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III. FUND BALANCE REPORTING <br /> Fund balance for governmental funds should be reported in classifications that comprise a <br /> hierarchy based primarily on the extent to which the City is bound to honor constraints on the <br /> specific purposes for which amounts in those funds can be spent. The classifications are as <br /> follows: <br /> A. Nonspendable—includes amounts that can not be spent because they are either(a) not <br /> in spendable form or(b) legally or contractually required to be maintained intact. The <br /> "not in spendable form" criterion includes items that are not expected to be converted <br /> to cash, for example, inventories and prepaid amounts. It also includes long-term <br /> receivables and property held for resale which are not otherwise restricted, committed <br /> or assigned. <br /> B. Restricted—amounts that can be spent only for specific purposes stipulated by external <br /> resource providers, enabling legislation or constitutional provisions. Effectively, <br /> restrictions may be changed or lifted only with the consent of the resource provider. <br /> Unrestricted: <br /> C. Committed—amounts that can be used only for specific purposes determined by a <br /> formal action of the City Council, the City's highest level of decision-making authority. <br /> Commitments may be changed or lifted only by the City Council taking the same <br /> formal action that imposed the constraint originally. The action to commit must occur <br /> prior to the end of the year. <br /> D. Assigned—includes amounts constrained by the City's intent to be used for specific <br /> purposes. The City's intent should be expressed by the City's Finance Director. The <br /> City Council authorizes the Finance Director to determine the Assigned fund balance <br /> reflecting the City Council's intent to include (a) all remaining amounts (except for <br /> negative balances) in governmental funds other than the general fund,which are not <br /> classified as nonspendable,restricted or committed and(b) amounts in the general fund <br /> that are intended to be used for a specific purpose. Assignments which result in a <br /> deficit to the unassigned fund balance are not allowed. <br /> E. Unassigned—residual amounts in the general fund which have not been classified as <br /> nonspendable, restricted, committed or assigned. It is also used for other governmental <br /> funds with a negative fund balance. <br /> IV. FUND BALANCE CLASSIFICATION HIERARCHY <br /> When both restricted and unrestricted resources are available for use in the same fund, it is the <br /> policy of the City to use the most restricted resources first, and then as needed use the <br /> unrestricted resources. When unrestricted resources are available for use, they will be used in <br /> the following order: first, committed; second, assigned; and last unassigned. <br /> Page 2 of 6 <br />