CITY OF LAGUNA NIGUEL NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basis of Accounting, Measurement Focus, and Financial Statement Presentation (Continued) Proprietary Fund Financial Statements (Continued) Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included in the statement of net position. The statement of revenues, expenses, and changes in net position present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, e recognized in the period in which they are earned while expenses are revenues ar recognized in the period in which the liability is incurred. In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts. Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as nonoperating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as nonoperating expenses. The City reports the following proprietary fund: Vehicle Replacement Internal Service Fund Accounts fo r interdepartmental operations where it is the stated intent that costs of or replacing vehicles to the departments of the City on a continuing basis be financed recovered primarily by charges to the user departments. C. Cash and Cash Equivalents The City pools its available cash for investment purposes. The City considers pooled cash and investment amounts, with original maturities of three months or less, to be cash equivalents. For purposes of the statement of cash flows, cash equivalents are defined as short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in fair value because rates. Cash equivalents generally have an original maturity dat of changes in interest e of three months or less from the date of purchase. Cash equivalents also represent the proprietary fund’s share in the cash and investments pool of the City. D. Investments Investments are reported in the accompanying financial statements at fair value. Changes in fair value that occur during the fiscal year are recognized as invest ment orted for that fiscal year. Investment income includes interest earnings, income rep changes in fair value, and any gains or losses realized upon the liquidation, maturity, or sale of in vestments. (40)