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<br />25 <br /> <br />Currently, the City Manager and staff present a budget to the City Council that <br />encompasses two Fiscal Years. Following approval, the City Council at least annually reviews <br />this bi–annual budget. <br /> <br />The City Manager is authorized to approve appropriation transfers within any City <br />department or fund up to a specified amount; however, any new appropriation or appropriation <br />transfer between departments or funds requires approval by the City Council. Supplemental <br />appropriations may be necessary during the year and are reflected in the budget amounts in the <br />financial statements. Expenditures may not legally exceed appropriations at the department <br />level. <br /> <br />Under the City Charter, all unexpended appropriations lapse at the end of the Fiscal <br />Year unless they are lawfully committed, or are required by law to be continuously appropriated <br />from year to year. <br /> <br />Lawfully committed amounts include amounts legally encumbered at year–end. <br />Encumbrance accounting, under which purchase orders, contracts, and other commitments for <br />the expenditure of monies are recorded in order to reserve that portion of the applicable <br />appropriation, is employed as an extension of formal budgetary integration in the governmental <br />fund types. Encumbrances outstanding at year–end are reported as reservation of fund <br />balances since they do not constitute expenditures or liabilities, and re–appropriations in the <br />subsequent year provide authority to complete these transactions as expenditures. <br /> <br />The City Council reviews budget results at the mid–year review and at budget adoption. <br />The ongoing review and long range planning focus for financial management provides <br />numerous opportunities to identify and respond to changes in revenues and expenditures and in <br />community priorities. <br /> City Reserves. In 1989–90, the City Council adopted a policy for funding financial <br />reserves and a series of financial values that were to be utilized in the development of the future <br />budgets (the “Financial Goals Statement”). The Financial Goals Statement identifies and <br />formalizes the financial principles by which the City is guided; it provides direction for preparing <br />annual budget strategies and budgets and for conducting the day–to–day and long–term <br />municipal affairs. <br /> <br />In part, the Financial Goals Statement stated that the City would maintain reserve fund <br />or working capital balances of at least 20% of operating expenditures in the General Fund and <br />Enterprise Funds. This was considered the minimum level necessary to maintain the City’s <br />credit worthiness and to adequately provide for (i) economic uncertainties, local disasters, and <br />other financial hardships or downturns in the local or national economy; (ii) contingencies for <br />unseen operating or capital needs; and (iii) cash flow requirements. Reflecting this policy goal, <br />the City maintained a Major Emergencies Reserve Fund and an Economic Uncertainty Reserve <br />Fund, the value of which Funds, together, were targeted to equal 20% of operating expenditures <br />in the City’s General Fund and Enterprise Fund, when possible. <br /> <br />In Fiscal Year 2015–16, realizing that unfunded liabilities for pensions and retiree <br />healthcare were a significant problem that restricted the City’s ability to provide services to its <br />community, the City Council reduced the reserve fund policy to 16.67% and directed that up to <br />50% of any General Fund annual surpluses go towards paying down unfunded liabilities <br />quicker. The targeted reserve level of 16.67% is equal to two months of operating expenses for