Ann Arbor Updates Fund/Debt Policies
At its June 20, 2011 meeting, the Ann Arbor city council adopted a new fund balance policy to comply with the Governmental Accounting Standards Board (GASB) Statement No. 54, and revised the city’s debt policy to include two new sections – one on defeasance of debt and another on inter-fund loans.
The new GASB standard requires a finer-grained explication of the components of a fund balance. The breakdown of fund balance categories is: (1) non-spendable – not in spendable form or legally/contractually unable to be spent; (2) restricted – constraints on funds placed by creditors or through enabling legislation; (3) committed – specific constraints placed on use of funds by the city council (for example, funds set aside by council resolution); (4) assigned – constrained by the intent of the city, but not restricted or committed (for example, those funds to which authority for assignment is given to the chief financial officer); and (5) unassigned – fund balance that does not fit into any other classification. [.pdf of fund balance policy]
The debt policy as it relates to inter-fund loans includes a provision that addresses the ability of the city to make loans to specific funds from the investment pool. [The city invests its fund balances in a pool, not for each fund.] The policy notes that while such inter-fund loads may be prudent in certain situations, they are ultimately backed by the city’s general fund. So such inter-fund loans should only be approved if the credit worthiness is high for the fund to which a loan is made. [.pdf of debt management policy]
This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow: [link] [Full Story]