2005 Comprehensive Annual Financial Report

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Proprietary funds. The City of South Bend maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City maintains seven individual enterprise funds. Information is presented separately in the proprietary statement of net assets and the proprietary statement of revenues, expense and changes in fund net assets for the Water Utility, Wastewater Utility and Century Center, which are considered major funds. Data from the other four funds are combined into a single, aggregated presentation. Individual fund data for each of these non -major proprietary funds is provided in the form of combining statements elsewhere in this report. Internal service funds are used to accumulate and allocate costs internally among the City's various functions. The City of South Bend uses internal service funds to account for its self funded liability insurance program, employee benefits program and central services ( a department that accounts for the expenses related to fuel, vehicle repairs and various other services and supplies provided to City departments on a cost - reimbursement basis). Because these services predominantly benefit governmental rather than business- type functions, they have been included within governmental activities in the government -wide financial statements but are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in the report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government -wide financial statement because the resources of those tunds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The City's fiduciary duties are accounted for in both Trust and Agency Funds. The primary trust funds are the Police and Fire Pension Funds (explained below). The Agency Fund is for payroll and related employee deductions. Pension Trust Fund Operations - Most City employees are covered by the Public Employees Retirement Fund and the 1977 Police Officers' and Firefighters' Pension Fund, both administered by the State of Indiana. However, certain police officers and firefighters hired before May 1, 1977, who did not opt into the 1977 fund, continue to be members of the 1925 Police Pension Fund and the 1937 Firefighters' Pension Fund. These two funds are administered by the City. This group of police officers and firefighters will continue to decline in the future, both as a total number and as a percentage of total payroll of both the police and fire departments and of the City as a whole. The 1925 and 1937 Plans are funded through a combination of property taxes levied by the City and distributions from the State Pension Relief Fund. As a result of the requirements of the state statute that created these funds, the City is legally prevented from funding them in any other way than a "pay-as-you-go" basis. As of January of 2005, the City received an actuarial survey on these funds to provide the proper disclosures required by generally accepted accounting principles. This information is included in the following section. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain other supplementary information. The combining statements referred to earlier in connection with non -mayor funds, internal service funds and fiduciary funds are presented immediately after the basic financial statements. Also included are budget comparisons for governmental funds other than the General Fund and the Park and Recreation Fund, a major special revenue fund. Government -wide Financial Analysis The financial analysis will focus on the net assets (Table 1) and changes in net assets (Table 2) of the City's governmental and business -type activities. 6