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6.1. G. - Page 11 The General Fund 1�as a Fund Balance, vvhich represents the difference between the Ceneral Fund's Assets and L,iabilities. One value of fhe General Fund Balance is its use in assessing the aba�ity of`the city or County to meet its current obligations and /or its need for near term financing. This General �und Balance is carnmonIy referred to as "Reserves" and Reserves are designed to protect a�ainst the need to raise t�es or reduce services due to temporary revenue shortfalIs or unplanned one-time expezlditures. The Genera� Fund Balance, and moz'e specifically the unreserved portion of the Ge�.eral �'und BaIance, was the appropriate znetric for this investigatior� because "The function o�reserved fund balance is simply t� isolate the portion of fund baIance that is not avaiIable for the following period's budget, so that unreserved fund balance can serve as a measure of cu� available zesouarces." The Grand Jury was pz interested in assessing utilization of avaiIable r�esources to meet budget needs over a specifc period of time. Further explanation af reserved and unreserved fund balance may be helpful. • Reserved General Fund Balance is not available for discretionary spending to me�t the operational needs of the gavernment in any given year. There are two primary reasoz�s for a Reserved cafegorization: o Those funds are subjected to legal restrictions ("rests�cte�i net assets") on spendin� narrower than the purpose of the fund. Examples include Measure A ar gas tax funds. o Those funds are not available for spending, e.g, long-tenn loans receivables. • Unreserved Genera� �'�nd Balance is available for cu�xent appropriation and spending as needed. Cities typically break down their Unreserved General �"und Batance into designated and undesignated portions. o Designated fun�ds z an intent �o use those funds :Far the stated �urpose (e,g., a capitaY project for a new park ar playground), However, unlike for restricted assets, there is no Iegal obligation or mandate far them ta do so. These funds may be r�allocated as city pziorities change. This z and reassignment, if any, occurs with the apparoval of City Council, usuaily as part of the annual budgeting process. o Undesignated funds are those funds not designated for any speci�c p�rpos� and available far spendzng without any constraints. GASB determined that clearer fund balance classifications were warranted and issued new standards as part af GASB Statement 54 in �'ebruary 2009. T�ey are required to be used for all applica�ie �nancial statements for per�ods beginning a�er JUne 30, 20�0, although earlier ado�tion was encouraged. These new classifications �`comprise a hierarchy based primarily an the e�ctent to which a government is bound to obsea const�aints imposed upon the use of th� z Governrnental Accounting, Auditing, and Financial Reporting Using the GASB 34 Modei, GF�A Publication hy Stephen J. Gauthisr, pa0 3 GASB Surnmary of Statement 54, Fund Balance,4eporfing and Governmentaf Fund Type Definifions (lssued 02/09), httpJlwww.qasi�.orq/s�lsurs�marvlc�stsm54.html (Also, see Attachment 3) 6