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HomeMy WebLinkAbout2019-08-27; Council Policy No. 87 - General Fund Surplus Policy Council Policy Statement Category: FINANCIAL MANAGEMENT POLICIES Specific Subject: General Fund Surplus Policy PURPOSE: To establish a City Council policy for the appropriation of surplus funds resulting from General Fund actual revenues exceeding total actual expenditures, plus any unspent and unencumbered expenditure budget for a given fiscal year. BACKGROUND: Due to various factors including economic expansion, prudent operations, or changes to various projects and programs, the City of Carlsbad (city) may end a fiscal year with a surplus of revenues over expenditures, encumbrances and commitments. Surplus funds are those funds that result after closing the city’s accounting records as defined by the results of the annual fiscal year audit. It is the intent of the city to use all surplus funds generated to meet reserve policies, and the avoidance or reduction of long term liabilities. The city will not use year-end surplus funds to fund ongoing operations unless otherwise approved by City Council. From time to time, the city manager may recommend to the City Council the use of surplus funds consistent with the uses identified in this policy. POLICY: For the purposes of this policy, the term “surplus” refers to any actual revenues less actual expenditures, in a given fiscal year, plus any unspent and unencumbered expenditure budget. To achieve the purpose of this policy, the city will take the following actions: 1. The city will use surplus funds to replenish any General Fund reserve deficiencies, up to the minimum level as set forth in the City Council General Fund Reserve Policy No. 74 and then any pension liability deficiencies, as defined in City Council Policy No. 86, Pension Funding Policy. 2. If the reserve and pension funding policies have been met as stated above, the city manager is authorized to approve the carry forward of any unspent and unencumbered budget for a particular item equal to or less than $100,000 into the following fiscal year. These items will be one-time expenditures and not for on-going services, programs or personnel. Policy No. 87 Date Issued: 08-27-2019 Effective Date: 08-27-2019 Resolution No. 2019-153 Cancellation Date: N/A Supersedes No. N/A August 27, 2019 Item #11 Page 4 of 8 3. Any remaining surplus funds in excess of reserve and pension liability deficiencies, and items equal to or greater than $100,000, as stated above, will be brought forward for City Council approval. 4. One-time funds, such as grant proceeds, will be used for one-time expenditures; therefore, the City Council may not use one-time revenues and surplus funds in a way that creates new on-going expenditure requirements, unless the City Council can demonstrate that adequate resources exist to support the on-going expenditure requirements. 5. After the close of the fiscal year, in preparation of the annual financial audit, city staff will demonstrate accountability and transparency by communicating compliance with the General Fund Reserve and Pension Funding Policy requirements in order for City Council to approve the staff recommended use of surplus funds. August 27, 2019 Item #11 Page 5 of 8