AGENDA REPORT. Honorable Mayor and Members of the City Council SUBJECT: POLICY FOR THE ESTABLISHMENT OF CITY FUNDS

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1 AGENDA REPORT Meeting Date: October 7, 2008 Agenda Item # City Manager Approval: TO: FROM: Honorable Mayor and Members of the City Council Margaret Van Warmerdam, Finance Director SUBJECT: POLICY FOR THE ESTABLISHMENT OF CITY FUNDS RECOMMENDED COUNCIL ACTION: Staff recommends that City Council approve the Policy for the Establishment of City Funds. SUMMARY: The Finance Department continues to complete written procedures for the Finance Department s Policy and Procedures Manual. Attached is the draft Policy for Establishment of the City Funds for the City Council review. PREVIOUS COUNCIL ACTION: City Council has approved a variety of written policy and procedures for the Finance Department in the last several years, as necessary. DISCUSSION: The City of Red Bluff s financial statements are prepared based on Generally Accepted Accounting Principles (GAAP). Generally Accepted Accounting Principles (GAAP) provide the authoritative definition of a fund: A fund is defined as a fiscal and accounting entity with a self balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. Please see attachment for the details of Policy for the Establishment of City Funds.

2 CITY FISCAL IMPACT: No fiscal impact. ATTACHMENTS: AP & P Policy for the Establishment of City Funds

3 Subject: Policy for Establishment of City Funds Departments Affected: All Departments Authority: File References: Number: Effective Date: October 8, 2008 Supercedes (Number/Date): Approved: October 7, 2008 I. PURPOSE To establish procedures and polices regarding establishment of City Funds. II. POLICY Generally Accepted Accounting Principles (GAAP) provide the authoritative definition of a fund: A fund is defined as a fiscal and accounting entity with a self balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations, and There is no limit to a number of funds a government may use for accounting and financial purposes, but the basic principle of governmental accounting says that a government should use the smallest number of individual funds possible, consistent with legal and operating requirements, and No matter how many individual funds a government elects to use, all of the funds can be grouped into three broad classifications: Governmental funds (typically used to account for tax supported governmental activities), Proprietary funds (used to account for a government s business type activities supported by fees and charges), and Fiduciary funds (used to account for resources that are held by the government as a trustee or agent for parties outside the government and cannot be used to support the government s own programs), and

4 GAAP has established classifications for governmental funds as follows: the general fund, special revenue funds, debt service funds, capital project funds, and permanent funds, and At the discretion of the City Manager, the Finance Director, and/or the City Council, funds may be established or closed out when necessary within the guidelines provided within GAAP. During the budget presentation to City Council, staff will update the City Council of any new fund or closed funds. The City Council of the City of Red Bluff hereby consents to follow the fund establishment policy by appointing the City Manager and Finance Director authorities to establish and close funds when legally or operationally necessary, and to accept the current funds, in the attached Exhibit A, as the established fund structure.

5 Exhibit A City of Red Bluff Funds and Departments Governmental 10-00/10 General Fund General Fund City Council General Fund City Manager General Fund City Clerk General Fund City Treasurer General Fund City Attorney General Fund Finance General Fund Non-departmental expenses General Fund Community Promotion General Fund Human Resources General Fund Engineering General Fund General Government Bldgs Public Safety Fire Public Safety Police Parks & Recreation Park Maintenance Parks & Recreation Recreation Parks & Recreation Swimming Pool Special Revenue Traffic Safety-Vehicle Code Police Public Safety Tax Fund Fire Public Educational/Gov t Prog. City Manager Public Safety Tax Fund Police Facilities and Capital Reserves City Manager Traffic Control Impact Fee Public Works Flood Protection Impact Fee Public Works Fire Protection Impact Fee Fire Police Protection Impact Fee Police City Admin. & Equipment General Government Bldgs Local Transportation Public Works Special Gas Tax Street Improvement Public Works T-21 Revenue Public Works Transportation Fund Public Works Transportation Fund Fleet Operations

6 44-42 Proposition 1B Funds Public Works Airport Impact Fees Public Works Parks & Rec Capital Improvement Park Maintenance Program Income Program Income Grants Grants Administration Grants Grants-Projects Grants Workforce Housing Grant Enterprise Funds Building Building Department Planning Planning Department Waste Water Operating Disposal Waste Water Operating Maintenance/Collection Waste Water Facilities Disposal Water Operating Water Water Facilities Water Aviation Airport Airport Industrial Park Airport Industrial Park Community Center Community Center Transportation Senior Nutrition Congregate Senior Nutrition Homebound Senior Nutrition