CITY OF LAGUNA NIGUEL MANAGEMENT’S DISCUSSION AND ANALYSIS JUNE 30, 2024 FINANCIAL PERFORMANCE (Continued) Fund Financial Analysis As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. Under GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, the sum of committed, assigned, and unassigned fund balance serves as a useful measure of a government’s net resources available at its discretion for spending at the end of the fiscal year. As of the end of the current fiscal year, the City’s governmental funds reported a total combined ending fund balance of $61.6 million, an increase of $4.4 million, or 7.8%, in comparison to the prior year. Of the total combined ending fund balance, $50.6 million, or 82.1%, is available for spending at the government’s discretion. Of the remaining $11.0 million, $0.2 million is classified as non-spendable, indicating that it is not in spendable form and previously obligated, and $10.8 million is restricted, indicating that its use is constrained by externally imposed limitations to be spent for public safety, public works, community development, and air quality improvement purposes. The City’s three major funds are the General Fund, the Miscellaneous Grants Special Revenue Fund, and the City Capital Projects Fund. A description and analysis of each fund is presented as follows: x General Fund – This fund is the chief operating fund of the City. The general fund is responsible for most of the City’s general governmental operations and basic services, including operating costs for public safety, community development, parks and recreation, public works, and general government. At the end of the current fiscal year, the total fund balance was $53.3 million. General Fund revenues exceeded expenditures this year by $3.0 million, or 5.7%. x Miscellaneous Grants Special Revenue Fund – This fund accounts for revenues and expenditures made for various City projects with funding provided by Federal and State grants. For FY 2023-2024, this fund has been classified as major due to the funds received from the Federal government’s American Rescue Plan Act (ARPA). At the end of the current fiscal year, total assets were $0.9 million and total liabilities and deferred inflows of resources were $1.2 million. The City received a total of $8.8 million in ARPA funds. Through June 30, 2024, the City spent $8.0 million of the funding on various capital improvement projects with the balance of unspent funds classified as unearned revenue. x City Capital Projects Fund – This fund accounts for all expenditures relating to City capital projects. Revenues and transfers into the fund generally equal actual expenditures on capital projects; therefore, this fund typically reflects a minimal fund balance at the end of the year. Total expenditures were $9.8 million and subsequent transfers into the fund were $11.7 million for the current fiscal year, an increase of $3.9 million from the previous fiscal year. GENERAL FUND BUDGETARY HIGHLIGHTS The original adopted General Fund revenue budget for FY 2023-2024 was $52.6 million. Actual revenues for the General Fund totaled $55.7 million, a positive variance of $3.1 million, or 5.9%. The primary reasons for this variance were higher property taxes ($1.6 million), investment income ($1.2 million), licenses and permits ($0.7 million), which all came in stronger than budgeted. The City intentionally budgets conservatively. The original adopted General Fund expenditure budget for fiscal year 2023-2024 was $51.9 million. Actual expenditures came in at $49.2 million, a positive variance of $2.7 million. The variance was due to actions the City took to continuously monitor and evaluate many operational budget items for effectiveness and efficiency. The General Fund ended with a positive, operational surplus of $3.0 million (actual revenues vs. actual non-capital expenditures). (12)