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CITY OF PARIS, TEXAS <br />Notes to Financial Statements (Continued) <br />September 30, 2021 <br />I. Summary of Significant Accounting Policies (Continued) <br />G. Assets, Liabilities, and Equity (Continued) <br />8. Net Position Flow Assumption <br />Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted <br />bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted <br />— net position and unrestricted — net position in the government -wide and proprietary funds financial <br />statements, a flow assumption must be made about the order in which the resources are considered to be <br />applied. <br />It is the government's policy to consider restricted — net position to have been depleted before unrestricted <br />— net position is applied. <br />9. Fund Balance Flow Assumption <br />Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted <br />resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts <br />to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund <br />financial statements, a flow assumption must be made about the order in which the resources are considered <br />to be applied. It is the government's policy to consider restricted fund balance to have been depleted before <br />using any of the components of unrestricted fund balance. Further, when the components of unrestricted <br />fund balance can be used for the same purpose, committed fund balance is depleted first, followed by <br />assigned fund balance. Unassigned fund balance is applied last. <br />10. Fund Balance Policies <br />Fund balance of governmental funds is reported in various categories based on the nature of any limitations <br />requiring the use of resources for specific purposes. The government itself can establish limitations on the <br />use of resources through either a commitment (committed fund balance) or an assignment (assigned fund <br />balance). <br />The committed fund balance classification includes amounts that can be used only for the specific purposes <br />determined by a formal action of the government's highest level of decision-making authority. The <br />governing council is the highest level of decision-making authority for the government that can, by <br />adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the <br />limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of <br />another ordinance) to remove or revise the limitation. The City does not have any restricted fund balances <br />by enabling legislation. <br />Amounts in the assigned fund balance classification are intended to be used by the government for specific <br />purposes but do not meet the criteria to be classified as committed. The council allows the finance director <br />to assign the fund balance, and may also assign fund balance as it does when appropriating fund balance to <br />cover a gap between estimated revenue and appropriations in the subsequent year's appropriated budget. <br />Unlike commitments, assignments generally only exist temporarily. In other words, an additional action <br />does not normally have to be taken for the removal of an assignment. Conversely, as discussed above, an <br />additional action is essential to either remove or revise a commitment. <br />33 <br />