Contributions to Internal Service & Enterprise Funds
SUBJECT: CONTRIBUTIONS TO INTERNAL SERVICE AND ENTERPRISE FUNDS
DEPARTMENTS & DISTRICTS AFFECTED: ALL DEPARTMENTS/AGENCIES
Cash contributions made by the County General Fund, or other funds, to Proprietary (Internal Service and Enterprise) Funds are to be budgeted and accounted for as appropriations and expenditures in the contributor fund and as estimated revenues and revenues in the recipient fund. Contributions of fixed assets are to be recorded as investment in Proprietary Funds in the contributor fund and as contributed capital in the recipient Proprietary Funds.
To account for contributions as prescribed by the State Controller's Accounting Standards and Procedures for Counties, as revised effective July 1984.
1.2.1 Board of Supervisors Resolution Ho. 82-162 authorizing the Auditor-Controller to prescribe accounting policies, and 1.2.2 Accounting Standards and Procedures for Counties, State of California, Chapter 13.
Internal Service Funds
Internal Service Funds are those funds in the 2800-2999 range of fund numbers which are used to account for financing of goods and/or services provided by one department/agency to other departments/agencies on a cost-reimbursement basis.
Enterprise Funds are those funds in the 2800-2999 range of fund numbers which are used to account for operations financed primarily by user charges.
Proprietary Funds is the term used to describe the operational nature of Enterprise and Internal Service Funds. Accounting records for Proprietary Funds are maintained on a basis of accounting different than that used for governmental funds (such as the General Fund). Proprietary Funds use the accrual basis of accounting in essentially the same manner as in commercial accounting. Recognition for transactions occurs when revenues are earned and when expenses are incurred.
Basis for Cash Contributions
Cash contributions to Internal Service Funds are generally made to cover the following:
Start-up costs of a new Internal Service Fund
First-time acquisitions of fixed asset equipment items.
Increased cost of fixed asset equipment replacement over the equipment's original cost.
Cash contributions to Enterprise Funds are generally made to cover the following:
Start-up costs of a new Enterprise Fund.
Partial funding of operations on an ongoing basis.
The amount of required cash contributions is determined by the department/agency responsible for the recipient fund, and is subject to review and approval by the County Administrative Office. The Agenda Item Transmittal is prepared by the responsible department/agency and is submitted to the Auditor-Controller for concurrence prior to being submitted to the County Administrative Office and the Board of Supervisors for approval.
Responsibility for Budgeting
The Auditor-Controller is responsible for budgeting cash contributions to Proprietary Funds based upon amounts requested by the responsible department/agency (2.1.1 above) and approved by the CAO.
Recording Budgetary Entries
Appropriations for contributions from the County General Fund are budgeted in the Miscellaneous FUBU (0352) in the Residual Equity Transfers Out object (500). The first three digits of the recipient fund number are used as a subobject. Estimated revenues for contributions to be received are budgeted in the recipient fund in the Residual Equity Transfers In object (783). A 010 subobject is used for contributions from the County General Fund. For contributor funds other than the County General Fund, the first three digits of the contributor fund number are used as a subobject. For example, a contribution from the Revenue Sharing Fund (1221) is budgeted as 783-122 in the recipient fund.
Any mid-year adjustments to budgeted amounts must be coordinated with the Auditor-Controller's Office. The originating department/agency is responsible for preparing the Agenda Item Transmittal (AlT) and requesting review and concurrence by the Auditor-Controller's Office prior to being sent to the CAO and the Board of Supervisors for approval.
Approval for Cash Contributions
During the year, Board of Supervisors approval must be obtained for each transfer of budgeted contributions from the General Fund, or other contributor fund, to Proprietary Funds.
Recording Cash Contributions
Upon Board approval, the Auditor-Controller charges 0352-500-XXX (or other contributor fund's object 500) and transfers cash to the appropriate fund. The Auditor-Controller also debits the 806 object (Investment in Internal Service and Enterprise Funds) using the first three digits of the recipient fund as a subobject, and credits the 950 object (Balance to Investments in Proprietary Funds) of the contributing fund. The transfers are recorded to the 783-XXX revenue object in the recipient fund. At year end, the Auditor-Controller closes the accumulated amounts in object 783 to the Contributions from Other Funds equity account (982).
Fixed Asset Contributions
Approval for Fixed Asset Contributions
During the year, Board of Supervisors approval must be obtained for each contribution of fixed assets.
Recording Fixed Asset Contributions
After Board approval has been obtained for fixed asset contributions, the following entries are recorded in the respective funds. In the contributing fund:
Debit 0100 - 806 - 2XX - Investment in Internal Service and Enterprise Funds Credit 0100 - 950 - 806 - Balance to Investments in Proprietary Funds
In the recipient fund:
Debit 2XX1 - 86X - Fixed Asset Account Credit 2XX1 - 982 - 010 - Contributions from Other Funds
Alternative Method of Procuring Fixed Assets
Fixed Assets may be sold to Proprietary Funds at fair market value subject to normal budgetary/approval considerations. This type of transaction must be coordinated through GSA Procurement/Surplus.