[HISTORY: Adopted by the Common Council of the City of Middleton 1-16-2024 by Res. No. 19-24. Amendments noted where applicable.]
A.
City of Middletown, NY (the "City") recognizes the significance of
sound financial management and establishes this Fund Balance Policy
for the General, Water and Sewer Fund to:
(1)
Ensure financial stability and resilience against economic fluctuations.
(2)
Maintain sufficient reserves for emergencies and unforeseen circumstances.
(3)
Establish guidelines for prudent use of available funds while meeting
community needs.
(4)
Provide transparency in financial reporting to stakeholders.
(5)
Protect the City's credit worthiness and provide adequate cash
flow needs.
(6)
Protect the City against reducing service levels or raising of taxes
due to temporary revenue shortfall, one-time expenditure, emergency
and disasters.
B.
The Office of NYS Comptroller recommends local governments establish
a policy to maintain reasonable levels of unexpended surplus funds
and other principle funds to hedge against unanticipated expenditures
and/or revenue shortfalls.
"Fund balance" is the total accumulation of operating surpluses
and deficits since the beginning of a local government's existence.
The fund balance shall be categorized as follows in accordance with
GASB principle 54:
A.
Nonspendable: Amounts that cannot be spent in the current period
either because of their form or because they must be maintained intact.
Classification: prepaid items, inventory.
B.
Restricted: Amounts that are subject to externally enforceable legal
purpose restrictions imposed by creditors, grantors, contributors
or law and regulation of other governments or through constitutional
provisional or enabling legislation. Classifications: capital reserves,
tax stabilization reserves, debt reserves, insurance reserves, and
other reserves allowed by state statutes.
C.
Committed: Amounts that are subject to purpose constraints imposed
by a formal action of the government's highest level of decision
- making authority (the Common Council) before the end of the year.
The same level of formal action is required to remove the constraints.
Classification: The Office of State Comptroller recommends most local
governments do not have committed funds due to reserves.
D.
Assigned: Amounts that are subject to a purpose constrained that
represents an intended use established by the government's highest
level of decision-making authority or by its designated body or official.
The purpose of the assigned fund balance represents the residual amount
of fund balance. Classification: The Office of State Comptroller states
that resolutions, ordinance, and local laws constitute a constraint
of resources and will result in an assignment of resources. Encumbrances
will typically be considered an assignment of fund balance.
E.
Unassigned: Represents the residual amount of fund balance in the
General Fund. Use is least constrained in this category. In funds
other than General Fund, this classification should only be used to
report deficit balances. Classification: all other unassigned fund
balances.
A.
The City recommends to maintain an unassigned fund balances at levels
consistent with:
(1)
Five percent to 20% of the prior year expenditure made from General,
Water and Sewer fund.
B.
The City Treasurer shall annually calculate and verify the compliance
with this policy. The formula to calculate the fund balance will be
as follows:
(1)
The audited balance available in the unassigned fund balance of the
most recent fiscal year, divided by the total expenditures.
C.
Surplus. In the event the unassigned fund balance exceeds the maximum
requirement, the excess may be used for any lawful purpose approved
by the Common Council.
D.
Deficit. In the event the unassigned fund balance falls below minimum
requirement of 5%, the City Treasurer shall prepare and submit a plan
to restore balance to minimum target levels in the next budget year.
Criteria for utilization:
A.
Unrestricted unassigned fund balance: Available for unforeseen expenditures,
one-time expense emergencies, offsetting economic downturn, covering
an unanticipated or excess shortfall in revenues or spike in expenses
or other lawful purposes approved by the governing body.
B.
Restricted, committed, and assigned fund balances: Shall be used
for their designated purposes only, as specified by legal or contractual
obligations or governing body decisions.
As financial circumstances may warrant, the City will look to
establish funds including but not limited to, retirement contribution,
contingencies, tax stabilization and capital; emergencies including
repairs.
Regular reporting:
A.
Periodic reporting on fund balance status in financial statements
and other relevant documents.
B.
Ensuring compliance with accounting standards, governmental regulations,
and reporting requirements.
C.
Transparency in communicating fund balance status to stakeholders,
including the governing body, citizens, auditors, and regulatory authorities.
