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City of Redwood City <br />Notes to the Basic Financial Statements (Continued) <br />For the Year Ended June 30, 2025 <br /> <br /> <br />73 <br />Note 1 – Summary of Significant Accounting Policies (Continued) <br /> <br />Q. Fund Balances <br /> <br />For governmental fund financial statements, fund balances are categorized as follows: <br /> <br />Nonspendable – Items that cannot be spent because they are not in spendable form, such as prepaid items and <br />inventories and long term receivables, or items that are legally or contractually required to be maintained intact, <br />such as principal of an endowment or revolving loan funds. <br /> <br />Restricted – Restricted fund balances encompass the portion of net fund resources subject to externally <br />enforceable legal restrictions. This includes externally imposed restrictions by creditors, such as through debt <br />covenants, grantors, contributors, laws or regulations of other governments, as well as restrictions imposed by <br />law through constitutional provisions or enabling legislation. <br /> <br />Committed – Committed fund balances encompass the portion of net fund resources, the use of which is <br />constrained by limitations imposed by the formal action of the government’s highest level of decision making <br />authority normally through resolutions, etc., and that remain binding unless rescinded or modified in the same <br />manner. The City Council is considered the highest authority for the City. <br /> <br />Assigned – Assigned fund balances encompass the portion of net fund resources reflecting the government’s <br />intended use of resources. Assignment of resources can be done by the highest level of decision making or by <br />a committee or official designated for that purpose. The City’s policy hereby delegates the authority to assign <br />amounts to be used for specific purposes to the City Manager and the Finance Director for the purpose of <br />reporting these amounts in the annual financial statements. <br /> <br />Unassigned – This amount is for any portion of the fund balances that do not fall into one of the above <br />categories. The General Fund is the only fund that reports a positive unassigned fund balance amount. In other <br />governmental funds, it is not appropriate to report a positive unassigned fund balance amount. However, in <br />governmental funds other than the General Fund, if expenditures incurred for specific purposes exceed the <br />amounts that are restricted, committed or assigned for those purposes, it may be necessary to report negative <br />unassigned fund balance in that particular fund. <br /> <br />When expenditures are incurred for purposes for which both restricted and unrestricted fund balances are available, <br />the City’s policy is to apply restricted fund balances first, then unrestricted fund balances as they are needed. <br /> <br />When expenditures are incurred for purposes where only unrestricted fund balances are available, the City uses the <br />unrestricted resources in the following order: committed, assigned, and unassigned. <br /> <br />R. Unbilled Services Receivables <br /> <br />In the water and sewer utilities, residential customers are billed bi-monthly and all commercial and industrial <br />customers monthly. Revenue is recorded as billed to customers on a cyclical basis. No accrual is made for unbilled <br />services. <br /> <br />There is no accrual for unbilled water services as of June 30, 2025; revenues cannot be recognized since water <br />meters are not read at such date. Management believes that the revenue from unbilled services does not have a <br />material effect on total revenue. <br /> <br /> <br />7.C. - Page 105 of 269 <br />124