Enterprise Funding: Pros and Cons
Enterprise Funding: Pros and Cons
Pros
1. Revenues remain with the enterprise. Funds can
be accumulated for capital projects so bonding can be avoided.
2. The use of retained earnings from year to year can
earn interest, help to stabilize rates, pay for capital
expenditures or improvements
3. The extent of general government support is specifically
identified and the true cost of the operation is
presented.
4) The cost of general government support is compensated
by the enterprise.
5) The accounting of fixed assets and depreciation can
provide a good indication of the value of the resources
devoted to providing the service and the level of
investment required to maintain those resources.
6) Financial transactions are reported using standard
accounting practices similar to the private sector.
Revenues are recognized when earned. Expenses
are recognized when incurred. Both become more
visable.
7) The DEP encourages the use of enterprise funds to keep
up with maintenance and capital expenses and to remain
self sustaining.
8) Using enterprise funding is encouraged to facilitate timely
application for and utilization of grants.
Cons
1. Enterprise funds require somewhat more accounting time
to keep the funds separate and to account for the annual depreciation of assests.
2. Should revenues of the enterprise be deficient, they must
be made up the following year through an increase in rates.
Establishing an enterprise fund allows communities to more easily account for revenues and expenses a sociated with a particular service, to maintain separate interest baring accounts, and to accumulate reserve funds for future capital needs. The intent is to improve the management and financing information for the enterprise by (a) indicating the total cost of providing the service, (b) presenting the impact on rates and charges of
Jeff Weise, Chair, Board of Water Commissioners.
Thank you for a providing the taxpayers with a clear definition of the controversial enterprise fund proposal.
Bill | 2010-10-25 09:05:01