Policies and Procedures

Balanced Budget

The development and management of the City of Roswell’s Annual Budget and Program for Services is governed by state law, formal policies, accepted practices, and the City of Roswell’s budget principles.

State law defines a balanced budget as the sum of estimated revenues and appropriated fund balances is equal to appropriations. City of Roswell's Fiscal Year (FY) 2022 is balanced by state law definition.

The principles guiding the development of the City of Roswell’s budget are that current year revenues should be equal to or greater than operating expenses and maintenance capital and that unassigned fund balance should be used for one-time capital projects.

A number of the other pertinent policies and practices are outlined in this section.

Basis of Budgeting/Accounting

All budgets are adopted on a basis consistent with Generally Accepted Accounting Principles (GAAP). Our budget is balanced, where inflows meet or exceed outflows.

For the basis of budgetary purposes, revenues and expenditures are recognized on the modified accrual basis to include encumbrances, which measures cash and all other financial assets that can readily be converted to cash.

The basis of accounting for the governmental funds is modified accrual and the basis of accounting for the proprietary funds is full accrual.

Full accrual recognizes economic events regardless of when cash transactions occur. Full accrual only requires reasonable assurance that the cash will be collected, while modified accrual accounting provides greater assurance that the cash will be available to pay liabilities when they come due.

Financial Policies and Procedures

The Roswell City Council has adopted a set of financial policies to govern the financial management of the various City funds. The practice of these policies has enabled the City to maintain an AAA uninsured rating with Moody’s and Standard and Poor’s. These policies cover 1) Budget Amendments for expenditures, 2) Budget Amendments for revenues, 3) Budget Transfers for expenditures, 4) Budget Transfers for revenues, and 5) City’s Investment Policy. The City of Roswell has also established procedures for 1) deposits, 2) deferred revenue, 3) disposal of assets, 4) purchasing, 5) petty cash, 6) acceptance of checks, 7) change drawer fund 8) purchasing card, 9) contracts, and 10) returned checks.

The City has developed financial policies to ensure that the City’s financial resources are managed in a prudent manner. The City maintains the goal of a structurally balanced budget to achieve long-term financial stability for the community. Current revenue will be sufficient to support current operating expenditures plus recurring capital (defined as “balanced budget”). Unreserved fund balances of three months operating expenditures will be maintained in the General Fund. Additional fund balance can be used for nonrecurring capital expenses. However, if projected revenue in future years is not sufficient to support projected requirements, an unreserved ending balance may be budgeted to achieve structural balance. This year’s budget is also reviewed in respect to how the decisions made this year will affect the City’s revenues and expenditures in the following years.

Revenue and Expenditure Policies

Current expenditures (both operating and recurring capital) are to be financed with current revenues. Fund balance in excess of authorized reserves will be used for one time capital purchases. The City shall avoid budgetary procedures that balance current expenditures through the obligation of future resources, or which finance on-going expenditures with one-time revenues. The City shall strive to avoid short-term borrowing to meet operational budget requirements. Nevertheless, this policy shall not prohibit short-term borrowing should a critical need arise.

Revenue estimates are based on historical trends and current information. The two largest revenue sources of property tax and sales tax are based upon historical data. User fees such as water and sewer, solid waste, and participant recreation rates are based on current number of users and historical trends.

Budget Transfers and Amendments

Since a budget is an estimate of revenues and expenditures, the budget management process does allow for transfers and amendments to the budget. The City of Roswell Budget Amendment/Budget Transfer process is regulated by the Official Code of Georgia Annotated and local policies. The level of control, the level at which budgeted expenditures may not legally exceed budgeted revenues plus allocated fund balance, is set at a minimum at the department level for each fund. Any increase in appropriation in any fund for a Department of local government, whether accomplished through a change in anticipated revenues in any fund or through a transfer of appropriations among Departments, shall require the approval of the governing authority.

Budget Transfers of less than $1,000 that do not change the total department allocation require approval of the appropriate Department Head. Departments may transfer a maximum of $5,000 per year in this manner. Budget Transfers of $1,000 or more require approval of the City Administrator or designee. Budget Transfers cannot increase the appropriation to any Department unless revenues to fund expenditures are from State or Federal reimbursement grant funds. Budget Transfers shall not be used to fund new capital projects that have not been previously approved by the governing authority.

Budget Amendments require approval of the governing authority. Any increase in appropriation in any fund for a Department that does not qualify as a Budget Transfer, shall qualify as a Budget Amendment and require approval of Council at any regular or special meeting of Mayor and Council.

Capital Improvement Program

The Capital Improvement Program (CIP) is a five-year program and details anticipated expenditures as well as the approved sources of funding. Capital requests are funded through fund balance, bond proceeds, grants, impact fees or other specially designated revenue sources.

The first year of the CIP is incorporated into the Annual Budget and Program for Services and is commonly known as the Capital Budget for the fiscal year. The Capital Budget is the governing body’s annual appropriation for capital spending and authorizes specific projects and appropriates specific funding for these projects. The subsequent or outlying years of the CIP are updated and revised each year to reflect the changing needs and priorities of the City. Projects and financing sources listed in the CIP for years other than the first year are not authorized until the Annual Budget and Program for Services for those years is legally adopted.

Accounting Policies

The budgeting and basis of accounting policies of the City of Roswell conform to Generally Accepted Accounting Principles (GAAP) as applicable to governments. The basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. At the fund level, government funds use the modified accrual basis of accounting. All government fund types, expendable trust funds and agency funds use the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e. when they become both measurable and available).

“Measurable” means the amount of the transaction can be determined and “available” means collectible within the current period or soon enough thereafter to be used to pay liabilities in the current period. The City considers revenues as available if they are collected within 60 days after year-end. Those revenues considered susceptible to accrual are property taxes, charges for services, sales taxes, fines, forfeitures, interest income, and intergovernmental grants. Revenues from licenses and permits and miscellaneous revenues are recorded as revenues when received in cash because they are generally not measurable until actually received.

In applying the susceptible-to-accrual concept to intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used for guidance. There are, however, essentially two types of these revenues. In one, monies must be expended on the specific purpose or project before any amounts will be paid to the City; therefore, revenues are recognized based on the expenditures recorded. In the other type, monies are virtually unrestricted as to purpose of expenditure and are nearly irrevocable (i.e., revocable only for failure to comply with prescribed compliance requirements, such as equal employment opportunity.) These resources are reflected as revenues at the time of receipt or earlier if they meet the criteria for availability.

Fund Accounting/Fund Structure

The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equities, revenues, and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds in this budget are grouped into generic fund types and two broad fund categories as follows:

Governmental Funds

General Fund: The General Fund accounts for resources that are generally not dedicated for a specific purpose. Most services provided are basic to the everyday operation of a municipality.

Major Revenues

• Property Tax

• Sales Tax

• Franchise, Alcohol, Business/Insurance Taxes

• Fines and Forfeitures

• Licenses and Permits

Primary Services

• General administration

• Planning

• Financial services

• Fire protection

• Police protection

• Parks

• Transportation services

Special Revenue Funds: Used to account for the proceeds of specific revenue sources that are restricted to expenditures for specified purposes. Special Revenue Funds currently used are: Leita Thompson Rental Fund, Confiscated Assets Fund, E-911 Fund, State Grant Fund, Federal Grant Fund, Tree Bank Fund, Soil and Erosion Fund, County/Local Grant Fund, Hotel/Motel Revenue Fund, Auto Rental Excise Tax Fund, and Special Events Fund.

Proprietary Funds

Enterprise Funds: Enterprise Funds are used to account for operations: 1) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods and services to the general public on a continuing basis are to be financed or recovered primarily through user charges; or 2) where the governing body has decided that periodic determination of revenues earned, expenses incurred and/or net income is appropriate for capital maintenance, public policy, management control, or accountability or other purposes. The City currently operates four enterprise funds: Solid Waste Fund, Water and Sewer Fund, Stormwater Utility Fund, and Recreation Participation Fund.

Fund Equity Policy

In a government there are two major classes of funds, Governmental and Proprietary. The Proprietary funds operate very similar to private-sector businesses. How much an individual customer pays typically will vary depending upon the quantity of goods or services. For the Proprietary Funds the focus is the inflows and outflows of economic resources (changes in net assets). Changes in net asset are recognized as soon as the cause of the change occurs, regardless of the timing of the related cash flows. Another way of looking at this is revenues are recognized as soon as they are earned, and expenses are recognized as soon as a liability is incurred. Equity of the Proprietary Funds is reflected with the terminology “Net Position.”

Net Position

The term Net Position is the terminology used for the equity of the Proprietary Fund and will also be in the Government-wide financial statements. Net Position is broken into three classes; invested in capital net of related debt, restricted, and unrestricted.

Invested In Capital Net Of Related Debt

Invested in capital net of related debt is equal to the capital assets minus any outstanding balance of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of capital assets of the government.

Fund Balance

The Governmental Accounting Standards Board Statement Number 54 (GASB 54) requires five components of fund balance; non-expendable, restricted, committed, assigned, and unassigned.

Non-Spendable Fund Balance

Non-spendable fund balance includes the value of the City’s assets that will never be converted to cash. These include but are not limited to prepaid items and inventories. This will also include assets that will not convert to cash soon enough to affect the current period such as long-term receivables and the non-cash assets held for resale such as land.

Restricted Fund Balance

Restricted fund balance includes the value of resources that are limited in how they may be used by external enforceable legal restrictions. This may be the result of other governments through laws and regulations, grantors or contributions through agreements, creditors through debt covenants or other contracts, and enabling legislation that limits how revenue can be used.

Committed Fund Balance

Committed fund balance includes the value of resources that are limited by the Mayor and Council. Further, the limitation that has been placed on the resources can only be removed by similar action that committed these resources in the fund balance.

Assigned Fund Balance

Assigned fund balance includes resources that the government has intentions for use but are not externally restricted or committed through formal action by the Mayor and Council. The Mayor and Council approve who has the authority to assign these resource values. Examples would be the buyers issuing purchase orders for goods or services which are under the dollar threshold for Mayor and Council’s approval.

Stabilization Funds

Adequate fund balance in the governmental funds and net assets in the proprietary funds are a necessary component of the City’s overall financial management strategy and a key factor in the external agencies’ measurement of the City’s financial strength.

Maintenance of fund balance and net assets assures adequate resources for cash flow and to mitigate short-term effects of revenue shortages.

The City shall maintain stabilization funds required by ordinance and/or bond covenants. The stabilization fund in the General Fund shall be 25% of budgeted expenditures. The Enterprise Funds shall have revenues budgeted in excess of expenditures and no more than 90% of unrestricted fund balance may be used. The stabilization fund will only be used to:

• Strengthen the City’s position in response to self-insurance,

• Provide funds in the event of unplanned expenditures the City could face as a result of natural disaster or terrorist attack.

All expenditures drawn from stabilization funds shall require prior Council approval.

When a new Enterprise Fund is established the target reserve will be built by budgeting excess revenues and controlling the use of unrestricted net position. If stabilization funds fall below required levels as set by this policy, the Mayor and Council must approve and adopt a plan to restore this balance to the target level within 24 months. If restoration of the reserve cannot be accomplished within such period without severe hardship to the City, then the Mayor and Council will establish a different time period.

Funds not otherwise non-spendable, restricted, committed, and assigned represent balances available for appropriation at the discretion of the Mayor and Council. However, the Mayor and Council will make every effort to use the unassigned funds for the following purposes:

• To provide pay-as-you go financing for capital projects

• To provide for revenue shortfalls resulting from unexpected economic changes or recessionary periods

Funds in excess of the policy plus non-spendable, restricted, committed, and assigned may be authorized by the Mayor and Council for expenditure within the City’s annual budget.

For FY 2022, the Participation Recreation Fund is not within the policy set forth. There is no stablization fund reserve for the FY 2022 Budget. This fund has a plan to bring the fund within policy within two years.

Investment Policy

The City’s Investment Policy is to invest public funds in a manner which will provide the maximum security with the best investment return, while meeting the daily cash flow demands of the City and conforming to all state and local statutes governing the investment of public funds. This policy applies to all funds under the control of the City of Roswell which are eligible to be invested, exclusive of pension obligations. The City’s investment objectives are:

• Safety: To ensure that losses are avoided to the principal of the City's investments and deposits.

• Complinance: To conform to the requirements of Federal and State law.

• Liquidity: To generate sufficient cash to meet all operating requirements and pay obligations as they become due.

• Income: To maximize the amount of interest income within the constraints of the objectives.

Purchasing Policy

The City Charter and State law set forth requirements for the expenditure of local government funds for the purchase of goods and services. Per the City of Roswell Code of Ordinances, the City Administrator shall have the responsibilities and powers of the Purchasing Agent for the City and may delegate some or all of the responsibilities to the Purchasing Manager.

The Purchasing Manager shall establish procedures for purchases of goods and services involving the estimated expenditures of $75,000 or less. These procedures determine the thresholds at which the number and type of quotes are required. Purchases with an anticipated amount of $75,000 or over require sealed bids or proposals.

The City has a partially decentralized purchasing process. Departments are allowed to make purchases for items under $2,500. For items between $2,500 and $25,000 the departments can obtain quotes. Quotes on items between $25,000 and $75,000 are to be obtained by the Purchasing Division.

Debt Service Policy

The Mayor and City Council adopted a formal debt policy in FY 2013 with the following objectives:

1. establishing conditions for the managed use of debt
2. creating procedures and policies that minimize the City’s debt service and issuance costs
3. retaining the highest practical credit rating
4. maintaining full and complete financial disclosure and reporting

Additionally, the City’s practices regarding debt are governed by the State of Georgia. The Constitution for the State of Georgia states that “The debt incurred by any county, municipality, or other political subdivision of this state, including debt incurred on behalf of any special district, shall never exceed 10% of the assessed value of all taxable property within such county, municipality, or political subdivision; and no such county, municipality, or other political subdivision shall incur any new debt without the assent of a majority of the qualified voters of such county, municipality, or political subdivision voting in an election held for that purpose as provided by law” (State of Georgia Constitution, Article IX, Section V). The City of Roswell currently has a 0.5% ratio of bonded debt to assessed value, well below the State of Georgia constitutional threshold of 10%.

The City of Roswell has utilized both general obligation and revenue bonds to finance capital improvements too large to be financed from current revenues. The most recent bond issue was approved by voters in November 2012 and sold in 2014 with an uninsured AAA rating.