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HomeMy WebLinkAboutCOW 2011-01-24 Item 4F - Ordinance - Establishment of Central Treasury Fund COUNCIL AGENDA SYN0PsIs IL' ITEM1\TO. i w In it ials Meeting Date 1 Prepared by 1 Initials 'ew Co�rncil review I j 01/24/11 1 SH I I (it/ ('r) `i .2' t 02/07/11 1 SH z-f, Ps ITEM INFORMATION CAS NUMBER: 11-012 I ORIGINAL AGENDA DATE: JANUARY 24, 2011 AGENDA. ITEM TIME Ordinance establishing a Central Treasury fund for the City CATEGORY Discussion Motion Resolution Ordinance Bid Award Public Hearing Other Mt Date 1/24/11 Mtg Date Mtg Date Mtg Date 2/7/11 Nltg Date Mtg Date Mtg Date SPONSOR Council Mayor Adm Svcs DCD Finance Fire Legal P&7R Police PW/ SPONSOR'S City Council is being asked to approve an ordinance establishing a Central Treasury fund SUMMARY for the City. The new fund will consolidate and simplify the recording of cash and investment entries, as well as increase investment opportunities through the pooling of cash into a single fund. This item is scheduled for Council consideration at the 01/24/11 Committee of the Whole and 02/07/11 Regular Council meeting. RI:, \'IEWED BY COW Mtg. CA &P Cmte F &S Cmte Transportation Cmte I I Utilities Cmte Arts Comm. Parks Comm. Planning Comm. DATE: 01/19/2011 RECOMMENDATIONS: SPONSOR /ADMIN. Finance COMMITTEE unanimous approval; Forward to Committee of the Whole CO IMPACT FUND SOURCE EXPENDPTURE RIX2UIRED AMOUNT BUDGETED APPROPRIATION REQUIRED Fund Source: Comments: MTG. DATE RECORD'OF COUNCIL ACTION 01/24/11 1 MTG. DATE ATTACHMENTS 01/24/11 Informational Memorandum dated 01/12/11 Draft Ordinance Minutes from the Finance and Safety Committee Meeting of 1/19/11 187 188 ;'`ma C i$y of Tukwila tr" r c� 1- itt ■�.Ya Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Finance and Safety Committee FROM: Shawn Hunstock, Finance Director DATE: January 12, 2011 SUBJECT: Central Treasury Fund ISSUE The City currently maintains cash and investment accounts in all thirty two funds that are used on a regular basis. Maintaining cash and investment accounts in each fund makes the process much more complex for posting investment income and purchasing investments or recording the maturity of investments. Each interest posting or investment purchase /maturity must be recorded against all funds involved. The process can take hours based on the complexity of the journal entry and the number of people involved with preparing, reviewing and recording the entries. An alternative to maintaining cash and investment accounts in each fund is to maintain a Central Treasury fund that holds all cash and investments for the City. Such a fund would simplify the processes already mentioned, and would also greatly simplify the bank reconciliation process and improve the timeliness of completion of monthly bank reconciliations. BACKGROUND The City has used the current method of allocating cash and investments to all funds for many years. Posting of investment income was always time consuming because we are mandated to apply interest earned to all funds currently holding a positive balance of cash or investments. Previously the City did not spend a good deal of time purchasing investments or managing our investment portfolio. However, now with the City's new investment policy and the need to more actively manage our investments due to the historically low earnings on the Local Government Investment Pool, Finance staff are much more involved with managing the City's money. This activity requires a good deal of time to maintain the accounting because investments must currently be allocated to different funds based on the availability of cash in those funds and the projected cash flows within the fund. DISCUSSION The Finance department proposes creation of a Central Treasury fund. This would be an agency fund with only Balance Sheet accounts. The fund would include cash and investments as assets, and Due to Other Funds as liabilities. No income or expense 189 INFORMATIONAL MEMO Page 2 would be recorded in the Central Treasury fund. All income associated with the pooled cash and investments would still be credited back to the thirty -two individual funds. A Central Treasury fund would eliminate the need to account for cash and investments within each of the separate funds, and instead would be accounted for in a Treasury fund. This would be an agency fund with "Cash," "Investments" and "Due to Other Funds" only. The General Fund and all other funds would have a "Due from Central Treasury" G/L account to account for their ownership of the cash and investments in the Central Treasury fund. Investment income would still accrue to the General Fund and all other funds, but the cash receipt would be recorded in the Central Treasury fund. At year -end all interfund balances are eliminated for financial reporting purposes, which means there would be no financial statements for the Central Treasury fund, and each other fund would report "Cash" and "Investments" as they have in the past. Again, this is just for financial reporting purposes, no entries would be made in EDEN for this elimination of interfund balances. Sample Journal Entries (not including automatic summary entries) A. Purchase of investment (old method): Dr. Investments 104.118.000 Cr. Cash 104.111.100 Dr. Investments 301.118.000 Cr. Cash 301.111.100 Dr. Investments 501.118.000 Cr. Cash 501.111.100 Purchase of investment (new method): Dr. Investments 690.118.000 Cr. Cash 690.111.100 B. As investment income is received (old method): Dr. Cash 000.111.100 Cr. Investment Income Rev. 000.361.110.00.00 Dr. Cash 104.111.100 Cr. Investment Income Rev. 104.361.110.00.00 Dr. Cash 301.111.100 Cr. Investment Income Rev. 301.361.110.00.00 Dr. Cash 501.111.100 Cr. Investment Income Rev. 501.361.110.00.00 As investment income is received (new method): Dr. Cash 690.111.100 Cr. Investment Income Rev. 000.361.110.00.00 Cr. Investment Income Rev. 104.361.110.00.00 Cr. Investment Income Rev. 301.361.110.00.00 Cr. Investment Income Rev. 501.361.110.00.00 19 0 W•12011 Info MemoslCentralTreasury.doc INFORMATIONAL MEMO Page 3 As you can see from the above illustrations, the entries needed for cash and investments with a Central Treasury fund are Tess complex than that required from our current method of accounting. As revenue is received and recorded in the various funds, the actual cash deposit is recorded in the Central Treasury fund. Each of the thirty -two funds we have now that have cash and investments will have a "Due from Central Treasury" account rather than Cash and Investment accounts. The Due from Central Treasury account will be a receivable account, and will essentially represent that fund's percentage ownership of the cash and investments in the Central Treasury fund. Another advantage of utilizing a Central Treasury fund is it creates additional investment opportunities that would otherwise be difficult or impossible with the current method of accounting. Specifically, we are somewhat limited now with the number and amount of investments we can make because we are limited to cash available within specific funds. If a particular fund does not have a lot of excess cash, beyond that needed for regular operations, we cannot make any investments and so the particular fund currently receives less in investment income now. With a Central Treasury fund concept, all cash will be pooled into one fund and any "excess" beyond current operating needs will be invested in order to maximize investment income. As such, all funds will benefit from the higher returns we will be able to earn with the pooled resources in the Central Treasury fund. RECOMMENDATION The Finance and Safety Committee is being asked to approve an ordinance repealing the current TMC Chapter 3.24, Payroll and Claims Funds, and creating a Central Treasury fund for the City. This item is scheduled for the January 19 Finance and Safety Committee meeting, the January 24 Committee of the Whole meeting, and the February 7 Regular Council meeting. ATTACHMENTS Draft Ordinance W:12011 Info Memos\CentralTreasury.doc 191 192 NI AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, RELATING TO THE ESTABLISHMENT OF A CENTRAL TREASURY FUND, SPECIFICALLY REPEALING AND RESTATING TUKWILA MUNICIPAL CODE CHAPTER 3.24; REPEALING ORDINANCE NO. 659 §1; PROVIDING FOR SEVERABILITY; AND ESTABLISHING AN EFFECTIVE DATE. WHEREAS, the current Payroll and Claims Funds chapter of the Tukwila Municipal Code was established in 1971 by Ordinance No. 659, and operational changes require an update to the regulations; and WHEREAS, the City Council recognizes the efficiencies gained by consolidating and simplifying the accounting for cash and investments for the City; and WHEREAS, the City Council has considered the additional opportunities for investing and increased investment earnings potential with a Central Treasury Fund; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, HEREBY ORDAINS AS FOLLOWS: Section 1. Regulations Established. Tukwila Municipal Code Chapter 3.24, "Central Treasury Fund," is hereby restated to read as follows: TMC Section 3.24.010, "Established." There is hereby established in the City, pursuant to RCW 35.21.085, a special fund to be known as the Central Treasury Fund for payment of salaries, wages, employee benefits, and claims against the City. Section 2. Repealer. Ordinance No. 659 §1 is hereby repealed. Section 3. Severability. If any section, subsection, paragraph, sentence, clause or phrase of this ordinance or its application to any person or situation should be held to be invalid or unconstitutional for any reason by a court of competent jurisdiction, such invalidity or unconstitutionality shall not affect the validity or constitutionality of the remaining portions of this ordinance or its application to any other person or situation. Section 4. Effective Date. This ordinance or a summary thereof shall be published in the official newspaper of the City, and shall take effect and be in full force five days after passage and publication as provided by law. W: \Word Processing \Ordinances \Payroll and Claims Funds.doc SH:mrh Page 1 of 2 193 PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at a Regular Meeting thereof this day of 2011. ATTEST /AUTHENTICATED: Christy O'Flaherty, City Clerk Jim Haggerton, Mayor Filed with the City Clerk: APPROVED AS TO FORM BY: Passed by the City Council: Published: Effective Date: Shelley M. Kerslake, City Attorney Ordinance Number: W: \Word Processing \Ordinances \Payroll and Claims Funds.doc SH:mrh Page 2 of 2 194 Finance Safety Committee Minutes January 19.2011— Paae 2 C. Ordinance: Emergency Management Staff is seeking Council approval of an ordinance amending existing Tukwila Municipal Code (TMC) Section 2.57 regarding Emergency Management. The proposed draft ordinance addresses discrepancies as identified through the Revised Code of Washington, and updates definitions and duties as appropriate. This section of the TMC was last updated via ordinance in February 2008. After a lengthy discussion and review of the ordinance, Committee Members suggested and identified several areas of the ordinance that may need additional clarification and/or further definition for application. Those areas will be addressed with the City Attorney, as appropriate, and staff will return to Committee at a later time for additional review of this ordinance. RETURN TO COMMITTEE FOR ADDITIONAL REVIEW AT LATER DATE. D. Ordinance: Central Treasury Fund Staff is seeking Council approval of a draft ordinance that creates a Central Treasury Fund for the City which will hold all cash and investments. This ordinance will repeal current TMC Chapter 3.24: Payroll and Claims Funds which was created in 1971 and is now considered outdated and inefficient in regards to current regulations and processes. In summary, the Central Treasury Fund will simplify accounting procedures, increase reconciliation efficiency and create additional investment opportunities. The fund will allow for cash and investments to be accounted for in the Central Treasury Fund as compared to accounting in each of the City's 32 individual funds. Ownership of cash and investments would still be attributed to each fund, as appropriate; however, the accounting methodology would be simplified by a "due from Central Treasury to account for such ownership. Committee Member Robertson suggested that staff provide examples of other entities that utilize this type or similar central treasury fund (i.e.: cities, state or other organizations). UNANIMOUS APPROVAL. FORWARD TO JANUARY 24 COW FOR DISCUSSION. E. Update: Revenue Generating Regulatory License (RGRL) and Business Licensing Based on previous Council request, staff presented an informational memo regarding concerns that have surfaced as a result of the newly implemented Revenue Generating Regulatory License Fee (RGRL) and Business Licensing. A discussion among Committee Members resulted in a shared concern regarding multiple charges of the RGRL fee in relation to a single /sole owner /proprietor (no employees) who owns and/or operates more than one business. For example, the current RGRL ordinance requires that a business license be secured for each business location. In turn, currently, the RGRL fee is also being assessed for each business location; therefore, a single /sole owner /proprietor who has three different businesses, with no employees other than self, will be charged for three separate business license fees and an RGRL for each location. Committee Members are interested in discussing opportunities to eliminate and/or reduce this duplication of the RGRL fee for single /sole owners /proprietors. It was suggested that this could possibly be accomplished through the application of one RGRL fee charge for single owners in instances as described above. Prior to making a recommendation on proceeding with changes or forwarding this item to Council for discussion, the Committee has requested that staff return to a meeting in late February/early March, after a majority of business license renewals and RGRL payments have been received, to present and discuss the following: o Data collected from this year's business license renewal and RGRL processes which can provide an overview of the number of single /sole owners /proprietors in the City and the financial impact of assessing one RGRL fee in place of multiple for multiple businesses. 195 196