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APPENDIX I <br />ALLOCATION AND ACCOUNTING RULES <br />(a) General Rule. Any issuer may use any reasonable, consistently applied <br />accounting method to account for Gross Proceeds, investments and expenditures of an issue. An <br />accounting method is "consistently applied" if it is applied uniformly within a Fiscal Period (as <br />hereinafter defined) and between Fiscal Periods to account for Gross proceeds of an issue and <br />any amounts that are in a commingled fund. <br />(b) Allocation of Gross Proceeds to an Issue. Amounts are allocable to only one <br />issue at a time as Gross Proceeds. Amounts cease to be allocated to an issue as Proceeds only <br />when those amounts (i) are allocated to an expenditure for a governmental purpose; (ii) are <br />allocated to Transferred Proceeds of another issue of obligations; or (iii) cease to be allocated to <br />that issue at retirement of the issue or under the Universal Cap. <br />(c) Allocation of Gross Proceeds to Investments. Upon the purchase or sale of a <br />Nonpurpose Investment, Gross Proceeds of an issue are not allocated to a payment for that <br />Nonpurpose Investment in an amount greater than, or to a receipt from that Nonpurpose <br />Investment in an amount less than, the Fair Market Value of the Nonpurpose Investment as of <br />the purchase or sale date. The Fair Market Value of a Nonpurpose Investment is adjusted to take <br />into account Qualified Administrative Costs allocable to the investment. Thus, Qualified <br />Administrative Costs increase the payments for, or decrease the receipts from, a Nonpurpose <br />Investment. <br />(d) Allocation of Gross Proceeds to Expenditures. Reasonable accounting methods <br />for allocating funds from different sources to expenditures for the same governmental purpose <br />include a "specific tracing" method, a "gross -proceeds -spent -first" method, a "first -in -first -out" <br />method or a ratable allocation method, so long as the method used is consistently applied. An <br />allocation of Gross Proceeds of an issue to an expenditure must involve a current outlay of cash <br />for a governmental purpose of the issue. A current outlay of cash means an outlay reasonably <br />expected to occur not later than five banking days after the date as of which the allocation of <br />Gross Proceeds to the expenditure is made. <br />(e) Commingled Funds. Any fund or account that contains both Gross Proceeds of an <br />issue and amounts in excess of $25,000 that are not Gross Proceeds of that issue if the amounts <br />in the fund or account are invested and accounted for collectively, without regard to the source of <br />the funds deposited therein, constitutes a "commingled fund." All payments and receipts <br />(including deemed payments and receipts) on investments held by a commingled fund must be <br />allocated (but not necessarily distributed) among each different source of funds invested in the <br />commingled fund in accordance with a consistently applied, reasonable ratable allocation <br />method. Reasonable ratable allocation methods include, without limitation, methods that <br />allocate payments and receipts in proportion to either (i) the average daily balances of the <br />amounts in the commingled fund from each different source of funds during any consistent time <br />I-1 <br />