Tucson is preparing to change its accounting rules to better show which of the city's funds are restricted for use and which funds are freely available for the city to spend.
The City Council will hear a report today on the new standards, showing which funds are non-spendable, which are restricted by outside entities, which are committed by city rules, and which are unassigned and available for any purpose.
Silvia Amparano, the city's deputy finance director, denied that the new rules are the result of an Arizona Daily Star analysis showing the city was borrowing from legally restricted funds to pay its bills when the balance on its unrestricted account fell below zero. Four experts, including in the Arizona Auditor General's Office, said the practice was improper and could be illegal, depending on the legal restrictions governing each fund.
Amparano said the changes are being made because Governmental Accounting Standards Board rules for disclosing restrictions will change next year. She said the city will continue the practice of borrowing from its restricted funds because the city believes it is not an issue.
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The new city policy will take effect as soon as the council gives final approval and will include the disclosures in its annual financial report to be issued in the fall, although the new accounting-board rules don't have to be implemented until June 30, 2011.
Amparano said the disclosures will show why the funds are restricted and "what authority establishes the restriction on each of the funds." She said the new rules will show what part of the city's rainy-day fund is restricted and can't be used, and what can be used freely.
"It's a definition of what's spendable and what's non-spendable," Amparano said. "So people are clear what's available to spend."
Amparano said the new disclosures wouldn't affect how the city uses cash, despite the fact that many municipalities use the same restrictions on cash that are used for accounting purposes at year-end. Amparano said she didn't know whether the disclosure of what's restricted and what's not would raise or reduce the city's rainy-day fund, which currently is 4 percent of the city's general fund. That's below the 5 percent strongly suggested by rating agencies and the council's own 10 percent target.
The city is expected to issue bonds in May for about nearly $60 million - $10 million of which needs to be refinanced to help balance next year's budget.
Stephen Gauthier, technical services director for the Government Finance Officers Association, said the old rules were designed to show what was generally available for the next budget year, while the new rules are designed to show what part of that money is spendable.
The new rules show "what are the limitations and what are the source of that limitation," Gauthier said, leaving the unrestricted money for what the city can actually spend money on. Gauthier said he was commenting on the rules in general and not on specifics in Tucson.
Gauthier said a city's borrowing from restricted cash would be a legal issue rather than an accounting issue, which is what the new rules cover.
Contact reporter Rob O'Dell at 573-4346 or rodell@azstarnet.com
