FYE 14 Budget prelim - City of Norman

CITY OF NORMANFINANCIAL POLICIESSeveral financial policies have been used in the development of the Fiscal Year Ending(FYE 14) Budget and five-year forecast. The applications of the policies vary given the type ofFund. The “Budget Highlights” section identifies the specific application of each policy, if itapplies to that particular fund. The financial policies that have been applied to various funds aredocumented below.Balanced BudgetThe City shall annually adopt a balanced budget in accordance with the OklahomaMunicipal Act (Title 11 Oklahoma Statutes 2006). As such, expenditures may not legally exceedappropriations at the Fund level for each legally adopted annual operating budget (i.e., a fundbalance cannot be negative).Five Year ForecastFive-year forecasts of resources and the utilization of those resources have been prepared forall Funds of the City for the purpose of projecting existing conditions into the future to determinefuture financial viability, to identify financial strengths and weaknesses and to provide a base forremedial or supportive financial policy actions. The City legally adopts a budget for a one-yearperiod; five-year forecasts are prepared for financial planning purposes. Based on these actions andother factors, actual financial performance in future years will vary from that projected here.Reasonable Cost of ServiceFor purposes of projecting existing costs into the future it has been assumed that existingcosts are reasonable given existing service levels.Reserve PoliciesOperating ReserveIn fiscal year 2011, Council directed staff to prepare a formal policy in Ordinance formcodifying the City’s reserve policies and complying with Governmental Accounting StandardsBoard Statement # 54. Direction was given to establish a separate “Rainy Day Fund” which couldnot be used except in unusual circumstances. The Ordinance (effective July 28, 2011) establishes aNet Revenue Stabilization or “Rainy Day” Fund, which would have minimum fund balance of threepercent (3%) of annual budgeted General Fund expenses, a target fund balance of four and a halfpercent (4.5%) of General Fund expenses and a maximum fund balance of sic percent (6%) ofannual General fund expenses. The Ordinance also requires a minimum General Fund OperatingReserve fund balance of three percent (3%) of General Fund expenses and would require that thetwo percent (2%) Emergency Reserve allocation be included in future year budgets. Under theOrdinance, Net Revenue Stabilization Fund balance could only be appropriated for expenditure bythe City Council if at least one of three circumstances is met:1.) The General Fund Operating Reserve fund balance is projected to fall below onepercent (1%) of budgeted expenditures.ANNUAL BUDGET33