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City of Redwood City 6.1.D. - Page 65 <br />Notes to the Basic Financial Statements <br />For the fiscal year ended June 30, 2016 <br />NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility <br />requirements have been satisfied. <br />Other revenues susceptible to accrual include other taxes, intergovernmental revenues, interest, and <br />charges for services. <br />Grant revenues are recognized in the fiscal year in which all eligibility requirements are met. Under the <br />terms of grant agreements, the City may fund certain programs with a combination of cost - <br />reimbursement grants, categorical block grants, and general revenues. Thus, both restricted and <br />unrestricted net position may be available to finance program expenditures/expenses. The City's policy is <br />to first apply restricted resources to such programs, followed by unrestricted resources if necessary. <br />Certain indirect costs are included in program expenses reported for individual functions and activities. <br />E. Compensated Absences <br />In compliance with Governmental Accounting Standards Board Statement No. 16, the City has established <br />a liability for accrued sick leave and vacation in relevant funds. For governmental activities, the current <br />liability for the payouts made after June 30, 2016 for those employees retired on or before June 30, 2016 <br />appears in the respective funds and the long-term liability appears in the government- wide financial <br />statements. This liability is set up for the current employees at the current rates of pay. An employee may <br />accumulate vacation up to two years entitlement and sick leave up to 960 or 1,920 hours depending on <br />the bargaining unit (with the exception that Battalion Chiefs who work 24 hour shifts may accumulate up <br />to 2,400 hours of sick leave). <br />An employee may elect to receive compensation in lieu of sick leave credits for any calendar year with <br />payment equal to varying amounts from 25% to 50% of the year's unused sick leave, depending upon the <br />employee's sick leave usage during the year. In addition to sick leave, payouts are made for unused <br />administrative holidays and accrued compensatory time. <br />If sick leave and vacation are not used by the employee or paid out during the term of employment, <br />compensation is payable to the employee at the time of separation. Such compensation is calculated at <br />the employee's prevailing rate at the time of retirement or termination. Whereas vacation is compensated <br />at 100% of accumulated hours, sick leave is compensated at 50% of accumulated hours at retirement <br />depending upon varying restrictions of the bargaining units. Upon termination only accrued vacations are <br />compensated. Each year an adjustment to the liability is made based on pay rate changes and adjustments <br />for the current portion. The general fund is primarily responsible for the repayment of the governmental <br />portion of the compensated absences. <br />Individual proprietary funds are responsible for the repayment of the liability attributable to their <br />respective funds. <br />38 <br />