TO: Mayor and City Council
FROM: Philippe Eskandar, City Manager
BY: Hillary Guirola-Leon, Finance Director
Mark Siegfried, Accounting Manager/Controller
DATE: October 25, 2024
SUBJECT: COMMITMENT OF DONATIONS FUND YEAR-END BALANCE
RESERVES
STRATEGIC PLAN CRITICAL SUCCESS FACTORS
Engaged and Connected Residents
Efficient, Responsive, and Effective City Services
Fiscally Responsible and Transparent City Government
BACKGROUND
Governmental Accounting Standards Board ("GASB") Statement No. 54 defines five specific classifications of fund balance for funds categorized as governmental funds. (All of the City’s individual funds are categorized as governmental funds, except for the Capitalized Equipment and Agency Funds.) The five fund balance classifications are intended to identify whether the specific components of fund balance are available for appropriation and are therefore "spendable." The classifications also are intended to identify the extent to which fund balance is constrained by special restrictions, if any.
Applicable only to governmental funds, the five classifications of fund balance are as follows:
Classifications Nature of Restriction
Non-spendable Cannot be readily converted to cash
Restricted Externally imposed restrictions
Committed City Council imposed commitment
Steven W. Huang, DDS, Mayor
Gretchen Shepherd Romey, Vice Mayor
Tony Chou, Council Member
Calvin Lo, Council Member
Steve Talt, Council Member
Assigned City Manager assigned purpose/intent
Unassigned Residual balance not otherwise
restricted/committed/assigned
Committed fund balance: That portion of a fund balance that includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action by the government's highest level of decision-making authority, and remain binding unless removed in the same manner. The City considers a resolution to constitute a formal action for the purposes of establishing a committed fund balance. The action to constrain resources must occur within the fiscal reporting period; however the amount can be determined subsequently.
DISCUSSION
On September 28, 2018, the City Council adopted the City's Donations Policy.
The Policy requires appropriate accounting and internal controls over donations activity, especially within the Donations Fund which is a component of the General Fund. The Policy also provides that properly documented excess or deficit annual collections can be carried between years on the City's accounting records. This will satisfy the intention of our donors that we apply their donations to intended purposes even if transactions cross fiscal years.
In October 2023, the City Council reaffirmed the committed fund balance of $245,605 as of June 30, 2023. The $245,605 was reported as committed fund balance of the General Fund on the City’s audited Annual Comprehensive Financial Report at June 30, 2023, as a result of this Council action. (The Donations Fund is combined with the General Fund on the City’s audited Annual Comprehensive Financial Report.)
To be consistent and for maximum transparency, the year-end figures of the Donations Fund are being presented to the City Council again this year for review and to authorize the Finance Department to commit these balances as of June 30, 2024.
FISCAL IMPACT & PROCUREMENT REVIEW
If approved, the committed balance would increase by $75,998 from last year’s balance of $245,605 that was approved at the October 11, 2023, City Council meeting.
See Attachment 1 for a breakdown of this committed balance by City activity.
This report requires no procurement review.
LEGAL REVIEW
The City Attorney's office has reviewed and approved as to form.
RECOMMENDATION
Staff recommends that the City Council approve the accompanying resolution to commit the balance as of June 30, 2024, as noted in the attachments. If the City Council concurs with staff’s recommendation, an appropriate motion would be:
“I move to adopt Resolution No. R-24-28 to commit the balance of $321,603 in the Donations Fund as of June 30, 2024.”
ATTACHMENTS
1. Committed balance by City Activity
2. Committed Fund Balances from Audited Annual Comprehensive Financial Report as of June 30, 2023
3. Resolution No. R-24-28
Balance at Balance at
6/30/2023 Donations Expenditures 6/30/2024
Community Development Projects $ 72,288 $ 13,450 $ - $ 85,738 Public Safety 33,235 20,863 - 54,098
Parks and Recreation 62,325 29,562 (10,599) 81,288
Library 77,757 67,932 (45,210) 100,479
Total $ 245,605 $ 131,807 $ (55,809) $ 321,603