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HUDSON CITY SCHOOL DISTRICT
SUMMIT COUNTY, OHIO

NOTES TO THE BASIC FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2016

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)

PROPRIETARY FUNDS

Proprietary funds are used to account for the District’s ongoing activities which are similar to those
often found in the private sector where the determination of net income is necessary or useful to sound
financial administration. Proprietary funds consist of an enterprise fund and an internal service fund.

Enterprise fund - The enterprise fund is used to account for operations (a) that are financed and
operated in a manner similar to private business enterprises-where the intent of the governing body is
that the costs (expenses, including depreciation) of providing goods or services to the general public on
a continuing basis be financed or recovered primarily through user charges; or (b) where the governing
body has decided that periodic determination of revenues earned, expenses incurred, and/or net income
is appropriate for capital maintenance, public policy, management control, accountability, or other
purposes. The District’s major enterprise fund is the Community Education fund which accounts for
all financial activities related to the Community Education and Recreation Center operations.

Internal service fund - The internal service fund is used to account for the financing of goods or
services provided by one department or agency to other departments or agencies of the district, or to
other governments, on a cost-reimbursement basis. The internal service fund accounts for operations
of the District’s self-insurance program for medical and dental benefits.

FIDUCIARY FUNDS

Fiduciary fund reporting focuses on net position and changes in net position. The fiduciary fund
category is split into four classifications: pension trust funds, investment trust funds, private-purpose
trust funds and agency funds. Trust funds are used to account for assets held by the District under a
trust agreement for individuals, private organizations, or other governments and are therefore not
available to support the District’s own programs. The District’s only trust fund is a private-purpose
trust which accounts for scholarship programs for students. Agency funds are custodial in nature
(assets equal liabilities) and do not involve measurement of results of operations. The District’s
agency funds account for student activities and for the fiscal agent activity for the Six District
Educational Compact.

C. Basis of Presentation and Measurement Focus

Government-wide Financial Statements - The statement of net position and the statement of activities
display information about the District as a whole. These statements include the financial activities of
the primary government, except for fiduciary funds. Internal service fund activity is eliminated to
avoid “doubling up” revenues and expenses. Interfund services provided and used are not eliminated
in the process of consolidation. The statements distinguish between those activities of the District that
are governmental and those that are considered business-type activities.

The government-wide statements are prepared using the economic resources measurement focus. This
is the same approach used in the preparation of the proprietary fund financial statements, but differs
from the manner in which governmental fund financial statements are prepared. Governmental fund
financial statements therefore include a reconciliation with brief explanations to better identify the
relationship between the government-wide statements and the statements for governmental funds.

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