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CITY OF FOREST HILL






                                                   GOVERNMENTAL FUND TYPES

                The General Fund is used to account for financial resources used for general operations. This is
                a budgeted fund, and any fund balances are considered resources available for current
                operations. All revenues and expenditures not required to be accounted for in other funds are
                accounted for in this fund. The General Fund appropriations are adopted as part of the annual
                budget process. The General Fund is accounted and budgeted on a modified accrual basis.



                Special Revenue Funds are used to account for resources restricted to, or designated for,
                specific purposes by a grantor. Federal and state financial assistance generally is accounted for
                in a Special Revenue Fund. Normally, unused balances are returned to the grantor at the close
                of specified project period. Special Revenue Funds appropriations are adopted as part of the
                annual budget process.

                The Debt Service Fund is used to account for tax revenues and for the payment of principal,
                interest, and related costs on long-term debts for which a tax has been dedicated. Any unused
                sinking fund balances are used to lower outstanding bonds. The Debt Service Fund
                appropriations are adopted as part of the annual budget process. Debt Service Funds are
                accounted for and budgeted on a modified accrual basis.

                Capital Projects Funds are used to account for capital outlay projects financed from general
                debt issued by the City. Capital Project Funds are not part of the annual budget process. Capital
                Project Fund appropriations require specific action by the City Council, are adopted on an
                individual project basis, and may be appropriated on a multi-year basis. General Capital Project
                funds are accounted for and budgeted on a modified accrual basis.

                These types of funds are also used to account for activities to plan the replacement of capital
                transportation, information technology and other heavy equipment in accordance with
                replacement schedules based on life of equipment and usage.

                Enterprise / Proprietary Fund Types
                The Water and Sewer Fund accounts for revenues and expenses on a full accrual basis. Water,
                sewer, and solid waste services are delivered to the citizens and businesses of the city. The
                total operating, capital and debt costs are recovered from the utility rates charged for the
                delivery of these services. The Water and Sewer Operating Fund appropriations are adopted as
                part of the annual budget process. The Water and Sewer Operating Fund is budgeted on the
                modified accrual (working capital) basis.


                Reconciliation between the net changes in working capital to the change in net assets GAAP
                (Generally Accepted Accounting Principles) basis are provided in the utility fund summary
                schedule in the Enterprise Funds section of this document. Water and Sewer Fund capital
                projects are not part of the annual budget process.





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