Page 81 - Ord 866 Adopting a revised Fiscal Year 17-18 and new proposed Fiscal Year 18-19 budget

Section 2 Financial Analysis
Budget 101 Overview

Fund Balance will be targeted to only be used with Council approval and can only be used for the
following:
Emergencies,
Non-recurring expenditures such as technology/ FF& E (furniture, fixtures and
equipment), or major capital purchases that cannot be accommodated through
current year savings.
Should such use reduce the balance below the appropriate level set as the objective
for that fund, recommendations will be made on how to restore it.
The Council shall approve all commitments by formal action. The action to commit
funds must occur prior to fiscal year-end, to report such commitments in the balance
sheet of the respective period, even though the amount may be determined
subsequent to fiscal year-end.
A commitment can only be modified or removed by the same formal action.

There are four primary reasons to maintain an adequate fund balance:
Cash Flow – It is essential for the Board of Trustees to have enough cash on hand for
payroll and other obligations to be made timely. In addition, most state and federal
grants require the Academy to make payment first before the grant will make
reimbursement.

Unforeseen Events – Reserves often act as a contingency to meet unbudgeted and
unexpected needs, thus allowing time to make permanent changes to the budget and
preventing fiscal problems from needlessly worsening.

Financial Security – A fund reserve demonstrates a sign of financial strength and security
to banking and financial institutions allowing the Town of Westlake to borrow funds and
sell bonds when additional facilities need to be built or renovated at more favorable
rates, thus saving the taxpayers money.

Interest Earning – Having a fund balance allows the Academy to earn additional
revenues without having to tax citizens.

FUND BALANCE COMPONENTS
In February 2009, the Governmental Accounting Standards Board ( GASB) issued GASB
Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This
Statement established five components of fund balance and because circumstances differ
among governments, not everyone will report all components. GASB 54 shifts the focus of fund
balance reporting from the availability of fund resources for budgeting to “the extent to which
the government is bound to honor constraints on the specific purposes for which amounts in the
fund can be spent.”

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