R179CITY OF KENNEDALE, TEXAS
RESOLUTION NO 179
A RESOLUTION BY THE CITY COUNCIL OF CITY OF KENNEDALE,
TEXAS, PROVIDING FOR FIANCIAL MANAGEMENT POLICES;
REPEALING CONFLICTING RESOLUTIONS; AND PROVIDING AN
EFFECTIVE DATE.
BE IT RESOLVED BY THE CITY COUNCIL OF CITY OF KENNEDALE, TEXAS:
WHEREAS, financial management policies are prepared to provide a framework for fiscal
decision-making to ensure that financial resources are available to meet the present and future
needs of the citizens of Kennedale; and
WHEREAS, the benefits of financial management policies are to improve and streamline the
decision-making process, enhance credibility, provide a sense of continuity, and provide a means
for dealing with fiscal emergencies.
NOW, THERES, BE IT RESOLVED BY THE CITY COUNCIL OF CITY OF
KENNEDALE,TEXAS:
That the financial management policies of City of Kennedale, Texas attached hereto as Exhibit
"A" have been reviewed and approved.
If any section, subsection, sentence, clause, or phrase of this Resolution shall for any reason be
held to be invalid, such decision shall not affect the validity of the remaining portions of this
Resolution.
This resolution shall become effective and be in full force and effect from and after the date of
passage and adoption by the City Council of City of Kennedale, Texas.
PASSED AND ADOPTED by the City Council of City of Kennedale, Texas, this the
10~' day of June 2004.
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AP OVED:
ayor, Jim No ood
K thy Tut er, City Secretary
EXHIBIT A
CITY OF KENNEDALE, TEXAS
FINANCIAL MANAGEMENT POLICIES
I. PURPOSE STATEMENT
The policies set forth below provide guidelines to enable the city staff to achieve a long-
term, stable financial condition while conducting daily operations and providing services
that are consistent with the council-manager form of government established in the city
charter. The budget team follows these policies while developing the annual operating
budget. The scope of the policies cover accounting, auditing, financial reporting, internal
controls, operating and capital budgeting, revenue management, cash management,
expenditure control, asset management, financial condition and reserve and debt
management.
II. ACCOUNTING, AUDITING, AND FINANCIAL REPORTING
• Accounting -City's Director of Finance is responsible for establishing the chart of
accounts and for properly recording financial transactions.
• External Auditing - City will be audited annually by outside independent accountants
(auditors). The auditors must be a CPA firm and must demonstrate significant
experience in the field of local government auditing. They must conduct the city's
audit in accordance with generally accepted auditing standards and be knowledgeable
in the Government Finance Officers Association Certificate of Achievement program.
The auditors' report on city's financial statements will be completed within four
months of the city's fiscal year end.
• External Financial Reporting -City will prepare and publish a comprehensive annual
financial report (CAFR). The CAFR will be prepared in accordance with generally
accepted accounting principles and will be presented annually to the Government
Finance Officers Association (GFOA) for evaluation and awarding of the Certificate
of Achievement for Excellence in Financial Reporting.
• Internal Financial Reporting -The Finance Department will prepare internal financial
reports sufficient for management to plan, monitor, and control City's financial
affairs.
III. INTERNAL CONTROLS
• Written Procedures -The Director of Finance is responsible for developing written
guidelines on accounting, cash handling, and other financial matters, which will be
approved by the City Manager. The Finance Department will assist department heads
as needed in tailoring such guidelines to fit each department's requirements.
• Department Heads' Responsibility -Each department head is responsible to the City
Manager to ensure that proper internal controls are followed throughout his or her
department, that all guidelines on accounting and internal controls are implemented,
and that all independent auditor control recommendations are addressed.
IV. OPERATING BUDGET
• Preparation -City's annual operating budget will be prepared by a budget team
consisting of the City Manager, the Assistant to City Manager, the Director of
Finance, and other staff members appointed by the City Manager to participate. A
budget preparation calendar and timetable will be established and followed in
accordance with State law.
• Balanced Budget -Current operating revenue will be sufficient to support current
operating expenditures. Annually recurring revenue will not be less than annually
recurring operating budget expenditures (operating budget minus capital outlay).
Debt or bond financing will not be used to finance current expenditures.
• Encumbrances -The City will not encumber funds for operating use at year-end.
• Budget Amendments -The Finance Department will monitor all financial operations.
The budget team will decide whether to proceed with the budget amendment and, if
so, will then present the matter to the City Council. If the City Council decides a
budget amendment is necessary, the amendment is adopted in ordinance format and
the necessary budgetary changes are then made.
• Reporting -Monthly financial reports will be prepared by the Finance Department and
distributed to and reviewed by each department head. Information obtained from
financial reports and other operating reports is to be used by department heads to
monitor and control the budget as authorized by the City Manager.
• Performance Measures & Productivity Indicators -Where appropriate, performance
measures and productivity indicators will be used as guidelines and reviewed for
efficiency and effectiveness. This information will be included in the annual budget
process.
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V. CAPITAL BUDGETS
• Preparation -The capital budget will include all capital project funds and all capital
resources. The capital budget will be prepared annually and presented to the City
Council with the operating budget.
• Control -All capital project expenditures will be appropriated in the capital budget.
The Director of Finance will certify the availability of such appropriations or the
availability of resources so that an appropriation maybe made before a capital project
is approved by the City Council.
• Encumbrances -Funds for capital projects will be encumbered until the project is
complete.
• Alternate Resources -Where applicable, assessments, impact fees, or other user-based
fees will be appropriated to fund capital projects that have a primary benefit to
specific property owners.
• Debt Financing - If and when debt is issued, the proceeds will be used to acquire
major assets with expected lives which equal or exceed the term of the debt issue.
The exception to this requirements are the traditional costs of marketing and issuing
the debt, capitalized labor for design and construction of capital projects, and small
component parts that are attached to major equipment purchases.
VI. REVENUE MANAGEMENT
• Simplicity -City will strive to keep the revenue system simple which will result in a
decrease of compliance costs for the taxpayer or service recipient and a corresponding
decrease in avoidance to pay.
• Certainty -City will strive to understand its revenue sources and predict the reliability
of revenue streams. City will enact consistent collection policies so that management
may reasonably rely upon the certainty that revenues will materialize according to
budgets, plans, and programs.
• Equity -City will strive to maintain equity in the revenue system structure. That is,
City will seek to minimize or eliminate all forms of subsidization among entities,
funds, services, utilities, and customers.
• Administration -The benefits of a revenue will exceed the cost of producing the
revenue. The cost of collection will be reviewed periodically for cost effectiveness
and efficiency.
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• Non-Recurring Revenues - One-time revenues will not be used for ongoing
operations. Non-recurring revenues will be used only for non-recurring expenditures.
Care will be taken not to use such revenues for budget balancing purposes.
• Property Tax -Property shall be assessed at 100% of the fair market value as
appraised by Tarrant Central Appraisal District. Reappraisal and reassessment will be
done regularly as required by State law. A 99% collection rate on current assessments
and a 1% collection rate on delinquent assessments and penalties will serve as the
goal for tax collections.
• User-Based Fees -For services associated with a user fee or charge, the direct and
indirect costs of that service will be offset by a fee where possible. There will be
periodic reviews of fees and charges to ensure that fees provide adequate coverage of
costs of services.
• Inter-fund Administrative Charges -Enterprise funds and certain special revenue
funds will pay the general fund for direct services rendered.
• Utility Rates -City will review and adopt utility rates annually that will generate
revenues required to fully cover operating expenditures, meet the legal restriction of
all applicable bond covenants, and provide for an adequate level of working capital
needs. The rates will allow the Water & Sewer Fund to meet the fund balance
(working capital) requirements of 25% of operations.
• Interest Income -Interest earned from investment of available monies, whether pooled
or not, will be in accordance with the equity balance of the fund from which monies
were provided to be invested.
• Revenue Monitoring -Revenues actually received will be compared to budgeted
revenues and variances will be investigated on a monthly basis.
VII. EXPENDITURE CONTROL
• Appropriations -The City Manager's level of budgetary control is at the fund level for
all operating funds. The Department Heads' level of budgetary control is at the
department level. When a budget adjustment or amendment among funds is
necessary, it must be approved by the City Council.
• Contin~ency Reserve -The general fund will maintain an undesignated balance of at
least 25% of budgeted expenditures.
• Purchasing -All purchases shall be in accordance with City's purchasing policy and
in accordance with State law.
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• Prompt Payment -All invoices will be paid within 30 days of receipt in accordance
with State law. Procedures will be used to take advantage of all purchase discounts
where considered cost effective. Payments will be processed in order to maximize the
city's investable cash.
VIII. ASSET MANAGEMENT
• Investments -City's investment practices will be conducted in accordance with the
investment policy approved by the City Council.
• Cash Mana eg_ ment -City's cash flow will be managed to maximize the cash available
to invest.
• Investment Performance - As per state law, the Director of Finance will issue
quarterly reports on investment activity to the City Council. Each report will be
issued within thirty days from the end of the quarter.
• Fixed Assets and Inventory -Such assets will be reasonably safeguarded and properly
accounted for and prudently insured. The fixed asset inventory will be updated
regularly.
IX. FINANCIAL CONDITION AND RESERVE
• No Operating Deficits -Current expenditures will be paid with current revenues.
Deferrals, short-terms loans, or one-time sources will be avoided as budget balancing
techniques.
• _Operating Reserves -The General Fund will maintain an undesignated fund balance
of at least 25% of budgeted expenditures. The Water & Sewer Fund will maintain
working capital of at least 25% of estimated expenditures. The Debt Service Fund
will maintain a fund balance of at least 10% of budgeted expenditures.
• Risk Management -City will pursue every opportunity to provide for the public's and
city employees' safety. Health insurance coverage and property and casualty
insurance coverage will be reviewed annually as to amount of coverage provided and
cost effectiveness.
• Loss Financing -City will maintain property, liability, and workman's compensation
coverage through participation in the Texas Municipal League's Intergovernmental
Risk Pool. The Pool maintains reinsurance coverage to protect the Pool in the event
of excessive losses.
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X. DEBT MANAGEMENT
• Long-Term Debt -For operating purposes, long-term debt will not be used. The life
of the bonds will not exceed the useful life of the projects financed.
• Self-Supporting Debt -When appropriate, self-supporting revenues will pay debt
service in lieu of tax revenues.
• Ratin s -Full disclosure of operations will be made to the bond rating agencies. City
staff, with the assistance of financial advisors and bond counsel, will prepare the
necessary materials for and presentation to the rating agencies.
• Water & Wastewater Bond Coverage Ratios -City will maintain a coverage rate of
1.50 times in the Water and Sewer Utility Fund.
• Federal Requirements -City will maintain procedures that comply with arbitrage
rebate and other federal requirements. City will attempt, within legal bounds, to
adopt strategies, which will minimize the arbitrage rebate of interest earnings on
unspent bond proceeds it must pay to the federal government.
• Leal Debt Limit -City will limit general obligation debt expenditures to 50% of
General Fund expenditures.
• Debt Service Reserves -City will maintain a fund balance of at least 10% of budgeted
expenditures in the Debt Service Fund.
• Competitive Bidding -City will use a competitive bidding process in the sale of
bonds unless the nature of the issue warrants a negotiated bid. In situations where a
competitive bidding process is not elected, the city will publicly present the reasons
and will participate with the financial advisor in the selection of the underwriter or
direct purchaser.
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