Local Government Finance 101

Unlike a business, a local government, such as a City, does not exist to maximize profits. Instead, a local government’s objective is to provide services within budgetary constraints. A measure of success is the cost effectiveness of providing those services.


The accounting rules for businesses are based upon Generally Accepted Accounting Principals (GAAP), which are established by the Financial Accounting Standards Board (FASB). The users of a business’ financial statements are typically investors and creditors who are concerned with profitability and financial position.

The Governmental Accounting Standards Board (GASB) establishes GAAP for local governments. Unlike businesses, a local government’s financial statements emphasize legal compliance. Examples of legal compliance issues include operating within the approved budget, adhering to debt requirements, proper use of funds restricted for a particular purpose, and following investment regulations.

The City’s fiscal year-end is June 30 each year. Typically, the City’s auditors present their audit opinion along with the audited financial statements at the first City Council meeting in October each year. The City has continued to receive a "clean" audit opinion each year. Click here to view the latest audited financial statements.


The budget process begins with goals and objectives meetings in January with the City Council, City Manager and department heads. These are public meetings. Based upon presentations by the City's staff and discussion between the Mayor and City Council, goals and objectives are prioritized by City Council for the next fiscal year.

Each February, department heads receive workpaper to prepare their individual line item budgets. Upon completion, the departmental budgets are returned to the Finance Director in March. The City Manager and Finance Director then analyze these amounts. Further discussions occur with department heads and the budget adjusted accordingly.

A proposed, balanced budget is then developed to support the direction and focus established for the community by City Council. Specific issues are identified which are vital to continued quality services within the means available. This method of budgeting serves to improve the level of organizational accountability. City Council meetings, held in April and May, provide all interested citizens an open forum where they can be heard. Upon review, and a subsequent public hearing, the Council adopts the proposed budget by resolution. Click here to go to the Budget section of our website, which has the most recent Budget Message, Budget Comparison and General Fund Charts for the City of Northville. 


State of Michigan Public Act 20 defines legal investment vehicles and policies for local units of government. Accordingly, the City’s investing activity is designed to meet those requirements. Click here for more information on the "Investment of Surplus Funds of Political Subdivisions Act 20 of 1943."