2012 Comprehensive Annual Financial Report - the City of Tukwila

CITY OF TUKWILA: 2012 CAFRNOTES TO THE FINANCIAL STATEMENTSFund Balance/Net PositionFund balance represents the difference between the current assets and current liabilities. The Cityrestricts those portions of fund balance which are legally segregated for a specific future use or whichdo not represent available, spendable resources and therefore are not available for generalappropriation or expenditure.Net position represents the difference between assets and liabilities. Net position invested in capitalassets, net of related debt, consists of capital assets, net of accumulated depreciation, reduced by theoutstanding balances of any borrowing used (i.e., the amount that the City has not spent) for theacquisition, construction or improvement of those assets. Net position is reported as restricted whenthere are limitations imposed on their use either through the enabling legislation adopted by the City orthrough external restrictions imposed by creditors, grantors or laws or regulations of other governments.The remaining balance is reported as unrestricted.The City applies restricted resources first when an expense is incurred for purposes of which bothrestricted and unrestricted net position is available. This is followed by committed resources, thenassigned, and lastly unassigned resources.In 2011, the 2003 Limited General Obligation Bond debt obtained to finance the construction of the golfcourse clubhouse was transferred from the Foster Golf Course fund to a governmental debt servicefund. This amount is excluded from the net investment in capital assets for the governmental activities.It is included in the total for the net investment in capital assets calculation for the primary government.In 2012, the City revised the Reserve Policy which addresses the various types of the City’s operatingand restricted use funds. The objectives of this Policy are to establish, attain, and restore minimumfund balances, including self-insurance health care reserve funds, and specified review and reporting offund balances.At the close of each fiscal year, the General Fund balance and the Reserve Fund balance shall eachequal or exceed 10% of the previous year General Fund revenue, exclusive of significant nonoperating,non-recurring revenues such as real estate sales or transfers in from other funds.Enterprise funds, at the close of each fiscal year, the unrestricted fund balance shall equal or exceed20% of the previous year revenue, exclusive of non-operating, non-recurring revenues such as realestate sales, transfers in from other funds or debt proceeds.The City shall maintain a reserve balance in each of its self-insured health care funds an amount equalto 2.5 times or 250%, of the actuarially determined IBNR (incurred but not reported) reserve. Thecontingency reserve balance will be combined with the IBNR reserve balance and recorded as oneliability in each of the self-insured health care plan funds.Fund Balance ComponentsThe fund balance amounts for governmental funds have been classified in accordance with GASBStatement No. 54 and are reported as nonspendable, restricted, committed, assigned or unassigned.Nonspendable fund balance includes items that cannot be spent. This includes activity that isnot in a spendable form (inventories, prepaid amounts, long-term portion of loans/notesreceivable, or property held for resale unless the proceeds are restricted, committed orassigned) and activity that is legally or contractually required to remain intact, such as aprincipal balance in a permanent fund.Restricted fund balances have constraints placed upon the use of the resources either by anexternal party or imposed by law through a constitutional provision or enabling legislation.60