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CITY OF MONTE VISTA, COLORADO <br /> NOTES TO THE BASIC FINANCIAL STATEMENTS <br /> December 31, 2011 <br /> I <br /> Deferred Revenue <br /> Revenues on grants, which are restricted by the grant document for specific purposes, are recognized as revenue <br /> only after eligible grant costs have been incurred. Grant funds received in excess of grant expenditures are <br /> recorded as deferred revenues. <br /> Encumbrances <br /> The City does not record purchase orders in the accounting system until invoices are ready for payment. <br /> Unfulfilled purchase commitments out-standing at the end of the budget year are rebudgeted in the succeeding year. <br /> End of the year fund balance intended to be used in the succeeding year is reported as designated fund balance. <br /> Fund Equity <br /> Fund Balance—Beginning in fiscal year 2011,the City implemented GASB Statement No. 54,Fund Balance <br /> Reporting and Governmental Fund Type Definitions.This statement is intended to improve the usefulness of <br /> information provided to financial report users about fund balance by providing clearer, more structured fund <br /> balance classification and by clarifying the definitions of existing governmental fund types. <br /> As a result fund balances are classified based on the extent to which the City is bound to honor constraints for the <br /> specific purpose on which amounts in the fund can be spent. In accordance with the Statement, fund balances are <br /> now classified in one of the five categories: <br /> • Nonspendable Fund Balance—are amounts that cannot be spent because they are not in spendable form— <br /> such as inventory and prepaid insurance. <br /> • Restricted Fund Balance—are restricted when constraints place on the use of resources are either(a) <br /> externally imposed by creditors,grantors, contributors, or laws or regulations of other governments or(b) <br /> imposed by law through constitutional provisions or enabling legislation. <br /> • Committed Fund Balance—are amounts that can only be used for specific purposes as a result of <br /> constraints imposed be the City Council,the highest level of decision making authority. Committed <br /> amounts cannot be used for any other purpose unless the Council removes those constraints by taking the <br /> same type of action. Committed fund balances differ from restricted balance because the constraints on <br /> their use do not come from outside parties, constitutional provisions, or enabling legislation. <br /> • Assigned Fund Balance—are amounts a government intends to use foe a specific purpose; intent can be <br /> expressed by the City Council or by an official or body to which the governing body delegates the <br /> authority. <br /> • Unassigned Fund Balance—are amounts that are available for any purpose; these amounts are reported <br /> only in the General Fund. <br /> Beginning fund balances have been restated to reflect the above classifications. <br /> When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, <br /> the City considers restricted funds to have been spent first.When an expenditure is incurred for which committed, <br /> assigned, or unassigned fund balances are available,the City considers amounts to have been spent first out of <br /> committed funds, then assigned funds,and finally unassigned funds, as needed, unless the City Council has <br /> provided otherwise in its commitment or assignment actions. <br /> 1 29 <br />