Trash Enterprise Fund Information
WHAT IS AN ENTERPRISE FUND?
An enterprise fund establishes a separate accounting and financial reporting mechanism for municipal services for which a fee is charged in exchange for goods or services. Under enterprise accounting, the revenues and expenditures of the service are segregated into a separate fund with its own financial statements, rather than commingled with the revenues and expenses of all other governmental activities. Financial transactions are reported using standards similar to private sector accounting. Revenues are recognized when earned and expenses are recognized when incurred, under a full accrual basis of accounting. An enterprise fund provides management and taxpayers with information to: • Measure performance • Analyze the impact of financial decisions • Determine the cost of providing a service • Identify any subsidy from the general fund in providing a service Enterprise accounting allows a community to demonstrate to the public the portion of total costs of a service that is recovered through user charges and the portion that is subsidized by the tax levy or other available funds, if any. A community may choose to recover total service costs through user charges, but it is not required. Enterprise funds frequently are used to account for services whose costs are only partially funded by fees and charges. For example, a community with a sewer enterprise votes a Proposition 2˝ debt exclusion to pay for a $10 million sewer line expansion and replacement project. Because the community will be raising the debt service costs of this project from the tax levy, user charges and fees will not fund the total cost of the sewer service. At year-end, the performance of an enterprise fund is measured in terms of positive and negative operations. An operating surplus is the result of revenue collected in excess of estimates and appropriation turnbacks, and translates into retained earnings that are maintained in the fund rather than closing to the general fund. Retained earnings of an enterprise fund are certified as an available fund after the submission of a June 30th balance sheet to DLS. Once certified, retained earnings may be appropriated only for expenditures relating to the fund. Conversely, if during the year, the enterprise fund incurs an operating loss, the loss must be raised in the subsequent year’s budget.