1990-10 Adopting the KIB Fiscal Policythat:
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KODIAK ISLAND BOROUGH
ORDINANCE NO. 90 -10
AN ORDINANCE ADOPTING THE KODIAK ISLAND BOROUGH
FISCAL POLICY
By: Mayor Selby
Drafted by:
Finance Director
Introduced: 02/15/90
Public Hearing: 03/15/90
Adopted: 03/15/90
BE IT ORDAINED by the Kodiak Island Borough Assembly
Section 1. This ordinance is of a general and permanent
nature and shall become a part of the Code of Ordinances.
Section 2. Title 3 is amended by adding a new chapter
Chapter 3.01
Fiscal Policy
3.01.010 Purpose.
3.01.020 Operating Budget Policies.
3.01.030 Debt Policies.
3.01.040 Revenue Policies.
3.01.050 Investment Policies.
3.01.060 Accounting, Auditing and Financial Reporting.
3.01.070 Capital Budget Policies.
3.01.080 Reserve Policies.
3.01.010 Purpose. This fiscal policy is a statement of
the guidelines and goals that will influence and guide the
financial management practices of Kodiak Island Borough. A fiscal
policy that is adopted, adhered to, and regularly reviewed is
recognized as the cornerstone of sound financial management.
Effective fiscal policy -
• Contributes significantly to the Borough's ability to
insulate itself from a fiscal crisis.
• Enhances long term financial creditability by helping to
achieve the highest bond and credit ratings possible.
• Promotes long term financial stability by establishing
clear and consistent guidelines.
• Directs attention to the total financial picture of the
Borough rather than single issue areas.
• Promotes the view of linking long -run financial planning
Ordinance No. 90 -10
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with day to day operations, and
• Provides the Assembly and the citizens of the Borough with
a framework for measuring the fiscal impact of government services
against established fiscal parameters.
To these ends the following fiscal policy statements are provided.
3.01.020 Operating Budaet Policies. The budget is a plan for
allocating resources. The objective is to enable service delivery
with allocated resources. Services must be delivered to the
citizens at a level which will meet real needs as efficiently and
effectively as possible.
The Borough goal is to pay for all recurring expenditures with
recurring revenues and to use nonrecurring revenues for
nonrecurring expenditures.
It is important that a positive undesignated fund balance and a
positive cash balance be shown in all governmental funds at the end
of each fiscal year.
When deficits appear to be forthcoming within a fiscal year,
spending during the fiscal year must be reduced sufficiently to
create a positive undesignated fund balance and a positive cash
balance.
When possible the Borough will integrate performance measurement
and productivity indicators within the budget. This should be done
in an effort to improve the productivity of Borough programs and
employees. Productivity analysis should become a dynamic part of
the Borough administration.
The budget must be structured so that the Assembly and the general
public can readily establish the relationship between expenditures
and the achievement of service objectives.
The individual department and agency budget submissions must be
prepared with the basic assumption that the Assembly will always
attempt not to increase the current tax rates.
Budgetary review by the Assembly will focus on the following basic
concepts -
A. Staff Economy
The size and distribution of staff will be a prime concern. The
Assembly will seek to limit staff increases to areas where approved
program growth and support absolutely requires additional staff and
to reduce staff where this can be done without adversely affecting
approved service levels.
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B. Capital Construction
Emphasis will be placed upon continued reliance on a viable level
of paydown capital construction to fulfill needs in an Assembly
approved comprehensive capital improvements program.
C. Program Expansions
Proposed expansion to existing programs and services must be
submitted as budgetary increments requiring detailed justification.
Every proposed program or service expansion will be scrutinized on
the basis of its relationship to the health, safety and welfare of
the community.
D. New Programs
New programs or services must also be submitted as budgetary
increments requiring detailed justification. New programs or
services will be evaluated on the same basis as program expansion
plus an analysis of long term fiscal impacts.
E. Existing Service Costs
The justification for base budget programs costs will be a major
factor during budget review.
F. Administrative Costs
In all program areas, administrative overhead costs should be kept
to an absolute minimum.
Functions of all departments and agencies should be reviewed in an
effort toward reducing duplicate activities within the Borough
government and the autonomous and semi- autonomous agencies which
receive appropriations from the borough.
The budget will provide for adequate maintenance of capital plant
and equipment and for its orderly replacement.
The administration will maintain budgetary controls at the
character level within each organizational unit. (Characters are
broad classifications of expenditures i.e., fringe benefits,
contractual services).
The preparation and distribution of monthly budget status reports,
interim financial statements, and annual financial reports are
required.
The Borough will remain current in payments to the retirement
system.
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The Borough will develop and annually update, a long range (3 -5
yrs) financial forecasting system that will include projections of
revenues, expenditures, and future costs and financing of capital
improvements that are included in the capital budget.
The Borough will develop, and annually update, a financial trend
monitoring system which will examine the fiscal trends from the
preceding 5 years (Trends such as revenues and expenditures per
capital and adjusted for inflation, liquidity, operating deficits).
Where possible, trend indicators will be developed and tracked for
specific elements of the Borough's fiscal policy.
3.01.030 Debt Policies. The Borough will not fund current
operations from the proceeds of borrowed funds.
The Borough will confine long -term borrowing to funding of capital
improvements or projects that cannot be financed from current
revenues.
When the Borough finances capital projects by issuing bonds, it
will repay the debt within a period not to exceed the expected
useful life of the project so constructed.
Target debt ratios will be annually calculated and included in the
review of financial trends.
Net debt as a percentage of the estimated market value of taxable
property should not exceed 2 %.
The ratio of debt service expenditures as a percent of governmental
fund expenditures should not exceed 15$.
The Borough recognizes the importance of underlying and overlapping
debt in analyzing financial condition. The Borough will regularly
analyze indebtedness including underlying and overlapping debt.
The Borough will maintain good communications about its financial
condition with bond and credit institutions.
The Borough will follow a policy of full disclosure in every annual
financial statement and bond official statement.
The Borough will avoid borrowing on tax anticipation and maintain
an adequate fund balance.
3.01.040 Revenue Policies. The Borough will try to maintain
a diversified and stable revenue structure to shelter it from short
run fluctuations in any one revenue source.
The Borough will attempt to maintain a diversified and stable
economic base by supporting policies that promote tourism, fishing,
agriculture, commercial and industrial employment.
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The Borough will estimate its annual revenues by an objective
analytical process.
The Borough, where possible and reasonable, will institute user
fees and charges for specialized programs and services in the
Borough. Rates will be established to recover operational as well
as capital or debt service costs.
The Borough will regularly review user fee charges and related
expenditures to determine if pre - established recovery goals are
being met.
The Borough will maintain a sound, consistent, and equitable ad
valorem property tax assessment program. The Borough will follow
an aggressive policy of collecting tax revenues. The annual level
of uncollected current property tax should not exceed 2 %.
The Borough should routinely identify governmental aid funding
possibilities. However, before applying for and accepting
intergovernmental aide, the Borough will assess the merits of a
particular program as if it were funded with local tax dollars.
Local tax dollars will not be used to make up for losses of
intergovernmental aid without first reviewing the program and its
merits as a budgetary increment.
3.01.050 Investment Policies. The Borough will maintain an
investment policy based on the Government Finance Officers
Association (GFOA) model investment policy.
The Borough will conduct an analysis of cash flow needs on an
ongoing basis. Disbursements, collections, and deposits of all
funds will be scheduled to insure maximum cash availability and
investment potential.
When permitted by law, the Borough will pool its various funds for
investment purposes.
The Borough will obtain the best possible return on all investments
consistent with the underlying criteria of liquidity and safety of
principal.
The Borough will regularly review contractual opportunities for
consolidated banking services. •
3.01.060 Accounting, Auditing and Financial Reporting
Policies. The Borough will establish and maintain a high standard
of accounting practices in conformance with Generally Accepted
Accounting Principals (GAAP).
The accounting system will maintain records on a basis consistent
with accepted standards for government accounting according to the
Government Accounting Standards Board (GASS).
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Regular monthly financial statements and annual financial reports
will present a summary of financial activity by departments and
agencies within all funds.
Where possible, the reporting system will also provide monthly
information on the total cost of specific services by type of
expenditure and revenue by fund.
An independent firm of certified public accountants will perform
an annual financial and compliance audit and will publicly issue
an opinion which will be incorporated into the Comprehensive Annual
Financial Report (CAFR).
The Borough will annually strive for the GFOA Certificate of
Achievement for Excellence in Financial Reporting and the GFOA
Distinguished Budget Presentation Award.
3.01.070 Capital Budget Policies. The Borough will make all
capital improvements in accordance with an adopted capital
Improvements Program.
The Borough will develop a multi -year plan for capital improvements
which considers the Borough's development policies and links the
development process with the capital plan.
The Borough will enact an annual capital budget based on the
multi -year capital improvements program.
The Borough will coordinate development of the capital improvement
budget with development of the operating budget. Future operating
costs associated with new capital projects will be projected and
included in operating budget forecasts.
The Borough will maintain all its assets at a level adequate to
protect the Borough's capital investment and to minimize future
maintenance and replacement costs.
The Borough will identify the "full- life" estimated cost and
potential funding source for each capital project proposal before
it is submitted to the Assembly for approval.
The Borough will determine the total cost for each potential
financing method for capital project proposals.
The Borough will identify the cash flow needs for all new projects
and determine which financing method best meets the cash flow needs
of the project.
3.01.080 Reserve Policies. The Borough will maintain a fund
balance designated for fiscal cash liquidity purposes (i.e., fiscal
reserve) that will provide sufficient cash flow to minimize the
potential of short term tax anticipation borrowing.
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ATTEST:
PASSED AND APPROVED THIS 15th DAY OF MARCH, 1990.
t hC - a
The Borough will maintain appropriated contingencies to provide for
unanticipated expenditures. The three contingencies and their
recommended minimum funding levels are:
Emergency Contingency 1 % of General Fund
Personnel contingency .5 % of General Fund
Litigation contingency .25 % of General Fund
The Borough will maintain sufficient self insurance reserves as
established by professional judgment based on the funding
techniques utilized and the recorded losses.
KODIAK ISLAND BOROUGH
Bo
peg ding Officer
Ordinance No. 90 -10
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