The City’s grant Funds are operated mainly on a reimbursement basis and as such may experience cash flow problems. Nevada Revised Statute (NRS) 354.8116 and Nevada Administrative Code (NAC) 354.290 establish that any fund experiencing a negative cash situation, regardless of duration, has participated in an interfund loan and would therefore be required to hold a public hearing to determine the use and availability of funds and to establish a loan agreement. Since grant spending cannot be predicted accurately, cash needs may not allow sufficient time to hold the public hearing required by Nevada law. Therefore, the public hearing is held in advance and discloses the terms of potential interfund loans which may be made during the year.

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 1) a sufficient amount of money is available for the loan; 2) money is not restricted as to its use; 3) that the loan of the money will not compromise the economic viability of the Fund from which the money is loaned; 4) the amount of time the money will be on loan from the Fund; 5) the terms and conditions for repaying the loan; and 6) 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 (FY16 to FY20), the Community Development Block Grant Entitlement Fund has experienced negative cash situations on 1,706 out of 1,827 days (about 93% of the time).  The amount of the interfund loans range from $28 to $444,310 and existed for approximately one week before we receive reimbursement of qualified expenditures.

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 in order to remain compliant with statutory requirements.

City staff believes that an interest free loan of up to $500,000 from the General Fund’s available non-restricted assets for a period of 30 days or less would not compromise the economic viability of the General Fund during FY21. 

The authority to use an interfund loan will assist city staff in complying with state law and should increase the probability of our auditors reporting that we have conformed with Nevada law during our FY21 cash management process.  Approval to establish interfund loans as needed will be valid for FY21 only.

1. Council could approve the Resolution authorizing the Financial Services Department to establish 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. 

2. 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 and provide further direction to the City Manager

I move to approve Resolution No. 3364, authorizing the Financial Services Department to establish 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 during fiscal year 2020-2021 (FY21).