R300RESOLUTION N0.300
A RESOLUTION ADOPTING AN AMENDED CITY OF KENNEDALE
FISCAL MANAGEMENT POLICY
WHEREAS, on June 10, 2004, City Council adopted the document entitled, "Financial
Management Policy," 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 tier dealing with fiscal emergencies; and
WHEREAS, the City Council has reviewed the City's Financial Management Policy.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF KENNEDALE, TEXAS:
The City Council of the City of Kennedale, Texas hereby approves the Financial
Management Policy dated November 5, 2009, attached hereto as "Exhibit A."
PASSED, ADOPTED AND APPROVED by the City Council of the City of Kennedale,
Texas, this the 5th day of November 2009.
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`~' •'• ' ` ~° APPROVED:
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"`~.~,°..••' °~~' Mayor, Bryan Lankhorst
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G ~Y~f~l~ ! C ~rt~ ~_i~
Kathy I~u~ City Secretary
CITY OF KENNEDALE
FINANCIAL MANAGMENT POLICY
ADOPTED BY CITY COUNCIL: JUNE 10, 2004
KENNEOALE
PREFACE
A Financial Management Policy provides guidelines to enable the City staff to achieve along-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.
It is our intent to bring forth this policy to Council for review at least annually. In order to demonstrate
that review, it will be custom practice for the governing board of a municipality to adopt a resolution
to make the review an official public record.
SUBSEQUENT REVIEW & ADOPTION
DECEMBER 11, 2008
NOVEMBER 5, 2009
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I. PURPOSE
The policies set forth below provide guidelines to enable the city staff to achieve along-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
A. Accounting -The Director of Finance is responsible for establishing the chart of
accounts and for properly recording financial transactions.
B. External Auditing - The City will be audited annually by outside independent
accountants (auditors). The auditors must be a Certified Public Accountant (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
Principals (GAAP) and be knowledgeable in the Government Finance Officers Association
(GFOA) 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.
C. External Financial Reporting -The City will prepare and publish a Comprehensive Annual
Financial Report (CAFR). The CAFR will be prepared in accordance with GAAP 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.
D. Internal Financial Reporting -The Finance Department will prepare internal financial
reports sufficient for management to plan, monitor, and control the City's financial
affairs.
III. INTERNAL CONTROLS
A. 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.
B. 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.
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IV. OPERATING BUDGET
A. 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.
B. 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.
C. Encumbrances -The City will not encumber funds for operating use at year-end.
D. 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.
E. 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.
F. 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.
V. CAPITAL BUDGETS
A. Preparation -The capital budget will include all capital project funds and capital
resources. The capital budget will be prepared annually and presented to the City
Council with the operating budget.
6. 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 may be made before a capital project is approved
by the City Council.
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C. Encumbrances -Funds for capital projects will be encumbered until the project is
complete.
D. 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.
E. 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 requirement is 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
A. Simplicity -The 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.
B. Certainty -The 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.
C. Equity -The 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.
D. Administration -The benefits of a revenue will exceed the cost of producing the
revenue, except in cases approved by the City Council. The cost of collection will be
reviewed periodically for cost effectiveness and efficiency.
E. 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.
F. 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.
G. 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
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periodic reviews of fees and charges to ensure that fees provide adequate coverage of
costs of services.
H. Inter-fund Administrative Charges -Enterprise funds and certain special revenue funds
will pay the general fund for direct services rendered.
Utility Rates -The 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.
J. 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.
K. Revenue Monitoring - Revenues actually received will be compared to budgeted
revenues and variances will be investigated on a monthly basis.
VII. EXPENDITURE CONTROL
A. 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.
B. Contingency Reserve -The general fund will maintain an undesignated balance of at
least 25% of budgeted expenditures.
C. Purchasing -All purchases shall be in accordance with City's Purchasing Policy and in
accordance with State law.
D. Prompt Payment -All invoices will be paid within thirty (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
A. Investments -The City's investment practices will be conducted in accordance with the
Investment Policy approved by the City Council.
B. Cash Management -The City's cash flow will be managed to maximize the cash
available to invest.
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C. 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 (30) days from the end of the quarter.
D. 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
A. 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.
B. 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.
C. Risk Management -The 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.
D. Loss Financing -The City will maintain property, liability and workman's compensation
coverage through participation in the Texas Municipal League's (TML)
Intergovernmental Risk Pool. The Pool maintains reinsurance coverage to protect the
Pool in the event of excessive losses.
X. DEBT MANAGEMENT
A. 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.
B. Self-Supporting Debt -When appropriate, self-supporting revenues will pay debt service
in lieu of tax revenues.
C. Ratin s -Full disclosure of operations will be made to the bond rating agencies. The City
staff, with the assistance of financial advisors and bond counsel, will prepare the
necessary materials for and presentation to the rating agencies.
D. Water & Wastewater Bond Coverage Ratios -The City will maintain a coverage rate of
1.50 times in the Water and Sewer Utility Fund.
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E. Federal Requirements -The 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.
F. Leal Debt Limit -The City will limit general obligation debt expenditures to 50% of
General Fund expenditures.
G. Debt Service Reserves -The City will maintain a fund balance of at least 10% of
budgeted expenditures in the Debt Service Fund.
H. Competitive Bidding -The 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.
XI. ANNUAL REVIEW
The Director of Finance shall, at a minimum, submit proposed amendments of this policy to the
City Council annually.
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