CITY OF LAGUNA NIGUEL MANAGEMENT’S DISCUSSION AND ANALYSIS JUNE 30, 2024 As management of the City of Laguna Niguel (“City”), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2024. Our intent is to assist the reader of these financial statements in better understanding the impact of financial decisions made by the City. This analysis will focus on the significant changes from the prior year and in relation to the current budget in an effort to explain the City’s overall financial condition. We encourage readers to consider the information presented here in conjunction with the additional information furnished in our letter of transmittal. OVERVIEW OF FINANCIAL STATEMENTS The City’s basic financial statements consist of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. This report also consists of supplementary information in addition to the basic financial statements. Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to private-sector business. They are comprised of the following: x Statement of Net Position The Statement of Net Position presents information on all City assets, deferred outflows of resources, liabilities, and deferred inflows of resources on a full accrual basis of accounting similar to that used by private-sector companies. The difference between assets and deferred outflows of resources, and liabilities and deferred inflows of resources is reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. x Statement of Activities The Statement of Activities presents information about the City’s revenues and expenses on a full accrual basis, with an emphasis on measuring net revenues or expenses for each of the City’s programs. This statement also reflects the change in net position for the year. Government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, community development, and parks and recreation. The City has no business-type activities. The government-wide financial statements can be found behind the tab section titled Government-Wide Financial Statements. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City are divided into two categories: governmental funds and one proprietary fund. The fund financial statements provide detail information about each of the City’s most significant funds, called Major Funds. The concept of Major Funds, and the determination of which are Major Funds, was established by Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments (GASB 34) and replaces the concept of combining like funds and presenting them in total. Instead, each Major Fund is presented individually, while all Nonmajor Funds are summarized and presented in a single column. (5)