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CITY OF SANTA ANA, CALIFORNIA <br /> AIR QUALITY IMPROVEMENT SPECIAL REVENUE FUND <br /> NOTES TO FINANCIAL STATEMENTS <br /> J U N E 30, 2021 <br /> NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br /> C. Budgetary Accounting (Continued) <br /> The City legally adopts annual budgets for the Special Revenue Funds including the Air <br /> Quality Improvement Special Revenue Fund. The budgetary control for the Special <br /> Revenue Funds is under the department in charge. The Air Quality Improvement Special <br /> Revenue Fund is managed by the Public Works Agency. Monthly budgetary reports are <br /> prepared to effect control through fiscal management. The City Council approved <br /> supplemental appropriations during the year, but they were not considered material. <br /> Budgets are prepared on a modified accrual basis. Encumbrances (e.g., purchase <br /> orders, contracts) outstanding at year-end are reported as restrictions of fund balances <br /> since they do not constitute expenditures or liabilities. All other annual appropriations <br /> lapse at fiscal year-end to the extent that they have not been expended or lawfully <br /> encumbered. During the fiscal year, the total Fund's expenditures were within the legal <br /> prescribed limits as approved by the City Council. <br /> D. Deferred Inflows of Resources <br /> In addition to liabilities, the balance sheet will sometimes report a separate section for <br /> deferred inflows of resources. This separate financial statement element, deferred <br /> inflows of resources, represents an acquisition of fund balance that applies to a future <br /> period and will not be recognized as an inflow of resources (revenue) until that time. The <br /> AQMD fund has one item that qualifies for reporting in this category, which is unavailable <br /> revenues from intergovernmental revenues and interest receivable. These amounts are <br /> deferred and recognized as an inflow of resources in the period that the amounts <br /> become available. <br /> E. Fund Balance <br /> AQMD's fund balance is reported based on the extent to which the City is bound to <br /> observe constraints on the use of the AQMD's resources. AQMD's fund balance is <br /> classified under restricted, which include amounts which are constrained for specific <br /> purposes that are 1) externally imposed by creditors, grantors, contributors, or laws or <br /> regulations of other governments or 2) imposed by law through enabling legislation. <br /> AQMD's fund balance is restricted for programs initiated for the purpose of implementing <br /> the California Clean Air Act. Information regarding the fund balance reporting policy <br /> adopted by the City is described in Note 1 to the City of Santa Ana's Annual <br /> Comprehensive Financial Report. <br /> City Council (8) 9 — 23 1/18/2022 <br />