The City has three grant Funds:

• The Community Development Block Grant Entitlement Fund was established to process transactions related to the Community Development Block Grants as awarded by the U. S. Department of Housing and Urban Development.
• The Community Development Block Grant Fund was established to process transactions related to the Community Development Block Grant Program Income and is also used to track the Washoe County Home Consortium housing program money.
• The Sparks Grants & Donation Fund was established to account for monies from all other governmental Fund grant awards, donations and other designated use awards. 

Each of these Funds processes transactions for grants that are operated on a reimbursement basis and as such, may cause the Fund to experience periods of ‘negative’ cash.  When that happens, the Fund is considered to have participated in an interfund loan per NAC 354.290 as revised in 2010.

NRS 354.6118 requires the City hold a public hearing before such a loan is made to determine, that a sufficient amount of money is available for the loan and the money is not restricted as to its use, and that the loan of the money will not compromise the economic viability of the Fund from which the money is loaned, and establish the amount of time the money will be on loan from the Fund, and the terms and conditions for repaying the loan, and the rate of interest, if any, to be charged for the loan.

The ability to predict cash needs of a grant Fund and hold a public hearing before grant expenditures are made is not practicable.  Therefore, approval of a Resolution authorizing the Financial Services Department to establish an interfund loan from the General Fund to one or more of the three grant Funds of the City, as needed, is requested.  

Over the last five years (fiscal year 2013 to June 2017), the Community Development Block Grant Fund has experienced negative cash situations on 1,602 out of 1,822 days (88 percent).  The amount of the interfund loans range from $7.37 to $444,310.81 and existed for approximately one week before we receive reimbursement of qualified expenditures.  Fiscal year 2017 was the first year since public hearings were required that the negative amount was over $300,000, the amount previously thought to be sufficient to cover this type of interfund loan.  Due to spending related to pedestrian improvements at 16^th and F street, we did violate NRS in 2016-2017 by loaning more than approved for two days.  As a result, a corrective action plan will be forthcoming that will state we are increasing the potential loan from $300,000 to $500,000 in 2017-2018 in an effort to avoid future violations.

While the other two grant Funds do not often experience negative cash situations, it is prudent to obtain authorization for all Funds that may need this type of loan.

Approving this Resolution will reduce the likelihood of violation findings, related to the General Fund, from our audit of fiscal year ending 06/30/2018. 

It is anticipated that an interest free loan of up to $500,000 from the General Funds non-restricted assets for a period of 30 days or less would not compromise the economic viability of the General Fund during fiscal year 2018.

For Council to be able to accurately determine that a loan can be made from a Fund with sufficient unrestricted money and that the loan does not compromise the economic viability of the loaning Fund, Council will be required to approve a Resolution similar to this each year.

Council could approve the resolution authorizing an interfund loan to the Community Development Block Grant Entitlement Fund, and/or the Community Development Block Grant Fund, and/or the Sparks Grants & Donations Fund, from the General Fund as needed.  Interfund loans from the General Fund to any of the three grant Funds, would be authorized as needed within fiscal year 2018.

Council could deny authorization of an interfund loan to the Community Development Block Grant Entitlement Fund, and/or the Community Development Block Grant Fund, and/or the Sparks Grants & Donations Fund, from the General Fund as needed.  Future violations of NRS will be noted in the City’s Comprehensive Annual Financial Report (CAFR).

I move to approve Resolution No. 3314 authorizing an interfund loan to the grant Funds of the City of Sparks as needed.