CITY OF LAGUNA NIGUEL MANAGEMENT’S DISCUSSION AND ANALYSIS JUNE 30, 2024 OVERVIEW OF FINANCIAL STATEMENTS (Continued) Fund Financial Statements (Continued) x Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financial requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. A reconciliation of both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances with the government-wide financial statements can be found on pages behind the tab section titled Government-Wide Financial Statements. The City has nine governmental funds for financial reporting purposes, of which three are considered major funds for presentation purposes. Each major fund is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances. The City’s three major funds are its General Fund, City Capital Projects Fund, and Miscellaneous Grants Special Revenue Fund. Data from the nonmajor governmental funds (e.g., Gas Tax Fund, Air Quality Improvement Fund, Law Enforcement Fund, Community Development Block Grant Fund, etc.) are combined into a single, aggregated presentation. The governmental funds financial statements can be found on pages behind the tab section titled Fund Financial Statements. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements on pages behind the tab section titled Supplementary Schedules. The City adopts an annual appropriated budget for all governmental funds. A budgetary comparison schedule has been provided for each of the funds to demonstrate compliance with this budget. x Proprietary Funds The sole proprietary fund used by the City is an internal service fund. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses an internal service fund to account for its fleet of vehicles. Proprietary fund financial statements provide the same type of information as the government-wide financial statements, only in more detail. Like the government-wide financial statements, proprietary fund financial statements use the accrual basis of accounting. A separate financial statement is provided for the Vehicle Replacement Fund. The fund financial statements can be found behind the tab section titled Fund Financial Statements. Notes to the Basic Financial Statements The notes provide additional information that is essential to obtain a full understanding of the data provided in the government- wide and fund financial statements. The notes to the basic financial statements can be found behind the tab section titled Notes to the Basic Financial Statements. Required Supplementary Information Required supplementary information includes budgetary information on the General Fund, Miscellaneous Grants Special Revenue Fund, the budget process, the City’s share of net pension liability and related ratios, the schedule of pension contributions and schedule of changes in net OPEB liability and related ratios. Required supplementary information can be found behind the tab section titled Required Supplementary Information. (6)