HomeMy WebLinkAboutResolution No. 14-C76RESOLUTION NO. 14-C76
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA
APPROVING AND ADOPTING THE INTERFUND LOAN POLICY
WHEREAS, the City of Azusa ("City") desires to maintain current and comprehensive
financial policies; and
WHEREAS, there is a need to formalize the policies regarding loans made between City
funds; and
WHEREAS, the City desires to adopt an Interfund Loan Policy;
NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE
CITY OF AZUSA DOES HEREBY:
Section 1. Approve and adopt the Interfund Loan Policy attached hereto as Exhibit A;
Section 2. Authorize City staff to take all actions necessary to carry out the Policy.
PASSED, APPROVED, and ADOPTED this 3`d day of November, 2014.
(M
/,Joseptl Romero Rocha
Mayor
ATTEST:
City of Azusa
INTERFUND LOAN POLICY
DEFINITION
Exhibit A
Interfund loans are borrowing of monies from one City fund to another City fund for a specific
purpose and with a requirement for repayment.
PURPOSE
The purpose of the policy is to provide guidelines regarding the establishment, management and
repayment of interfund loans.
INTERFUND LOAN POLICY
General
1.1 Interfund loans may be used to alleviate cash deficiency and shall 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
• 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.
1.3 Interfund loans shall not be used to solve ongoing structural budget issues.
1.4 Interfund loans shall not hinder the accomplishment of any function or project for which
the lending fund was established.
1.5 An analysis will be performed to determine that the borrowing fund will have sufficient
revenues to repay the principal and interest payments over the period of the loan as
required in the loan agreement.
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.
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss.
CITY OF AZUSA )
I HEREBY CERTIFY that the foregoing Resolution No. 14-C76 was duly adopted by
the City Council of the City of Azusa, at a regular meeting thereof, held on the 3rd, day of
November, 2014, by the following vote of the Council:
AYES:
COUNCILMEMBERS:
GONZALES, CARRILLO, MACIAS, ALVAREZ, ROCHA
NOES:
COUNCILMEMBERS:
NONE
ABSENT:
COUNCILMEMBERS:
NONE
Exhibit A
2.2 The following procedures should be followed in establishing an interfund loan:
a) The loan shall account for borrowing between funds and shall not be available for
appropriation or be considered revenue to the borrowing fund.
b) Interfund loans should be reported as receivables in the lending fund and payables in the
borrowing fund.
c) Loan interest will be recorded as revenue to the lending fund and as expenditure to the
borrowing fund.
d) A loan agreemeWshould be established between the lending fund and the borrowing
fund and include the following:
i) Purpose of Loan
ii) Loan Amount
iii) Term
iv) Repayment Source
v) Rate of Interest - equals the investment earnings the lending fund would have
received had the loan not occurred.
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 consistently with the loan terms.
3.3 If the borrowing fund continues to maintain a negative cash balance for periods beyond the
term of the loan, scheduled payments should be postponed until the fund has a positive
cash balance.
a) Interest should continue to accrue and be added to the principal of the loan.
b) Missed scheduled payments shall be reported by the Finance Department to the City
Council.
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
shall be approved by the City Council.
November 3, 2014
2