CITY OF LAGUNA NIGUEL NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) O. Net Position and Fund Balances (Continued) Restricted net position. This component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Unrestricted net position. This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of the net position. In the Governmental Fund Financial Statements, fund balances are classified in the following categories: Nonspendable fund balance. Nonspendable fund balances are items that are not expected to be converted to cash, such as prepaid items and deposits, or items that are required to be maintained intact, such as principal of an endowment or revolving loan funds. Restricted fund balance. Restricted fund balances include amounts that can be spent only for the specific purposes stipulated by external resources providers, such as grant providers, constitutionally, or through enabling legislation. Effectively, restrictions may be changed or lifted only with the consent of resource providers. Committed fund balance. Committed fund balances include amounts that can be used only for the specific purposes determined by formal action of the government’s highest level of decision-making authority, i.e. adoption of the annual City Financial Reserves Policy and resolutions. Commitments may be changed or lifted only by the government taking the same formal action that imposed the constraint originally. The City Council is considered the highest authority for the City. Commitments of fund balance are specified in the City’s Financial Reserves Policy, which is reviewed and amended as appropriate on an annual basis by the City Council Assigned fund balance. Assigned fund balances comprise amounts intended to be used by the government for specific purposes. Intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority. The City Council is the body authorized to assign amounts to a specific purpose. In governmental funds, other than the General Fund, assigned fund balance represents all amounts that are not classified as restricted or committed. Resources in governmental funds other than the General Fund are to be used for the specific purpose of that fund. (47)