More about the different types of businesses that cities
run
(we call them "Funds")
That's right, cities run multiple businesses - sometimes a dozen or more.
The business units are all responsible to the city, but also have many other
rules, laws and regulations they must follow. Many times these also are
what requires the business in the first place.
Now, you have more questions (I'm just guessing):
- Why does one city run multiple businesses.
Well, because each business unit (again, we call them Funds) is required to
be separate financially from all other city Funds. In Washington, the
constitution says that one Fund cannot benefit from a "gift" of
another Fund (something like that but much more complicated sounding).
- OK, but this still doesn't make sense. Is
there a good reason?
Oh, you want a good reason. Well, the concern was that it is easier to
hide the true facts from the citizens if the money within a city could pass
from (using an example here) the Sewer Construction Fund to the Neighborhood
Park Construction Fund. So, in order to insure that the different
activities of the city could be clearly tracked by the citizens, the
requirement for separate Funds has evolved.
- What kind of "multiple businesses" are
we talking about?
We will provide some detail on these in just a moment (or if you just can't
wait, click here). Basically the Funds are divided into the way the
money is raised and the way the money is spent. For instance, Funds
that are mostly supported by your taxes are "Governmental Funds"
while Funds that are supported by fees paid by users are "Enterprise
Funds".
Here are the Fund categories and a brief description. Click on the Fund
Name to get more detailed information about that particular type of fund.
Governmental Funds - mostly tax supported (either local, state, or national
taxes with some fees):
- General Fund (this is actually a
"catch all"): but it is often the main focus of your city's
efforts. It is mostly supported by taxes and pays for such essential
services as police, fire and often parks.
- Special Revenue Funds: There may be many of these in your city. They
account for the non-business like (hopefully this will make more sense in
just a moment) special accounts. For instance, gas taxes are
restricted to road improvements and we use a Special Revenue Street Fund to
account for them (and the road work they pay for).
- Capital Projects Funds: Just like it sounds, these account for the various
non-business like (be patient - I'll explain this in a moment) capital
projects. Examples are street and sidewalk improvements, new parks,
improvements to city buildings, etc.
- Debt Service Funds: Yes, we have special Funds to track the repayment of
the bonds. We won't try to explain the different types of bond issues,
but trust me we need to track them very carefully. The bond buying
marketplace keeps a close eye on our Debt Service Funds.
Proprietary Funds (business like - now you get the explanation) - mostly fee
supported with some taxes:
- Enterprise Funds: These are business like activities of the city where the
customers are outside of city government. Examples include utilities
(water, sewer, garbage, storm water), and golf courses. These are
business like because it is intended that the user fees pay all or most of
the costs (both short-term and long-term) of the operation. The
long-term costs include the maintenance of the capital investment.
- Internal Service Funds: These are businesses where the customer is
actually other city departments (or neighboring governments). Examples
here are print shops, motor pools, and other central services. Again,
the fees (charged this time to other city departments) are intended to cover
the costs.
Trust Funds - These are really Funds where it isn't the city's money, but
they are holding it for someone else. There are a wide variety of types of
Trust Funds, but some common ones include: Pension Funds, Bequests, Deferred
Compensation, etc.
There are "Account Groups" also, but we won't bother too much with
them. There are two, debt and fixed assets. They are basically lists
of the governmental debt and governmental assets. The Proprietary Funds
account for their own long-term debt and assets (remember they have the
long-term perspective).
You can learn more about each of the fund types by following the links above
(click on the fund name).
Or, you can return to where you came from (The
Numbers Really Do Add Up)