Fund Balance Guidelines for the General Fund
The City of La Quinta is a resort city in Riverside County, California, specifically in the Coachella Valley between Indian Wells and Indio. The population was 37,467 at the 2010 census. La Quinta embarked on a nine-month journey to study its financial situation and create policy recommendations for its reserve levels. After several months of research and soliciting input from stakeholders, city staff created a long-range outlook of the city’s financial stability. La Quinta relies heavily on discretionary income spending at its hotels, restaurants, and shops. The city is also near a large fault line, and the threat of a major earthquake is always a worry. Rapidly rising pension costs are another concern. The new reserves policy addresses all of these factors, improving the city’s ability to face the future. To create its general fund balance and reserves policy, La Quinta benchmarked its policies against those of other cities and performed a historical analysis of its current reserve amounts. The city also worked with the risk management office, which conducted a full analysis of city assets and insurance coverage to determine natural disaster needs. City staff also used resources including GFOA publications and best practices. |
Implementation of Best Practice The processes for implementing GFOA's best practice on the General Fund and Reserves policy was broken into three steps. 1) Elected official guidance. La Quinta staff was directed by City Council to undertake a study of reserves and utilize the Financial Advisory Commission to assist in the study.
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![]() 2) The staff and Financial Advisory Commission created a sub-committee to study reserves, and conduct several months of research on history.
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![]() 3) Collaboration. La Quinta used the expertise of the Commissioners, the staff, and the Council to determine collectively what the findings from their study meant for their reserve levels.
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Benefits
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Tools and Resources |
GFOA Best Practice: Fund Balance Guidelines for the General Fund GFOA recommends that governments establish a formal policy for the level of unrestricted fund balance that should be maintained in the general fund for generally accepted accounting practice and budgetary purposes. The guideline should articulate a framework and process for how the government would increase or decrease the level of unrestricted fund balance over a specific time period. In particular, governments should provide broad guidance in the policy for how resources will be directed to replenish the fund balance if it falls below the prescribed level. |
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