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HomeMy WebLinkAbout7354_CCv0001.pdf RESOLUTION NO. 7354 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDLANDS ESTABLISHING AN INTERFUND LOAN POLICY WHEREAS, as part of City staff's continuing effort to enhance the fiscal and operational practices of the City, an Interfand Loan Policy has been developed and submitted to the City Council for review; and WHEREAS, an interfund loan is defined as a loan from one City fund to another City fund for a specific purpose with a requirement for repayment; and WHERE-AS, the purpose for establishing an Interfund Loan Policy is to provide guidelines regarding the establishment, management, and repayment of interfand loans. NOW,THEREFORE, BE IT RESOLVED by the City Council of the City of Redlands as follows: Section 1. The City Council hereby adopts the Interfund Loan Policy attached hereto as Exhibit"A." ADOPTED, SIGNED AND APPROVED this 17th day of December,2013. Pete Aguilar,Mayor ATTEST: Sam Irwin;Cit Clerk 1, Sam Irwin, City Clerk of the City of Redlands, hereby certify that the foregoing resolution was adopted by the City Council at a regular meeting thereof held on the 17th day of December, 2013, by the following vote: AYES: Councilmernbers Harrison, Foster, Gardner, Gilbreath; Mayor Aguilar NOES: None ABSTAIN: None ABSENT: None Sam Irwin, City Clerk L\cc1eW,,.Reso1utions\Res 7300-73WReso 7354.doc EXHIBIT"A" City of Redlands POLICY & PROCEDURES Subject: Interfund Loan Policy Department: Finance Policy No. F-003-2013 Effective Date: Ordinance/Resolution No. 7354 Approval Date: DEFINITION Interfund loans are loans from one City fund to another City fund for a specific purpose with a requirement for repayment. PURPOSE The purpose of this policy is to provide guidelines regarding the establishment, management, and repayment of interfund loans. INTERFUND LOAN POLICY General 1.1 Interfund loans should be considered temporary or short-term borrowing of cash and may be made for the following reasons: • To offset timing differences in cash flow • To offset timing differences between expenditures and reimbursements, typically associated with grant funding • To provide for advance spending for a capital project prior to securing project financing. • For other needs as deemed appropriate by City Council. 1.2 The term of the interfund loan may continue over a period of more than one year, but must be "temporary" in the sense that no permanent diversion of the lending fund results from the failure to repay by the borrowing fund. Additionally, interfund loans should not hinder the accomplishment of any function or project for which the lending fund was established. 1.3 Interfund loans should not be used to solve ongoing structural budget problems. Procedures 2.1 The establishment of Interfund loans requires coordination among several parties, including the department overseeing the funds that would provide or receive the loan, the Finance Department, and the City Attorney's Office. Interfund loans must be approved by the City Council. 2.2 The following procedures should be followed in establishing an interfund loan: EXHIBIT"A" 1) The department managing the borrowing fund should prepare a request of interfund loan. The request shall include amount requested, loan period, and monthly/annual payment plan. The department should analyze projected revenues and expenditures for the particular fund. The interfund loan request and supporting documentation should be forwarded to the Finance Department. 2) The Finance Department should provide information on the status of the funds providing and receiving the loan, potential funding options, and estimated loan and interest repayment calculation. Interfund loans should include an interest component that equals the investment earnings the providing fund would have received had the loan not occurred. 3) Documents prepared in 1 and 2 above should be forwarded to the City Attorney's Office to determine if there are legal restrictions associated with the use of the identified funding source for the interfund loan, and to prepare the resolution with the loan terms. Repayment 3.1 Repayment of the loan is top priority of the borrowing fund once cash is available. 3.2 As part of the annual budget process, the Finance Department should ensure that the loan repayment is budgeted consistent with the loan terms. 3.3 If the borrowing fund continues to maintain negative cash balance for periods beyond the term of the loan, scheduled payments should be postponed until the fund has a positive cash balance. Interest should continue to accrue and be added to the principal of the loan. 3.4 If the borrowing fund is an operating fund, it must maintain positive cash balance of at least 10% of its operating expense/expenditure budget to be able to repay the loan; excess cash balance (over the 10%) should be used to make scheduled payments and catch-up payments. Modification 4.1 Modification of loan term, interest rate, and/or repayment schedule of an interfund loan should be approved by unanimous vote of the City Council.