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INTERNAL SERVICE FUNDS Internal Service Funds account for the financing of goods or services provided by a department to other departments on a cost-reimbursement basis. Three examples of this are the Employee Benefit Fund, the Repair and Replacement Fund and the Self Insurance Fund. These funds not only account for current year expenditures but also long term liabilities of the City. These liabilities may not result in actual expenditures in the short term, but will result in future expenditures for the future replacement of equipment or the payment in the future of employee retirement, medical benefits and unused vacation. In accordance with the City's adopted financial policies and the City's General Plan, the City recognizes costs as they accrue, and sets money aside to fund the future expenditures, rather than allowing these costs to accumulate and become a future financial burden. Employee Benefit Fund The Employee Benefit Fund (EBF) is used to account for employee benefit costs. The departments' budgets are charged for benefit expenses as a percent of salary, and the dollars then flow to the EBF, where the actual costs are recorded. For 2013/14FY, the variance in actual revenues and expenditures to budget was $276,023 as shown in Table 10. The Fund Balance is equal to the amount of the outstanding PERS Side Fund Loan paid off in July 2011 (current balance $4.6 million). The Retiree Medical Fund advanced the monies to pay off the Side Fund Loan with PERS for the Police Officers Group. The original loan was $7.8 million. It is anticipated that the loan will be repaid by 2018/19FY. Table 10 presents the activity in 2013/14FY for the Employee Benefit Fund. Table 10. Employee Benefit Fund —Amended Budget vs. Actual Amended Employee Benefit Fund Budget Actual $Variance %Variance Beginning Fund Balance ($5,459,008) ($5,459,008) $0 Plus Reeenues 16,668,357 17,757,543 1,089,186 6.5% Less Expenditures (16,095,638) (16,908,801) (813,163) 5.1% Ending Fund Balance _ ($4,886,289) ($4,610,266) $276,023 Change in Fund Balance $572,719 $848,742 $276,023 Replacement/Renovation Funds In accordance with the City's financial policies and the General Plan, the City maintains various Replacement/Renovation Funds. The purpose of these Funds is to provide ongoing replacement of City equipment, vehicles, traffic signals, streetlights, and to make major repairs/renovations to City facilities, parks, and medians, in order to extend their useful lives. Table 11 presents the activity in 2013/14FY in these funds. Additionally, $1.125 million of expenditures originally planned for 2013/14FY were not undertaken and/or were rescheduled to a later time. Therefore, these funds ended the year with $1.271 million more in fund balance than originally budgeted. Staff is also recommending a Year-End Page 10 of 12