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CITY OF SANTA ANA, CALIFORNIA AIR QUALITY IMPROVEMENT SPECIAL REVENUE FUND NOTES TO FINANCIAL STATEMENTS J U N E 30, 2021 NOTE1 GENERAL The financial statements are intended to reflect the financial position and changes in the financial position attributable to the Air Quality Improvement Special Revenue Fund (AQMD) of the City of Santa Ana, California (the City). These financial statements are exclusively for AQMD and do not purport to, and do not present fairly the financial position and changes in the financial position for the City. The South Coast Air Quality Management District (SCAQMD) is authorized under Assembly Bill 2766 (AB 2766) Chapter 1705 [California Health and Safety Code (CHSC) Sections 44220 through 44247] to impose a motor vehicle registration fee to be used by the SCAQMD and local governments specifically for programs to reduce air pollution from mobile sources and related planning, monitoring, enforcement, and technical studies necessary for the implementation of the California Clean Air Act of 1988. The California Department of Motor Vehicles collects the vehicle registration fee and subvenes it to SCAQMD. Upon receipt, the vehicle registration fee is split into segments with 40% of the revenue place in a special revenue fund designated as the Air Quality Improvement Trust Fund for quarterly distribution to local governments. CHSC Section 44243 requires cities and counties receiving the AB 2766 funds to separately account for the revenues and to expend the revenues for air pollution reduction measures pursuant to the California Clean Air Act of 1988 or the SCAQMD's Air Quality Management Plan pursuant to Article 5 of Chapter 5.5 of Part 3 of the CHSC. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Fund Accounting The financial activity of the City is accounted for on the basis of funds, each of which is considered a separate accounting entity with a self-balancing set of accounts. Monies under AB 2766 are accounted for in the Air Quality Improvement Special Revenue Fund, which is a special revenue fund. B. Measurement Focus and Basis of Accounting The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. City Council (6) 9 — 21 1/18/2022