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6.1.G. - Page 16 D. Running Liqnic�ity — According to intervaews with Certified Public Accountants specializing in goveriuroental audits, thas is a useful fiscal measure that does not typically appear zn city and County CAFRS and Budgets. Running Liquidity is the number of days a city or Caunty governrnent could continue to operate normally without additional revenue corning in. A typical vvay of calculati�g this is by dividing the "Maximum Unrestricted Liquidity" by the city's ar County's daily spending rate �its axiz�ual Genera� Fund expenditures divided by the 365 days in a year}. The resuZt is the number of days of spending this cash ��il� cover, its "Running Liquidity", as shown in Chart 3. Typically, a Running Liquidity below 90 days would t�igger a closer examination o�'the de�ails of this and other fiscal measures to ensure the city or County's abzlity to operate at an acceptably iaw risk. This additional evaluation was beyond the scope ofthis investigatian. A arnodi�ed version of this metric was utilized to enable a standard basis af comparison of cities' and the County's relative liquidity. Maxi�um Unrestricted Liquidity is typically the sum of two main sources af liquid assets -- the Unrestricted Assets in the GenEral Fund Ba�ance and the cash in Intert�al Service Funds. Internal Service Funds are cost pools tk�at can be "charged to" by the General Fund, such as for fle�t manager�ent, risk znanagement, and warkears cozxzpensat�qn costs. Cash can be transferred between Funds, and Internal Service Fund c�sh may he loaned or transferred to the General Fund to, in effect, supplement its revenues. For the purposes of this analysis, the Grand Jury used the total of Unreserved General Fund Balance and Internal Service Fund Cash as the Maximum Liquidity and divided it by the eity's or County's daily spending rate (General Fund Expenditures/355). Every city has unique financial circumstances and there is flexibility available in terms of how the details are managed and r�parted. This underscores tihe corriplexity of attemp�ing to per#'orm con�parative analysis and why it mal�es sense far us ta present results rafher than interpret thezr�. Since neither Maximum Ur�est� Liquidity nor Running Liquidity are caIeulatet� or sY�own in any of the city ar Cour�ty CAFRs examined, reporting standards could not be assessed. The Unre��rrred General Fund Balance is cansistenily reported, but there is signi�cant variation in the use of Znternal Service Funds. Cities an.d tk�e County k�ave the Iegitimate ogtion of setting up Internal Service Ft�nds in numbers and for tracking purposes that wark for their particular circumstances. Smalf cities may have few Intemal Service Funds while larger ones may ha�e many (e.g., Hillsborough has one, while Daly City has s�ven). W�ile the movement of funds between Ir�tez Service Funds arad the General Fund as shown in the CAFRs, it is not trivial to determirze tivith certainty whether all of the cash in the Ir�ternal Service Funds is truly available to support operations. It is accepted that it is not the cities' or County's intent ta make all of those �unds av�i�able to the General Fund undez normal circumst�nces; hor�ever, that was not the purpose of our assessment. Our purpose was to identi:Fy liquid funds that could be made available if necessaty Fo suppvrt operations. By using L7GPB, the Cirand rury is being conservative si�xce some Reserved Funds may not be legally "restricted" from use and coulci also be made available in an exz�ergency, 11