AgdaPkt 2011-06-27 - Laserfiche WebLink

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6.2.D. - Page 1 REPORT To the Honorable Mayor and City Council From the City Manager June 27, 2011 SUBJECT Governmental Accounting Standards Board Statement No. 54 (GASB 54) Fund Balance Reporting RECOMMENDATION Adopt, by resolution, classification of certain amounts as "committed" pursuant to the new reporting requirements of GASB 54 and delegate authority to the City Manager to "assign" amounts to be used for specific purposes. BACKGROUND The Governmental Accounting Standards Board issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The requirements of this statement are intended to improve financial reporting of governmental entities by providing fund balance categories and classifications that will be more easily understood. The term fund balance is used to describe the difference between assets and liabilities reported on the balance sheet of a governmental fund. In the past, fund balances have been classified into three separate components: Reserved, Designated, and Undesignated. GASB 54 dictates the use of the following five classifications that comprise a hierarchy based primarily on the extent to which the City is bound to honor constraints that control how specific amounts can be spent: • Nonspendable fund balance includes items that cannot be readily converted to cash such as inventories and long -term loans receivable. • Restricted fund balance includes amounts restricted by external resource providers such as grantors, or through enabling legislation such as State gasoline tax. • Committed fund balance consists of amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the City Council. At this time, the recommendation is that the City Council adopt the attached resolution classifying as committed fund balance the portion of fund balance in the general fund currently designated for retiree medical benefits, for maintenance of Sandpiper Park, and for the general plan. Also, it is recommended that the City Council commit the amount of fund balance in non - general fund governmental funds currently designated for geographic information system, and amounts that have been appropriated for specified capital projects and remain unspent. This recommendation corresponds to the City's current practice of designating fund balance for the carryover of