Budget and Reserve Policy Item #32

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City of Santa Ana Council Policy Mayor's Authorization Subject Council Approval Date: BUDGET AND RESERVE POLICY March 16, 2021 This policy supersedes Budget and Financial Policies approved by City Council on June 6, 2017. PURPOSE This Budget and Reserve Policy includes directives to balance the budget and provide information to support long- range financial decisions, and Reserve requirements to mitigate risk and support cash flow. Development of this policy included a risk assessment and cash flow analysis, as well as best -practice recommendations from the Government Finance Officers Association (GFOA), a national non-profit organization providing training and interpretation of accounting and financial reporting standards applied to the government sector since 1906. This policy compliments budget requirements contained in the City's Charter and Municipal Code. HLTI�1"8_1i"731PL7LII_L`Ia4 The City's audited financial statements of assets and liabilities are presented in two formats: the Government -wide Statement of Net Position (full -accrual accounting), and the Fund Financial Balance Sheet (modified accrual accounting focused on available resources and current liabilities). Both presentations include the concept of restricted balance and unrestricted balance. In the Fund Financial Balance Sheet, unrestricted balance is comprised of committed, assigned and unassigned amounts. Committed and assigned amounts are spending constraints self- imposed by the City. This policy refers to the Unrestricted Fund Balance as the Reserve amount. NON -RECURRING RESOURCES Non -recurring resources include Unrestricted Fund Balance and one-time revenue (e.g. legal settlement, sale of property, etc.). The City Council may elect to fund recurring costs with non -recurring resources in either of the following circumstances: 1. The City Council declares a fiscal emergency or local emergency. 2. The City Council approves the use with a two-thirds vote for documented loss of revenue pursuant to an economic downturn or unusual circumstance. GENERAL FUND Background The General Fund is the primary operating fund of the City. It accounts for all general purpose unrestricted revenues including sales tax, property tax, locally levied taxes, fees for service and fines. The General Fund accounts for the operating costs of core city services including public safety, recreation, land -use regulation, public facility maintenance, and governance. General Fund Budget Directives & Long -Range Planning To support the ongoing fiscal health of the General Fund, the following directives are established. The City Manager shall annually present a balanced budget to the City Council for adoption, defined as proposed spending not exceeding available resources. Non -recurring resources should only fund non -recurring or capital costs. Budget and Reserve Policy, March 2021 - Page 1