The purpose of this policy is to ensure that City Council, Mayor,
and Administration of the City of Allentown (hereinafter the "City")
has endorsed a policy with respect to its Fund balances for the General
Fund and the Risk Fund that contemplates the following desired effects.
Non-spendable Fund balance: This category represents funds that
are not in spendable form and includes such items as prepaid expenditures
and inventory.
Restricted Fund balance: This category represents funds that
are limited in use due to constraints on purpose and circumstances
of spending that are legally enforceable by outside parties.
Committed Fund balance: This category represents funds that
are limited in use due to constraints on purpose and circumstances
of spending imposed by City Council. Such commitment is made via a
resolution by City Council and must be made prior to the end of the
year. Removal of this commitment requires a resolution by City Council.
Assigned Fund balance: This category represents intentions of
an individual or group designated by City Council to use the funds
for specific purposes. Through a resolution of City Council, the designee
would have to be delegated the responsibility to assign funds. Through
the approval of the City's Administrative Order, City Council
has provided that the Finance Director serves as the designee for
assignments.
Unassigned Fund balance: This category represents all other
funds available for investment or other purposes not yet restricted,
committed, or assigned. As used herein, the terms "unassigned" or
"unassigned funds" shall be synonymous with the term unassigned Fund
balance.
Unrestricted Fund balance: When used in this policy, the term
"Unrestricted Fund balance" shall mean the Fund balance is also uncommitted,
unassigned, excludes custodial and fiduciary funds, and is synonymous
with terms such as operating reserves. As used herein, the terms "unrestricted"
or "unrestricted funds" shall be synonymous with the term "Unrestricted
Fund balance."
The Government Accounting Standards Board ("GASB") Statement No.
54 strongly recommends that government units identify "non-spendable"
amounts within each fund, as well as "restricted," "committed," "assigned,"
and "unassigned" amounts.
The Government Finance Officers Association ("GFOA") recommends that
"[G]governments' establish a formal policy on the level of unrestricted
fund balance that should be maintained in the general fund for GAAP
and budgetary purposes. Such a guideline should be set by the appropriate
policy body and articulate a framework and process for how the government
would increase or decrease the level of unrestricted fund balance
over a specific time period. In particular, governments should provide
broad guidance in the policy for how resources will be directed to
replenish fund balance should the balance fall below the level prescribed."
Furthermore, Section 507 of the Code grants the City the general
authority to "make and adopt any rules and regulations necessary for
the proper management, care and control of the City and its finances"
(emphasis added).
Restricted Fund balance: Any portion of the General Fund balance
that is restricted shall have a higher priority for payment than assigned
or unassigned Fund balances.
Minimum unassigned Fund balance: The City's goal is to achieve
and maintain an unassigned fund balance in the General Fund of at
least 17% of the annual amount assigned for the General Fund expenditures,
including transfers to other funds, but not including restricted funds.
If unassigned fund balance unintentionally falls below 17%,
the Mayor shall prepare and submit a plan to restore the minimum required
level as soon as economic conditions allow. The plan shall detail
the steps necessary for the replenishment of Fund balance as well
as estimated timeline for achieving such.
These steps may include, but are not limited to, identifying
new, nonrecurring, or alternative sources of revenue; increasing existing
revenues, charges and/or fees; use of year end surpluses; and/or enacting
cost saving measures such a delaying capital purchases, reducing departmental
operating budgets, freezing vacant positions, and/or reducing the
workforce. The replenishment of Fund balance to the minimum level
shall be accomplished within a three-year period. If restoration of
the reserve cannot be accomplished within such a period without severe
hardship to the City, then City Council shall establish an extended
timeline for attaining the minimum balance.
Appropriation of unassigned Fund balance: The unassigned fund balance
may be employed temporarily below the minimum threshold set in this
section in case of a material threat to public safety of the citizens
of the City but shall be restored within the following budget year
in a manner consistent with the minimum unassigned fund balance listed
above.
Monitoring and reporting: The City Council may at any time, whether
on a monthly, quarterly, or annual basis, require the Mayor, and/or
the Director of Finance to report on the state of the Fund balances
consistent with this policy.