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CITY OF SANTA ANA, CALIFORNIA <br />AIR QUALITY IMPROVEMENT SPECIAL REVENUE FUND <br />NOTES TO FINANCIAL STATEMENTS <br />JUNE 30, 2024 <br /> <br /> <br /> <br />(8) <br /> <br />NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />C. Budgetary Accounting (Continued) <br />The City legally adopts annual budgets for the Air Quality Improvement Special Revenue <br />Fund. The budgetary control for the Special Revenue Fund is under the department in <br />charge. The Public Works Agency is responsible for the budget of the Air Quality <br />Improvement Special Revenue Fund. <br /> <br />Budgets are prepared on a modified accrual basis. Encumbrances (e.g., purchase <br />orders, contracts) outstanding at year-end are reported as restricted or assigned fund <br />balances since they do not constitute expenditures or liabilities. All other annual <br />appropriations lapse at fiscal year-end to the extent that they have not been expended or <br />lawfully encumbered. Expenditures may not legally exceed appropriations at the <br />department level. <br /> <br />Budgetary Compliance. During the fiscal year, the total Fund’s expenditures were within <br />the legal prescribed limits as approved by the City Council. <br /> <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 /> <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 /> <br />F. Estimates <br />The preparation of financial statements in accordance with accounting principles <br />generally accepted in the United States of America requires management to make <br />estimates and assumptions that effect certain reported amounts and disclosures. <br />Accordingly, actual results could differ from those estimates.