ACTION MEETING DATE: MAY 3, 2004 DEPARTMENT ID NUMBER: AS-04-011 Generally the changes, revisions, and updates recommended are intended to improve clarity and readability of the Financial Policies. For example, several terms used in the Financial Policies are now defined. In addition, current practices regarding the review by City Council of changes to the budget are identified. Overall, no substantive existing authorities are changed and no new authorities are created by these recommended changes, revisions, and updates to the Financial Policies. Some highlights of the recommended changes, revisions, and updates are: • The introduction of a summary budget document for the general public. • The expansion of the use of General Fund reserves to include mandates. • The inclusion of policies related to Special Revenue Funds as distinguished from Enterprise Funds. • The inclusion of a policy distinguishing charges for services from user fees. Attachment(s): City Clerk's . • - Number No Description 1 Recommended Financial Policies 2. 1 Legislative Draft of Financial Policies RCA Author: William McReynolds H:%RCXs\Revisions to Financial Policies.doc 4120/2004 3:38 PM ATTACHMENT # 1 CITY OF HUNTINGTON BEACH FINANCIAL POLICIES FINANCIAL REPORTING AND ACCOUNTING STANDARDS ❑ The City's accounting system will be maintained in accordance with generally accepted accounting practices and the standards of the Government Accounting Standards Board and the Government Finance Officers Association. ❑ The annual financial report will be prepared within six months of the close of the previous fiscal year. The City will use generally accepted accounting principles in preparing the annual financial statements and will attempt to qualify for the Government Finance Officers Association's Excellence in Financial Reporting Program. ❑ The City will strive for an unqualified audit opinion. An unqualified opinion is rendered without reservation by the independent auditor that financial statements are fairly presented. ❑ The City will contract for an annual audit by a qualified independent certified public accounting firm. The independent audit firm will be selected through a competitive process at least once every five years. The contract period will be for an initial period of three years, with two one-year options. BUDGETING ❑ Biannually, the City Administrator will prepare a two-year budget, with the first year submitted to the City Council for legal adoption, and the second year presented as a planning document. ❑ The budget will be prepared consistent with the standards developed by the Government Finance Officers Association and California Society of Municipal Finance Officers. In addition, a summary version will be provided to the public in a user-friendly format. ❑ The City will maintain a balanced operating budget for all funds with estimated revenues being equal to, or greater than, estimated expenditures, and with periodic City Council reviews and necessary adjustments to maintain balance. ❑ On-going revenues will support on-going expenditures. Revenues from one-time or limited duration sources will not be used to balance the annual operating budget. ❑ Support function appropriations will be placed in the department in which they are managed. GENERAL FUND BALANCE ❑ The General Fund reserve will be a minimum of seven percent (7%) of the annual General Fund budget at adoption. Subsequent appropriations causing this minimum to be reduced will be reviewed by the City Council on a quarterly basis. ❑ Allocation of prior year-end General Fund balance in excess of the minimum reserve will be allocated as follows: ■ 50 percent for capital projects (transferred to the Capital Projects Fund) ■ 50 percent for future expenditures (combined with the General Fund Reserve) ❑ All supplemental appropriations from the General Fund minimum reserve that cannot otherwise be funded during the current fiscal year operating budget must meet one of the three following criteria: • It is an unanticipated emergency. ■ It is required to implement a Memorandum of Understanding (MOU) or a mandate. ■ It is a new expense that is offset by related revenues. ❑ Any unanticipated and unrestricted revenues received during the fiscal year will be added to the General Fund fund balance. Page 1 of 3 Updated 5004 CITY OF HUNTINGTON BEACH FINANCIAL POLICIES APPROPRIATION AUTHORITY ❑ The City Council is the appropriation authority for the City Budget. As required by state law, appropriations expire at the end of each fiscal year. NON-DEPARTMENTAL BUDGET ❑ The City shall maintain a non-departmental budget that is used for expenditures that do not apply to a specific department, are Citywide in nature, or shared by several departments. The Administrative Services Director and City Administrator shall be responsible for administration of this budget. OPERATION OF THE CAPITAL PROJECTS FUND ❑ The Capital Projects Fund will only be used to budget for, and construct, capital improvement projects identified in the City's five year Capital Improvement Plan. ❑ Savings from completed capital improvement projects will be retained for use on other infrastructure projects. ❑ Interest earned on idle funds in the Capital Projects Fund will be retained for use on other infrastructure projects. ENTERPRISE FUNDS ❑ An Enterprise Fund is a type of proprietary fund used to report an activity for which a fee is charged to external users for goods or services. The City will set users fees for each enterprise fund at a rate that fully recovers the direct and indirect costs of providing service. ❑ The City will adjust user fees as necessary to ensure that enterprise funds do not collect revenues at a rate in excess of the fund's operating, capital, and reserve requirements. ❑ Enterprise funds will be supported by their own rates and not subsidized by the General Fund. ❑ Enterprise funds will pay their share of overhead services provided by the General Fund. SPECIAL REVENUE FUNDS o A Special Revenue Fund is used to account for the proceeds of specific revenue sources that are restricted to expenditure for specified purposes. ❑ The City Council will establish which revenues require placement into a special revenue fund. ❑ The City Council will establish which expenditures will be expensed to each special revenue fund. DEBT ISSUANCE &MANAGEMENT ❑ The City will not use long-term debt to pay for current operations. ❑ The City will strive to construct capital and infrastructure improvements without incurring debt. Debt financing will be considered for capital and infrastructure improvements when one or more of the following circumstances exist: • When the term of the debt does not extend beyond the useful life of the improvements; ■ When project revenues or specific resources will be sufficient to service the long-term debt; ■ When the cost of debt is less than the impact of the cost caused by delaying the project. CHARGES & USER FEES o "User Fees" are fees for services that are exclusively provided by the City and cannot legally exceed the cost of the service provided nor the statutory limit (if lower). User Fees will be reviewed and/or revised periodically by the City Council. User Fees that do not recover all direct and indirect costs of service will be clearly identified and must be approved by the City Council. Page 2 of 3 Updated 5/3/04 CITY OF HUNTINGTON BEACH FINANCIAL POLICIES o "Charges" are fees that have no statutory limit and typically are set at"market rates" since the public can choose to obtain these services from other sources.Charges will be reviewed and/or revised periodically by the City Council. Charges that do not recover all direct and indirect costs of service will be clearly identified and must be approved by the City Council. ❑ Fees for infrastructure improvements required by new development will be reviewed annually to ensure that the fees recover development related expenditures. CAPITAL MANAGEMENT ❑ The City will prepare a five year Capital Improvement Plan. The plan will be developed biannually and updated annually. The Capital Improvement Plan will include current operating maintenance expenditures, funding to support repair and rehabilitation of deteriorating infrastructure, and the construction of new infrastructure projects. ❑ Prior to planning the construction of new infrastructure, the improvement's future operating, maintenance, and replacement costs will be forecast and matched to available revenue sources in the operating budget. Page 3 of 3 Updated 5/3/04 ATTACHMENT #2 0 0 FINANCIAL REPORTING AND ACCOUNTING STANDARDS ❑ The city's accounting system will be maintained in accordance with generally accepted accounting practices and the standards of the Government Accounting Standards Board and the Government Finance Officers Association. ❑ The annual financial report will be prepared within six months of the close of the previous fiscal year. The city will use generally accepted accounting principles in preparing the annual financial statements and will qualify attempt to for the Government Finance Officers q Y Association's Excellence in Financial Reporting Program. ❑ The city will strive for an unqualified audit opinion. An unqualified opinion is rendered without reservation by the independent auditor that financial statements are fairly presenfed ❑ The city will contract for an annual audit by a qualified independent certified public accounting firm. The independent audit firm will be selected through a competitive process at least once every five years. The contract period will be for an initial period of three years, with two one-year options . OPERATING BUDGET BUDGETING ❑ Biannually, the City Administrator the sits will prepare a two-year budget, with the first year submitted to the City Council for legal adoption, and the second year presented as a planning document. ❑ The budget will be prepared consistent with the standards developed by the Government Finance Officers Association and California Society of Municipal Finance Officers. in addition, a summary version will be provided to the public in a user-friendly format. ❑ The city will maintain a balanced operating budget for all funds with estimated revenues being equal to, or greater than, estimated expenditures, and with periodic City Council reviews and necessary adjustments to maintain balance. ❑ On-going revenues will support on-going expenditures. Revenues from one-time or limited duration sources will not be used to balance the annual operating budget. ❑ Support function appropriations will be placed in the department in which they are managed. GENERAL FUND R1= BALANCE ❑ The General Fund reserve will be a minimum of seven percent (7%) of the annual General Fund budget at adoption. Subsequent appropriations causing this minimum to be reduced will be reviewed by the Ox Council on a quarterly basis. ALLOCATION OCATION C)F oolno ycnC7 CAlh QGFENCOnI FLi inin QAl enirF ❑ .A Fund balan--e in evress of the re-sewe will he allnno4eid c felln,w s- Allocation of prior year- end end General Fund balance in excess of the minimum reserve will be allocated as follows: ■ 50 percent for capital projects (transferred to the Capital Projects Fund) ■ 50 percent for future expenditures (combined with the General Fund Reserve) APPRa-PRIATIONS FROM THE GENERAL FUND RESERVE1 ❑ All supplemental kinbudgeted appropriations from the General Fund minimum reserve that cannot otherwise be funded during the current fiscal year operating budget must meet one of the three following criteria: ■ It is an unanticipated emergency. ■ It is required to implement IabeF negetiations a Memorandum of Understanding (MOW or a mandate. ■ It is a new expense that is offset by related revenues. Page 1 of 5 Updated 3/10/04 the UR anti c;i patedlun budgeted revenuer* aFe i;ot restpiGted for- a speGifiG puFpese, the funds ends General Fund halanGe ❑ Any_unanticoated and unrestricted revenues received durincr the fiscal year will be added to the General Fund fund balance. APPROPRIATION AUTHOR] 'G RRY FORWARD OF FUNDS ital ffejests identified iR the Gity'S Capital Improvement Plan lapses thFee fisGal years aft6F adOptiOR. Capital knpFevement PFGjeGtG that haVe been funded bUt nGt hn6tiated Wall hA idlar.tifiedf in the Gapital lmpFeyemenf Plan for- the Revd (r.,,rrent) budget year. The Cl year. Council is the appropriation authority_for the City Budget. As required by state law, appropriations expire at the end of each fiscal year. lapses three fisGal YeaFs after adOptiOR. Capital projeGts that have -heeR fuRded but not initiated will be the Gapital IrAprovemepot Plan. RFTelnlFn SINGS Ll General Fund departments may FetaiR a portion of theqF SaVIF196 (appMffiatienq MiRu appropriated in the next firGal yea�s budget and May Gnly be used W one time expenses. Ge„nteradts a "use it OF 108e it" mentality that non result in unneGes ary SpeRdting. NON-DEPARTMENTAL BUDGETS RaWFe OF We shaFed by several depaFtments. Responsibility for managing these aGoounts The City shall maintain a non-departmental budget that is used for expenditures that do not apply to a specific department, are citywide in nature, or shared by several departments. The Administrative Services Director and City Administrator shall be responsible for administration of this budget depaFtmental budgets. D Support NncAiens aFe to be assigned to the departmant frnm iNhish they are managed. OPERATION OF THE CAPITAL PROJECTS FUND ❑ The Capital Projects Fund will only be used to budget for, and construct, capital improvement projects identified in the city's five year Capital Improvement Plan. ❑ Savings from completed capital improvement projects will be retained for use on other infrastructure projects. ❑ Interest earned on idle funds in the Capital Projects Fund will be retained for use on other infrastructure projects. U Tr-ansfers to the Capital PFGjert Fund from 9theF funds' fund balanGe will be FeGeFded on the fiFet business day of eaGh fisGal year-. ENTERPRISE FUNDS ❑ An Enterprise Fund is a type of proprietary fund used to report an activity for which a fee is charged to external users for goods or services. The city will set users fees for Page 2 of 5 Updated 3/10/04 each enterprise funtat a rate that fully recovers the directand indirect costs of providing service. ❑ The city will adjust user fees as necessary to ensure that enterprise funds do not collect revenues at a rate in excess of the fund's operating, capital, and reserve requirements. ❑ Enterprise funds will be supported by their own rates and not subsidized by the General Fund. ❑ Enterprise funds will pay their share of overhead services provided by the General Fund. SPECIAL REVENUE FUNDS ❑ A Special Revenue Fund is used to account for the proceeds of specific revenue sources that are restricted to expenditure for specified purposes. ❑ The City Council will establish which revenues require placement into a special revenue fund. ❑ The City Council will establish which expenditures will be expensed to each special revenue fund. DEBT ISSUANCE & MANAGEMENT ❑ The city will not use long-term debt to pay for current operations. ❑ The city will strive to construct capital and infrastructure improvements finansing without incurring debt. Debt financing will only be considered for capital and infrastructure improvements under the following circumstances: ■ When the term of the debt does not extend beyond the useful life of the improvements it financed; or, ■ When project revenues or specific resources will be sufficient to service the long-term debt; or ■ When the cost of debt is less than the impact of the cost caused by delaying the rp oiect. CHARGES & USER FEES pFegr,am or se nice is in the p bliG interest "User Fees" are fees for services that are exclusively provided by the City and cannot leaally exceed the cost of the service provided nor the statutory limit of lower). User Fees will be reviewed and/or revised eriodicali by-the City Council. User Fees that do not recover all direct and indirect costs of service will be clearly identified and must be approved by the City Council. ❑ "Charges" are fees that have no statutory limit and typically are set at "market rates" since the public can choose to obtain these services from other sources. Charges will be reviewed and/or revised periodically by the City Council. Charges that do not recover all direct and indirect costs of service will be clearly identified and must be approved by the City Council. ❑ Fees for infrastructure improvements required ate by new development will be reviewed annually to ensure that the fees recover development related expenditures. CAPITAL MANAGEMENT ❑ The city will prepare a five year Capital Improvement Plan. The plan will be developed biannually and updated annually. The Capital Improvement Plan will include current operating maintenance expenditures, funding to support repair and rehabilitation of deteriorating infrastructure, and the construction of new infrastructure projects. Page 3 of 5 Updated 3/10/04 ❑ Prior to planning the construction of new infrastructure, the improvement's future operating, maintenance, and replacement costs will be forecast and matched to available revenue sources in the operating budget. Page 4 of 5 Updated 3/10/04 FINANCIAL POLICIES— EDITED VERSION Page 5 of 5 Updated 3/10/04 0 0 RCA ROUTING SHEET INITIATING DEPARTMENT: ADMINISTRATIVE SERVICES SUBJECT: ADOPT REVISIONS TO THE CITY'S FINANCIAL POLICIES AS RECOMMENDED BY THE FINANCE BOARD COUNCIL MEETING DATE: May 3, 2004 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Not Applicable Resolution (w/exhibits & legislative draft if applicable) Not Applicable Tract Map, Location Map and/or other Exhibits Not Applicable Contract/Agreement (wlexhibits if applicable) Si ned in full by the City Attome Not Applicable Subleases, Third Party Agreements, etc. (Approved as to form by City AHome Not Applicable Certificates of Insurance Approved by the CityAttomey) Not Applicable Financial Impact Statement Unbud et, over$5,000) Not Applicable Bonds (If applicable) Not Applicable Staff Report (If applicable) Not Applicable Commission, Board or Committee Report (If applicable) Not Applicable Find in s/Conditions for Approval and/or Denial Not Applicable EXPLANATION FOR MISSING ATTACHMENTS REVIEWED RETURNED FOR RDED''' Administrative Staff Assistant City Administrator Initial City Administrator Initial 6I1 City Clerk EXPLANATION FOR RETURN OF ITEM: (Below . . RCA Author: William McReynolds