What are Proprietary Funds?

Proprietary Funds are used to account for the business-­‐type activities of a government—those that are similar to activities carried out in the private sector. There are two types of proprietary funds:

• Enterprise Funds — account for operations 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 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. Enterprise funds include: water, wastewater and solid waste.

• Internal Service Funds — account used to account for business-­‐type activities in which the
customers are other government departments or agencies.

Montana Municipal Officials Handbooks 3rd Edition, Section 5.303