Proprietary Fund Operations
For activities similar to profit-seeking
businesses
 Provides goods and services on a fee or
user charge basis
 Should be self-supporting
 Accrual basis and Economic Resources
 Fixed assets, depreciation, and long-term
debt are recorded in each proprietary fund

Financial Statements

Statement of Net Assets (Balance Sheet)
Working capital approach (Current/Non-current)
 Net Assets: Capital, restricted, and unrestricted


Statement of Revenue, Expenses and
Changes in Net Assets
Distinct operating income (Loss) section
 Non-operating income section (interest expense)
 Transfers-in, transfers-out, and capital
contributions section

Statement of Cash Flows

Four sections instead of normal three

Operating, non-capital financing, capital and
related financing, and investing
Must use ‘direct’ approach
 Must include reconciliation section from
operating income (loss) to cash flow from
operating activities

Proprietary Funds

Internal Service


Provides services to
one or more internal
departments of the
same government
entity
Used when services
can be performed
more efficiently
and/or more timely

Enterprise Funds


Provides services to
other parties, both
intergovernmental
and outside
government for a
fee
Known as businesstype services
provided by the
government entity
Internal Service Funds
Provides goods or services to other
intergovernmental funds on a costreimbursement basis
 Examples include computer services,
print services, and motor pool
 Revenue accounts: charges for services,
etc.
 Expense accounts: similar to for-profits
 Transfers-in (out) and capital
contributions are not revenue

Internal Service Funds, Concluded

Risk management activities
Self-insurance programs may use either the
general fund or an internal service fund
 Inter-fund premiums are inter-fund services
provided or used in internal service funds
 When claims are paid or accrued, an operating
expense is charged if in an internal service fund
 Deficits in internal service fund at end of year
should be made up over a reasonable time and
disclosed in notes to financial statements

Enterprise Funds
Used to account for governmental units that
provide services to the general public on a
user-fee basis (Water departments)
 Must be established when one of following is
true

Debt is backed solely by fees and charges
 Legal requirement costs be covered through fees
and charges
 When the government has a policy to establish fees
and charges to cover the cost of providing services

Classes of Long-Term Debt

Revenue Bonds
Payable solely from revenue earned by the
enterprise
 Recorded directly in the accounts of the
enterprise fund


General Obligation Bonds
Issued by pledging full faith and credit of the
government in addition to the enterprise fund
 If payment to be made from enterprise fund, these
liabilities should also be recorded in enterprise
fund

Solid Waste Fund Notes

Post-Closure Costs
Liability must be estimated and accrued as landfill
is in actual use
 Estimated costs include liners, monitoring wells,
periodic inspections, engineering fees for 30
years after closure
 Estimated costs are expensed and the related
long-term debt is recorded based on actual use in
each period.
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