Page 43 - GFOA Draft 2

CITY OF SAGINAW
DESCRIPTION OF FUNDS

The City of Saginaw budget is made up of various funds. A fund is a grouping of related accounts
that is used to maintain control over resources that have been segregated for specific activities or
objectives. Funds are used to track revenues and expenditures/expenses for different programs and
functions. All of the funds of the City can be divided into two categories – governmental funds and
proprietary funds. Governmental funds include the General Fund, Debt Service Fund, and Capital
Projects Fund. Special revenues are accounted for in the Special Revenue Funds and are a type of
Governmental fund. The City of Saginaw operates and maintains its own water and sewer utility
system. The Enterprise Fund, a proprietary fund, is used to account for water and sewer utility
system funds.

The City’s budgets of governmental funds (General Fund, Debt Service Fund, Capital Projects Fund
and Special Revenue Funds) are prepared on a modified accrual basis. This means that obligations
of the City such as outstanding purchase orders are budgeted as expenditures. However, revenues
are recognized only when they are measurable and available.

The budgets of the City’s proprietary funds (Enterprise Fund and Water/Wastewater Escrow Fund)
are prepared using a full accrual basis. This means it recognizes expenses as encumbrances when a
commitment is made, such as through a purchase order. Revenues, on the other hand, are
recognized when they are earned by and due to the City (for example water user fees are recognized
as revenue when bills are produced).

The Comprehensive Annual Financial Report shows the status of the City’s finances on a basis of
generally accepted accounting principles (GAAP). In most cases, this conforms to the way the City
prepares its budget. There are several exceptions: Compensated absences (accrued but unused
vacation/sick leave and compensatory time) are not budgeted but are reported as an expense in the
Comprehensive Annual Financial Report. Contributed assets are not budgeted but are booked as
revenue. Depreciation and gains or losses on assets are not budgeted but are reported as an
expense or revenue (gain on asset). In the Enterprise Fund capital expenses are budgeted but at year
end are booked as additions to capitalized assets. Bond principal payments are budgeted expenses
but booked as a reduction to liability at year end. The Comprehensive Annual Financial Report shows
fund revenues and expenditures/expenses on both a GAAP basis and Budget basis for comparison
purposes.

All of the City’s funds that are included in the Comprehensive Annual Financial Report and audited by
the independent auditors are appropriated. Each of the funds is listed and described below.

GENERAL FUND
The General Fund is the major operating fund of the City. It is used to account for all revenues and
expenditures except those required to be accounted for in another fund. Expenditures for General
Administration, the Municipal Court, the Fire Department, the Police Department, Public Services,
Park Maintenance, the Community Services Department, the Library, Inspections/Code Enforcement,
Animal Services, Fleet Maintenance, and the Economic Development Department, and Information
Technology are included in the City’s General Fund.

DEBT SERVICE FUND
The Debt Service Fund is used to account for the accumulation of resources for, and the payment of,
general obligation long-term debt principal and interest.
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