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    12.    
City Council Regular
Meeting Date: 11/13/2018  

SUBJECT:
MONTHLY FINANCIAL REPORT AND FIRST QUARTER BUDGET REVIEW FOR FISCAL YEAR 2018-19
 
RECOMMENDATION:

1. Receive and file the Monthly Financial Report for September 2018.
 
2. Adopt a Resolution entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS, CALIFORNIA, ADOPTING A BUDGET AMENDMENT FOR FISCAL YEAR 2018-19 INCREASING THE BUDGET IN VARIOUS FUNDS BY $811,264 FOR ADJUSTMENTS BASED ON THE FIRST QUARTER BUDGET REVIEW
BACKGROUND/ANALYSIS:
The Monthly Financial Report for September 2018 (see attached) is being presented to the City Council and the public to provide a status update of the City’s financials at September 30, 2018. The Financial Report includes the budgetary information for the City’s annual financial plan as well as the actual resources received and the use of these resources in fulfilling the financial plan.

Financial data is reported on a cash basis, meaning that revenue is reported when cash is received and expenditures are reported when cash payments are made.  The majority of General Fund revenues come in sporadically throughout the year and most of it is received or accrued in the last six months of the fiscal year.  Meanwhile, expenditure transactions continue to be paid each month, regardless of when the revenues are received. This highlights the importance of maintaining a reserve that allows for cash flow needs during the lean months when there are no revenues.  At the end of the fiscal year, the accrual basis of accounting is applied to all governmental accounts. As a result, many of the revenues received or expenditures paid in July and August are accrued to the month of June, to comply with the Generally Accepted Accounting Principles (GAAP), which matches the transaction to the period in which the revenue was earned or the expenditure occurred. The Enterprise Funds, or business type funds, use the “accrual” method of accounting. These business type funds charge customers a fee to cover the cost of services that are provided. This method applies to the Water Utility Fund and Sewer Utility Fund.
 
On a quarterly basis, staff reviews the status of the budget, prepares a summary of the Capital Improvement Program, and proposes budget amendments for City Council consideration.  City staff is seeking approval for the following budget amendments:
 
Ratify City Manager Budget Amendments - General Fund (001)
Resolution No. 2018R-032 authorizes the City Manager to appropriate from reserves up to $25,000 per transaction, for each expenditure line item or capital improvement project.  The total appropriations by the City Manager from General Fund reserves may not exceed $100,000 in a fiscal year until ratified by the City Council.  In the first quarter of Fiscal Year 2018-19, the City Manager authorized $62,800 in budget amendments.  These budget amendments have already been recorded in the City’s financial system, and are reflected in the ending budget balances in the Monthly Financial Report for September 2018.  It is recommended that the City Council ratify the following:
 
Department   Description Amount Fund
Finance   Correct Internal Service charges for Water/Sewer Utility Funds
$     3,700
500/501
Public Works   Install security cameras at the Civic Center 23,200 100/399
Public Works   Increase Street Tree Maintenance appropriation 25,000 010
Public Works   Increase Street Sweeping Contract appropriation  5,900 033
Finance   Increase various CFD’s budgets for CAFR extension        5,000 Various
  Total $    62,800  
 
City-Wide Administrative Overhead Charges - Various Funds
The Fiscal Year 2018-19 adopted budget included annual appropriations to charge various funds administrative overhead charges that are calculated through the City’s cost allocation plan. After the start of the Fiscal Year, it was discovered that these charges were incorrectly entered into the City’s financial system.  In order to correct the error, it is recommended to increase appropriations by $811,264 in various funds as detailed in Exhibit No. 1 of the resolution.  This amendment will decrease the unreserved fund balance in the affected funds by a total amount of $811,264. In addition, the General Fund revenues adopted by the City Council related to the overhead charges were overstated and need to be decreased by $110,000 to correspond to the related charges.  This adjustment will decrease the General Fund Unreserved Fund Balance by $110,000.
 
Public Works Department- Storm Drain Personnel Changes - General Fund (001)
The Fiscal Year 2018-19 adopted budget included a part-time Management Analyst position in the Storm Drain division that was funded by the Sewer Utility and General Fund.  Due to the reorganization of duties within the Public Works Department, Staff is requesting to adjust the funding for this position to the Public Works Administration division which is funded entirely by the General Fund.  It is recommended to decrease the funding in the Sewer Fund by $58,102, and increase the appropriation in the General Fund by the same amount.  This budget amendment will decrease the General Fund Unreserved Fund Balance by $58,102 and increase the Sewer Utility Unreserved Fund balance by the same amount.
 
Capital Improvement Program
 
The City currently has 52 projects designated in the Capital Improvement Program (CIP). As of September 30, 2018, two projects were completed, 48 projects were either in the design process or under construction, and two projects had been deleted. The completed projects are as follows:
 
Pavement Repairs
Veterans Park Indentation
 

Capital Project Budget Modifications:

Los Serranos Park (Project No. 800212)
Appropriation:  Decrease CFD 5 - Soquel Cyn Fund (640) $551,100
Increase Parks & Recreation Facilities Fee Fund (027) $551,100
Reason:                It is recommended to replace $551,100 of CFD 5 appropriations with Parks & Recreation Facilities Fee funds to utilize the maximum amount available of the development impact fee funding.
  









Repair of Sewer on Boys Republic and Grand Avenue (Grand Avenue/Highway 71 Trunk Relief) (Project No. D13002)
Appropriation:  Decrease Sewer Utility Fund (501) $54,800
Increase Sewer Facilities Fee Fund (506) $54,800
Reason:                It is recommended to replace $54,800 of Sewer Utility Fund appropriations with Sewer Facility Fee funds to align the budget with the percentage allocated in the Development Impact Fee study.







Reservoir No. 18 (Project No. W11004)
Appropriation:  Decrease Water Facilities Fee Fund (507) $2,997,700
Increase Water Utility Fund (500) $2,997,700
Reason:                It is recommended to replace $2,997,700 of Water Facilities Fee Fund appropriations with Water Utility funds to align the budget with the percentage allocated in the Development Impact Fee study.







Supervisory Control & Data Acquisition System (SCADA) (Project No. 800162)
Appropriation:  Decrease Water Facilities Fee Fund (507) $166,500
Increase Water Utility Fund (500) $166,500
Reason:                It is recommended to replace $166,500 of Water Facilities Fee Fund appropriations with Water Utility funds to align the budget with the  percentage allocated in the Development Impact Fee study.







Los Serranos Transit Access Park (Project No. S19003)
Revenue:  Increase Miscellaneous Grant Fund (199) $87,100
Reason:                It is recommended to increase the Miscellaneous Grant Fund revenues $87,100 to account for the projected reimbursements expected to be received based on the adopted Fiscal Year 2018-19 CIP budget.  






Los Serranos Safes Routes to School West (Project No. S19005)
Revenue:  Increase Miscellaneous Grant Fund (199) $249,800
Reason:                It is recommended to increase the Miscellaneous Grant Fund revenues $249,800 to account for the projected reimbursements expected to be received based on the adopted Fiscal Year 2018-19 CIP budget.  


 
ENVIRONMENTAL (CEQA) REVIEW:
This proposed action is exempt from review under the California Environmental Quality Act (California Public Resources Code §§ 21000, et seq., "CEQA") and CEQA Guidelines (Title 14 California Code of Regulations §§ 15000, et seq.), because it does not involve any commitment to a specific project which could result in a potentially significant physical impact on the environment; and, constitutes an organizational or administrative activity that will not result in direct or indirect physical changes in the environment.  Accordingly, this action does not constitute a "project" that requires environmental review (see specifically 14 CCR § 15378(b)(4-5)).












 
FISCAL IMPACT:
The effects on fund balance, as a result of the proposed FY 2018-19 budget amendments, are as follows:
 
  Net Increase/
(Decrease)

 
Appropriations  
General Fund – Unreserved (001)* $      (55,902)
Community Services Fund (003)                  35
Community Development Fund (004)                  31
Gas Tax Fund (010)                  50
CDBG Fund (017)               (380)
Parks & Recreation Facilities Fee Fund (027)        (611,300)
Water Utility Fund (500)     (3,133,600)
Sewer Utility Fund (501)         123,702
Sewer Facilities Fee Fund (506)        (125,000)
Water Facilities Fee Fund (507)      2,727,700
Equipment Maintenance Fund (551)              (100)
CFD 5 - Soquel Cyn, Rincon & Woodview Fund (640)         551,100
Various Development Impact Fee Funds     (287,600)
Appropriations Subtotal     (811,264)
Revenues  
General Fund - Unreserved (001) (110,000)
Miscellaneous Grants (199)       336,900
Revenues Subtotal       226,900
Total ($584,364)
 
*This total does not include the City Manager approved budget amendments, which are reflected in the balances of the Monthly Financial Report for September 2018.
 
REVIEWED BY OTHERS:
None
Attachments
Financial Report - September 2018
Resolution_Amendment No. 19B021
Exhibit No. 1 to Resolution

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