Special Revenue Funds

The Governmental Accounting Standards Board (GASB) issued Statement No. 54. This Statement clarifies the definitions of governmental fund types which may result in some of our funds, in particular-special revenue funds, becoming part of our general fund for external financial reporting unless the City takes specific action. These changes will affect the financial statements for the year ended December 31, 2011.
The Wisconsin Department of Revenue confirmed that they do not have the authority under Wisconsin Statutes to change how a municipality qualifies for the ERP. The city must follow generally accepted accounting principles, as set by the GASB.
With the Wisconsin Department of Revenue distributing close to $60M from its expenditure restraint program (ERP) each year and the City receiving $110,000 of these funds last year and having budgeted for them in 2011, it becomes important to meet the requirements of GASB. The unrestricted aid is paid to qualifying municipalities that limit growth in spending. Staff recommends allowing the reclas­sifying of the special revenue funds into the general fund as a result of GASB 54, because we would exceed the allowable increase, thereby disqualifying the city from receiving the ERP payment.
Staff is requesting the Council take the appropriate action by approving a resolution restricting/committing the special revenue funds. By analyzing all of the special revenue funds, we have determined that they meet the GASB new definition’s three basic features.
The first is that the funds must be either restricted or committed. Restricted means constraints are placed on the revenue by external factors (creditors, grantors, contributors, or laws/regulations of other governments, or local ordinance). Committed means the revenue can only be used for specified purposes, and this constraint must be set by the Council by approving a resolution or a motion. It could also be done by formally adopting a budget policy, financial policy, or separate policy committing these funds. Including these funds as an item in the government’s budget does not automatically qualify as a commitment according to GASB 54. If the funds are not restricted or committed, they may have to become part of the general fund. Staff has always treated the special revenue funds as restricted/committed, but there is no official policy statement by the Council.
GASB 54 also requires that a specific revenue source make up a substantial portion of the resources of the special revenue fund. Transfers in from another fund are allowed, but may not be part of the specific revenue sources. Lastly, the restriction or commitment discussed above must be for expenditures of a specific program. Items such as “contingencies” or “emergencies” would not qualify.
This resolution provides the official statement of restriction/commitment needed to meet GASB requirements.