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