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Home My WebLink AboutCC AG PKT 2010-10-25 #H AGENDA STAFF REPORT DATE: October 25, 2010 TO: Honorable Mayor and City Council THRU: David Carmany, City Manager FROM: Robbeyn Bird, CPA - Director of Administrative Services /City Treasurer SUBJECT: VEHICLE REPLACEMENT AND FUND ACCOUNTING PRINCIPLES REPORT SUMMARY OF REQUEST: Receive and file the vehicle replacement and fund accounting principles report. FUND ACCOUNTING OVERVIEW: To educate and inform the City Council as well as the residents of Seal Beach, a brief overview of fund accounting is being presented to enhance the subsequent discussion of the vehicle replacement fund. In private industry, even the most complex businesses generally are presented in external financial reports as a single, unitary entity. Governmental agencies including local government are not presented in the same manner. The authoritative and financial reporting standards for state and local governments require that government -wide financial statements be accompanied by fund - based presentations. A fund is a separate, self - balancing set of accounts used to account for resources that are segregated for specific purposes in accordance with special regulations, restrictions, or limitations. There are a variety of fund -types including General Fund, Special Revenue Funds, Capital Projects Funds, Debt Service Funds, and Proprietary Funds. Seal Beach has 41 funds consisting of the following fund types: Fund Type Number of Funds General Fund 1 Special Revenue Funds 25 Capital Projects Funds 2 Debt Service Funds 8 Proprietary Funds 5 Agenda Item H Page 2 The General Fund is the chief operating fund of the City. Generally Accepted Accounting Principles (GAAP) prescribes that the general fund be used "to account for all financial resources except those required to be accounted for in another fund." Special Revenue Funds are used to account for specific revenues that are legally restricted to be spent for particular purposes. Gas Tax is a very good example of a special revenue fund. There is a tax levied on gasoline sales and the revenue collected must be used for repair, construction, maintenance and right -of -way acquisitions relating to streets and highways. Capital Projects Funds are used "to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds)." Debt Service Funds are used "to account for the accumulation of resources for, and the payment of, general Tong -term debt principal and interest." There are two types of Proprietary Funds: Enterprise Funds and Internal Service Funds. An Enterprise Fund is used to report any activity for which a fee is charged to external users for goods or services. Seal Beach uses Enterprise Funds to account for the water and sewer activities of the City. Internal Service Funds are used "to report any activity that provides goods or services to other funds, departments, or agencies of the primary government and its component units, or to other governments, on a cost - reimbursement basis." Internal Service funds are never required by GAAP. Nonetheless, internal service funds commonly are used for a wide variety of activities, including central garages and motor pools, duplicating and printing services, information systems, purchasing, and central stores. The remainder of this report will focus on the one internal service fund that is set up in the accounting records of the City. In January 2009, the City Council approved staffs recommendation to open a vehicle' replacement fund and designated the transfer of $2 million from the General Fund to the vehicle fund. The vehicle replacement fund operates as an internal service fund in the City's accounting records. At fiscal year ended June 30, 2009, the balance in the vehicle fund remained at $2 million. Page 3 During the fiscal year 2009 -2011 budget process, transfers to the vehicle replacement fund were approved in the amount of $304,600 for each fiscal year 2009/10 and 2010/11. The following funds were required to transfer revenue into the vehicle replacement fund for each fiscal year: Vehicle Revenue Stream General Fund $162,300 AQMD Fund 800 Water Fund 63,600 Beach Maintenance Fund 61,000 Sewer Fund 16,900 These amounts were determined by a vehicle schedule that estimates replacement cost and useful life of the vehicle. Based on this information, the replacement cost is divided by the useful life of the vehicle to determine the annual contribution to the vehicle fund by the department or fund that has use of the vehicle. During the 2009/10 fiscal year, General Fund revenues began to decline and measures were taken to ensure fiscal stability as reported at the July 12, 2010 City Council meeting. Therefore, transfers to the vehicle replacement fund were suspended for the last quarter of 2009/10 and the 2010/11 fiscal years. The following is a list of vehicles slated for replacement as approved in the 2009/11 budget on page 212: • = 2009 -2010 Replacement - , .... .. — Department 1 Model Year 1 Make I Model Type Cost I Lifeguards 2004 Dodge Dakota 28,100 Police 1998 Mercury Marquis (Black) 33,300 Police 2000 Ford Expedition (Blue) 45,700 Police 2003 Ford Crown Victoria 32,200 Police 2003 Ford Crown Victoria 32,200 Police 2003 Ford Crown Victoria 32,200 Police 2003 BMW RS -BMW Motor 25,600 Recreation 2000 Honda ATV 5,600 PW - Beach 1986 J.C.B. Back Hoe 68,800 PW - Beach 2000 15 Foot Rake 12,900 316,600 All of the vehicles above were replaced with the exception of the beach rake which was able to be repaired and the Honda ATV. In addition, during fiscal year 2009/10 the City Council approved the purchase of 2 jet skis and 1 motorcycle. The following is a list of actual vehicles that were purchased during fiscal year 2009/10 (also included as Attachment A) Page 4 • • . . . •: 2009 -2010 Vehicles Purchased . . Department [ Model Year Make Model Type I Cost I Police 2009 Ford Crown Victoria 31,511 Police 2009 Ford Crown Victoria 33,890 Police 2009 Ford Crown Victoria 31,470 Public Works 2009 Terex Tractor Backhoe 54,345 Police 2010 Ford Ford Edge 31,992 Police 2010 Ford F150 XLT 2010 Truck 29,750 Police 2010 Honda Honda Motorcycle 24,030 Lifeguard 2006 Honda Honda ARX Jet Ski 3,698 Lifeguard 2006 Honda Honda ARX Jet Ski 3,698 Lifeguard 2010 Chevrolet Colorado Truck 25,760 1270,144 Based on the above information, the purchase of vehicles was under budget by $46,456. During the year, revenues were $263,625, total expenditures were $270,144, and beginning fund balance was $2 million. Therefore, at fiscal year ended June 30, 2010, the remaining cash balance in the vehicle replacement fund was $1,993,481. The 2010 -11 budgeted vehicles to be replaced are as follows: 2010 4011 Replacement = - -- - : Department Model Year Make i Model Type [ Cost Lifeguards 2004 Dodge Dakota 28,800 Police 2000 Radar Trailer 16,400 PW - Beach 1995 Tennant Tennant Sweeper 31,000 Model 355 PW - Beach 1999 Rockland Beach King Sanitizer 72,600 PW - Fleet 1991 Ford F -250 25,900 PW - Sewer 2000 Pacific Tek Power Vacuum 34,200 PW - Storm Drains 1988 Military pump gpm Water 900 PW - Streets 1990 Supra -Hot 3005 steam cleaner 11,400 PW - Streets 2000 Ford F -550 AT37G Altec 86,900 Bucket Truck PW - Water 1996 Ford F -250 25,900 PW - Water 1999 Ford F -250 - CNG 27,400 PW - Water 2001 Ford F-450 Serv. B 49,200 410,600 1 Page 5 None of the vehicles listed in the chart above have been replaced during the current fiscal year. As requested by the City Council at the October 11, 2010 meeting, all vehicles purchased in the future will be agendized for approval regardless of the fact that they have already been approved through the budget process. FISCAL IMPACT: None RECOMMENDATION: Receive and file the vehicle replacement and fund accounting principle report. SUBMITTED BY: NOTED AND APPROVED: -401 R., 1. , Robbeyn Bi CPA t. vid Carman, ity Ma ager Director of Administrative Services N OT n ( O O CO t� 7 r 0 CA N O) O n n. • +'' O) f0 V' W I* CO O) 0) CO 0 N u) 00 co CA n O co_ O n O ‘- cri C) V co M co co co N N co co N N 0 l' ... - _zvvv m ca cao° r. - O CMc. MQ'a'( N M O a T.) co pCNO�� N a) O0 c) a > Z Z 0 N ' 0 Q' 0 Y Y )0. LL rL: 0J as ca O O_ >.0 N Y ;7' . O O O Y 0 0 - 2 - 1 ` 0' , U N 2 X �.. :d' Ti U >> V U l0 0 I- O a' H ` y' 'O > m °) J 2 Q Q O „ d : O C C C O W X N as f0 ES 't= O O O U C C C O UUUHU.u_IIxo • o) .0. N_ :O: :0= 4N: 0 N co N N e0 O` P. N y V 'O V > i 'O • I.. :: LL lL L).. 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