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Finance Director responding to #197850 re: grants and donations that require this Board's approval.
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Official Text
Dear Honorable Board of Aldermen:
I am writing this memo in response to Order #197850, a request that the “Director of Finance and/or City Treasurer report to this Board on what categories of grants, gifts, payments, donations, etc. and by what type of entities need to be formally accepted by a vote of this Board and which do not require official acceptance.”
General Fund Revenue
Revenue belongs to the General Fund unless otherwise provided by statute. (M.G.L. Ch. 44, Sec. 53.)
All unrestricted revenues, including real and personal property taxes, other local taxes, such as excises, special assessments and betterments, unrestricted local aid, investment and rental income, fees, fines, permits, voluntary and statutory payments in lieu of taxes and other receipts not expressly dedicated by statute flow to the General Fund and do not require “acceptance” by the Board of Aldermen before they are booked to their respective accounts. General Fund Revenues support the overall General Fund Operating Budget; hence they are not under the direct control of any Department Head. The General Fund Operating Budget is subject to appropriation by the Mayor and the Board of Aldermen.
Special Revenue Funds
Special Revenue Funds are particular revenues segregated from the general fund into a separate fund and earmarked for expenditure for specified purposes by statute. Special revenue funds include annual revenue funds, receipts reserved for appropriation, revolving funds, and gifts and grants from governmental entities and private individuals and organizations. Special revenue funds are classified based on the availability of the funds for expenditure and need for a prior appropriation.
Grants and gifts are not appropriated. In most cases (but not all) grants and gifts require the approval of the Mayor and the Board of Aldermen for acceptance and expenditure. M.G.L. Ch. 44, Sec. 53A allows an officer or department of the City to accept grants or gifts of funds from the federal government, from a charitable foundation, a private corporation, an individual, from the Commonwealth, a county, an agency, or another municipality, and expend such grants and gifts with the approval of the Mayor and the Board of Aldermen. In the case of a grant or gift given for educational purposes, the approval of the School Committee is required.
A Consolidated Gift Account may be established with the approval of the Mayor and the Board of Aldermen to accept gifts of like nature for a specified purpose without the need for a vote for acceptance and expenditure for each gift. The Sunsetters Consolidated Gift Account and the Shape Up Somerville Consolidated Gift Account are examples.
Departmental Revolving Funds under M.G.L. Chapter 44, Sec. 53E1/2 are annually authorized by the Mayor and the Board of Aldermen. Such entities may receive departmental receipts received in connection with the programs authorized for support. Expenditures may be made from revolving funds without further appropriation. There is no need to formally accept or expend any gifts, payments, or receipts to a revolving fund once annually authorized. Examples include the Cable Telecommunications Revolving Fund and the Council on Aging Revolving Fund.
Statutory Revolving Funds may receive departmental receipts received in connection with the statutory purpose of the fund. There is a basis in state law for each of these funds. At some point in the City’s history, these statutory revolving funds were established by a vote of the Mayor and the Board of Aldermen or the School Committee. Receipts are not formally accepted by vote of the Board of Aldermen or School Committee. Some examples of statutory revolving funds would be the Arts Council Lottery, the Affordable Housing Trust Fund, the Adult Education Fund, the Community Schools Fund, and the Parks and Recreation Fund.
Annual Revenue Funds are streams segregated from the general fund into a separate fund to separately budget and account for services that generate, or for purposes supported by, those revenues. These include enterprise funds for services financed and delivered in a manner similar to private enterprises in order to account for all costs, direct or indirect, of providing the goods or services. The Community Preservation Fund is an example of an Annual Revenue Fund. There is no formal acceptance of receipts by a vote of the Board of Aldermen but there is an appropriation requirement to establish a budget for the fiscal year.
Receipts Reserved for Appropriation are receipts from a specific revenue source segregated from general fund into a separate fund and earmarked for appropriation for specified purposes by statute. Appropriations are limited to actual collections on hand and available. There is no formal acceptance of receipts by a vote of the Board of Aldermen but these receipts are all subject to appropriation. Examples include Parking Meter Receipts and Proceeds from the Sale of Real Estate.
Trust and Agency Funds are fiduciary funds segregated from the general fund to account for assets held in a trustee capacity or as an agent for individuals, private organizations, other governmental units, etc. These include expendable trust funds, non-expendable trust funds, pension trust funds and agency funds. There is no formal acceptance of receipts by a vote of the Board of Aldermen. Examples are the Scholarship Fund, the Police Detail Fund, and the Student Activity Agency Fund.
I hope this memo adequately answers your questions.
Respectfully,
Edward Bean
Finance Director