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Analysis of City of Santa Ana Reserve Funds Page 6 savings across all departments, but primarily in the Police Department, were approximately $14 million. These were the main factors in spendable reserves increasing approximately $10 million for the year. Overall, from the 2011-12 fiscal year through the end of the 2015-16 fiscal year, total reserves grew from approximately $11 million to almost $77 million. Out of the $77 million, approximately $75 million is reserved, in some form, for a specific purpose. The remaining $2 million has not been designated for a specific purpose. Of the $77 million at June 30, 2016, $29 million was available at the discretion of the City Council. During the last two budget adoptions by the City, $27 million of the $29 million has been earmarked by the City Council for one-time uses and/or special projects. As of to date, a number of these funds have not been spent. The remaining reserve amounts are separately identified as reserve goals set by the City's Fiscal and Budget Policy. This is an important point because these unspent funds, even though they have been earmarked by the City Council, may be needed and/or considered as one-time funds to balance an upcoming budget. In reviewing the City's other (non -General Fund) funds, all the funds classified as Governmental Funds had reserves that are classified as Restricted. Forthe Proprietary Funds, all of these funds' reserves are restricted for the enterprise operation that they operate. Nothing came to our attention that these funds' reserves are misrepresented in the City's financial statements. Budgeting Methods ("Attrition Savings") Used During the 2016-17 budget adoption process, the City Manager initiated an "Attrition Savings Process", which was aimed at redirecting potential personnel and operational cost savings for the upcoming year to other General Fund programs and/or projects. The philosophy of the program worked as follows. Based on historical data, each operating department within the General Fund, (i.e., the Police Department, the City Clerk's Office), had a historical record of salary savings and operational cost savings each year, mainly due to funded personnel positions that were not filled (for the full year or part of the year), during a given budget year. Based on the historical average of vacant positions, and the corresponding salary and benefits cost, the average cost of salary savings, and unused operational savings, was removed from the respective department's overall budget. The accumulation of these savings across all operating departments within the General Fund were than reprogramed into other programs and/or projects for the 2016-17 fiscal year. As far as communications with the City Council, it should be noted that the attrition savings were identified as a line item in the General Fund Trial Budget that was presented to the City Council in April, 2016. Beyond that, there did not seem to be any substantial discussion about the reprograming at any further budget meetings. There also does not seem to be any direct correlation between the savings removed from department's budgets and any new and/or additional programs that were added. The "attrition savings" process of removing a portion of a department's personnel budget, which in essence is what was done, is a budgeting methodology that has been done in other cities. Recognizing o• � •,