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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2015 43 Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q. FUND EQUITY In the fund financial statements, governmental funds report fund balances in classifications that disclose constraints for which amounts in those funds can be spent. These classifications are as follows: Nonspendable – portions of fund balance related to prepaids, inventories, long-term receivables, and corpus on any permanent fund. Restricted – funds are constrained by external parties (statute, grantors, bond agreements, etc.). Committed – funds are established and modified by a resolution approved by the City Council. Assigned – consists of internally imposed constraints. These constraints are established by the City Council and/or management. The City Council passed a resolution authorizing the Finance Director to assign fund balances and their intended uses. Unassigned – is the residual classification for the General Fund and also reflects negative residual amounts in other funds. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, it is the City’s policy to use restricted first, then unrestricted fund balance. When an expenditure is incurred for purposes for which committed, assigned, and unassigned amounts are available, it is the City’s policy to use committed first, then assigned, and finally unassigned amounts. The City formally adopted a fund balance policy for the General Fund. The policy establishes an unassigned fund balance range of 40% - 50% of General Fund operating expenditures. The fund equity balances in the proprietary funds have been classified into two broad categories:  Net position – net investment in capital assets  Unrestricted net position Net position represents the differences between assets and deferred outflows of resources and liabilities and deferred inflows of resources in the government-wide financial statements. Net position – net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the ouststanding balance of any long-term debt used to build or acquire capital assets. Net position is reported as restricted in government-wide financial statements when there are limitations on their use thorugh external restrictions imposed by creditors, grantors, or laws or regulations of other governments. R. INTERFUND TRANSACTIONS Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures or expenses in the fund that is reimbursed. All other interfund transactions are reported as transfers. All interfund transactions are eliminated except for activity between governmental activities and business- type activities for presentation in the entity-wide statements of net position and statements of activities.