Fort Walton Beach Council agenda — 03-19-12--special--audit — reading text

E These classifications reflect not only the nature of funds. but also provide clarity to the level of restriction placed upon fund balance. Fund balance can have different levels Unassigned r of restraint, such as external versus internal compliance requirements. r fund balance is a residual classification with the General Fund. The General Fund should be the only fund that reports a positive unassigned balance. In all other funds, unassigned is limited to negative residual fund balance. The City's General Fund formal fund balance policy establishes a targeted minimum reserve balance in its w a Committed Fund Balance equal to 30% of annual budgeted expenditures. 0 In circumstances when an expenditure is made forfund a purpose for which amounts are balance is generally depleted in o. available in multiple fund balance classifications. the order of restricted, committed, assigned, and unassigned. Net Assets When both restricted and unrestricted resources are available for use, it is the govemment's policy to use restricted resources first and then unrestricted resources, as they are needed. F. Reclassifications Certain accounts in prior -year financial statements have been reclassified for comparative purposes to conform to presentation in the current -year financial statements. G. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 41  3. t. a City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgets Budgets are adopted on a basis consistent with generally accepted accounting principles. Annual appropriated budgets are adopted by resolution for all governmental and proprietary funds. However, budgets for proprietary funds are not legally required a to be reported on and me not included in these financial statements. All appropriations lapse at fiscal year -end except for appropriations related to multi -year capital projects. Budgetary data reflected in the financial statements are established by the following a n procedures: o Prior to September 1 of each year, proposed budgets are received by the City Council U from the City Manager. These proposed expenditures, along with allforward be brought estimated are receipts, taxes to be levied, and balances expected to a considered by the City Council. The City Council requires such changes as deemed necessary, sets proposed millages, and establishes dates for tentative and final public r N budget hearings as prescribed by Florida Statutes. N Proposed budgets are advertised in a newspaper of general circulation in the City. Public hearings are conducted for the Purposes offorreceiving input, responding to intended actions to all citizens t0n complaints, and providing reasons and explanations participating. m u Prior to October 1, the budget for all governmental and proprietary funds of the City is legally enacted through passage of a resolution. Budget amendments are periodically LL passed via resolutions during the fiscal year. Appropriations lapse at year -end except for appropriations related to multi -year capital projects. Budgeted beginning fund utilization of prior balance in the accompanying financial statements reflects planned level required to accomplish am years' unreserved/undesignated fund balance to the N current year objectives. a The level of budgetary control ( that is the level at which expenditures cannot legally exceed appropriations) has been established at the fund level. The City Manager and Finance Director are authorized to transfer budgeted amounts within departments of a fund and between departments of a fund: however, any revisions that alter the total of any fund must be approved by the City Council. expenditures n Budget amounts reflected in the financial statements are originally adopted amounts as dE amended by actionamounts of the City Council by revision of fund totals. All amendments to were made in a legally permissible manner. Um originally adopted 42 PSCketPg• 68  3 1. a City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY ( CONTINUED) B. Encumbrances Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded in order to reserve that portion of the applicable appropriation, is employed in the governmental funds. Encumbrances outstanding at year -end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be reappropriated and honored during the subsequent year. NOTE 3 - DEPOSITS AND INVESTMENTS The City maintains a cash and investment management pool in which each fund ( except Pension Trust Funds) participates on a dollar equivalent and daily transaction basis. The City's cash and investment management pool includes pooled cash maintained in interest - bearing demand deposit accounts, certificates of deposit, and pooled investments of the Local Government Surplus Trust Fund. Interest income ( which includes unrealized gains and losses) is distributed monthly based on balance at date of distribution. The City' s cash and investment management pool is considered to be cash equivalent for reporting purposes because it is an internally managed fund, which allows individual funds to, at any time, deposit additional cash or make withdrawals without prior notice or penalty. The Local Government Surplus Trust Fund - Fund B does not meet the requirements of a SEC 2a7 -like fund defined by GASB No. 31 and is considered an investment; however, the City has chosen not to reclass Fund B from cash equivalent to investment for reporting purposes due to its immaterial balance of approximately $ 218,000 at September 30, 2012 in comparison to the City's pooled cash of approximately $ 26 million. As of September 30, 2012. Fund B recorded an unrealized gain on investment in the amount of $56. 141. 43 Packet.P„  31. City of Fort Walton Beach, Florida NOTES TO FINANCIAL STATEMENTS September 30, 2012 NOTE 3 - DEPOSITS AND INVESTMENTS ( CONTINUED) Deposits Custodial Credit Risk - it is the City's policy to maintain its deposits only with " Qualified Public Depositories" as defined in Chapter 280, Florida Statutes. The provisions of this statute allow " Qualified Public Depositories" to participate in a multiple financial institution collateral pool to ensure the security for public deposits. All qualified public depositories must place with or in the name of the Chief Financial Officer of the State of Florida, collateral in the amount of the average daily balance of public deposits multiplied by the average monthly balance of public deposits or 125 percent of the average daily