We are often asked, what is FUND ACCOUNTING? The City of Cathedral City’s accounting system, as in all municipal accounting systems, is maintained on a fund basis, in accordance with governmental accounting standards. Each of the City’s Funds is considered a separate accounting entity with a self-balancing set of accounts that records assets, liabilities, fund equity, revenues and expenditures. Funds are established and segregated for the purpose of recording specific programs or attaining certain objectives in accordance with special regulations, restrictions, or limitations. Funds are classified into one of three categories: governmental (general, special revenue, debt service and capital projects); proprietary (enterprise and internal service), and fiduciary (trust and agency).
Governmental Funds are used to account for most, if not all, of a government’s tax supported activities such as public safety and general services. The general fund, special revenue funds, capital project funds and debt service funds are considered governmental funds. Governmental Funds report activities on the basis of near-term inflows and outflows of financial or spendable resources.
Proprietary Funds are used to account for a government’s business-type activities. As proprietary funds report activities similar to those of private sector businesses and use the same generally accepted accounting principles as those businesses. Enterprise funds, of which the city has none, and internal service funds are considered proprietary.
Fiduciary Funds are used to account for assets held by the City acting in a fiduciary capacity for other entities. Such funds are operated to carry out the specific actions of agreements, ordinances, grants and other governing regulations and cannot be used to support the City’s own programs.
