Reso 2013-029 - Laserfiche WebLink

Home

City of San Leandro Notes to Basic Financial Statements For the year ended June 30, 2012 79 NOTE 10 – NET ASSETS AND FUND BALANCES, continued C. Encumbrances The City uses an encumbrance system as an extension of normal budgetary accounting for governmental funds. Under this system, purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of applicable appropriations. Encumbrances outstanding at year -end are recorded as restricted, committed or assigned fund balance, depending on the classification of the resources to be used to liquidate the encumbrance, since they do not constitute expenditures or liabilities. Outstanding encumbrances at year-end are automatically reappropriated for the following year. Unencumbered and unexpended appropriations lapse at year-end. Encumbrances outstanding as of June 30, 2012 were as listed below: General Fund 217,736$ 217,736$ D. Contingency Arrangements The City’s annual budget requires the City to implement and maintain fund balance to handle any unforeseen contingencies in the future, rather than continued reliance on the City’s operating General Fund reserves. These unforeseen contingencies include Economic Uncertainty, major Emergencies and Contingencies. As of June 30, 2012, the following are reported within the unassigned fund balance of the General Fund: Major Emergencies 5,000,000$ Economic Uncertainty 5,177,251 Compensated Absences 540,062 Total 10,717,313$ E. Use of Restricted/Unrestricted Net Assets When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the City’s policy is to apply restricted net assets first. With respect to fund balance, the City considers restricted amounts to have been spent first when expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Additionally, the City considers committed amounts to have been spent first, assigned amounts to have been spent second, and unassigned amounts to have been spent last when an expenditure is incurred for purposes for which committed, assigned, and unassigned fund balance is available. F. Minimum fund balance policy. The governing City Council has adopted a financial policy to maintain a minimum level of unrestricted balance (the total of the committed, assigned, and unassigned components of fund balance) in the general fund. The guidelines call for such designated fund balance to be 20% of the General fund operating expenditures. This amount is intended to provide fiscal stability when economic downturns and other unexpected events occur.