CC 06-04-2021 Item No. 1 Attachment I - Contingency InquiryAttachment I
1. Is there a GASB best practice regarding contingencies for the city that would support the
City Manager’s discretionary fund? Perhaps this is just locating the policy that is
referred to in the FY 2013 2014 budget.
Staff Response: The Government Finance Officers Association (GFOA) frequently
releases guidance to municipalities to improvement their processes. Recently, and since
the onset of the COVID‐19 pandemic, the GFOA issued an article titled, “Balancing the
Budget in Bad Times.” One of the recommendations was to “Pool department
resources.” An opportunity that often pays big dividends is a shared budget
contingency. This is an opportunity for risk pooling. To illustrate the potential, imagine
that a government has 10 departments, each with a 10% change of incurring an extra $1
million in added costs. In the absence of risk pooling, each department builds $1 million
of “padding” into their budget to account for the risk, for a total of $10 million in
padding across the government. On average, however, the government will only incur
$1 million in unexpected costs each year (10 departments x 10% change x $1 million
loss), resulting in $9 million in unnecessary padding. The finance department can help
departments manage unexpected and unavoidable spending by creating a shared
budget contingency that can be used for unexpected and unavoidable spending.” GFOA
also issued a “Budgetary Pooled Contingency Policy” for municipal agencies to use as a
template (see attachments J & K)
2. How was the City Manager’s proposed Discretionary Fund for contingencies calculated
for this year?
Staff Response: The City Manager’s proposed Discretion Fund for contingencies was
calculated as follows:
3. Confirm that when the CM spends her contingency funds, she still must follow the
City’s purchasing policy (and get Council approval for contracts that exceed the limit).
Or let me know that that is not how you interpret the budget.
General Fund Materials and Contract Services Base (A) 29,521,589$
Less: Sheriff Contract ‐ Law Enforcement (B) (15,485,487)$
Less: Sheriff Contract ‐ Interoperability (C) (48,539)$
Less: City Attorney's Office Contract (D) (1,765,000)$
Total (E) 12,222,563$ (A‐B‐C‐D)
City Manager Contingency ‐ 2.5% of Total (F) 305,564$ (E * 2.5%)
City Manager Contingency (G) 305,564$
Public Works Maintenance Contingency (H) 287,686$
Total Contingency (I) 593,250$ (G+H)
Attachment I
Staff Response: The City Manager’s contingency funds are generally transferred to the
respective department in need of additional appropriations. Regardless of where the
appropriations reside in the City’s chart of accounts, the City’s purchasing policy always
applies.
4. For each department that has appropriations for contingencies since 2013, what
expenditures were made with any of these contingency funds?
Staff Response: See attachments L & M.