6.2. SR 04-08-2013 cf
Ells _ REQUEST FOR ACTION
River
TO ITEM NUMBER
Mayor and City Council 6.2
AGENDA SECTION MEETING DATE PREPARED BY
Work Session Aril 8,2013 Tim Simon, Finance Director
ITEM DESCRIPTION REVIEWED By
Financial Management Policies Update Cal Portner, City Administrator
REVIEWED BY
ACTION REQUESTED
Continue review and consolidation of city financial management policies.
BACKGROUND/DISCUSSION
One of the Finance Department goals for 2013 was to update and consolidate our financial management
policies. Previously,we had many stand-alone policies that were amended and adopted at various times.
By combining them into a single source document it allows for easier review and updating and seeing the
full integration of the policies. On March 11, the Council reviewed the majority of these policies;this
review will cover updates to the public purpose expenditure, travel reimbursement,and fund balance
policies.
During our recent bond rating call with Standard and Poor's,they increased the city's financial
management assessment from "good" to "strong,"which is the top level. This increase was due in part
to our strong policies and the continual review and update of these policies.
The update and modifications were done by reviewing standards and best practices recommended by the
Government Finance Officers Association (GFOA), and a review of policies by other cities. Items
underlined are modifications or additions from our old policies.
Relative Importance of Financial Policy Types (GFOA,financial policies pg 29)
Essential policies Highly advisable policies
Fund balance and reserves Accounting and financial reporting
Operating budget Revenues
Capital budgeting and planning Internal Controls
Debt management Expenditures
Long-range financial planning Purchasing
Investment Risk Management
Economic Development
Financial Management Policies (change summary)
Purpose Section
■ No change from March 11, 2013,work session review.
P O w I H I D A Y
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Objectives
■ No change from March 11, 2013,work session review.
Revenue and Expenditure
■ No change from March 11, 2013,work session review.
Utilities
■ No change from March 11, 2013,work session review.
Cash Management
■ No change from March 11, 2013,work session review.
Investments
■ No change from March 11, 2013,work session review.
Fund Balance
• Staff reviewed best practices of the GFOA, State Auditor's office, and several communities in
regards to reserve policies.
• With the implementation of Governmental Accounting Standard Board (GASB) Statement No.
54, fund balance was reorganized into several categories: Nonspendable,Restricted, and
Unrestricted. In the past, the city's practice was to transfer out any amount above the minimum
to fund capital projects or other one-time expenditures. This has really helped in the replacement
of capital assets and future capital assets that would otherwise need to be included in the General
Fund budget. Over the past several years,with the decline in values and other variables in the
budget,we have kept any amount above the minimum for discussion in the next budget cycle.
With Statement No. 54 we can only assign fund balance in the General Fund that we are using for
the next subsequent budget,not future budgets. During our recent audit, the auditors reviewed
Statement No. 54 and the revised guidance to make sure we comply with GASB. Statement No.
54 is reprinted for your reference.
Paragraph 16 of GASB Statement No. 54
16. An appropriation of existing fund balance to eliminate a projected budgetary deficit in the subsequent year's
budget in an amount no greater than the projected excess of expected expenditures over expected revenues
satisfies the criteria to be classified as an assignment of fund balance. As discussed in paragraph 15,
assignments should not cause a deficit in unassigned fund balance to occur.
What this means is that the amount above our maximum we will transfer out to a Capital Project
Fund and we still have the flexibility of each budget cycle to make an annual transfer in similar to
the way it may have been done in the past.
• For over 20 years we have not increased our minimum amount greater than 40% of next year's
budget. Maintaining fund balance in the General Fund is important to provide cash flow between
revenue collections (tax settlements),tax delinquencies, tax court cases, unforeseen circumstances,
capital expenditures,and a strong financial condition and credit rating. With the growth of the city
and budget over those years, staff would like to discuss putting a range with a minimum and
maximum percentage. Attached is a survey of AAA rated cities and their General Fund policy
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and the applicable percentages. As rating agencies criteria is consistently being recalibrated a
greater emphasis is on reserve levels for operations and debt obligations. Staff would like the
Council to consider a range of 45-50%. The State Auditor's Office considers an appropriate
amount up to 50%.
• Added sections for Enterprise, Special Revenue, Debt Service,and Capital Project Funds.
• Every year the Council reviews each fund and the related fund balance through our Capital
Improvement Program,we added a section to put that in the policy under monitoring and
reporting.
Debt
■ No change from March 11, 2013 worksession review.
Capital Improvement
■ One change from work session review—Added section on capital assets and capitalization
thresholds. Capitalization thresholds have not been updated since the implementation of GASB
Statement No. 34 in 2003. No material difference will be incurred with updating a few categories
from$5,000 to $10,000.
Risk Management
■ No change from March 11, 2013,work session review.
Accounting.Auditing and Financial Reporting
■ No change from March 11, 2013,work session review.
Operating Budget
■ No change from March 11, 2013,work session review.
Purchasing/Credit Card Use
• Two changes from work session review—Added a section on contractor's bonds for any project
in excess of$100,000 to correspond to state statue.
• Per Council discussion regarding using credit cards for larger meetings/events, adjusted the
credit card use policy to reference employee meals only and would then allow for the larger
events.
Public Purpose Expenditures
• Added letter k under food/meals/refreshments for employees separating with 10 years or greater
of service (light refreshments only).
• Added a sentence under volunteer recognition program/events for employees serving in a
volunteer capacity or purpose in which they would be eligible for the annual dinner and token
gift.
• Deleted a sentence of clothing and other sundry items for employees and uniforms since these are
covered under the personnel policy manual. Departments have specific policies in regards to
uniforms and safety items.
• Deleted a sentence of trinkets or marketing items for the examples of marketing items as we have
a much broader list.
Expense and Travel Reimbursement
■ Added language in no overnight stay required section.
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• Maximum gratuity amount of 18%.
• Linked the maximum reimbursement amounts including gratuity to U.S. General Services
Administration (GSA) standard per diem rates. This was the benchmark in the past and
linking the website will allow the policy to adjust as the standard rates change (which is
similar to the IRS mileage reimbursement amount).
• Added only meal expenses shall be reimbursed for city-required attendance at day-long
training/workshops with morning and afternoon sessions when no meal is provided
between the two sessions.
■ Added language in overnight stay required section.
o Linked the per diem amount to the GSA standard per diem rates. Staff felt with the
amount of time spent on reviewing and lost receipts on overnight travel that switching to
a per diem will create staff efficiencies and given the GSA amount of$46 which is $1
more than the current out-state reimbursement. Employee will still be required to provide
adequate substantiation verifying the date,time,and location of the event or meeting and
the business purpose of the trip.
ATTACHMENTS
• Draft policies
• AAA cities survey of General Fund-fund balance policies
• City of Roseville newsletter narrative on reserves—November/December 2012 issue
• Office of the State Auditor statement of position on fund balance
• U.S. General Services Administration—Meals and Incidental Expenses (M&IE) Breakdown
Action Motion by Second by Vote
Follow Up
N:\Public Bodies\City Council\Council RCA\Agenda Packet\04-08-2013\Financialpolicyupd2tepartlLdocx
City of
Elk
River
04
City of Elk River
Financial Management Policies
Adopted
Table of Contents
Purpose.......................................................................................................................................................................
Objectives................................................................................................................................................................... I
Revenueand Expenditure....................................................................................................................................... I
Utilities........................................................................................................................................................................ I
CashManagement....................................................................................................................................................3
Investments................................................................................................................................................................3
FundBalance..............................................................................................................................................................8
Debt...........................................................................................................................................................................1 1
Capital Improvements........................................�
...................................................................................................13
RiskManagement....................................................................................................................................................14
Accounting, Auditing, and Financial Reporting................................................................................................14
OperatingBudget...................................................................................................................................................15
Purchasing/Credit Card Use................................................................................................................................16
Public Purchase Expenditures..............................................................................................................................20
Expense and Travel Reimbursement/Elected Official....................................................................................25
Financial Management Policies
Purpose
The City of Elk River is responsible to its citizens to manage its resources wisely and adopting
financial policies is an important step to ensure that resources are managed responsibly. The
policies provide the framework for the overall fiscal management of the city and guide the decision-
making process.
Most of the policies represent long standing principles, traditions and practices which have guided
the city in the past and have helped maintain financial stability over the past years. These financial
policies will be reviewed periodically to determine if changes are necessary.
Objectives
• Providing sound principles to guide the decisions of the City Council and management.
• To provide both short-term and long-term financial stability to city government by ensuring
adequate funding for providing and protecting infras e needed by the community
today and for years to come.
• Protecting and enhancing the city's credit rating an prevent default on any municipal
obligations.
• To protect the City Council's policy-making ability by ensuring that important policy
decisions are not constrained by financial problems or emergencies.
Revenue and Expenditure "W-Aw'4W,
• The city will provide long-term financial stability through sound short and long term
financial planning.
• The city will estimate its annual revenues and expenditures in a conservative manner so as to
reduce exposure to unforeseen circumstances.
• The city will project revenues and expenditures for the next five years and will update these
projections each budget process.
• Whenever user charges and fees are determined to be appropriate and the direct benefits are
identifiable, the city will establish user charges and fees at a level related to the cost of
providing the service (operating,direct,indirect, and capital). Fees will be reviewed annually.
• To the extent feasible, one-time revenues will be applied toward one-time expenditures or
placed into reserves. One-.time revenues will not be used to finance ongoing programs.
Utilities
• The City Council sets fees and user charges for municipal sanitary sewer utility and garbage
collection. The Utilities Commission sets fees and charges for the water and electric utilities.
The city will encourage the Utilities Commission to adopt financial management policies
similar to the policies stated in this section.
• The city will strive to set users fees for municipal utilities at a level that creates financially
sustaining enterprises.
Financial Management Policies Page 1
• The fee structure for municipal utilities should produce a net annual surplus of revenues
over expenditures after accounting for all operating costs,depreciation of capital assets and
payment of debt service.
• All municipal utility funds will maintain adequate cash reserves. The reserve needs vary for
each municipal utility. The assessment of cash reserves should take into account future
capital investments,diversity,and stability of revenues and potential for unanticipated
changes in revenues and expenditures.
• All utility rates should be reviewed every year to minimize the impacts of rate changes and to
insure adequate long-term funding.
• Elk River Municipal Utilities will make an annual contribution to the city. The cash
contribution will be based on 3% of gross electric sales within the corporate limits of the
city. The City Council will determine the portion of this contribution to be allocated to the
General fund and the Equipment Replacement fund.
• The City Council will determine the chargeback to the Sewer fund for administration of the
sanitary sewer system.
• Any other transfer of equity from a utility fund to the General fund should only be done on
a one-time exception basis, for example, to fund an unusual,unanticipated expense. In no
event shall such equity transfers be made in consecutive years. Equity=transfers must be
approved by the City Council.
Financial Management Policies Page 2
Cash Management
• It is the policy of the city to pool cash balances from all funds to maximize investment
earnings. Exceptions include legal and specific practical requirements that demand
segregation of funds.
• Funds received are to be deposited into an interest bearing account with the city's currently
designated official depository by the next business day.
• Cash on hand is to be kept to the minimum required to meet daily operational needs.
Investments
It is the policy of the City of Elk River to invest public funds in a manner which will provide the
highest investment return with the maximum security while meeting the daily cash flow demands of
the entity while conforming to all state and local statutes governing the investment of public funds.
The investment policy applies to all financial assets of the municipality. These funds are accounted
for in the city's Annual Financial Report and include all city funds with the exception of the Water
and Electric funds which fall under the investmtu"hder cy adopted by the,.Elk River Utilities
Commission.
Investments shall be made with judgment and circumstances then prevailing which
persons of prudence,discretion, and intelligence exercise in the management of their own affairs,
not for speculation,but for investment, considering the probable safety of their capital as well as the
probable income to be derived.
The standard of prudence to be used by investment officials shall be the "prudent person" standard,
as defined by Minnesota Statute §356A.04, Subd. 2, and shall be applied in the context of managing
an overall portfolio. Investment officers acting in accordance with written procedures and the
investment policy and exercising due diligence shall be relieved of personal responsibility for an
individual security's credit risk or market price changes,provided deviations from expectations are
reported in a timely fashion and appropriate action is taken to control adverse developments.
All investments shall be limited to those permitted by Minnesota Statute §118A. The primary
objectives,in priority order, of the City of Elk River's investment activities shall be:
1. Safety
Investments shall be undertaken in a manner that seeks to ensure the preservation of
capital in the overall portfolio. To attain this objective, diversification is required in order
that losses on individual securities do not exceed the income generated from the remainder
of the portfolio.
2. Liquidity
The investment portfolio will remain sufficiently liquid to enable the city to meet all
operating requirements which might be reasonably anticipated.
3. Return on Investment
The investment portfolio shall be designed with the objective of attaining a market rate of
return throughout budgetary and economic cycles. The investment strategy will take into
account the constraints on risk and cash flow characteristics of the investment portfolio.
Financial Management Policies Page 3
4. Maintaining the Public's Trust
All officials and employees who are part of the investment process shall seek to act
responsibly as custodians of the public trust. Investment officials shall avoid any
transaction that might impair public confidence in the municipality's ability to govern
effectively.
Authority to manage the City of Elk River's investment program is derived from Minnesota Statutes
�118A. Management responsibility for the investment program is hereby delegated to the Finance
Director. No person may engage in an investment transaction except as provided under the terms
of this policy and the procedures established by the Finance Director. The Finance Director shall be
responsible for all transactions undertaken and shall establish a system of controls to regulate the
activities of subordinate officials.
Officers and employees involved in the investment process shall refrain from personal business
activity that could conflict with the investment program, or which could reasonably cause others to
question or doubt their ability to make impartial investment decisions. Employees and investment
officials shall disclose to the Finance Director any material financial interests in financial institutions
that conduct business within this jurisdiction, and they shall further disclose any large personal
financial/investment positions that could be related to the performance of the City of Elk River's
portfolio.
The Finance Director will maintain a list of financial institutions authorized to provide investment
services. In addition, a list will be maintained of approved security broker/dealers selected by credit
worthiness,who maintain an office in the State of Minnesota. These may include "primary dealers"
or regional dealers that qualify under Securities & Exchange Commission Rule 15c3-1 (uniform net
capital rule). All brokers doing business with the city shall have a Broker Certification form on file
with the Finance Director in accordance with Minnesota Statutes §118A.04, Subd 9. All investments
must be placed with brokers whose office is in the State of Minnesota. No investments may be
made with out of state brokers.
Investment instruments authorized and permitted by this policy are as follows:
A. Repurchase Agreements
Repurchase agreements consisting of collateral allowable in Section 118A.04.
B. United States Securities
Governmental bonds, notes, bills,mortgages (excluding high-risk mortgage-backed
securities), and other securities,which are direct obligations or are guaranteed or insured
issues of the United States,its agencies,its instrumentalities, or organizations created by an
act of Congress.
High risk mortgage-backed securities are as follows:
1. interest-only or principal-only mortgage-backed securities; or,
2. any mortgage derivative security that:
a. has an expected average life greater than ten years;
b. has an expected average life that:
i. will extend by more than four years as the result of an immediate and
sustained parallel shift in the yield curve of plus 300 basis points; or
Financial Management Policies Page 4
ii. will shorten by more than six years as the result of an immediate and
sustained parallel shift in the yield curve of minus 300 basis points;
or
iii. will have an estimated change in price of more than 17 percent as the
result of an immediate and sustained parallel shift in the yield curve
of plus or minus 300 basis points.
C. Minnesota Joint Powers Investment Trust
Agreements or contracts for shares of a Minnesota joint powers investment trust whose
investments are restricted to securities authorized for investment by the government entity
and shares of an investment company registered under the Federal Investment Company
Act of 1940,whose shares are registered under the Federal Securities Act of 1933,as long
as the investment company's fund receives the highest credit rating and is rated in one of
the two highest risk rating categories by at least one nationally recognized statistical rating
organization and is invested in financial instruments with a final maturity of no longer than
13 months.
D. State and Local Securities
State and local government obligationtasows:
;
1. any security which is a general obligation'o any staNg rnment with
taxing powers which is rated"A" or better by a national bond rating service;
2. any security which is a revenue obligation of any state or local government with
taxing powers which is rated"AA" or better by a national bond rating service;
and,
3. a general obligation of the Minnesota Housing Finance Agency which is a moral
obligation of the State of Minnesota and is rated "A" or better by a national
bond rating service.
E. Commercial Paper -
Commercial paper issued by United States'corporations or their Canadian subsidiaries that
is rated in the highest quality category (e.g.,A-1,P-1,F-1,or D-1 or higher) by at least two
nationally recognized rating agencies and matures in 270 days or less.
F. Time Deposits
Time deposits that are fully insured by the Federal Deposit Insurance Corporation.
Bankers acceptances of United States banks.
The city shall not purchase investments that, at the time of purchase, cannot be held to maturity. All
investments shall be purchased with the intent to hold until maturity. This section shall not be
construed to restrict the sale of investments prior to maturity which may be in the best interest of
the city.
The city shall not invest in GICs or Reverse Repurchase Agreements.
The City of Elk River will follow Minnesota statutes regarding the use of collateral requirements. In
order to anticipate market changes and provide a level of security for all funds,the collateralization
level will be at least ten percent more than the amount on deposit plus accrued interest at the close
Financial Management Policies Page 5
of the business day. To the extent that funds deposited are in excess of available federal deposit
insurance,the government entity shall require the financial institution to furnish collateral security.
All collateral shall be placed in safekeeping in a restricted account at a Federal Reserve Bank, or in
an account at a trust department of a commercial bank or other financial institution that is not
owned or controlled by the financial institution furnishing the collateral. The selection shall be
approved by the City of Elk River.
Any collateral pledged shall be accompanied by a written assignment to the government entity from
the financial institution. The written assignment shall recite that,upon default,the financial
institution shall release to the government entity on demand, free of exchange or any other charges,
the collateral pledged. Interest earned on assigned collateral will be remitted to the financial
institution so long as it is not in default. The government entity may sell the collateral to recover the
amount due. Any surplus from the sale of collateral she payal e to the financial institution,its
assigns, or both.
Investments may be held in safekeeping with:
1. Any Federal Reserve Bank;
2. Any bank authorized under the laws of the` '"nited States or any state 0 exercise corporate
trust powers,including,but not limited to, the bank from which the investment is purchased;
3. A primary reporting dealer in:United States government securities to the Federal Reserve
Bank of New York; or
4. A securities broker/dealer having its principal executive office in Minnesota,licensed
pursuant to chapter 80A, or an affiliate of it, regulated by the Securities and Exchange
Commission;provided that the government entity's ownership of all securities is evidenced
by written acknowledgments identifying the securities by the names of the issuers,maturity
dates,interest rates, CUSIP number, or other distinguishing marks.
The city will minimize investment custodial credit risk by permitting brokers that obtained
investments for the city to hold them only to the extent there is SIPC and excess SIPC coverage
available. Securities pu;1� sed that-exceed available SIPC coverage shall be transferred to the city's
custodian.;
The City of Elk River will diversify its investments by security type and institution. In establishing
specific diversification strategies, the following general policies and constraints shall apply:
A. Portfolio maturities shall be staggered to avoid undue concentration of assets at a specific
maturity sector,with one broker-dealer or financial institution, or any one type of
instrument. The maturities selected shall provide for stability of income and reasonable
liquidity.
B. The Finance Director shall establish an annual process of independent review by an
external auditor. This review will provide internal control by assuring compliance with
policies and procedures.
C. The investment portfolio will be designed to obtain a market average rate of return during
budgetary and economic cycles,taking into account the City of Elk River's investment risk
constraints and cash flow needs.
Financial Management Policies Page 6
D. The Finance Director shall prepare an investment report on a periodic basis and include:
1. Listing of individual securities held at the end of the reporting period.
2. Listing of investments by maturity date.
3. Percentage of the total portfolio which each type of investment represents.
4. Market to market analysis.
5. Rate of return for the quarter.
Financial Management Policies Page 7
Fund Balance
Fund balance reserves are an important component in ensuring the overall financial health of a
community, by giving the city sufficient funds to meet contingency and cash-flow timing needs. In
establishing an appropriate fund balance,the city needs to consider the demands of cash flow,need
for emergency reserves, ability to manage fluctuations of major revenue sources, credit rating and
long-term fiscal health.
A. Classification of Fund Balance/Procedures
1. Nonspendable
Amounts that are not in a spendable form or are re uired to be maintained intact.
Examples are inventory or prepaid items.
2. Restricted
Amounts subject to externally enforceable legal restrictions. Examples include grants,
tax increment and bond proceeds.
3. Unrestricted
The total of committed fund balanc&,fd§signed fund balance,an ssigned fund
balance:
• Committed fund balance —amounts a�cKbe used only for tie specific
purposes determined by a formal action of the government's highest level of
decision-making authority. Commitments may be changed or lifted only by the
government taking the same formal action that imposed the constraint originally.
• Assigned fund balance —amounts a government intends to use for a specific
purpose;intent can be expressed by the government body or by an official or body
to which the governing body delegates the authority.
• Unassigned fund balance—residual amounts that are available for any purpose
Kn the general fund. The General fund should be the only fund that reports a
ositive unassigned fund balance amount. This classification is also used to
account for deficit fund balances in other governmental funds.
B. General Fund
• The city will maintain an unassned General fund balance of not less than 4091e 45-
50% of budgeted operating expenditures; however, this need could fluctuate with each
year's budget objectives.
• Annual proposed General fund budgets shall include this benchmark policy. Council
shall review the amounts in fund balance in conjunction with the annual budget
approval, and make adjustments as necessary to meet expected cash-flow needs.
• In the event the unassigned General fund balance will be calculated to be less than the
minimum requirement at the completion of any fiscal year, the city shall plan to adjust
budget resources in the subsequent fiscal years to bring the fund balance into
compliance with this policy.
• The City Council may consider appropriating (for authorized purposes) year-end fund
balance in excess of the policy level or increasing the minimum fund balance. An
example of preferred use of excess fund balance would be for one-time expenditures,
such as: ,
Financial Management Policies Page 8
1. to fund an expenditure of significant long-term benefit or legacy to the
community
2. to fund a one-time (non-recurring) expenditure or grant match
onnortunity
3. to provide catch-up funding or long-term obligations not previously
recognized
4. to fund a one-time unplanned revenue shortfall
5. to fund an unplanned expenditure due to an emergency or disaster
6. to retire existing debt
7. to fund polic shifts b other governmental entities having a negative
impact on the city
8. to moderate property taxes
• Appropriation from the minimum fund balance shall require the approval of the City
Council and shall be used only for non-recurring expenditures,unforeseen emergencies
or immediate capital needs that cannot be accommodated through current year
savings. Replenishment recommendations will accompany the decision to utilize fund
balance.
• At the discretion of the City Council, fund balance may be committed for specific
purposes by resolution designating the specific use of fund balance and the amount.
The resolution would need to be approved no later than the close of the reporting
period and will remain binding unless removed in the same manner.
• The City Council authorizes the Finance Director and/or City Administrator to assign
fund balance that reflects the city's intended use of those funds.
• When both restricted and unrestricted resources are available for use,it is the city's
policy to first use restricted resources,and then use unrestricted resources as they are
needed. When committed, assigned or unassigned resources are available for use,it is
the city's policy to use resources in the following order; 1) committed 2) assigned and
3) unassigned.
C. EnteWrise Funds X_
The city will maintain reserves in Enterprise funds at levels sufficient to provide adequate
working capital for current expenditure needs, for the replacement of capital assets within
the fund over their estimated useful life and to pay for future capital projects. Future
capital projects must be identified and quantified in a written plan for the fund which shall
be included in the city's annual Capital Improvement Plan (CIP.
The city will maintain a reserve balance at a level which takes into consideration the
following:
• Cash Flow
• Six months of projected operation expenditures (Sewer and Garbage
• One year of projected operation expenditures (Liquor
• Debt service obligations— 100% of next year's principal and interest
• Contingency
• Potentially volatile revenue sources
• Unforeseen natural or man-made disasters and emergencies
Financial Management Policies Page 9
• Savings
• Planned one-time expenditures and grant matching opportunities
• Impact of significant capital projects identified in a long-term plan
• Other Factors
• Impact on city' bond rating
• Requirements by external funding source
D. Special Revenue Funds
The city will maintain reserves in the Special Revenue funds at levels sufficient to provide
working capital for current expenditure needs plus an amount that is estimated to be
needed to meet legal restrictions, requirements by external funding sources and/or pay for
future capital projects. Future capital projects must be identified and quantified in a
written plan for the fund,which shall be included in the cijc:'s annual CIP.
E. Debt Service Funds
The city will maintain reserves in the Debt Service funds at levels sufficient to provide
working capital for current expenditure needs plus an amount that is estimated to be
needed to meet legal restrictions and requirements b�:external funding sources.
F. Capital Project Funds
The city will maintain reserves in the Capital Project funds at levels sufficient to provide
working capital for current expenditure needs plus an amount that is estimated to be
needed to meet legal restrictions, requirements b3�external funding sources and/or pay for
future capital projects. Future capital projects must be identified and quantified in a
written finance plan for the fund,which shall be included in the city's annual CIP.
G. Monitoring and Reporting
The Finance Director shall annually review with the City Council the status of the fund
balances with this polio present it to the City Council in conjunction with the
development of the annual budget and/or other long-term financial planning documents
such as the CIP.
The city will annually review the adequacti:of the reserve balances.
The city will periodically review updates to rating agency methodologies and medians to
make sure that the reserve policy is consistent to ensure maintaining its existing rating or
that it positions itself for an upgrade.
Financial Management Policies Page 10
Debt
The City of Elk River has chosen,by policy,to guide its issuance of debt by following the guidelines
listed below. These practices were identified through examination of materials from state statutes,
bond rating agencies,and the Government Finance Officers Association (GFOA). This policy can
be amended in the future by the City Council,but is consistent with general municipal practices at
the time of its adoption.
In accordance with the authorities cited in the background section,the City of Elk River will use the
following policies in determining when and how to use debt for financing capital and equipment
needs.
A. Debt Limits
1. Legal Limits: A*
a. Minnesota Statutes, Section 475 prescribes the statutory debt limit that outstanding
principal of debt cannot exceed 3% of taxable market value. This limitation
applies only to debt that is wholly tax-supported. The type of debt included is
either general obligation debt of any size bond issue (G.O.) or lease revenue bond
issues that were over$1,000,000 at the time of issuance. However,there are also
several other types of debt that do not count against the limit. G.O. tax increment,
G.O. abatement G.O. special assessment, G.O. utility revenue,and most HRA or
EDA-issued debt is considered to have a separate revenue source other than just
taxes and so are excluded from the legal debt limit calculation. HRA and EDA
public project revenue bonds or lease revenue bonds with financing lease
agreement with a city or county do count against the statutory debt limit.
b. Local ordinances do not limit the city's abili to issue debt.
2. Policy huts.
a. Uses of Debt: Debt will be used only for capital costs. The city will not utilize
debt for cash flow borrowing, even though this is allowed by state statutes.
..: CIP and Financial Planning: The city's capital improvement plan shall contain
debt assumptions which match this policy and requires a commitment to long
range financial planning which looks at multiple years of capital and debt needs.
Tax Increment Bonds: The city shall use G.O. tax increment bonds only when the
development merits special consideration.
3. Financial Limits:
a. Bond issues may require a special debt levy. The city hereby adopts a policy to
limit the amount of the city's property tax levy dedicated to debt service (principal
and interest plus 5% for G.O. bonds) to less than 20% of the total tax levy.
Unlike rating agencies, the city's definition of tax levy does not include special
assessments,tax abatements, or tax increments.
b. Pure revenue bond debt for the city shall be used primarily as lease revenue bonds,
supported by taxes. The city may use revenue bonds for enterprise, electric and
water utility operations,but only if debt service coverage achieves investment grade
rating from the city's rating agencies.
Financial Management Policies Page 11
B. Use of Variable Rate Debt and Derivatives
1. Variable Rate Debt. The city shall use variable rate debt only if total principal and
interest of the debt constitutes less than 20% of the city's total debt payments and only
if circumstances dictate the need for a short call date.
2. Derivatives. The city will not use derivative based debt.
C. Debt Structuring Practices
1. Term: State law limits general obligation debt to 30 years in most circumstances. The
city shall not exceed 25 years in term of debt.
2. Term for Equipment: The city has a goal of paying for all capital equipment with a
useful life of five years or less from cash reserves or annual operating budgets. State
law does allow cities to issue debt (known as equipment certificates or capital notes)
with a term of ten years or the useful life of the equipment if it is at least 10 years. The
city would prefer,within the bounds of levy limits,to fund capital equipment on a pay-
as-you-go basis. Capital equipment with a useful life greater than five years may be
financed with debt,but the bond term should not exceed ten years.
3. The city's collective debt goal shall be to amortize at least 50% of its principal within
10 years.
4. The city shall usually issue debt with level principal and interest payments.
5. The city shall have a call date (pre-payment date) of no longer than 10,years on longer
term debt and 6 to 8 yeaqk4 rter-term deb ..;..
D. Debt Issuance Practices
1. Rating Agencies: The city utilizes a rating agency for all of its debt issuance of more
than$1M or longer than 3 years in term.
2. Method of Sale: The city shall use competitive bidding for all of its debt unless the
debt is so specialized in its nature that it will not attract more than 2 bids.
3. Refunding:
Advance refunding bonds shall not be utilized unless present value savings of 4%
to 5% of refunded principal is achieved and unless the call date is within 4 years.
The state law minimum is 3% of refunded principal. Bonds shall not be advance
to
if there is a reasonable chance that revenues will be sufficient to pre-pay
the debt at the call date.
b. Current refunding bonds shall be utilized when present value savings of 3% of
refunded principal is achieved or in concert with other bond issues to save costs of
issuance.
c. Special assessment or revenue debt will not be refunded unless the Finance
Director determines that special assessments or other sufficient revenues will not
be collected soon enough to pay off the debt fully at that call date.
4. Professional Services. The city shall use an outside bond attorney and an independent
financial advisor to structure the sale.
E. Debt Management Practices
1. Investment of bond proceeds. The city shall invest bond proceeds in a capital project
fund.
Financial Management Policies Page 12
2. Disclosure: The city shall comply with SEC rule 15(c)2(12) on primary and continuing
disclosure. Continuing disclosure reports shall be filed no later than 180 days after
receipt of the city's annual financial report.
3. Arbitrage Rebate: The city shall complete an arbitrage rebate report for each issue no
less than every five years after its date of issuance.
4. The city has also adopted post issuance debt compliance policy as a separate policy.
Capital Improvements
The city will maintain buildings,infrastructure,utilities,parks, facilities, and other assets in a manner
that protects the investment and minimizes future maintenance and replacement costs.
The Finance Director will annually prepare and submit to the City Council a Capital Improvements
Plan (CIP) for the next five fiscal years.
At a minimum, the CIP will include a description of the proposed improvement, the estimated cost,
timing and potential sources of funding. If applicable, the CIP will identify implications for the
operating budget created by the proposed improvement.
In most cases,private developers will be responsible for the construction of st*+ts, sanitary sewer,
watermain, and storm water collection systems needed to serve new development. The city may
install infrastructure and assess property owners when this approach provides the best alternative.
The city will finance street and utility oversizing and trunk utility systems.
The city will maintain a system of capital charges for sanitary sewer and water services. The charges
will be collected when undeveloped land is platted and when new users connect to the system.
Revenues from the capital charges will be accumulated and used to pay for the capital investment
related to the maintenance and expansion of the utility system.
The city will strive to maximize the revenues collected from capital charges in order to protect
existing utility users from bearing the costs associated with growth. The City Council will work with
the Utilities Commission to set capital charges for the water system at appropriate levels. In not less
than three year intervals, the city staff shall evaluate the amount of all capital charges and
recommend necessary changes to the City Council and the Utilities Commission.
The city will maintain an equipment acquisition and replacement program. The city will annually
update the plan to provide funding for all equipment purchases over$25,000 to be made in the next
five fiscal years. The city shall attempt to fund the program without the use of debt. It is
recognized that State imposed levy limits may create the need incur debt for equipment acquisition.
The city will establish and maintain a program for the construction and maintenance of the
municipal storm water management system. Financial projections for the storm water management
system shall be updated annually.
The city will establish and maintain a program for the maintenance of the municipal street system.
The initial sealcoating in new subdivisions will be financed with monies collected for this purpose at
the time of original development. Other sealcoating and other maintenance activities will be
financed through the General fund.
Financial Management Policies Page 13
The city will prepare an on-going plan for the reconstruction of all city streets. The city will provide
a sustainable source of funding for the street reconstruction program. The city will annually
prepare cash flow projections for street reconstruction projects to ensure adequate and ongoing
funding.
Capital Assets and Capitalization Thresholds
A capital asset is a tangible asset that has a life expectancy of more than one year. For financial
statement reporting purposes,the city reports capital assets in the following categories and has
established a capitalization threshold for each category:
Capitalization
Categoo Threshold
Land $10,000;.
Buildings $25,000
Other Improvements $25,000
Machinery and equipment ss,000 $10,000
Vehicles 5,0w) $10,000
Infrastructure $100,000
Construction in progress Accumulate all costs and capitali
if over$100,000 when completed
Other assets -x,900 $10,000
Another criterion for recording capital assets'`is capital-related debt. Capital assets purchased with
debt proceeds should be capitalized and depreciated over their estimated useful life.
The amount to record for a capital asset is any cost incurred to put the asset into its usable
condition. Donated capital assets should be reported at fair value at the time of acquisition.
Risk Management
1. The city will maintain a Risk Management Program that will minimize the impact of legal
liabilities, natural disasters or other emergencies through the following acitivies:
• Loss Prevention. Prevent negative occurrences.
• Loss Control. Reduce or mitigate expenses of a negative occurrence.
• Loss Financing. Provide a means to finance losses.
• Loss Information Management. Collect and analyze relevant data to make prudent
loss prevention,loss control and loss financing decisions.
2. The city will maintain an active Safety Committee comprised of city employees.
3. The city will periodically conduct educational safety and risk avoidance programs, through its
Safety Committee and with the participation of its insurers,within its various departments.
4. The city will maintain the highest deductible amount, considering the relationship between
cost and the city's ability to sustain the loss.
Accounting, Auditing, and Financial Reporting
■ The city will establish and maintain the highest standard of accounting practices,in
conformity with Generally Accepted Accounting Principles (GAAP).
Financial Management Policies Page 14
• The city will attempt to maintain the GFOA Certificate of Excelleance in Financial
Reporting.
• The city will arrange for an annual audit of all funds and account groups by independent
certified public accountants or by the State Auditor's Office.
• Regular monthly reports present a summary of financial activity by major type of funds as
compared to budget. Department directors will review monthly reports comparing actual
revenues and expenditures to the budgeted amounts. Any negative variance in any revenue
or spending category (Personal Services, Supplies, Other Charges and Services, Capital
Outlay) for their department as a whole projected to exceed$5,000 by year-end will be
reported in writing to the Finance Director and the City Administrator.
Operating Budget
• The City Administrator,when submitting the proposed budget to the City Council,will
submit a balanced budget in which appropriations will not exceed the total of the estimated
General fund revenue and the fund balance available after applying the General Fund
Reserve Policy.
• The city will annually appropriate a contingency appropriation in the General fund budget,
not to exceed .5% of the total budget,to provide for unanticipated expenditures of a non-
recurring nature.
• In the event there is an unanticipated shortfall of revenues in a current year budget,the
Finance Director may recommend the use of a portion of the General fund balance,not to
exceed the amount of available cash or reserved for working capital or already appropriated
to the General fund current budget.
• The budget will provide for adequate maintenance of buildings and equipment,and for their
orderly replacement.
• The Finance Director will prepare regular monthly reports comparing actual revenues and
expenditures to the budgeted amount. All significant variances will be summarized in a
written report to the City Administrator and City Council.
• The operating budget will describe the major goals to be achieved and the services and
programs to be delivered for the level of funding provided.
• Before adding a new program or service, the city will consider the cost benefit analysis of
using outside contractors versus in-house provided services.
• The city will attempt to maintain the GFOA Distinquished Budget Presentation Award.
• The city will not sell assets or use one-time accounting principle changes to balance the
budget for any fund.
• The city will provide ample time and opportunity for public input into its budget setting
deliberations each year,including any required public hearings.
• Department heads will be responsible for administration of their departmental operating
budget. Requests for budget adjustments must be submitted and approved before any
program incurs cost overruns for the annual budget period.
• The budget shall be adjusted as needed to recognize significant deviations from original
budget expectations. The council shall consider budget amendments each December.
Budget amendments are intended to recognize changes made by the council during the year,
to reflect major revenue and expenditure deviations from budgeted amounts, and to
consider year-end budget requests. Budget amendments are not intended to create a budget
that matches budgeted revenues and expenditures to actual revenue and expenditures.
Financial Management Policies Page 15
■ Administrative budget amendments may be made throughout the year by department
directors to adjust line item budgets within their department as long as the total
departmental budget does not change. These line item budget changes exclude personal
service and capital outlay categories. Administrative budget admendments must be
requested in writing and approved by the City Administrator and Finance Director.
Purchasing
The goal of the Purchasing Policy is to ensure all purchases are consistent with Minnesota statutes,
to establish internal controls, to maintain the appropriate documentation,and to ensure the best
value for the public money.
Purchasing Authority
The department/division director for which the service, equipment, or supplies are ordered must
recommend the order be placed. The department/division director may designate the authority to
make certain purchases to department staff. This designation must be communicated to the Finance
Department. Final approval of all purchases must be evidenced by the department/division
director's signature on the purchase order,invoice and/or receipt. Purchase orders must be
completed prior to acquisition to insure accountability,provide amount verification, and avoid a
misunderstanding with respect to cost between the vendor and the city.
Purchasing Thresholds NOW,,.
All expenditures up to $50,000 must be within the limits established by the department budget.
The thresholds of dollar amounts that have been established either by policy, City Code, or statutory
authority for the purpose of purchasing city goods are identified as follows:
Purchase Process Approving Notes
Level Required Authority
• Written quotes are not required,but verbal quotes are
recommended.
Department
Less than Director • At the point of sale,the receipt must be signed by the individual
$5,000 Designee purchasing the item.• The receipt/invoice must also be signed and coded by the
de artment director
• When there is more than one feasible source of supply for an
item,the city shall request written price quotations from at least two
$5,000-
4, - Purchase Department sources and shall place the order at the lowest price quoted,provided
$224,9 999 Quotes es Director
the items are of comparable quality.
• Quote information should be attached to the purchase order.
• When there is more than one feasible source of supply for an
$25,000- City item,the city shall request written price quotations from at least two
$49,999
P.O./Quotes Administrator sources and shall place the order at the lowest price quoted,Administrator provided
the items are of comparable quality.
• Quote information should be attached to the purchase order.
• Check the availability of an item through a cooperative purchasing
program before obtaining quotes.
$50,000- Council City Council • When there is more than one feasible source of supply for an
$100,000 Approval item,the city shall request written price quotations from at least two
sources and shall place the order at the lowest price quoted,provided
the items are of comparable qualitv.
Bids/Cooperative
• There are three processes available that would satisfy statutory
Above$100,000 City Council requirements for purchases above$100,000. (See"Purchases
Agreements
Exceedin $100,000"section below for more details.
Financial Management Policies Page 16
Purchases Exceeding$100,000
There are three processes available that would satisfy statutory requirements for purchases that are
above $100,000:
1. Purchases through Cooperative Purchasing Organizations:
The city is a member of various cooperative purchasing organizations
2. Purchases Made Outside of the Cooperative Bidding Process:
If the amount of the contract is estimated to exceed$100,000, and funds are appropriated
within the current operating budget or capital improvement program, sealed bids shall be
solicited by public notice at least 10 calendar days before scheduled bid opening following
preparation of bid specifications as authorized by the City Council. The successful bid is to
be awarded by the City Council to the lowest responsible bidder.(Minnesota Statutes
471.345)
3. Non-Competitive Supplies or Equipment:
If the city is purchasing a product or service which is available from only one source,the
acquisition will be made in the same fashion as a purchase between$50,000 and $100,000
except that no other quotes are required.
Exceptions to Competitive Bidding
The following are some of the more common_exceptions e competitive bidding requirements:
• Contracts less than$100,000
• Cooperative purchasing organize
• Intergovernmental contracts
• Noncompetitive supplies and equipm
• Real estate purchases
• Professional services including:
• Architectural
• Auditing
• Engineering
• Legal
o Group Insurance
;'
• Banking Services
• Investment Services
• Financial Service Providers
• Construction Management
• Surveying
• Emergency Purchases...
Contractor's Bond
The city is required to obtain both a payment and performance bond for all public work contracts
over$100,000. Payment and performance bonds protect the city as well as subcontractors and
persons providing labor and materials. When the public work contract is let, the amount of the
bond needs to be equal to the contract price. If the contract price increases due to change orders,
unforeseen conditions, cost overruns or any other reason after the contract is signed, the city has the
option of increasing the amount of the contractor's bond. Consideration may be given for the
Financial Management Policies Page 17
percentage of the contract that is complete in relation to the contractor's bond and the increase in
the contract price.
Professional Services
Contracts for professional services such as those provided by engineers, attorneys,architects,
accountants, and other services requiring technical, scientific or professional training are exempt
from competitive bidding requirements. However,the goals to secure professional services remain
the same: to ensure all purchases are consistent with Minnesota statutes, to establish internal
controls, to maintain the appropriate documentation, and to ensure the best value for the public
money.
The following chart identifies the required procedures for professional services contracts.
Purchase Process Approving Notes
Level Required Authority
•At least two written quotes shall be obtained where there is more
so- Quotes Department than one feasible source.
$24,999 Director • In cases where the city has established apool of qualified
consultants,the consultant may be selected from the existing pool.
•when there is more than one feasible source,the city shall request
written price quotations in the form of a Request for Proposal from at
$25,000 least two sources.
Council •The quotes shall be submitted in written format
and Above City Council
Approval •The standard contract shall be awarded to the service provider with
the best qualifications and proposal for the specific project Total
cost shall not be the only consideration,but must be included in the
analysis of the proposals.
Emergency Purchases
Under Minnesota's Emergency Management Act, the city has the authority to enter into contracts
during an emergency without following many normally required procedures. An emergency is
defined as "an unforeseen combination of circumstances that calls for immediate action to prevent a
disaster from developing or occurring". A disaster is "a situation that creates an actual or imminent
serious threat to the health and safety of persons, or a situation that has resulted or is likely to result
in catastrophic loss to property or the environment,and for which traditional sources of relief and
assistance within the affected area are unable to repair or prevent the injury or loss".
During an emergency or disaster,the City Council may waive compliance with the time-consuming
procedures or formalities concerning:
1. The performance of public work
2. Contracting
3. Incurring obligations
4. Renting equipment
5. Purchasing supplies and materials
Emergency purchases will only be allowed when the mayor issues a proclamation declaring an
emergency, and the steps listed in Minn. Stat. � 12.29 are completed.
Financial Management Policies Page 18
Credit Card Use
According to Minn. Stat. � 471.382,the City Council may authorize the use of a credit card by any
city officer or employee otherwise authorized to make a purchase on behalf of the city. A purpose
of this policy is to establish criteria for who may be issued a credit card and the specific use of the
credit card.
Authority for Credit Card Holder
City staff having authority to make certain purchases will be eligible credit cardholders. A
department director may request a credit card for city authorized purchasers when there is a
demonstrated efficiency to be gained. The Finance Director must review and approve each request
before the card is issued. Such requests must include the following information:
1. The name of the specific user
2. The general reason and types of purchases they will be making
3. Any other information necessary to complete the credit card process
The department director is responsible for notifying the Finance Director wh' any changes occur
to the cardholder's status.
Types of Purchases Allowed by Credit Card
A purchase by credit card must comply with all statutes, ;`'and city policies applicable to city
purchases. Specifically:
1. All purchases must be made by the authorized card holder.
2. All credit card purch must compl with the ca 's.Purchasing Policy guidelines for
quotes and bids.
3. All expenditures must be`within the li ablished e department budget.
Types of Purchases Prohibited:
Use of a city credit card is prohibited for the following purchases:
1. Personal purchases of any kind.
2. Alcoholic beverages of any kind.
3. Emalo3 ee meal purchases(ie_while attending conferences/workshops
4. Uniform purchases.
If a city employee makes a purchase by credit card that is inconsistent with this policy and/or is not
approved by the Council, the employee is personally liable for the amount of the purchase.
Procedures and Documentation
Finance will receive the monthly bill and the cardholder will receive a copy of the monthly statement
of their charges. The cardholder will code and attach invoices and receipts for all charges on the
statement and submit all of the documentation to the department director or designee by the due
date. Payment will be made if the billing matches all completed credit card statements and receipts.
Violations
Failure to comply with any portion of this policy may result in disciplinary action (up to and
including termination), cancellation of the credit card, and legal and financial consequences.
Financial Management Policies Page 19
Public Purchase Expenditures
Pursuant to the statutes and laws of the State of Minnesota which regulate the expenditure of public
funds for public purposes, the Elk River City Council believes it is necessary and appropriate to
provide assistance and guidance to the officials, employees, and representatives of Elk River to aid in
the determination of when public funds may be spent for a public purpose.
To provide that assistance and guidance, the Elk River City Council adopted these public purpose
guidelines for the establishment of operating policies and procedures and the appropriate
expenditures of public funds. Based on these guidelines,the City Council authorizes the City
Administrator, elected officials and appointed department heads to establish administrative policies
and procedures that are consistent with these guidelines and the adopted City policies which
implement these guidelines.
De anition: A public purpose expenditure is one avhich relates to the purpose for which the City of Elk River exists
and the duties and responsibilities of Elk River, its eleceand ointed ocials employees, and other
representatives.
Public Purpose Guidelines
1. Training and development programs ver empl oyees serve a'public purpose when
those training and development programs are directly related to the performance of the
employees'job-related duties and are directly related to the programs/services for which
the city is responsible.
2. Payment of employee work-related expenses,including travel,lodging and meal expenses,
serves a public purpose when those expenses are necessarily incurred by Elk River
employees in connection with their actual work assignments or official duties and those
expenses are directly related to the performance of the governmental functions for which
Elk River has responsibility.
3. Appropriate safety and health programs for Elk River employees serve a public purpose
because they result in healthier and more productive employees and reduce certain costs to
the city and the taxpayers of Elk River,including various costs associated with workers
compensation and disability benefit claims,insurance premiums,and lost time from
employee absences.
4. Public expenditures for appropriate Elk River employee and volunteer recognition
programs serve a public purpose because formally recognizing employees and volunteers
who make significant contributions and demonstrate their commitment during the
performance of their duties results in higher morale and productivity among all Elk River
employees and volunteers, and therefore helps the city to fulfill its responsibilities
efficiently and more cost effectively.
5. Public expenditures for food and refreshments associated with official Elk River functions
serve a public purpose when the provision of food or refreshments is an integral part of an
official Elk River function and the provision of food or refreshment is necessary to ensure
meaningful participation by the participants.
Financial Management Policies Page 20
6. Public expenditures for appropriate community and customer outreach and similar
activities serve a public purpose when those expenditures are necessary for Elk River to
ensure the efficient operation of its programs/services,promote the availability and use of
city resources,and promote coordinated, cooperative planning activities among and
between the public and the private sectors.
Specific Programs and Expenditures
Every City of Elk River expenditure must be valid based upon the public purpose for which it is
expended. These line-items are approved annually by the City Council as a part of the overall
budget approval process which includes a public hearing on the proposed budget.
The following items are deemed to meet the Council definition of public purpose expenditures.
Meetings: Food/Meals/Refreshments
The City Council recognizes that situations in which city business needs to be discussed can and
do occur during meal hours (i.e. luncheon meetings). In addition,there are public and employee
meetings and events in which reasonable refreshments may add to the success of the meeting
and/or event and create a more productive workforce. Meals are allowed at training or meetings
only when they are part of a meeting or training involving official city business and when it is the
only practical time to meet.
The following items are deemed to meet the Council's definition of public purpose expenditures
in regards to food/meals/refreshments.
a. Allowed at city meetings and events that have the purpose of discussing city issues.
These meetings would normally have a pre-planned agenda and would involve
predominately non-city employees.
b. Allowed when they are part of the structured agenda for an offsite conference,
workshop, seminar,training session, or meeting in which the City Administrator or a
department director has authorized the employee to attend for training and development
purposes. This does not include routine staff meetings.
C. Allowed when they are part of a breakfast/lunch/dinner meeting for official city
business when it is the only practical time to meet and when it involves non-city
employee participants (i.e. business developers or business representatives). Payment
for fees relating to a special event, such as a Chamber of Commerce event, may also be
allowed when approved by the City Administrator and when attendance is deemed to
meet the public purpose guidelines for community or customer outreach and marketing
of the city.
d. Allowed during non-routine, official meetings of the City Council, council committees,
advisory boards/commissions,and taskforces.
e. Allowed where employees or volunteers are participating in a City Council
sponsored or authorized special event or in an outside event as an official
representative of the city.
f. Allowed for department sponsored meetings, conferences or workshops where
the majority of invited participants are not city employees.
g. Cookies and coffee allowed for city employees' monthly safety meetings
sponsored by the Safety Committee.
Financial Management Policies Page 21
h. Annual safety training lunch where lunch is provided at a minimal cost while
safety training is being held.
i. A dinner meal to be allowed for staff during performance of election related
duties on Election Day.
J. Coffee is provided by the city for employees and guests at city buildings.
k. Light refreshments ma,` be provided for employees that separate employ
after 10 years of service.
Alcoholic Beverages
The City of Elk River will not purchase or reimburse any employee, councilmember,
volunteer, or agent for the purchase of alcoholic beverages.
Employee Recognition Program
The City of Elk River City Council recognizes the hard work"and service performed by the
employees of the City of Elk River through a formal Employee Recognition Program. The City
Council believes the benefits of attracting, retaining and motivating employees through an
Employee Recognition Program support employee job satisfaction,which in turn impacts
cooperation and productivity. The result is to provide excellent ublic and customer service to
better serve the interests of the citizens of the comma
No provisions of this policy, or its administration, shall .......
e subject to review under the grievance or
arbitration provisions of any collective bargaining agreement.
The Program will include:
a. Annual Employee Recognition Celebration. Annually=the city will sponsor an Employee
Recognition Celebration for City employees according to the Employee Recognition
Program Policy.
b. Recognition Plaques. The city supports recognition plaques in recognition of retirement.
The employee shall receive a plaque thanking them for their dedicated years of service to
the community.
Volunteer Recognition Program/Events
The City of Elk River City Council recognizes the hard work and service performed by the
volunteers of the City of Elk River through a formal Volunteer Recognition Program. This Program
promotes teamwork and coordination amongst the City Council, staff,board/commission members,
Police Reserves, and parks and recreation volunteers.
The Program will include:
a. Volunteer Recognition Program for Board/Commission Members. Annually, the
city will sponsor a dinner (which may also include minimal entertainment) for
invited participants and their guests. This dinner and a token gift for the
volunteers will serve as de minimus compensation for the service provided by the
volunteers and employees serving in a volunteer capaci , or purpose. Employees
working directly or indirectly with the volunteer groups being recognized shall be
invited along with their guest to the event and have the cost of their meals paid
for by the city. .
Financial Management Policies Page 22
b. Police Reserves/Parks and Recreation Volunteers. Annually, the city will sponsor
an event or picnic for invited participants and their guests.
Other Events
The city supports other events that are planned and paid for by employees. Examples of such
events include holiday gatherings and monthly birthday recognition.
Refreshments and Food for Emergency Response Staff
Because emergency personnel are often called to perform for extended periods of time where
refreshments are important to duty performance, firefighters,police officers, and other emergency
response personnel may be provided refreshments or food when it is deemed appropriate by the
City Administrator or department director to assure the delivery of quality emergency response
service.
Employee Training
The City Council supports employee training and allows for reasonable reimbursement of
registration, tuition and travel expense for conferences, seminars,workshops, and approved city
employment-related course work in accordance with the City of Elk River Personnel Policy.
The Personnel Policy also contains guidelines for an education reimbursement program. Job
related advanced education meets the public purpose guidelines of this policy.
Employee Wellness and Safety Programs
The City Council recognizes the importance of employee fitness and health as it relates to the
overall work and life satisfaction of the employee and the impact on the city's health insurance
program.As such,the City Council supports the Employee Wellness Program,which has been
designed to educate employees on fitness/health issues. Also,in an effort to promote wellness,
the city maintains a fitness room equipped with exercise equipment that is available to all staff
24/7.
The city=also supports programs that provide discounts to employees when participating in parks
and recreation wellness related activities.
The Employee Safety Program and programs created by the Safety Committee to promote and
retain a safe work environment are supported by the City of Elk River. Refer to Meetings:
Food/Meals/Rcfresh ants.
t�
Membership and Duey - AA
The City Council has determined that the city will fund memberships and dues for the city,
Councilmembers and its employees in professional organizations and city social and community
organizations when the primary purpose is to promote,advertise,improve or develop the city's
resources and advantages and not personal interest or gain. Said memberships shall be approved by
the department director and City Administrator.
Membership in the Local Chamber of Commerce
The City Council has determined that it serves a public purpose for the Economic Development
Authority (FDA) to maintain membership in the Elk River Chamber of Commerce as a means of
Financial Management Policies Page 23
promoting,advertising,improving, and developing the economic resources and advantages of the
city.
Donations to Organizations
The City Council has determined that it serves a public purpose for the City of Elk River to donate
to the Annual Independence Day Celebration wherein the event promotes the resources and
advantages of the City.
The City Council has determined that it serves a public purpose for the City of Elk River to
purchase candy for distribution during the local high school homecoming and county fair parades.
Clothing and Other Sundry Items
Employees may receive T-shirts,and other sundry items of nominal value ($5.00) when these items
are made available to the general public or if these items are determined by the City Administrator
to be important to the successful involvement of employees in special city sponsored or supported
events (i.e. Natieftal Nig4t Ottt-Nite To Unite, etc.). Effiplayees ffiffy he supplied with tinifefffF,,
ela4ii�, beets aftd other gear-i=teeess_-__—,-f7of per-f6fffiffftee of theif job.
Trinkets or Marketing Items
The City Council has determined that it serves a public purpose for the City of Elk River to
distribute items of a nominal nature for the purpose of educating or promoting city provided
programs. .
Sympathy Gifts
The cost of flowers or other similar items as a sign of sympathy shall not be paid for by public
funds.
Gifts for Employees, Consultants and Other
The city shall not pay for gifts to employees, cons ts, or similar persons working with or for the
city.
Conclusion
The City Council reserves e right to not fund any item of expenditure described in this policy. No
provision of this policy, or its administration, shall be construed as being a benefit or condition of
employment by or for any employee of the city, nor is any provision of this policy to be considered a
provision of the City's Personnel Policy.
The Elk River City Council has determined that the above expenditures are valid expenditures and
serve a public purpose.
Financial Management Policies Page 24
Expense and Travel Reimbursement
This policy establishes guidelines and procedures for the payment and reimbursement of travel and
other expenses incurred by employees and city officials in the conduct of approved official city
business. This policy applies to all employees and city officials including temporary,regular full and
part-time employees, the mayor, council members,and members of city commissions or
committees.
Authorization
Unless otherwise required by law,the following conditions must be met in order to qualify for
reimbursement:
• The expenditure must qualify as a public purpose expenditure as determined by state law
and the Elk River City Council for which the city may use tax money.
• Employees must receive supervisor oefficials ministrator approval for reimbursement of
expenses.
Elected Official Out-of-State Travel
The City of Elk River recognizes that its Electe may at times receive value from traveling
out of the state for workshops, conferences, events and other assignments.This policy sets forth the
conditions under which out-of-state travel will be reimbursed by the city:
1. The event,workshop, conference or assignment must be approved in advance by the City
Council at an open meeting and must include an estimate of the cost of the travel. In
evaluating the out-of-state travel request,the Council will consider the following:
• Whether the Elected Official will be receiving training on issues relevant to the city
or to his or her role as the Mayor or as a Council Member.
• Whether the Elected Official will be meeting and networking with other elected
officials from around the country to exchange ideas on topics of relevance to the city
or on the official roles of local elected officials.
• Whether the Elected Official will be viewing a city facility or function that is similar
in nature to one that is currently operating at, or under consideration by the city
where the purpose for the trip is to study the facility or functions to bring back ideas
for the consideration of the full Council.
■ Whether the Elected Official has been specifically assigned by the Council to testify
on behalf of the city at the United States Congress or to otherwise meet with federal
officials on behalf of the city.
■ Whether the city has sufficient funding available in the budget to pay the cost of the
trip.
2. No reimbursements will be made for attendance at events sponsored by or affiliated with
political parties.
3. Limitations may be imposed on paying for expenses for a Council Member who has
announced his/her intention to resign,not to seek reelection, or who has been defeated in
an election.
4. The Council may request an oral or written report from the Elected Official on the results of
the trip.
5. The city will reimburse for travel,lodging, meals, and registration using the same procedures,
limitations and guidelines outlined in this expense and travel reimbursement policy.
Financial Management Policies Page 25
6. The City Council may make exceptions to the policy depending upon circumstances unique
to the trip and/or Elected Official.
Expense Reimbursement Procedure
Reimbursement shall be made in accordance with the rules stated in this policy. No reimbursement
shall be made unless the reimbursement request meets the following criteria and the proper
documentation is included with the reimbursement request.
1. All reimbursement requests shall be submitted to Finance within 30 days of the date
incurred for processing.
2. The City Administrator may,under unique circumstances, approve reimbursement for
items submitted after the 30 day limit.
3. Expense reimbursements $25.00 or less may be submitted to petty cash for payment with a
detailed vendor receipt.
4. Expense reimbursements in excess of$25.00 will be paid by vendor check.
5. Employees shall submit a completed expense reimbursement request form to their
supervisor for written approval with detailed documentation (i.e. original itemized receipts,
mileage form, etc.). Reimbursement shall not be made when receipts are not submitted as
required.
6. Upon approval, supervisors shall submit the form to Finance for payment.
Travel
1. Supervisors shall only approve mileage reimbursement to conduct official city business
when a city vehicle is not available, a staff vehicle does not meet the intended work
objective, or when a specific employment agreement prevails. Carpooling should be used
whenever feasible.
2. Reimbursement shall be at the standard IRS mileagft-
3. When an employee travels directly to a conference or seminar site, mileage will be
computed from the employee's home or normal place of work,whichever is less.
4. Travel to and from the worksite (commuting) is not eligible for reimbursement,including
evening and weekends.
5. If out of state travel is required, costs sh .i enerally be based on a comparison between
the cost and convenience of the lowest available air fare and travel by personally owned
vehicle or city vehicle with associated meals,lodging, and loss of work time costs.
a. Employees should select the most economical airfare that fits the conference or
meeting schedule.
b. An employee may elect to drive for personal reasons instead of utilizing air
transportation with the following provisions:
i. Prior written approval must be received from the department
director and city administrator.
ii. On the date permission is received to drive,the employee must get a
written quote for airfare based on the lowest round trip rate available
that fits the conference or meeting schedule. The quote must
include the departure and arrival times and be attached to the
reimbursement request.
iii. Reimbursement will be made based on a comparison between the
cost and convenience of the lowest available airfare and travel by
personal vehicle,with associated lodging and meals,whichever is less.
Financial Management Policies Page 26
iv. Travel time above that required for air travel,will be on the
employee's personal time.
Lodging
1. The City will pay for reasonable hotel accommodations appropriate to the purpose of the
trip.
2. Rates for accommodations shall be comparable to those of other facilities in the area. The
hotel hosting a convention shall be deemed an appropriate accommodation.
3. The city will pay the single rate if the employee or official is accompanied by a guest or
family member. 'Jo
Meals
Meal expenses incurred must be paid directly by the employee. City credit cards cannot be used to
purchase employee meals. Each employee must submit their own receipt for reimbursement.
1. No overnight stay required:
a. Meal expenses shall be reimbur `'" 6r city-required attendance at day-long
training/workshops with morning and afternoon sessions when no meal is provided
between the two sessions. Meals before or after the event are not reimbursable.
b. Expenses for meals,including maximum gratuity of 18%,will be reimbursed with an
original itemized receipt credit card receipts are not acceptable) up to the
Minnesota Standard per diem rate in accordance with the U.S. General Services
Administration (GSA) Standard per diem rates (www.gsa.gov .
C. Reimbursement for alcoholic beverages is prohibited.
d. Reimbursement shall not be made for meals included in the conference or meeting
fee.
2. Overnight stay required:
a.,, No meals are to be charged to the hotel/motel room.
< Expenses for meals.including rg atuity,will be reimbursed in accordance with the
U.S. General Services Administration (GSA) standard per diem rates which may be
found at www.gsa.gov.
C � Per Diem meal expenses at the applicable daily rate does not require receipts, but the
employee must provide adequate substantiation veri ,ing the date, time and location
of the event or meeting and the business purpose of the trip.
d. Reimbursement for alcoholic beverages is prohibited.
3. Meals for Others:
Elected officials,the city administrator,department directors, or other designated city
employees serving as representatives of the city may occasionally provide a meal for other
persons who have official business with the city. The cost of providing such meals,
including tax and a reasonable gratuity,will be reimbursed provided the following
conditions are met:
• The name and official capacity of each person attending must be listed
• The public benefit of the meeting must be described
• Reimbursement for alcoholic beverages is prohibited
• Original itemized receipts must be provided
Financial Management Policies Page 27
• Must comply with the City's Public Purpose Expenditure Policy.
• The amount reimbursed per person will follow the amounts listed in accordance with
U.S. General Services Administration (GSA) standard per diem rates (=.gsa.gov)
Advance Expense Check
If requested, an advance expense check may be issued for estimated travel expenses. The advance
shall be issued pursuant to Minnesota Statute 471.97.
• A signed Reimbursement Request with receipts must be submitted within 30 days of travel.
• The city shall determine the estimated travel expense amount to be advanced.
• Any additional reimbursement due to the employee shall be paid by the city based on the
receipts submitted.
• Any refund due from the employee shall be paid to the city within 10 days of submission of
the Reimbursement Request. The refund due from the employee shall be based on the
actual receipts submitted.
• All other provisions of this travel policy a determine the ex enses eligible for
reimbursement.
Other
• All reimbursements will be subject to tax as rqusred by IRS regulations.
• Only actual expenses for the employee shall be submitted and reimbursed. e employee is
responsible for all lodging,meal, travel,and other expenses of anyone accompanying the
employee.
• By signing the Reimbursement Request, the employee acknowledges and agrees that all items
included in the Reimbursement Request are legally eligible for reimbursement and meet all
of the provisions of this travel policy and other applicable laws.
Financial Management Policies Page 28
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- QV02I JH.L 30 STICRI
{ STATE OF MINNESOTA
OFFICE OF THE STATE AUDITOR
SUITE 500
7jy (651)296-2551 (Voice)
525 PARK STREET (651)296-4755(Fax)
REBECCA OTTO SAINT PAUL,MN 55103-2139 state.auditor,&anosa.state.mn.us(E-mail)
STATE AUDITOR 1-800-627-3529(Relay Service)
Statement of Position
Fund Balances for Local Governments
Based on GASB Statement No. 54
Background
Governmental Accounting Standards Board's (GASB) Statement No. 54, Fund Balance
Reporting and Governmental Fund Type Definitions, defines the classifications of fund balance
based on the focus of the constraints placed on the use of current fund balance. The Statement
also identifies the governmental fund type definitions. This Statement of Position addresses only
the fund balance classifications and reporting.
The requirements of GASB 54 are applicable to all local governments. Implementation was
required for the first fiscal year ended June 30, 2011. However, most Minnesota local
governments report on a calendar year. For those reporting on a calendar year, the first required
year for implementation was the year ended December 31, 2011.
In governmental funds,' local government should identify fund balance separately based on a
hierarchy of the constraints placed on the use of the financial resources within governmental
funds. A local government will classify its fund balances into one of up to 5 classifications:
nonspendable, restricted, committed, assigned, and unassigned. While some of the GASB 54
classifications are similar in nature to the classifications under pre-GASB Statement No. 54, the
focus is different, and thus, what is classified into these classifications may be different.
Fund Balance Classifications/Definitions for Governmental Funds
The fund balances of a local government's governmental funds should be reported in the new
classifications based on the definitions in the following table:
Governmental fund reporting focuses primarily on the sources, uses, and balances of current financial resources
and often has a budgetary orientation. The governmental fund category includes the general fund, special revenue
funds, capital projects funds, debt service funds, and permanent funds. Codification of Governmental Accounting
and Financial Reporting Standards§ 1300.102.
Reviewed: July 2012 2010-1003
Revised: July 2012
This Statement of Position is not legal advice and is subject to revision.
An Equal Opportunity Employer
i.
Fund Balance Reporting
Classification Definition Examples
Nonspendable "Amounts that cannot be spent because they are . Inventories,
either (a) not in spendable form or (b) legally or . Prepaid items,
contractually required to be maintained intact."2 • Long-term receivables in the
general fund,and
• Permanent principal of
endowment funds.
Restricted "Fund balance should be reported as restricted when • Restricted by state statute,
constraints placed on the use of resources are either: a Unspent bond proceeds,
a. Externally imposed by creditors (such as . Grants earned but not spent,
through debt covenants), grantors, . Debt covenants, .
contributors, or laws or regulations of other • Taxes dedicated to a specific
k governments;or purpose,and
Ib. Imposed by law through constitutional . Revenues restricted by
provisions or enabling legislation. enabling legislation.
Committed "Used for specific purposes pursuant to constraints • The governing board has
imposed by formal action of the government's decided to set aside $1 M for a
highest level of decision-making authority."" new city hall.
• Property tax levies set for a
specific purpose by resolution.
Assigned "Amounts that are constrained by the government's • Governing board has set aside
intent to be used for specific purposes, but are $2 million for a county
neither restricted nor committed."5 hospital and the county
manager may amend this up to
-o $100,000.
• Governing body delegates the
authority to assign fund
balance to the finance officer.
c • Governing board has
appropriated fund balance
often to balance next year's
budget6
• Positive residual balances in
governmental funds other than
the general fund.
Unassigned Unassigned fund balance is the residual classification for the General Fund. This is fund
balance that has not been reported in any other classification. The General Fund is the only
fund that can report a positive unassigned fund balance. Other governmental funds would
report deficit fund balances as unassigned.'
2 GASB Statement No. 54,¶6.
3 GASB Statement No.54,¶8.
4 GASB Statement No. 54,¶ 10.
5 GASB Statement No.54,¶ 13.
6 See appropriated fund balance section of this document.
'GASB Statement No.54,$ 17.
Reviewed: July 2012 2 2010-1003
Revised: July 2012
Classifying Fund Balance
A local government should classify its fund balances based on the nature of the particular net
resources reported in a governmental fund. The government would first start by identifying
nonspendable net resources, followed by restricted, committed, assigned and lastly unassigned.
This will classify a fund's net resources from those that have the most constraints placed on their
use to the least. A fund's net resources also are affected by the spending policy of that
government. A local government should determine the order of use of resources when
expenditures are incurred. Are restricted resources used first? Or, if available for use, are
unrestricted net resources (committed, assigned, or unassigned) used first? If a local government
does not have an accounting policy that identifies the order of use of resources, then the net
resources with the most constraints are used first.
Unrestricted Fund Balance
Unrestricted fund balance is the amount of fund balance left after determining both nonspendable
and restricted net resources. The unrestricted fund balance is the amount of fund balance that a
local government, itself, has placed constraints on its use (committed and assigned) and fund
balance that does not have any specific purpose identified for the use of those net resources
(unassigned). Unrestricted fund balance, therefore, includes the committed, assigned, and
unassigned classifications. Committed and assigned fund balance represent resources set aside
by the government to fund specific purposes. The two classifications differ in the formality of
the action required to set aside the net resources.
The government's highest level of decision-making authority is required to commit available
fund balance to a specific purpose. Once the action has been taken, the committed funds cannot
be used for any other purpose unless the commitment is rescinded by the same type of action that
previously committed the funds. The action taken to commit the funds must be taken prior to the
end of the fiscal year, but the specific amount may be determined in the subsequent period.
The authority to assign may be delegated to an official other than the governing body. Unlike
committed fund balance, the action taken to assign fund balance may be made after year end. In
governmental funds other than the general fund, the assignment must follow the government's
intent for the specific purpose of the individual funds. Therefore, all remaining positive fund
balances in the special revenue, debt service, and capital projects funds are classified as assigned.
Unassigned fund balance represents the remaining unrestricted fund balance in the general fund
after identifying fund balance that has been committed or assigned. Deficits in fund balances of
other governmental funds are reported as unassigned. Assignments should never cause a deficit
in unassigned fund balance to occur.
Stabilization Arrangements: Restricted/Committed vs. Unassigned
Many local governments currently set aside part of fund balance for emergencies, working
capital, cash flows, revenue shortages, or other contingencies. The authority to set aside these
amounts usually comes from ordinance or resolution. The GASB calls these types of funds
Reviewed: July 2012 3 2010-1003
Revised: July 2012
"stabilization arrangements." For a government to be able to set aside these types of funds as
restricted or committed, they need to specifically define when these amounts may be used and
specify a situation that cannot be expected to occur routinely. For example, identifying funds to
be accessed "in an emergency" does not sufficiently detail the circumstance or condition that
must be met for the funds to be considered committed. To commit these funds, the government
needs to be more specific in defining an emergency.,, If the arrangement meets these
requirements, it would be considered a specific purpose and reported as either restricted or
committed, depending on the source of the constraint. Stabilization arrangements that do not
meet the requirements should be reported as part of unassigned fund balance in the general fund.
Appropriated Fund Balance
Usually a local government only classifies fund balances at year end for financial reporting
purposes. Thus only current, and not future, net resources are classified. Typically, the
subsequent year's budgeted expenditures are expected to be paid from the subsequent year's
revenues and not the current reporting year's ending fund balances. On occasion, local
governments will "deficit" budget, or in other words, budget more expenditures than anticipated
revenues and drawdown beginning fund balance for the subsequent year. An appropriation of
existing fund balance to eliminate a projected budgetary deficit in the subsequent year's budget
in an amount no greater than the projected excess of expected expenditures over expected
revenues satisfies the criteria to be classified as an assignment of fund balance.8
Recommendations
Adoption of Comprehensive Fund Balance Polic
p P y
q
The GASB's Statement No. 54, Fund Balance Reporting and Governmental Fund Type
Definitions, identifies fund balance accounting policies that a local government may have or
should consider. The Office of the State Auditor recommends that each local government
establish/approve a formal comprehensive fund balance policy relating to accounting and
financial reporting of governmental fund balances. A local government's fund balance policy
k could address the following areas:
• Minimum fund balance
• Order of resource use
• Stabilization arrangements
• Committing fund balance
• Assigning fund balance
Minimum Fund Balance
The Office of the State Auditor recommends that local governments determine and establish in
their fund balance policy a desired minimum level of unrestricted fund balance to maintain in
their general fund and other significant governmental funds. The local government's governing
8 GASB Statement No.54,$ 16.
Reviewed: July 2012 4 2010-1003
Revised: July 2012
body should keep revenue streams in mind when determining a minimum level of fund balance
for their policy. Often a local government's revenue stream is not evenly distributed throughout
the year. A local government will need sufficient beginning fund balances to pay expenditures
until these revenues are received. For example, funds that rely heavily on property taxes must
maintain sufficient financial resources until the next tax revenue collection cycle. Funds that
rely on state appropriations and grants should consider the timing of those payments. Also, local
governments need to maintain a prudent level of financial resources to protect against a forced
service level reduction or having to raise taxes and fees because of temporary revenue shortfalls
or unpredicted one-time expenditures.
Other considerations include the predictability of revenues and the volatility of expenditures. A
local government may need higher levels of unrestricted fund balance if significant revenue
sources are subject to unpredictable fluctuations or if operating expenditures are highly volatile,
such as greater expenditures in the early part of the year. The availability of resources in other
funds and the potential drain on the general fund resources from other funds could affect the
necessary level of minimum unrestricted fund balance. The availability of resources in other
funds may reduce the amount of unrestricted fund balance needed in the general fund, just as
deficits in other funds may require that a higher level of unrestricted fund balance be maintained
in the general fund.
After establishing a minimum level of unrestricted fund balance, the policy should provide for
both a time frame and a specific plan for increasing or decreasing the level of unrestricted fund
balance. If the actual unrestricted fund balance is not consistent with the policy, a plan should be
developed by the governing body that will allow for compliance with the desired minimum level.
The fund balance policy should include a provision for a regular review of the sufficiency of the
minimum fund balance level.
Order of Resource Use
The Office of the State Auditor recommends that local governments include in their
comprehensive fund balance policy.the normal order of resource use. The policy should identify
which fund balance resources (restricted or unrestricted) are normally used first when an
expenditure is incurred for purposes for which both restricted and unrestricted fund balance is
available. Also, for unrestricted fund balance, the local government should identify the order in
which committed, assigned, or unassigned amounts are spent when an expenditure is incurred for
purposes for which amounts in any of those unrestricted fund balance classifications could be
used.
Stabilization Arrangements
The Office of the State Auditor also recommends that local governments consider establishing a
stabilization arrangement for emergency situations in their comprehensive fund balance policy.
The policy should establish the amount to be set aside, identify the types of nonroutine
emergencies/situations that would meet the need for use of stabilization funds, and clearly state
that the amount set aside may only be used for the identified emergency situations.
Reviewed: July 2012 5 2010-1003
Revised: July 2012
Committing Fund Balance
The Office of the State Auditor also recommends that a local government's governing body
identify in its comprehensive fund balance policy its process for committing fund balance to a
specific purpose. The policy could identify the local government's highest level of decision
making authority, what formal action is required to commit fund balance, and what specific
purposes normally will require committing resources.
Assigning Fund Balance
Furthermore, the Office of the State Auditor recommends each local government that decides to
delegate the authority to assign fund balance for a specific purpose include in their
comprehensive fund balance policy the body or official authorized to assign amounts to a
specific purpose and the types of specific purposes that may be assigned by that delegated body
or official. The policy should also specify how the amounts for such assignments are arrived at
and whether the governing body will set the assignments annually or will set up a process to
make the assignment based on the guidelines established by the governing body.
Appropriate Fund Balance Levels
The Office of the State Auditor recommends that, at year-end and/or at other key times of the
year, local governments that rely significantly on property taxes maintain an unrestricted fund
balance of approximately 35 to 50 percent of fund operating revenues or no less than five months
of operating expenditures in their general fund and special revenue funds. This amount of
unrestricted fund balance should provide the local government with adequate funds until the next
property tax revenue collection cycle. The adequacy of unrestricted fund balance should be
assessed based on an individual local government's own circumstances. If the local
government's unrestricted fund balance is less than or greater than the recommended level, the
local government should be able to explain the reason for the difference.
According to the Minnesota Department of Education, Minnesota school districts, unlike most
local governmental units, experience timing of receipts from local property tax levies, state aids,
and federal aids that provide a more reliable flow of cash to fund operations. Therefore, a
recommended unrestricted fund balance for school districts may be less than the amounts
recommended above for other local governmental units. Each school district should determine
the appropriate level of unrestricted fund balance based on the school district's circumstances.
Local governments should also consider taking a position on the level of unrestricted fund
balance in other funds that have unrestricted revenues. In setting an appropriate level, the local
government should consider any long-term forecasting/planning issues to avoid the risk of
placing too much emphasis on the level of unrestricted fund balance at any one time.
Reviewed: July 2012 6 2010-1003
Revised: July 2012
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Per Diem Meals and Incidental Expenses ( M&IE) QUESTIONS:
overview Breakdown
For all travel policy questions.email
FY 2013 Highlights t.velpolicy @gsa.gov.
Per Diem Files(Archived) The following table is provided for federal employees who need to deduct provided meals from
Per Diem Mobile app their daily meals and incidental expense(MME)allowance. Refer to Section 301.11.18 of the
Federal Travel Regulation for specific guidance on deducting these amounts from your per diem �f
FAQ reimbursement claims for meals furnished to you b the government. Other organizations may
v y 9 g v Traveling?
Have a Per Diem°uestion? have different rules that apply for their employees:please check with your organization for more Find Resources to Help
M&IE Breakdown assistance. fo
Factors Influencing Lodging The table lists the six M&IE tiers in the lower 48 continental United States(currently ranging
Rates from$46 to$71).If you need to deduct a meal amount,first determine the location where you
will be working while on official travel. You can look up the location-specific information at
Fire Safe Hotels www.Osa.goyperdiem. The MME rate for your location will be one of the six tiers listed on this RELATED GSA TOPICS
Per Diem Rates table. Find the corresponding amount on the first line of the table(M&IE Total)and then look State Tax Exemption Forms
below for each specific meal deduction amount. FedRooms®
Per Diem Mobile Blackberry File
Travel E-mait Notification
Download The table also lists the portion of the M&IE rate that is provided for incidental expenses POV Mileage Reimbursement Rates
(currently$5 for all tiers),as well as the amount federal employees receive for the first and last
calendar day or travel. Th first and last calendar day of travel is calculated at 75 percent.
GOVERNMENT LINKS
M&IE Total U14 $51 $56 $61 $66 $71 Fire Safety infomtation
Continental $8 $9 $10 $11 $12
Breakfast
Breakfast !i
Lunch $12 $13 $15 $16 $18
Dinner $26 $29 $31 $34 $36
Incidentals .-'$5 $5 $5 $5 $5
First& $38.25 $42 $45.75 $49.50 $5325
Last Day of
Travel
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