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Ordinance 66-11RECORD OF ORDINANCES Day Lc enl Blank. Inc �' ordinance No FoffiNo.30933 66 -11 Passed 20 AN ORDINANCE ADOPTING CERTAIN ACCOUNTING AND FINANCIAL REPORTING PROVISIONS, AS REQUIRED BY GOVERNMENTAL ACCOUNTING STANDARDS BOARD STATEMENT NUMBER 54, AND DECLARING AN EMERGENCY WHEREAS, the Governmental Accounting Standards Board (the "GASB ") promulgates generally- accepted accounting principles applicable to all governmental entities subject to its authority in the United States of America, including the City of Dublin (the "City"); and WHEREAS, the GASB has issued Statement Number 54, Fund Balance Reporting and Governmental Fund -Type Definitions ( "Statement No. 54'x, which mandates that the highest level of decision - making authority of a governmental entity must adopt, as legally - enforceable legislation, certain accounting and financial reporting- related management decisions; and WHEREAS, the GASB requires Statement No. 54 to be implemented no later than a governmental entity's first fiscal year beginning after June 15, 2010; and WHEREAS, the City must comply with all the provisions of GASB Statement No. 54, no later than its fiscal year which begins January 1, 2011 and ends December 31, 2011, so that the City may retain its eligibility to receive an unqualified Independent Auditors' Opinion on its financial statements for the fiscal year then ended, and for all subsequent fiscal years. NO , THEREFORE, BE IT ORDAINED by the Council of the City of Dublin, of its elected members concurring, that: Section 1 . Each of the following governmental funds of the City shall be declared to be a Special Revenue Fund, and all revenues credited or allocated to the fund, that are not otherwise restricted for specific use by the external parties providing them, are hereby declared to be committed for expenditure in support of the specific purposes of the fund. Such committed resources include, but are not limited to, the following revenue types: charges for services, user fees, admissions, memberships, assessments, fines, licenses, permits, contributions and donations, rental income, investment income, refunds and reimbursements, and any other revenues specifically intended to support the purpose of the fund: Fund # Fund Description 210 Street Maintenance and Repair 211 State Highway Improvements 212 Cemetery 213 Recreation 214 Safety 215 Swimming Pool 216 Permissive Tax 217 Hotel /Motel Tax 218 Education and Enforcement 219 Law Enforcement Trust 220 Mandatory Drug Fine 221 Mayor's Court Computer 222 Accrued Leave Reserve 223 Wireless 9 -1 -1 806 Cemetery Perpetual Care RECORD OF ORDINANCES Ordinance No. 66 -11 Section 2 . Any new governmental fund the City may establish subsequently, intended to support a specific purpose and which meets the GASB Statement No. 54 definition for classification as a Special Revenue Fund, by receiving proceeds from revenue sources intended for specific purposes, shall also have any such fund resources, as described in Section 1, committed for expenditure in support of the specific purpose of the fund. Section 3 . All governmental funds currently established by the City, that meet the Statement No. 54 definition for classification as either a Capital Project or Debt Service fund, or any new fund that the City may establish subsequently that meets either definition for such a classification, will have all that fund's resources committed to support the purpose of the respective fund. Section 4 . In any fund, restricted resources shall be considered to be expended first, followed by unrestricted resources, when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Section 5 . In any fund, committed resources shall be considered to be expended first, followed by assigned resources and lastly unassigned amounts, when an expenditure is incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. Section 6 . In any fund, available unrestricted resources or unrestricted fund balance may be assigned to be used for specific purposes, by declaration of the City Manager or the Deputy City Manager /Finance Director. Such assigned amounts may also revert back to an unassigned status by a similar declaration of intent. Section 7 . This ordinance is declared to be an emergency necessary for the immediate preservation of the public peace, health, safety or welfare, and furthermore, emergency passage is necessary to comply with the timeframes set by the GASB. The ordinance shall therefore be applicable to the City's fiscal year beginning January 1, 2011 and all subsequent fiscal years, and will take effect immediately upon passage. Passed this 1A - ` � day of Mayor - ATTEST: ng Officer Passed Page 2 of 2 Clerk of Council Office of the City Manager City of Dublin Pho 614 - 410.4400- Fax: - 4490 43017 - 1090 Memo To: Members of Dublin City Council From: Marsha I. Grigsby, City Manager Date: November 23, 2011 Initiated By: Angel L. Mumma, Deputy City Manager /Director of Finance Stephen A. Sova, Director of Accounting & Auditing Re: Ordinance No. 66 -11 - Adopting Certain Accounting and Financial Reporting Provisions as Required by Governmental Accounting Standards Board Statement Number 54, and Declaring an Emergency Summary The Governmental Accounting Standards Board (the "GASB'� is an independent nonprofit organization, established by an agreement of the nationwide Financial Accounting Foundation and various other national associations of state and local government officials. The GASB is recognized by governments, the accounting industry, and capital markets as the official source of generally accepted accounting principles for state and local governments in the United States, including the City of Dublin (the "City'. Recently, the GASB issued its Statement Number 54: Fund Balance Reporting and Governmental Fund Type Definitions ( "Statement No. 54'x. Guidance therein will significantly affect how individual funds are displayed, and how fund balances of the individual funds are categorized, in the City's Comprehensive Annual Financial Report (the "CAFR'�. Statement No. 54 requires that individual fund balance amounts be categorized, labeled and shown separately on the face of the fund financial statements, depending on the level of restriction associated with the various assets in, and /or revenues credited to, each fund. There are five such fund balance categories: 1) Non - spendable fund balance is defined as amounts that cannot be spent, nor converted to cash, such as inventory or prepaid assets. 2) Restricted fund balance represents those amounts received that have restrictions imposed on their use by external parties, such as creditors and grantors, or are legally restricted by laws or levies that cannot be amended by unilateral action of the City. This includes income tax revenues collected for capital improvement purposes, property tax revenues and reimbursements, service payments received from tax increment financing districts, hotel /motel taxes received, and grants. 3) Committed fund balance amounts can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision - making authority; although it is an internally imposed limitation, it must be legally enforceable. This includes all revenues credited to Special Revenue funds that are not otherwise externally restricted, as per the previous categorization above. Memo to Council re: Ordinance 66 -11, GASB Statement No. 54 November 23, 2011 Page 2 4) Assigned fund balance are those amounts intended by the City to be used for specific purposes, but the limitations are not legally - enforceable, such as the unspent balances of open encumbrances. 5) Unassigned fund balance represents all other fund resources to which no spending limitations are attached, and are normally found only in the General Fund. The primary purpose of Ordinance 66 -11 is to establish those funds for which non - externally restricted revenues will be committed internally, by specific and legally enforceable City Council action, to be used only to support the specific purposes of the fund. This includes all the City funds currently described as Special Revenue funds, including the Street Maintenance Fund, the Cemetery Fund, the Recreation Fund, the Safety Fund, Swimming Pool Fund, and the Hotel /Motel Tax Fund. Under Statement No. 54 guidelines, this commitment of resources permits those funds to continue to be presented as separate and individual Special Revenue funds in the City's CAFR. If such fund resources are not committed by Council Ordinance, Statement No. 54 requires those related funds to potentially be combined with the Genera/ Fund for all financial statements included in the City's CAFR. We believe that this would result in a misleading and inaccurate representation of the City's intentions for the use of public monies in those funds and is, therefore, an undesirable consequence if the Ordinance is not adopted. Statement No. 54 also requires that City Council formally adopt other accounting policies that the GASB had previously considered to be management prerogatives. These related provisions in Ordinance 66 -11 include: 1) establishing Capital Project and Debt Service funds; 2) establishing the order in which monies are expended in funds, with the most - restricted resources being spent first and the least- restricted resources being spent last; and 3) that designating internally assigned fund balances can be made by the declaration of intent of same by the City Manager or the Finance Director, without the necessity for formal City Council action; under most circumstances this authorization will be necessary only to approve purchase orders. The GASB requires Statement No. 54 to be implemented by the City no later than its fiscal year which ends December 31, 2011, and any such City Council Ordinance required to be adopted must also be legally enforceable by that date as well. Furthermore, the City must fulfill all the requirements of Statement No. 54 in its published December 31, 2011 CAFR, in order to remain eligible to receive an "unqualified" independent auditors' opinion on its 2011 financial statements. Failure to do so could jeopardize the City's AAA bond rating. Recommendation Staff recommends that Ordinance 66 -11 be approved as emergency legislation at the second reading /public hearing on December 12 in order to be effective immediately upon adoption.