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7.1.A. - Page 16 <br /> service paid during the year is shown under debt service funds. The Port of Redwood City is an enterprise activity <br /> and is presented as an enterprise fund. <br /> Financial information for separate legal entities related to the City including the Redwood City Facilities and <br /> Infrastructure Authority, Redwood City Public Financing Authority, and Successor Agency to the Redevelopment <br /> Agency of Redwood City is blended in the City's financial statements in accordance with Governmental Accounting <br /> Standards Board Statement No. 14. <br /> FINANCIAL INFORMATION <br /> Accounting System and Budgetary Control <br /> The City's accounting records for governmental operations are maintained on a modified accrual basis, with the <br /> revenues being recorded when both measurable and available, and expenditures being recorded when the <br /> services or goods are received and the liabilities are incurred. Accounting records for the City's enterprises are <br /> maintained on the accrual basis. <br /> In developing and modifying the City's accounting system, consideration is given to the adequacy of internal <br /> accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance <br /> regarding: <br /> • The safeguarding of assets against loss from unauthorized use or disposition, and <br /> • The reliability of financial records for preparing financial statements and maintaining accountability for <br /> assets. <br /> The concept of reasonable assurance recognizes that: <br /> • The cost of a control should not exceed the benefits likely to be derived, and <br /> • The evaluation of costs and benefits requires estimates and judgments by management. <br /> All internal control evaluations occur within the above framework. We believe that all of the City's internal <br /> accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of <br /> financial transactions. <br /> Budgetary control is maintained at the program level by encumbering estimated purchase amounts prior to the <br /> release of purchase orders to vendors. Purchase orders that result in an overrun of budget balances are not <br /> released until additional appropriations are made available. <br /> As demonstrated by the statements and schedules included in the financial section of this report, the City of <br /> Redwood City continues to meet its responsibility for sound financial management. <br /> FACTORS AFFECTING FINANCIAL CONDITION <br /> Local Economy <br /> The local economy is recovering from the "Great Recession" more robustly than the national economy with the <br /> unemployment rate in San Mateo County decreasing to 4.2% as of June 2014 from 5.4% as of June 2013, which is <br /> consistently lower than the State's unemployment rate of 7.3% and the national rate of 6.3 %. The number of <br /> employed residents in the County increased from 378,400 in June 2013 to 388,300 in June 2014. <br /> Relatedly, the Redwood City commercial real estate market continues to exhibit signs of high demand with the <br /> citywide vacancy rate decreasing to 9.24% as of the second quarter 2014 compared to 9.95% as of the second <br /> quarter 2013. Vacancy rates in Redwood City's downtown area are notably lower, with retail vacancy at 7% and <br /> the office space vacancy rate at 5.24% as of June 2014. <br /> ii <br />