Page 91 - City of Westlake FY20 Budget

Section 2 Financial Analysis
Significant Accounting Policies

There are four primary reasons to maintain an adequate fund balance:
• Cash Flow – It is essential for the Council to have enough cash on hand for payroll and other
obligations to be made timely. In addition, most state and federal grants require the payment
prior to the grant reimbursement request.

• 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 Town to earn additional revenues.

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.”
• Fund Balance Reporting - The Town shall report governmental fund balances per GASB 54
definitions in the balance sheet as follows: Non-spendable, Restricted, Committed, Assigned,
Unassigned
• General Fund Unassigned Fund Balance - The Town shall strive to maintain the General Fund
unassigned fund balance at 180 days of operation.
• Use of Fund Balance - 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.
• Approval of Commitments - The Town Council shall approve all commitments by formal action.
o 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 after fiscal year-end.
o A commitment can only be modified or removed by the same formal action.
o The Town Council delegates the responsibility to assign funds to the Town Manager or
his/her designee.
o The Town Council shall have the authority to assign any number of funds.
o Assignments may occur after fiscal year-end.
o The Town Council will utilize funds in the following spending order: Restricted,
Committed, Assigned, and Unassigned.

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