Fund Descriptions

The City of Homer’s financial system involves the use of 25 funds. These funds are broken down into four major categories: The General Fund, Enterprise Funds, Debt Funds and Reserve Funds.

Fund accounting has always been used as a control device to segregate financial resources and ensure that the segregated resources were only used for their intended purpose. The use of funds for financial reporting demonstrates accountability.

There are three broad fund categories: Governmental Funds, Proprietary Funds and Fiduciary Funds.

GOVERNMENTAL FUNDS

General Fund The general fund is the general operating fund of the City of Homer. It serves as the primary reporting vehicle for current government operations. This fund accounts for all current financial resources not required by law or administrative action to be accounted for in another fund. Financial support for this fund comes from such sources as general property taxes, sales taxes, fees and inter-governmental revenues (i.e. reimbursement from enterprise funds to the general fund for administrative services). Expenditures are authorized in the general budget. In the general fund you will find various departments such as Administration, Finance, Planning and Zoning, Public Safety, Fire, Public Works, Library and Airport.

RECOMMENDATION: Maintain $2,000,000 balance for purposes of providing operating capital for all City operations.

Debt Service Fund The debt service funds are used to account for the accumulation of resources for the payment of general long-term principal, interest and related cost. This fund includes the Rangeview Special Assessment bonds and bonds needed to finance HARP. Each enterprise fund includes their respective general long-term debt principal, interest and related costs. During the year these are kept in separate funds but are reported in the respective enterprise fund at the end of the year for financial statement presentation. During the year there is a debt service fund for HARP, Water and Sewer. Revenue for these funds comes mainly from the collection of sales tax and assessments.

HARP Debt Service Fund This fund collects street and sidewalk assessments, and sales tax revenue to pay for the financing of the debt incurred in the construction of streets and sidewalks. Often in the past bonds were issued to pay for the owner’s portion of the construction of streets and sidewalks, and then later assessments are levied and collected to pay off the bond debt. Now it is not necessary to issue bonds. The fund is self-supporting.

Water Debt Service Fund Water services are extended and property owners are assessed for part of the cost of this service. Bonds finance the property owner costs. Collecting assessments from property owners pays for the bonds and the balance is paid from water revenues.

Sewer Debt Service Fund A few years ago the City of Homer built a new sewer plant. The debt for this new plant is paid out of funds collected from sales taxes. The City of Homer has extended sewer services and then assessed the respective property owners. This money is collected in this fund and the bond debt that was incurred to finance the sewer services are paid out of this fund.

Reserve Funds Those portions of the fund balance that are legally segregated for a specific future use are reserve funds. These funds are appropriable for expenditures with the approval of the City Council during the budget process or on an individual basis as situations arise which are addressed by the City Council. There are three types of reserve funds being used by the City now.

*Fleet Allocation Reserve The sole purpose of this fund is for replacement of the City’s fleet of vehicles on a planned rotation basis as their useful life expires. It is not for the purchase of vehicle accessories. Each department director through the normal budgetary process funds fleet allocation every year in an amount sufficient to cover the replacement of that department’s fleet of vehicles. At the present the following exist: Administration, Fire, Police, Public Works, Water, Sewer and Port/Harbor. Resolution 91-52. Include all rolling stock i.e., graders, backhoes, dump trucks, fire trucks, etc.

*Depreciation/Capital Reserve Capital replacement monies are to be restricted and distributed only for major capital outlay expenditures. Unbudgeted and unexpected capital costs in excess of $10,000 shall come from these reserve accounts. To use these restricted funds, the City Council must approve the proposed purchase of services and/or goods. These reserve accounts have been established for City Hall, Fire Department , Police Department, Public Works Department, City Leased Property, Library Airport, Sewer (94-129a), Water (94-130A), and Port and Harbor (92-51S).

*Special Reserves When certain situations arise the City Council may deem it necessary to create another reserve for a specific purpose. The Sewer Reserve (HUD)(Memorandum 94-53) was created from the balance of a grant from HUD.

Capital Project Funds Capital project funds account for financial resources used for the acquisition or construction of major capital facilities (other than those financed by the Proprietary Fund Type). This fund is used as a financial reporting tool to demonstrate compliance with legal and contractual provisions, and to compile certain cost data. The purpose is to control expenditures for each project or closely related group of projects. In the general fund this is mainly used for the construction of roads and the collection of cost data. The sewer and water funds use this for the addition of sewer and water lines or improvements. Most of the funds for the extension of sewer and water lines come from the State and assessments (taxpayers). The Port and Harbor use the construction fund for various grants and improvements to their facilities and for the collection of cost data.

PROPRIETARY FUNDS

Enterprise Funds Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises. It is the intent of the City Council that the cost of providing goods and/or services to the general public be financed or recovered primarily through user fees. The City has the following enterprise funds: Sewer and Water, and Port and Harbor.

Note: Since fiscal year 2001, the Water Fund and the Sewer Fund are combined and called the Utility Fund. The Utility Fund is an enterprise fund consisting of activities of providing water and sewer services to the Homer residents. These activities extend beyond the city boundaries.

Internal Service Fund The chief aim of an internal service fund is cost reimbursement. This fund accounts for operations that provide a service to other departments with the City on a cost-reimbursement basis. The City of Homer’s health insurance is a self-funded program. The City holds sufficient funds to pay claims and other costs incurred by the program. Each department is allocated a portion of the cost, depending on their individual employee needs, to pay the necessary expenditures of this fund. The amount allocated from departments is not limited to the expenses of this fund, as any remaining balance remains in the fund for future expenses.

FIDUCIARY FUNDS

Nonexpendable Trust Funds Trust funds account for resources received and held by the City of Homer in a fiduciary capacity. The original cash in this account was the cash balance ($12,300) available when the City of Homer took over the operation and maintenance of the Library. The Homer Public Library, Inc provides the money in the Library Endowment. The principal amount of the gift is to be maintained intact and invested. Investment earnings are to be used for the acquisition of books and equipment for the Homer Library. The interest earned by this fund is recorded in this fund and is used for the purchase of books and equipment for the Library.

Agency Funds An agency fund is used to account for assets held by the City. Agency funds are custodial in nature and do not involve measurement of operations. This fund generally serves as a clearing account. The City has two such accounts – (1) Library contributions and (2) Fire Department contributions.

Library Contributions Fund For the City of Homer is include funds received by the Homer Public Library, Inc. until such time as disbursements are requested.

Fire Donation Fund This includes funds received by the Homer Volunteer Fire Department until such time as disbursements are requested.

funddesc